How to Straighten Out the Fluctuating Hour Workweek

Evaluating the risks and benefits of one method of overtime payment is important for the upcoming new regulations.

The Department of Labor has made recent changes to the salary threshold for white-collar exemptions set to take effect on December 1, 2016. Many employers are struggling to find the best option to best comply with these new regulations without breaking the law, or the bank. A lesser-known alternative that is becoming more and more popular for many companies us the fluctuating workweek method of payment for non-exempt employees.

Under this method, a non-exempt employee receives a fixed weekly salary regardless of the hours worked–as the name suggests. In weeks in which the employee surpasses 40 hours, the employee will receive an extra 0.5 times their regular rate for overtime hours. This solves the employer’s worry for the law but it is also a risky change in its essence.

Administration of the fluctuating workweek can be challenging. With few exceptions, employers must pay employees their full salaries even in workweeks wherein the employee did not work 40 hours. Additionally, an employer must have safeguards in place to make sure that the employee’s hourly rate never falls below an applicable minimum wage.

The fluctuating workweek may be beneficial to both employees and employers for two primary reasons: 1) it provides employees consistency by guaranteeing them a minimum salary; 2) it can reduce the stress that’s caused by having to pay hefty overtime payouts.

As with everything in the world, this is not a matter that can be divided into black and white, right and wrong. It’s a big block of gray. To determine its appropriateness, we have to consider a lot of things: nature of positions, hours of work, employee population, and the employer’s ability to administer practice.

Contact the experts at Colorado Nonprofit Insurance Agency, part of HUB International in Denver, Colorado at 303-894-0298. We will work with you to ensure you are getting the most out of your coverage.