Healthcare News & Insights

New overtime rule: How it’ll affect hospitals

You’ve likely heard about the Department of Labor’s (DOL) recent updates to the overtime threshold. Hospitals will be significantly affected by the changes, which are set for the end of the year, and the time to start preparing is now. 

The DOL’s new ruleGettyImages-157185308 increases the salary at which a person can earn overtime after working more than 40 hours in one work week. Currently, the maximum is set at $23,660, but in December that number will more than double.

Starting Dec. 1, workers who earn up to $47,476 must receive overtime pay. According to a brief from The Advisory Board, this figure includes both employees’ regular yearly salaries and any nondiscretionary bonuses of up to 10% of the threshold.

Per DOL estimates, this change will affect at least 200,000 hospital workers. The majority of them are nurses, paramedics, medical and pharmacy technicians, and medical and physical therapy assistants. Mean salaries for these workers range from an average of $25,710 to $47,010, according to an article in Modern Healthcare.

Hospitals’ next steps

Overtime hours are ingrained in hospitals’ culture – unpaid or not. So with the DOL change, facilities will likely have to budget more money to pay workers who may not have been eligible for overtime pay before. That means it’s essential for hospitals to have a plan for how to best manage this extra expense.

An article from Healthcare Dive lists the four options hospitals can choose from in this scenario:

  1. Raise salaries so employees will continue to be exempt from overtime.
  2. Keep salaries at their current levels and pay workers overtime after they’ve worked over 40 hours.
  3. Restructure workloads or shifts so workers’ hours won’t exceed 40 in one week.
  4. Adjust wages to make up for the change.

Hospitals need to find the strategy that works best for them, whether it’s one or a combination of these options.

An excellent way to start, according to the Healthcare Dive piece, is to take a look at the current salaries of your facility’s exempt employees and figure out how many workers will become eligible for overtime pay under the new rules. That’ll give you base data to calculate how much expenses will increase if you raise their salaries to meet the threshold.

Then, compare that number to how much you’d have to pay the workers in overtime at their current salaries (and their current shifts) to get an idea of which option is the most cost-effective for your hospital.

Importance of recordkeeping

Whichever option you choose, it’s going to become even more critical for you to have accurate records of hours worked for hospital staff, as this information will allow you to pay workers accurately and make adjustments to your approach to overtime pay, if necessary.

Per the Healthcare Dive article, the new DOL requirements don’t require employees to clock in and out using punch cards or biometric time clocks. Simply having employees document their own hours (including overtime hours) is sufficient – however, a more exact time-tracking system may help your facility better allocate its resources.

Besides tracking the exact hours that employees work, it will also become more crucial for hospitals to track the types of duties certain employees perform.

Here’s why: The DOL has a “white collar” exemption to overtime, where hours spent on “executive, administrative or professional” duties aren’t subject to overtime pay. Some hospital employees – nurse supervisors for example – perform both administrative duties and nonexempt tasks, often during the same shift.

So to stay in compliance here, hospitals must be able to differentiate between the hours worked that count toward the overtime requirement, and those that don’t.

Ultimately, the DOL rules will make it more challenging for hospitals to strike a balance between staying within budget constraints and having adequate staff to handle each shift. That’s why being proactive and planning for these changes as soon as possible is essential.

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