Business Cases – HRP999

Analyzing the Reports

  1. Once you have produced results analyze and identify whether the employees are already covered by a collective bargaining unit agreement that provides 1.5 hours of overtime for hours worked over 40 (AP/APS 11 and below); also analyze and identify whether an exception to the FLSA overtime requirement applies.
  2. Rule out employees for whom an exception – doctor, lawyer, teacher our outside sales – applies. In general, those most likely to be applicable to MSU are the teacher exemption and the doctor/resident exemption. For a listing of MSU faculty and academic staff job titles that are automatically presumed to meet the teacher exemption can be found here: https://www.hr.msu.edu/flsa/. Work with Human Resources or Academic Human Resources to make this determination if needed.
  3. For those employees for whom an exception does not apply or who are not already covered by a collective bargaining agreement where overtime is provided, analyze how much overtime the impacted employees typically work in a given week. Overtime is defined as hours worked over forty in a work week.
  4. Project the possible financial impact if employees were to work overtime. Units are expected to manage the financial impact within their own budgets. To determine the financial impact of overtime hours, determine the following:

    Each employee’s hourly rate.  An employee’s hourly rate can be determined by taking the annual salary and dividing it by 2080 work hours.

    Example: The cost of overtime based on the projected number of work hours in excess of 40 hours.

    $45,000 (annual salary) / 2080 (# of work hours in a year) = $21.63 (hourly rate)

    Overtime is calculated by multiplying the hourly rate by 1.5.

    Example:  In this case, if an employee is expected to work 10 hours of overtime each week, it would cost the department $324.50 per week.

    (1.5 (overtime rate) x $21.63 (hourly rate)) x 1 hour of overtime = $32.45 (overtime for 1 additional hour)

  5. Note that the fringe cost for overtime payments is 7.65% and is not factored into the calculation above. An example cost calculation spreadsheet may be found here: M0re information about FLSA.
  6. Determine potential ways to address the impact. In determining the ways to address the impact, analyze which of the following options may make sense for the employees impacted:
  7. Budget to raise salaries to $47,476, with additional fringe cost of 19.05%.
  8. Budget to pay overtime for all newly non-exempt employees, with additional fringe cost of 7.65%.
  9. Analyze whether restricting overtime hours is possible. You will need to consider whether restricting work hours makes sense for particular employees. Included in that assessment should.
  10. In lieu of restricting overtime hours, you will also want to look creatively at the use of flexible work hours. Nothing in the FLSA precludes an employee working non-traditional hours, such as 10 a.m. to 7 p.m. If the bulk of the work occurs during those hours, changing an employee’s schedule to fit the timing of the work is one method of addressing the overtime issue. Please consult any applicable collective bargaining agreements and/or with Employee Relations with regard to unionized employees. Before entering into any agreements, Human Resources will need to be consulted.
  11. There is an alternative to paid overtime – providing employees compensatory time off at a rate of time and a half is a possibility for MSU. However, there are numerous restrictions involved in the use of this alternative, including the requirement that the agreement be voluntary between the employer and employee prior to work performed, the limited employer discretion regarding when it may be used and the mandatory cash payout for the unused time upon termination.

Please refer to the Compensatory Time Toolkit located here: https://www.hr.msu.edu/flsa/.

Next Steps

Departments should meet with newly non-exempt employees to review overtime policy and responsibilities, initiate time tracking, report and pay overtime when required.

  1. Departments should meet with newly exempt employees to discuss exempt status and stop time tracking unless CBA requires.
  2. Follow instructions in Toolkits.
  3. Have internal discussions about decisions that will need to be made.
  4. Become familiar with this report, FLSA time-tracking requirements and other FLSA basics.