Overtime Rules and Flexible Work

The U.S. Department of Labor’s proposed overtime rules may or may not go into effect on Dec. 1 of this year.

But if the new regulations do become reality, large employers could face unintended and unanticipated consequences, according to new WorldatWork research.

The Scottsdale, Ariz.-based non-profit HR association’s recent Quick Survey on Implementation of New FLSA Rules survey polled 948 WorldatWork members with compensation and HR generalist in their titles.

When asked how they are addressing or plan to address employees that were exempt under the old overtime rules who fall below the new standard salary level threshold, 73 percent of employers said they did or will raise some to the new minimum threshold, while reclassifying others to non-exempt. (Fifteen percent indicated that they did or will raise all to the new minimum salary threshold and maintain exemption, while 9 percent intend to reclassify all to non-exempt, and 4 percent said they were unsure of their plans.)

Among those who plan to reclassify employees to non-exempt, 49 percent said their workplace flexibility options will decrease. The number of large organizations planning to go this route is “of particular concern,” according to a WorldatWork statement summarizing the findings.

For example, 62 percent of responding companies with 10,000 to 39,999 employers said they intend to reduce the flexibility options they offer workers.

“The fact that larger employers are more likely to decrease flexibility will obviously affect more employees,” says Kerry Chou, senior practice leader at WorldatWork. “That being said, this result could be a byproduct of the fact that larger organizations are more likely to have formalized flex programs as opposed to ad hoc programs.”

Naturally, the new rules figure to have a significant financial impact on employers, with 69 percent of respondents telling WorldatWork that their overall costs have already increased or will increase as a result of the new standard salary-level threshold. Just 13 percent said that net costs have stayed or will stay the same, and they won’t require taking separate actions such as reclassifying employees as non-exempt to contain costs.

Some employers may look at cutting flexible work options as one way to offset additional expenses connected to new overtime rules, says Chou, adding that workplace flexibility can be a big factor in recruiting and retaining talent.

As such, companies that choose to offer fewer flexible work options may ultimately see higher turnover and greater difficulty in attracting replacements for departing employees, he says.

“The increased cost of overtime compliance, coupled with high turnover—or at least lower job satisfaction of current workers—are consequences that will need to be addressed.”