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  • The U.S. Department of Labor’s (DOL’s) has implemented a new overtime rule that will significantly increase the salary threshold for white-collar exemptions to overtime requirements in two phases, including the following:

    • Effective July 1, 2024, the Fair Labor Standards Act’s (FLSA’s) annual salary-level threshold for white-collar exemptions to overtime requirements will increase from $35,568 to $43,888. 
    • Effective January 1, 2025, the annual salary threshold will rise to $58,656 – nearly a 65% increase from the current level. 

    The Fair Labor Standards Act (FLSA) mandates overtime pay for the majority of employees, but it also provides exceptions for certain job categories. Those employees who qualify for overtime pay are labeled as “nonexempt,” while those who do not qualify are termed “exempt.” The most frequently seen exemptions from overtime, commonly known as the “white-collar exemptions,” encompass roles such as executive, administrative, professional, outside sales, and specific computer-related jobs.

    Who Is Affected

    To qualify for white-collar exemptions, employees must be paid a salary of at least the threshold amount and meet certain duties tests. If they are paid less than the threshold or do not meet the tests, they must be paid 1.5 times their regular hourly rate for hours worked in excess of a 40-hour work week. FSLA’s white-collar executive, administrative, and professional exemptions are not eligible for overtime pay.

    The new rule is expected to expand overtime protections to lower-paid salaried workers, which could provide meaningful financial relief for some employees. However, the changes may also burden small businesses, potentially forcing them to cut jobs or raise prices.

    Proceed With Caution

    Employers will need to carefully review their exempt employees’ salaries and decide whether to raise them to maintain the exemption or to reclassify them as non-exempt and pay overtime. This process should be approached cautiously, as the rule is likely to face legal challenges.

    Employers will need to:

    • Budget for increases in salary and overtime expenses. 
    • Plan for communication or reclassification decisions. This will include training reclassified employees on timekeeping requirements and rules against off-the-clock work. Employers must also manage concerns that employees might raise if they are upset about losing their salaried status. 
    • Considering the 2025 salary-level thresholds and the interim, employers must determine whether to accomplish this in two steps or jump straight to the 2025 threshold. 
    • Be mindful of state, local, and wage and hour laws that may impose additional requirements for exempt status beyond federal requirements under the FLSA. 

    How To Navigate This Rule

    GMS can help your company stay compliant with the DOL’s new overtime rule and manage the associated challenges. Our team of HR experts can assist with analyzing your workforce, determining the appropriate classification for each employee, and implementing any necessary salary adjustments or reclassifications.

    We can also provide guidance on navigating the legal uncertainties, training programs for managers and employees on the new requirements and ensuring your payroll and timekeeping systems are updated to comply. By partnering with GMS, you can confidently navigate these complex regulatory changes and avoid penalties or disruptions to your business. Contact us today!

  • The U.S. Department of Labor (DOL) has introduced a new rule under the Fair Labor Standards Act (FLSA) set to take effect on March 11, 2024. This rule could potentially lead to significant changes in how contract workers are classified, with potential implications for employers regarding benefits, insurance coverage, and exposure to employment-related lawsuits.

    The New Rule

    The Employee or Independent Contractor Classification Under the Fair Labor Standards Act rule, which replaces a rule established during the Trump Administration, aims to provide a clearer analysis for employers to determine a worker’s employment status. It re-adopts an enhanced economic realities test for worker classification that was previously in effect under an Obama administration rule. The new rule introduces a six-factor test to guide employers in determining a worker’s employment status under the FLSA, as opposed to the two-factor test under the Trump administration.

    The six factors in determining worker status under the new rule include the following:

    • Opportunity for profit or loss depending on managerial skill
    • Investments by the worker and potential employer
    • Degree of permanence of the work relationship
    • Nature and degree of control
    • Extent to which work performed is an integral part of the business
    • Skill and initiative

    Concerns With The New Rule

    Employers have expressed concerns about the broader impact of the new rule, fearing that it may have consequences beyond just minimum wage and overtime pay protections. While the DOL insists that the change is tailored and limited, some experts and industry professionals believe otherwise.

    In addition, the change in worker classification may have significant implications for various industries, particularly the construction sector. However, the National Electrical Contractors Association has expressed support for the new rule, citing its potential to address the widespread misclassification of workers across industries.

    The new rule faces court challenges, with concerns raised about potential confusion arising from workers being classified differently under various statutes and across different states. This confusion could lead to increased employment-related litigation, as highlighted by pending lawsuits challenging the rule.

    Implications For Workers And Employers

    While some labor unions and advocates support the reclassification of workers as employees for wage and hour purposes, certain groups, such as app-based gig workers and business advocates, are concerned about the potential loss of opportunities and flexibility if gig workers were to be classified as employees.

    In addition, the new rule may prompt employers to rethink their insurance coverage. This could lead to more confusion about the coverage of certain claims and the need for additional insurance, such as employment practices liability insurance (EPLI) or directors and officers (D&O) liability insurance.

    How A PEO Can Help

    In light of the changes stemming from the DOL’s new rule on employee classification, businesses may find value in seeking the support of a professional employer organization (PEO) like Group Management Services (GMS). PEOs offer expertise in navigating complex employment regulations, providing guidance on worker classification, and assisting in the management of benefits and insurance coverage. Through a partnership with GMS, businesses can proactively address the challenges posed by the new rule, ensuring compliance while maintaining their focus on core business operations. As the regulatory landscape continues to evolve, leveraging the resources and expertise of a PEO can empower businesses to adapt effectively and thrive in the face of changing employment practices and legal requirements. If you’re interested in learning more about what a partnership looks like with GMS, contact us today.

  • In October 2023, Representatives Raja Krishnamoorthi, D-Illinois, and John James, R-Michigan, introduced the bipartisan Opportunity to Compete Act, a groundbreaking legislation designed to address the challenges faced by job seekers without bachelor’s degrees. The act aims to ensure fair consideration for these individuals in the hiring process, emphasizing skills-based evaluation over traditional educational qualifications.

    The Need For Change

    The current hiring landscape is heavily influenced by automated recruitment systems, which often utilize degree requirements as a primary filtering mechanism. A 2021 study revealed that over 90% of employers rely on such systems, with half using education level as a decisive filter. This approach inadvertently excludes a significant portion of the workforce, as approximately two-thirds of U.S. workers do not hold a bachelor’s degree.

    Addressing Bias And Promoting Diversity

    The Opportunity to Compete Act seeks to rectify this imbalance by mandating that large employers using automated degree requirement settings disclose the expected years of experience applicants need. In addition, it allows for the substitution of relevant work experience for a four-year degree. This shift in evaluation criteria would amend the Fair Labor Standards Act (FLSA) to eliminate bias against individuals who have acquired valuable skills through alternative routes such as military service, community college, or training programs.

    Advocacy And Support For The Act

    Industry experts and advocates have strongly supported the Opportunity to Compete Act, emphasizing its potential to foster diversity and inclusion while expanding access to job opportunities. Chief Executive Officer (CEO) of YUPRO Placement Michelle Sims highlighted the legislation’s role in diversifying the evaluation criteria during the initial stages of hiring, thereby promoting fairer consideration for all candidates.

    In addition, this bill emphasizes the significance of the millions of workers who have honed their skills through alternative educational paths such as community college, apprenticeships, and on-the-job experience. The act is positioned as a critical enabler for these individuals to showcase their capabilities and contribute meaningfully to the workforce.

    Empowering Alternative Educational Routes

    The proposed legislation acknowledges the value of alternative educational pathways, which provide accessible and affordable means for individuals outside traditional talent pools to develop skills relevant to various early and mid-career roles. By recognizing the value of these non-traditional routes, the act supports a more inclusive and equitable approach to evaluating job candidates.

    Hiring And Recruiting With A PEO

    Should this bill go into effect, small business owners will need to remain compliant. However, you didn’t start your business to stay on top of laws and regulations or spend countless hours hiring and recruiting top talent that will help your business grow. That’s why small and medium-sized companies turn to a professional employer organization (PEO) like GMS for help. A PEO provides comprehensive HR services to its clients, including payroll, benefits, compliance, and more. This partnership allows businesses to outsource the administrative and legal aspects of hiring and recruiting. In addition, at GMS, our HR experts can access a larger pool of qualified candidates, offer competitive compensation and benefits packages, and reduce your turnover and hiring costs. If you want to learn more about how GMS can help your business grow, contact us today. We’re here to help you and your business thrive.

  • It’s time to dust off your HR processes and give them a thorough review. HR laws and guidelines are subject to change, and your HR policies must reflect those changes. Though auditing your HR procedures may seem like a hassle or something that can wait, if found noncompliant, you could incur significant penalties and reputational damage that can take months or years to set right. HR can be complicated and confusing to understand. We’ve compiled a short guide to help you start your audit.

    Why Are HR Audits Necessary?

    HR audits aren’t mandatory, but they can help protect your business and save you time and money in the long run. HR audits carefully examine your business policies and procedures as they relate to federal, state, and local laws such as the Fair Labor Standards Act (FLSA) and the Americans with Disabilities Act (ADA). They help find outdated policies misaligned with current laws or practices, and also identify areas negatively impacting employees that need improvement.

    In addition, HR audits can:

    • Help improve your processes and policies. HR audits can highlight inefficiencies by thoroughly examining existing HR procedures, from recruitment and onboarding to performance evaluations and compliance with labor laws. Audits can help organizations foster a more engaging and responsive workplace environment, ensuring policies are not only compliant but also aligned with the strategic goals and expectations of employees.
    • Reduce turnover. HR audits can help you identify reasons employees are leaving and assist in developing a plan to boost retention. These audits examine various aspects, including job satisfaction, management practices, career development opportunities, and workplace culture. By gathering and analyzing exit interview data, employee surveys, and other relevant information, you can identify patterns and pinpoint specific areas for improvement.
    • Address and prevent harassment. Creating a safe and respectful workplace is a non-negotiable for modern organizations. HR audits can help ensure you have proper policies to prevent harassment or bullying affecting team morale, productivity, and more. They review existing policies, complaint procedures, and how past incidents are handled to assess their effectiveness. Through reviewing compliance with current laws and best practices audits can help determine areas for improvement and develop new strategies to better protect employees.
    • Improve workplace safety. HR audits can provide a comprehensive review of safety practices, incident reports, and compliance with occupational health and safety regulations. By analyzing data on common workplace injuries, such as when and where they happen; you can identify any underlying safety hazards, such as faulty equipment, fatigue, understaffing, etc.

    HR audits can drastically improve areas of your business while ensuring you avoid lawsuits, fines, and reputational harm. Think of them as preventative care that keeps your organization healthy and capable of recovering from potential setbacks.

    Types Of HR Audits

    Beyond a general HR compliance audit, there are a few other audits to choose from: best practices, strategic, and function-specific. Each is helpful and can help safeguard your business.

    Best practices audit

    This audit examines your HR practices holistically and compares them to proven best practices. It helps identify areas for improvement while assessing your competitive advantage.

    Strategic audit

    Strategic audits are particularly helpful if your business is growing. They help identify strengths and weaknesses in your HR processes and ensure they align with your business’s strategic plan.

    Function-specific

    These audits focus on one or a few areas within your HR practices, such as payroll, hiring, and onboarding.

    How To Conduct An HR Audit

    Once you’ve selected the right audit for your business, there are a few critical steps to consider. First, determine who will be conducting the audit. While internal audits are possible, and you can run them yourself, partnering with a professional employer organization (PEO) can save you time and energy, ensuring you don’t miss any vital elements.

    After determining who will conduct the audit, start planning the details, when it will take place, the type of audit, and your goals. Inform your team, including information about audit meetings, what to expect, questions they will be asked, or information they will need to locate.

    Now that you’ve laid the groundwork to conduct your audit, consider the following:

    1. Check federal and local laws and industry regulations 
    Start by reviewing employment laws. Ensure you thoroughly understand them and employee forms such as W-2, I-9, etc. Stay updated with your industry’s specific regulations and review your department’s practices for potential risks. This foundational step ensures your audit is grounded in the latest legal requirements and industry standards.
    2. Evaluate current processes  
    Audits not only evaluate your policies and procedures but also their implementation. Technically speaking, your practices could be compliant and efficient; however, you could still have issues if poorly implemented. 
    3. Secure sensitive information
    Audits go beyond reviewing employee handbooks; they often require examining employee paperwork. This means handling sensitive information, and you’ll need to ensure it stays protected, digitally or otherwise, throughout the process. 
    4. Create your audit report
    Write up your findings. Include the specific areas you examined, any areas that need to be addressed, and the plan to manage them. Give this report to senior leadership and key stakeholders who must stay involved.
    5. Communicate changes with your team
    Transparency and communication are crucial to implementing changes effectively. Keep your staff informed about any policy or process adjustments resulting from the audit. Early and frequent communication helps to secure team buy-in, which is vital for successful implementation.

    HR Audits With GMS

    HR audits can get complicated quickly; you risk overlooking critical elements when handled internally. Partnering with a PEO like GMS can help. You’re an expert in your field but probably not an expert in HR. Our HR professionals stay up to date on employee laws and regulations. No matter what type of HR audit you need, with GMS, you’ll gain access to a dedicated HR specialist who:
    • Takes the time to learn how your HR functions are currently being handled
    • Drafts a comprehensive report that outlines your current HR status
    • Provides recommendations on how you can improve your internal HR processes
    • Offers recommendations on HR functions that can be outsourced

    Contact us today, and let us take the administrative HR burdens off your plate.

  • Ensuring strict adherence to HR laws and regulations is a non-negotiable for small business owners; however, many employers find this process daunting. HR compliance is a complex and ever-evolving process that varies from state and city levels. Additionally, the rise of remote work expands many businesses’ geographical reach, resulting in more intricate multi-state compliance needs. Moreover, since laws and regulations are subject to change, you, as a business owner, must remain continuously vigilant to stay compliant.

    Navigating these intricacies is often an overwhelming and frustrating feat. It can be particularly challenging for small businesses and startups that often rely on limited staff and delegate HR to individuals who are unfamiliar with its complexities. Nevertheless, failing to adhere to the laws and regulations can lead to substantial financial and reputational repercussions. While there is no one-size-fits-all approach to avoiding non-compliance penalties, there are a few common areas businesses tend to struggle with.

    What Is HR Compliance? 

    HR compliance aligns your company’s policies and procedures with a network of federal laws, such as the Fair Labor Standards Act (FLSA) and the Americans with Disabilities Act (ADA), combined with state and local labor laws. These laws outline the obligations and responsibilities you must uphold as an employer. HR compliance encompasses various aspects, including hiring, worker classification, data privacy, and security.

    Failure to adhere to or purposefully neglecting HR compliance can lead to severe consequences for your business. Substantial financial penalties, not to mention time and resources spent on legal fees, will be lost. Beyond financial implications, the reputational impact on your business can be detrimental and lead to an extensive loss in revenue.

    In other words, following HR regulations isn’t just a legal obligation but a safeguard for you, your business, and your employees. It ensures proper measures are in place to avoid legal troubles, financial setbacks, and reputational harm.

    Common HR Compliance Pitfalls

    Although HR compliance varies based on location, company size, and industry, there are a few more universal areas companies tend to struggle with, including:

    Hiring practices

    The laws enforced by the Equal Employment Opportunity Commission prohibit discrimination across all facets of employment. As an employer, ensuring your hiring staff is well-informed about crafting inclusive job postings and understanding the permissible and impermissible questions during the hiring process is crucial. Severe penalties, including lawsuits and fines, can be levied against businesses that discriminate based on factors such as race, color, religion, sex (including gender identity, sexual orientation, and pregnancy), national origin, age, disability, or genetic information. Adhering to these regulations is not only the law but essential to foster a fair and diverse workplace.

    Pay inequity

    Performing regular salary audits is necessary to guarantee pay equity for employees. Many states, including Ohio, California, Washington, Nevada, and Colorado, to name a few, have implemented legislation to prevent discriminatory pay practices. However, as businesses expand and internal changes occur, such as transfers and promotions, gender pay disparities can inadvertently emerge. Conducting systematic and consistent salary reviews helps identify and rectify gaps, ensuring a fair, equitable, and compliant compensation structure within your organization.

    Health coverage

    The Affordable Care Act’s Employer Shared Responsibility Provision mandates that businesses with 50 or more full-time employees provide affordable health insurance options to employees. This includes ensuring coverage for dependents up to age 26. Failure to meet this requirement can lead to penalties if employees receive premium tax credits through the Health Insurance Marketplace.

    Policies and procedures

    Another significant but easily avoidable challenge stems from outdated or nonexistent employee guidelines. While employees share the responsibility of adhering to laws and regulations, the liability falls on you, as a business leader, to provide comprehensive policies and procedures.

    Unclear guidelines can lead to misunderstandings and misinterpretations, potentially resulting in actions that breach HR regulations. Therefore, ensuring up-to-date and transparent employee guidelines reinforces adherence and minimizes the risk of legal and regulatory infringements.

    Training and orientation

    Additionally, implement a comprehensive onboarding process and offer continuous training for your employees. This is crucial to guarantee your team understands your company’s policies and procedures. Inadequate training can expose your business to vulnerabilities and potential lawsuits in the future.

    Employee misclassification

    Accurate employee classification is essential due to its direct influence on taxation. Distinct categories such as independent contractors, salaried workers, and hourly employees are subject to varying tax regulations. Incorrectly categorizing full-time or hourly employees as contractors deprives workers of their rightful compensation and protections. Even unintentional misclassification holds serious consequences, including substantial fines.

    Inaccurate payroll and tax payments

    Ensuring accurate and timely payment for your staff is an absolute necessity. Failing to do so exposes your business to wage claims that can have detrimental effects, impacting your financial stability and reputation. Additionally, to avoid audits and fines, it’s essential to file payroll taxes accurately.

    Workers’ compensation

    Workers’ compensation is an “exclusive remedy,” meaning that an employee injured on the job cannot sue their employer immediately following an incident. In the event of an on-the-job accident, it’s imperative that managers and staff report the incident and subsequently submit the necessary claims immediately to avoid potential lawsuits.

    Additionally, maintaining current knowledge about accident trends within your industry is paramount. By staying informed, you can proactively support your staff through safety programs and training initiatives, reducing the likelihood of injuries.

    Termination

    In numerous states across the United States, the concept of “at-will employment” reigns supreme. This legal principle grants employers the authority to terminate employees at their discretion, without needing a specific reason, as long as the termination does not violate any laws or regulations.

    However, it doesn’t mean that employees don’t have rights. There are still requirements you are responsible for as an employer. For example, many states, such as Alabama, Alaska, Arizona, California, and Delaware, recognize good faith and fair dealing, meaning you can’t fire an employee to avoid paying retirement benefits or a hefty commission. Additionally, this safeguards employees from being fired from a place of malice. Obeying local laws protects your business from wrongful termination lawsuits and helps create a trusting and respectful work environment.

    Data privacy and security

    As an employer, your employees trust you with their sensitive information. With the shift towards electronic storage of this information, implementing data security has become integral to safeguarding your employees’ data. By ensuring a strong security system, you fulfill your responsibility to protect sensitive information and mitigate the risks associated with unauthorized access and data breaches. In the unfortunate event of a breach, having a detailed action plan allows for a swift and organized response, helps minimize the potential damage, and swiftly rectifies the situation.

    Maintaining compliance is an ongoing and dynamic process that requires time, effort, and continuous refinement of internal policies and procedures. Regulatory landscapes rapidly evolve, and you need to adapt in order to ensure your business remains in line with legal requirements. Maintaining a robust system of regular internal reviews, policy updates, and staying up-to-date with any changes in laws and regulations are essential to protecting your business effectively.

    How GMS Can Help

    You’re an expert in your field but probably not an expert in human resources. Ignoring the need for effective HR management is a recipe for disaster. Deficiencies in any HR function, such as payroll, workplace safety, or performance management, could result in:

    • Non-compliance fines
    • Miscommunication between departments
    • Slow productivity growth

    Professional employer organizations (PEOs) such as GMS can perform human resource audits to review your current HR policies, procedures, documentation, and systems. By conducting an HR audit, we can help your business reduce costs and improve its HR functions in a fraction of the time. In addition, HR audits can help assess compliance with ever-changing rules and regulations to minimize legal and regulatory liability. Contact us today, and let us help take care of the administrative tasks so you can focus on the areas of your business you enjoy most!

  • Change is on the horizon for labor standards in the United States. On August 30th, 2023, the U.S. Department of Labor (DOL) unveiled its intention to elevate the minimum salary level for the Fair Labor Standards Act (FLSA) “white collar” exemptions. This proposed rule could substantially impact millions of American workers, and its potential consequences are worth exploring.

    Raising The Bar

    The cornerstone of this proposed rule is a substantial increase in the minimum salary level. Currently set at $684 per week ($35,568 annually), the DOL aims to boost it to $1,059 per week ($55,068 annually). This adjustment reflects the evolving landscape of the American workforce and the increasing cost of living.

    Such a raise in the minimum salary level promises greater financial stability for workers. It aligns with inflation and acknowledges the need for fair compensation in an economy where many struggle to make ends meet. This change could represent a welcome shift towards better work-life balance and financial security for workers previously excluded from overtime pay due to the lower salary threshold.

    Elevating The HCE Benchmark

    The proposed rule doesn’t stop at raising the minimum salary level; it also seeks to elevate the salary requirement for highly compensated employees (HCEs). It’s currently set at $107,432; however, the new threshold would increase to $143,988 per year. This change aims to ensure that highly compensated individuals are fairly compensated for their work while still enjoying the benefits of exempt status.

    Equality Across Territories

    Another significant aspect of this proposed rule is the intention to standardize salary levels across all U.S. territories. This move would bring Puerto Rico, Guam, the U.S. Virgin Islands, and the Commonwealth of the Northern Mariana Islands (CNMI) in line with the federal minimum wage, providing a more equitable standard for workers nationwide. American Samoa, a unique part of the U.S., would see its special salary levels increased to $890 per week. This adjustment acknowledges the distinct economic conditions and cost of living in this territory.

    Keeping Up With Change: Automatic Updates Every Three Years

    One of the critical features of this proposed rule is its commitment to adapting to economic changes. The DOL intends to automatically update the standard salary level and the HCE total annual compensation threshold every three years to avoid stagnation. This approach aims to keep labor standards aligned with the evolving economy and cost of living.

    Empowering Businesses In An Evolving Labor Landscape

    In light of these changes to labor standards, businesses face a complex landscape where compliance and adaptability are paramount. This is where a professional employer organization (PEO) can help. PEOs like Group Management Services (GMS) bring a wealth of experience and expertise in navigating the intricate web of labor regulations, providing businesses with a strategic advantage.

    GMS serves as a dedicated partner in ensuring that your organization complies with the new salary requirements and optimizes your HR processes. By entrusting the intricacies of labor standards and compliance to GMS, your company can concentrate on its core operations, fostering growth and resilience amid evolving workforce dynamics. In times of change, aligning with a PEO can be the strategic method that propels your business toward success in a shifting employment landscape. Contact our HR experts today to learn more!