Seven Steps to Maximize Resource Flexibility and Minimize Cost

In 2009, I published an article on Mainstreet.com discussing how to maximize resource flexibility through contracted services. With the recent and ongoing changes in overtime rules, minimum wage rates, IRS rulings on joint employment relationships, and employee classification criteria, it is time to revisit the topic.

The Workforce Dilemma

Companies of all sizes have historically relied on their workforce to remain competitive. However, rising compensation and benefit costs have created a dilemma: businesses struggle to afford full-time, permanent employees. Competing in today’s market requires agility, but it also demands strategic financial planning. The challenge has intensified with new overtime eligibility rules—managers earning less than $55,068 (effective as of 2024) are now eligible for overtime pay. This shift has transformed workforce planning into a complex equation balancing financial affordability, capacity, and customer service.

Optimizing Your Business

You must balance resource availability and financial feasibility to sustain and grow your business. How can companies scale up, seize opportunities, and value employees while maintaining financial stability?

Navigating Regulations and Compliance

In my original article (available here), I emphasized the importance of balancing the workforce with contracted services, particularly for roles that are not required daily. This advice remains relevant, but businesses must now carefully follow classification rules that distinguish between independent contractors and employees. Proper classification is essential when engaging specialized experts without requiring full-time employment.

The majority of workloads, however, will be handled by employees—the backbone of any organization. Staffing for optimal customer service is a top priority. Below are five key areas that influence workforce planning:

Key Workforce Considerations

• Minimum Wage Increases – Ensuring compliance with evolving wage laws.
• Overtime Eligibility Changes – Effective July 1, 2024, impacting employee compensation.
• Affordable Healthcare Act – Addressing full-time equivalent (FTE) designations and joint employment.
• IRS Joint Employment Rulings – Understanding regulatory impacts on employment relationships.
• Employee vs. Independent Contractor Classification – Ensuring compliance with IRS and labor laws.
• Family and Medical Leave Act (FMLA) – Ensuring compliance with federal and state-specific leave requirements.
• State-Specific Employment Laws – Monitoring unique state requirements such as predictive scheduling laws, paid family leave mandates, and local minimum wage differences.
• Pay Transparency and Equity Laws – Complying with laws requiring disclosure of salary ranges and fair pay practices to address wage disparities.

Documentation is Key: Documenting workforce analyses, classifications, and compliance strategies is critical. Proper documentation supports decision-making and regulatory adherence. Businesses should proactively seek expert guidance to optimize workforce strategies and ensure compliance.

Seven Critical Steps for Business Success

1. Assess Business Needs and Staffing – Go beyond job titles to analyze duties, salaries, and classifications. (Refer to my podcast and article on Overtime Rule changes.)
2. Review Employee Classifications – Verify whether employees are correctly classified as exempt from overtime and ensure independent contractors meet IRS criteria (IRS classification test).
3. Identify Affected Employees – Determine which employees will be impacted by regulatory changes, starting with overtime eligibility.
4. Analyze Financial Impact – Calculate costs associated with compliance without modifying business operations. Establish an apples-to-apples comparison before implementing changes.
5. Develop Strategic Workforce Scenarios:
   • Scenario 1: Maintain status quo and absorb cost increases.
   • Scenario 2: Adjust salaries to maintain exempt status where possible.
   • Scenario 3: Align salaries and responsibilities to meet new thresholds.
   • Scenario 4: Modify workloads and staffing to reduce overtime expenses.
   • Scenario 5: Implement a hybrid strategy balancing salary adjustments, workload redistribution, and new hiring.
6. Establish an Annual Review Process – Regularly assess workforce structure, salaries, and compliance to ensure ongoing alignment with regulations. Please note that overtime salary thresholds are revised every three years.
7. Stay Informed on Regulatory Changes – Monitor labor, tax, and compliance regulations to facilitate proactive business planning.

By following these steps, businesses can optimize workforce management while maintaining financial stability and compliance.