Household Employee Overtime: Change Coming
May 18, 2016
Household employee overtime rules are commonly misunderstood, and often just plain ignored. The vast majority of household employees – nannies, senior caregivers, housekeepers, etc. – are classified as non-exempt (NOT exempt from overtime rules) employees. These household employees must be paid overtime.
However some more skilled household employees – estate managers, head housekeeper or house managers for example – may be considered exempt or hourly employees. This classification is largely depended on the actual work performed and not on the employee’s title. This is where the change is coming!
Salaried employees are paid the same amount every work week regardless of the actual number of days worked or actual hours worked. The primary work performed by a salaried household employee must be supervision, not actually doing (there is an 80/20 rule used in this determination). Today, in general a salaried household employee who is paid $23, 600 per year or more (last updated in 2004) AND has a span of control over two or more employeesAND whose time is primarily spend in supervisory activities may be considered exempt from the FLSA’s overtime rules.
New Household Employee Overtime Rules
Changes are coming, however, and now is the time to prepare. In March 2014 President Obama signed an executive memorandum instructing the U.S. Department of Labor to review the standards defining a salaried, exempt employee. The US DOL has published proposed rules changes in July 2015 that are widely expected to become effective in 2016.
The key change for household employment is the implementation of a formula that sets the minimum annual salary for an exempt (salaried) worker that keeps up with inflation without the need for rules changes. This formula, when adopted, will increase the minimum weekly salary in 2016 to $913 or $47,476 annually. In 2016, a salaried household employee earning between $47,476 and $134,004 annually must meet the supervision tests described above to retain the exemption from overtime. It is assumed that highly compensated employees earning $134,004 or more per year and who “customarily and regularly” perform one of the exempt duties of an administrative, executive or professional employee are generally exempt. The duties requirement is relaxed because a high level of compensation is a strong indicator that an employee is exempt.
When the rule becomes effective December 1, 2016, all household employees who are paid less than $47,476(2016) no matter their duties are hourly employees entitled to overtime.
Kathleen (Kathy) WebbPresident of HomeWork Solutions, Inc. | Household Payroll & Employment Tax
Reposted from Facebook
In 1981, I was a young single mother of two active sons. A few years earlier, I completed a degree in Community Services Development with a minor in Writing. In those days, what I had to offer was in demand. However, every time I submitted my resume for a position in my field, I walked away from the interview knowing that there was something else I was to do. I was at a crossroads in my life without direction. Money began to run short. I was forced to find something to pay my bills. One of my friends suggested that I go with her to her husband’s small construction work site. He was paying people $50 per hour to take plaster and other debris off of newly installed windows. The work was hard, but I liked it and was desperate to do something.
Inspired, I decided to see what other cleaning or housekeeping work I could find to keep me going. I put an ad in our local paper, and within two weeks was earning enough to make me take a second look at what I had uncovered. I charged twice as much as anyone typically paid. Clients did not mind as I was not the typical domestic arriving at their door. Within days, I had people answering my ad who wanted me to find them housekeeping work. Surprisingly, I also learned that some callers were seeking girls for less than desirable work. The code was always, “I understand you cook”! I grew wise in my choice of words, and made it clear that only housekeeping was for sale. I interviewed multiple potential housekeepers to work with me at “Starkey and Associates, Inc.” Most people who answered my call for more qualified housekeepers were 60 plus years old, had been housekeeping for 25 years, and were tired. I had a different sort of person in mind. I was looking for “Quick, bright, educated professionals, who had good self-esteem, were trained in housekeeping, and saw themselves as professionals. These people were few and far between. There was a great deal of work to do in this industry, and I felt I was the person to do it.
Homes we served were typically 1 to 3,000 square feet, with average standards. Clients appreciated our coming every week at the same time, and completing the cleaning basics. My associates expected to stay from 3-6 hours depending upon the contracted agreement, and used their cleaning supplies. The model quickly became very popular. Within one year, I had 30 women working with me, serving over 300 clients.
One day, a client contracted for only her kitchen to be cleaned, and allotted 6 hours. It was beyond dirty! My scheduled associate woke up with a terrible cold, so I did the cleaning myself. At the end of the 6 hours, you could eat off the floor. I had cleaned out the pantry of all foods older than 2 years, scrubbed the floor on my hands and knees, and cleaned the stove until it shined. The client arrived home, fired me and refused to pay. Her idea of clean and mine were not the same. She was a hoarder and I had disrupted her world. It was another lesson learned.
Today’s housekeeping world is not much different. The average rate per hour is higher at $25, but the way people enter the housekeeping world is not.
I learned that housekeeping for each HNW employer is different. They typically follow what their Moms taught them. Cleaning for each client is unique, and it is the housekeeper’s task to learn each vision.
I began to develop ways of asking how they wanted tasks performed, and end results. I also learned which clients did not know what they wanted, and they were the ones who were much more difficult to please. Most importantly, I learned that of the close to 500 different homes I had visited, not one client wanted their home cleaned in the same way! I learned I needed to teach them process and procedures. Household Managers must do this to teach priorities and expectations. If this is not done, Housekeepers in today’s world think robotically and clean the same rooms daily, whether it is needed or not! They also have no knowledge of the care of fine collectibles, often ruining works of art worth millions.
It all taught me about the required business and accounting principles and insurance necessary to protect me, how to lead and manage people, time management, and about employees’ motives in serving others. It taught me about clients, and those I choose to serve. I learned that as a Housekeeping Baseline, it takes 4 hours to clean 2,000 square feet if cleaned on a weekly basis with average cleaning standards. It all prepared me for what was to come.
These simple changes in my growing business model made us very popular for our high quality of work. My parents were embarrassed that I was, in their mind, a cleaning lady, but I didn’t care because I was making very good money and learning how I loved to make a difference. I also learned that I personally loved cleaning. It felt healing to me. Maybe as I cleaned for others, I was also cleansing my inner soul. Starkey and Associates, Inc., my housekeeping company, lasted over 17 years, until I had eventually grown my abilities and company to what it is today: Starkey International Institute for Household Management, Inc. Starkey trains Professional Housekeepers about etiquette, surfaces, products, rotational needs and timing directly in homes and we’re experts at it! I found my path in life; it has been indeed a gifted journey. -Mary Louise Starkey