On May 18, the White House announced its official revisions toU.S. overtime rules — a change that will expand overtime pay to 4.2million U.S. workers nationwide who were previously ineligible forovertime pay. Now comes the challenge of successfully navigatingthese changes.

Much of the attention around these rules is focused on theimpact on employees’ wages and the consequential labor costdecisions companies might undertake (such as cutting overtime hoursor bonus/incentive pay) to maintain their bottom lines. But, thesechanges will also have a huge influence on employee benefitspolicies and plan options as employers decide on their approachesto stay compliant with the new regulations.

Employers’ compliancy strategies (such as reclassifyingemployees) will greatly impact both the availability and the levelof various employee benefits policies and plans. And accurateemployee reporting and classification — hourly versus non-exemptsalaried, etc. — will be critical to ensuring employees receiveadequate benefits compensation related to changes in benefitslevels and new eligibility for certain benefits.

For example, some benefits, such as family and medical leave,are mandatory under federal or state law. However, other benefits,such as disability or dental insurance, are optional, so employersmight need to review who is entitled to certain bonus benefits —particularly with any reclassified employees.

If employers aren’t compliant or don’t provide the governmentmandated minimum of employee benefits compensation, they facecostly fines, penalties and lawsuits they may not be able toafford. It is estimated that employers could shell out as much as $874 millionto updatepayroll systems, convert salaried employees to hourly, and tracktheir hours if similar regulations were imposed. Employersneed to get educated on the new rules and decide how to bestnavigate compliancy, while revamping their current employeebenefits policies and plans.

Employers may currently have a set of benefit perks that aredifferent for exempt employees. For example, exempt employees mayaccrue more vacation time than their nonexempt counterparts. An employer will need to determine if they grandfather employeesand allow them to continue accruing time off at the current rate orwill they move them to a different, lower accruallevel? Or, will they use this as an opportunity to lookat the policies, and take a new approach to their time off plans tocreate plans that best fit their company culture?

To ensure compliancy, employers’ first step is to answer onecritical question: Can their organization afford to increase laborcosts?

Answering that question will determine the labor cost options anemployer has, influencing their flexibility in offering optionalemployee benefits policies and plans. Only then can employerscritically evaluate their current employee benefits policies andplans, including three essential preliminary steps:

1. Get educated. Business owners should review theovertime rules changes and create a smart FAQ resource to keepthemselves and stakeholders (HR leaders and/or management teams)educated on the specific changes.
   
   

2. Get organized. Develop a calendar of keydeadlines and a checklist of administrative and legalrequirementsaround the new rules (i.e., employee classificationchanges deadlines).
   
   

3. Take action. Plan now, but be thoughtful andthorough. The December 1, 2016 deadline might seem far away, butthe sooner employers get moving on adapting their policies, theless at risk they are for unexpected penalties and fines do toavoidable errors.
   
   

Once employers analyze the new rules and their current polices,they can identify holes in their employee benefits offerings anddevelop a strategy on how to fill the gaps around governmentmandates and adjust their optional benefits policies and planswhile managing costs.

For example, some employers might provide certain salaried staffwith a life insurance benefit based on a specific salarymultiplier, but provide hourly workers with a flat amount orlower multiplier. With the new changes, employers that pay thepremiums for these plans could experience added costs depending onthe company’s classification changes and adjustments.

But no matter what path to compliancy employers choose, it’sinherent they provide clear communication to employees while theymake business decisions around overtime rules, and changes tobenefits policy and compliancy.

Everyone needs to understand the new rules and whether itaffects them. Specifically, employees need to understand if and whythey are being reclassified, how that changes their role and how itaffects their pay. The regulatory environment is volatile and it’scrucial to provide effective, clear communication to employees onthe issues impacting them most, such as benefits eligibility andwage increases.