Hiring new employees would be a complicated process even if there weren’t any laws involved, but your insurance clients must comply with the Fair Labor Standards Act. This law requires them to designate their employees as exempt or nonexempt so that their workers receive any overtime to which they are entitled. The next time you meet with clients to discuss staffing liability insurance, share this information about determining exemption statuses with them.
Which Employees Are Nonexempt?
The key to how to classify exempt versus nonexempt employees is whether they are paid hourly. Your clients’ workers are nonexempt if they receive minimum wage and 1.5 times their usual wage for overtime. Depending on where your clients work, there may be additional laws governing when they must offer overtime and how much they must pay. Still, if their workers qualify for both minimum wage and overtime, they are nonexempt.
Which Employees Are Exempt?
Exempt employees, on the other hand, receive salaries instead of hourly wages. Because their salaries are fixed for the year and disbursed regularly, exempt employees are not eligible for overtime. Their salaries must be equivalent to $455 a week or more, though, or else they may be eligible for overtime.
Most exempt employees have more responsibilities than nonexempt employees. Usually, their jobs require training or education, and they oversee at least two other workers.
When Do Employers Need to Offer Overtime?
Your staffing liability insurance clients must follow the FLSA’s guidance for overtime. Generally, if nonsalaried employees work more than 40 hours in a single week, they should receive 1.5 times their usual pay for any hours they work past 40. For example, if a nonexempt employee worked 45 hours at $11 per hour, he or she would receive $440 in regular wages and $82.5 in overtime pay for the five extra hours.
Previously, exempt employees could not receive any compensation for overtime. The U.S. Department of Labor changed its regulations in 2020, though, allowing employers to use bonuses to make up for workweeks greater than 40 hours.
Which Is Better?
Whether it’s better for your clients to have exempt or nonexempt employees varies depending on their budgets, schedules, and staff sizes. Nonexempt employees have much more flexibility because they can work a lot but aren’t entitled to a set number of hours. On the other hand, once they work more than 40 hours, your clients have to pay them more money.
Exempt employees aren’t entitled to overtime, saving your clients money, but they usually have to work regular schedules. Also, they’re eligible for health insurance and other benefits, which is another cost for your staffing insurance liability clients. Ultimately, what’s most important is that your clients understand the different classifications and use them correctly.
About World Wide Specialty Programs
For the last 50 years, World Wide Specialty Programs has dedicated itself to providing the optimal products and solutions for the staffing industry. As the only insurance firm to be an ASA commercial liability partner, we are committed to that partnership and committed to using our knowledge of the industry to provide staffing firms with the best possible coverage. For more information about Staffing Professional Liability Insurance or any other coverage, we have available to protect your staffing business, give us a call at (877) 256-0468 to speak with one of our representatives.