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On July 1, the Department of Labor’s new rule on overtime takes effect. The impact could be far reaching. In early June, Republicans in Congress launched an effort to block the rule.
Meanwhile, our team nationwide is working with clients to help them understand the rule, its implications and the workarounds to ensure a stable and steady workforce.
The new rule increases the pay levels at which a salaried employee becomes exempt from the requirement to pay overtime. Currently, a salaried employee making $35,568 per year ($684 per week) or more is not eligible for overtime. Under the new rule, salaried employees must make $43,888 annually ($844 per week) before becoming exempt from overtime. The exemption level will be raised again in six months to $58,656 per year ($1,128 per week) starting Jan. 1, 2025. After that, the levels will be raised every three years.
What’s the implication?
Consider this scenario: a salaried manager earning $880 per week ($22 per hour) ends up having to work 10 extra hours per week to fill in for gaps in staffing. Under the new rule, that manager must be paid overtime for those hours, or $33 per hour (assuming time-and-a-half for overtime). That’s a big premium to cover shifts usually filled by hourly workers.
What’s the workaround?
Given the rule takes effect in the third quarter, chances are many companies haven’t budgeted for these overtime rates. One idea to ensure a stable and steady workforce is to supplement staff with part-time temporary support through a staffing company.
Managers who have a trusted staffing partner can fill those shifts with trained, vetted, temporary employees working at a lower effective rate. The staffing company recruits the workers, manages their pay and workers’ compensation insurance, and handles the paperwork, leaving managers time to handle all the other details of operations. Planning ahead is key.
What should I ask?
There are many staffing companies available and not all fit every need. Some, like our company, specialize in a particular industry. Others are generalists. Be sure to ask questions and carefully think through the partner you choose if this seems like an option.
How do you find workers?
Any staffing firm can provide their clients with warm bodies. Reputable companies who want to build a long-term relationship with their clients will focus on providing the best possible candidates for the positions that need to be filled. Ask how the staffing company finds its candidates and what vetting is done. If workers need to pass background checks or have certifications, look for a staffing partner that will listen to those needs and provide only qualified candidates.
How do you classify workers?
Some staffing firms, especially app-based platforms advertising low prices, classify their workers as independent contractors rather than W-2 employees. In many cases, this situation can expose their clients to liability for back wages and benefits, workers’ compensation claims, and DOL fines if the workers are deemed to be misclassified. A trusted staffing partner will classify its workers as W-2 employees, paying their workers’ compensation insurance and protecting their clients from the risks of misclassification.
How do you communicate with clients?
A staffing partner should provide clear and timely information to their clients. The best will provide each client with a dedicated team member to serve as the point of contact. Clients should be able to define the best form of communication for them – email, text, or phone call – and the staffing firm should comply.
What do you do if there is a problem?
Even the best staffing companies can run into challenges filling an order. It’s perfectly appropriate to ask how the firm handles those situations. Clients should be skeptical of a company that promises 100% fulfillment 100% of the time. It’s far better to focus on building a long-term relationship with a staffing partner that’s based on transparency and trust than to fall for companies that offer unrealistic expectations.
What else can a staffing partner do?
While most people think of staffing firms for hiring temporary workers, some also provide recruiting and hiring services for permanent and executive positions. Working with a staffing firm as a partner can help take the stresses out of hiring and improve the bottom line.