What New Overtime Rules Mean for Home Health Agencies

Monday, September 26, 2016


Anyone who works in a salaried position would probably tell you that doing so is a double-edged sword. While it’s nice to have a stable paycheck and have some flexibility in your working hours throughout the week while still earning the same amount, it can also be frustrating when you work significantly more than your scheduled 40 hours, but don’t receive any compensation for that time. 


Thanks to a new law passed in early June, that could all change for more than 4 million salaried workers. According to the new overtime salary exemption limits released by the Department of Labor on June 6, as of December 1, 2016, salaried employees who earn less than $47,476 per year will now qualify for overtime pay — 1.5 times their typical hourly labor rate — for all hours worked above the standard 40 in a workweek. This is a significant increase over the former exemption limit of $23,660 per year.


While many workers are happy about the changes, there is grave concern among employers in virtually every industry about how these new rules will affect their payroll and, ultimately, the bottom line. Opponents of the new rules note that not only does it have the potential to increase payroll expenses significantly, it could also lead to reduced hiring of managers and other skilled employees in favor of part-time workers who would not qualify for overtime.


From the perspective of employees, increasing overtime rules creates a significant burden on them, since they now have to account for their time and may lose some of the flexibility that salaried positions offer.


The new overtime rules will undoubtedly affect many businesses across the country. However, there is one industry that is going to be largely unaffected by the new rules: Health care, and specifically, home health care.


Limited Change for HHAs

While other recent decisions regarding minimum wage rules and overtime pay have had a significant effect on home health, this new rule about paying salaried employees overtime is most likely going to impact only a very small minority of HHAs. This is because the vast majority of home health employees earn hourly wages, and are not salaried employees. Among those employees who are salaried, many are management or executive level, and do not fall within the overtime threshold.


The reason that so few home health workers are salaried employers is due to reimbursement models. Health care providers are reimbursed at hourly rates, and therefore, employees are paid hourly rates as well. In many cases, even salaried employees must code their time for Medicare reimbursement, so that the agency can be appropriately reimbursed.


Planning for the Change

The DOL believes that all businesses will have adequate time to prepare for the new rules, given that it does not take effect for nearly six months. Home health agencies need to review their payroll now and make adjustments to avoid problems once the new rules go into effect. There are a number of ways to handle salaried employees should they qualify for overtime pay.


  1. Change all salaried employees to hourly employees. Some businesses are opting to handle the change by moving all employees to an hourly wage, rather than a salary. This does not eliminate the overtime requirement, but it does make the administration of pay easier. However, critics of this plan note that paying all employees hourly could have the effect of eliminating work schedule flexibility and comp time, and send the wrong message to employees about the potential for career growth and upward mobility.
  3. Requiring more tracking of employee time. Most HHAs with salaried employees are likely to begin requiring employees to track their time, and paying overtime pay when required. This does present a significant administrative burden to a small agency, but is viewed by many as the easiest and least disruptive means of meeting the requirement. A comprehensive agency management solution with mobile options can help keep this burden manageable.
  5. Increasing salaries. Some agencies with salaried employees who earn near the overtime threshold are opting to increase those workers’ salaries so they don’t qualify for overtime pay.
  7. Restricting overtime work. Finally, most agencies are enacting new policies that severely restrict or prohibit salaried workers from working more than their contracted number of hours. This is often done in conjunction with the increased tracking of time.


Currently, the overtime exemption threshold is scheduled to increase every three years, meaning that even if employers increase employee salaries or change salaried workers to hourly, they may still be required to pay overtime to those individuals in the future. However, many experts point out that these new rules are good for workers, as they ensure adequate compensation for those who work long hours, and are more likely to be taken advantage of due to their salaried status. How it truly affects employers remains to be seen.


If you are looking for tools to better manage your agency and your employee’s time, check out Complia Health's resources and learn more about our unique solutions for agency management.