Q&A: Using Analytics to Tame the New Overtime Rule

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On January 1st, the highly contentious overtime rule will take effect after years of negotiation. The new rules will impact an estimated 1.3 million workers and, of course, their employers. We spoke with Ian Cook, Visier’s vice president of people solutions, about the new rule’s implications and how analytics can help employers address them.

How would you describe the new rule’s mandates, the types of companies it will impact most and what the major impacts will be?

The new ruling means that on Jan. 1, 2020, the minimum exempt salary threshold will be raised from $23,660 a year, or $455 per week, to $35,568 annually, or $684 a week. In its final ruling, the Department of Labor:  

  • Raised the “standard salary level” from the currently enforced level of $455 per week to $684 per week (equivalent to $35,568 per year for a full-year worker).
  • Raised the total annual compensation requirement for “highly compensated employees” from the currently enforced level of $100,000 per year to $107,432 per year.
  • Allowed employers to use nondiscretionary bonuses and incentive payments—including commissions—paid at least annually to satisfy up to 10 percent of the standard salary level in recognition of evolving pay practices.
  • Revised the special salary levels for workers in U.S. territories and the motion picture industry.

The ruling impacts companies that employ hourly workers—such as retailers and food service businesses—and the way they handle long-term financial planning, future annual updates and compensation planning. Over 1 million employees will be reclassified, and many employers will raise pay to avoid having to pay their employees time-and-a-half.

We spoke with Ian Cook, @Visier vice president of people solutions, about the overtime rule’s implications and how analytics can help address them. #HR #HRTech Click To Tweet

What are the strategies employers are considering to address the rule?

Ian Cook Visier
Visier’s Ian Cook

The pressure is on HR to find the delicate balance between productivity, employee engagement and workforce budget, while staying compliant. In order to achieve this, HR must find an effective solution that will help them make the right compensation and workforce changes while balancing the needs of the workers and the bottom line.

The first thing HR has to do is determine which employees fall into the new salary range. It isn’t enough to know the total number of people now eligible for overtime, though. The information needs to be broken down into specific buckets that can be used to plan future workforce options.

For example, if the majority of people who’ve become eligible are paid $32,000 per year, then it may be more cost-effective to increase this group’s pay to $36,000 annually and maintain their exempt status.

Another tactic employers may take is to tweak non-discretionary bonuses. The FLSA requires that calculations factor in “regular rate” of pay, with the exception of bonuses that employees generally expect and/or are dependent on quality, quantity or efficiency of production, or the number of hours worked. Employers are allowed to include non-discretionary bonuses in the regular rate of pay, and so can increase their employees’ bonuses to keep them over the FLSA’s threshold for reclassification.

How does an employer’s HR technology and payroll system factor into their decision-making?

Large-scale changes such as these don’t just affect the workforce—they have a direct impact on business results, too. Investing in a well-developed workforce analytics function, one that’s supported by effective processes and technology, will better equip the organization to handle, assess and implement any necessary changes that come out of the woodwork.

New regulations and business changes are introduced all the time, and CHROs have to be able to provide an accurate and strategic response. An effective analytics function makes this process less chaotic and less stressful. The team can quickly assess the cost impacts of a change, break headcount down into the groups that will be affected by it, and develop and cost multiple workforce scenarios related to different options the business can take. Also, the team can determine how these talent changes will directly affect business outcomes ahead of time and mitigate any negative consequences.

A properly implemented analytics function can only operate with speed and accuracy if the right tools and processes are in place. This means eliminating the reliance on spreadsheets to assess and plan out the workforce. There are several reasons why this method doesn’t serve HR well.

Data inaccuracy is the first and most common problem. Any movement of data requires validation and this inevitably becomes a time-consuming and error-prone process when spreadsheets are used. For example, if the HR team is doing a deep dive into what overtime looks like in your organization, they need to be certain that none of the data is incorrect, missing and/or misaligned. Otherwise, they may end up with inaccurate calculations that lead to poor workforce decisions.

The second problem is the data is nearly impossible to keep updated. Employees are constantly moving in and out of the organization, so the spreadsheet must be regularly refreshed or the HR team could be working off of a “frozen snapshot” of the company without realizing it.

How does the rule impact an employer’s HR tech?

Rulings such as these make analytics even more critical to HR. The complexity of HR data makes it very hard to handle on a spreadsheet. It’s a process that requires HR to spend most of their time merging data from multiple sources, refreshing and updating the data regularly, and handling 30 to 40 different columns across thousands of people. To top it off, there’s no guarantee that the HR team will end up analyzing error-free data, which prevents HR from making the best suggestions for navigating the business through changes. 

HR has suffered from credibility challenges when it comes to urgent business issues, and spreadsheet dependence is one of the leading causes. With the right mix of technology, processes and people, HR can build a highly functioning analytics team that can gather and analyze data, and present detailed fully-costed options for any change with accuracy and within hours—not weeks.

This same approach also makes it easy to collaborate with stakeholders across the organization—including Finance, executives and line-of-business leaders—on workforce plans. Spreadsheets have made this a traditionally slow process, but new cloud-based workforce planning technology quickly collects stakeholder input, shares plan details with them, and, since it’s in the cloud, ensures everyone is always working with the latest information.

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