June 2016 Newsletter
Construction Economy Forecast: Consumer confidence UP, unemployment LOW, and unpredictable weather in Trump-ville?!
- Kinda, sorta better? – The CMD Group’s Construction Economy Forecast “nuggets”
- Work smarter + faster – the awesome Save 5/10/15/20% on Users & Modules sale
- TUG 2016 recap and 2017 location announcement
- Tony’s pick for June: Swizznet for cloud hosting
- Toss out those old baby shoes! FREE Sage 100 Lunch & Learn in SLC at the Ruby River Steakhouse
- CRM is NOT your Mama’s address book!
- Epic 100 + 300 Tips and Tricks: Ransomware true horror story, the new OT law for salaried employees, and dance lessons for Sage 100!
The Construction Economic Forecast Presentation Recap
As is their custom, the CMD Group and iSqFt hosted their bi-annual construction economy outlook including Alex Carrick, North American Chief Economist, CMD; Kermit Baker, Chief Economist, American Institute of Architects; and Ken Simonson, Chief Economist, AGC of America. In May’s presentation entitled, “Is Construction Gaining or Waning?” the three pundits weighed in on economic statistics, market conditions, and growth trends in the industry.
As is our custom, we plucked a few nuggets that we feel are worth your attention. Full presentation slides are available here (registration may be required). The 90 minute recorded version can be viewed here.
Overview of the Broader Economy
Starting off on a positive note, Kermit Baker addressed “Factors Influencing the 2016/17 Outlook for the U.S. Construction Industry” and shared his optimism for the current state of the economy:
- Manufacturing sector is weak; commodities markets (energy, agriculture, many building materials) facing deflationary conditions
- International economic slowdown underway (China, Europe; S. America), which, coupled with strong dollar, will dampen U.S. export growth
- Construction sector recovery and expansion facing some challenges:
- tight labor market in construction trades may hinder activity
- volatility in building commodity prices create construction cost uncertainty
- rising cost of capital likely to pressure multifamily, commercial property values
As we all know, the rental market continues to be strong in the form of multi-family and multi-purpose construction; and Baker proved that renter household growth has surpassed the pace in any other decade (as far back as the 1950’s).
Construction Spending and Employment
Next up to bat, was Ken Simonson of AGC America. Mr. Simonson showed further proof that Multifamily (MF) continues to exceed Single Family (SF) spending over the last five years.
Simonson’s forecast for 2016 residential spending comes in at 5-9%, while MF should continue the upturn at 8-12% growth.
As far as market areas that hiring construction help, the news is mostly good. Whereas this map was mostly red two years ago, the trend to green (employment up) is encouraging.
By now, we’ve all heard about the construction labor shortage. AGC surveyed their base and revealed the shortage by craft/and roles:
What’s more interesting, is how companies are adjusting for this difficulty. It’s been anecdotally reported that workers are working off current jobs, lured by other contractors with higher pay rates and bonuses. This could prove to be quite disruptive for construction deadlines and create competitive ill-will.
Labor Market Overview
Last up to bat, Alex Carrick, Chief Economist for CMD Group and Canadian-at-large, Mr. Carrick took a look at the big picture for employment, labor and building starts.
Nothing is quite as dramatic as charts showing trends, and this economy overview shows the contrast of the Recession to now (below). While general employment (upper left) has surpassed pre-recession peak, construction employment isn’t as high as it was in 2006; it’s actually much lower than the overall labor improvement. Mr. Carrick touches on the political bone of contention – that the total employment participation rate has dropped from 67% to 62.5% – which represents a potential 7 million people who are out of work.
While at first glance, this looks like a strong recovery, the stock market has had a “choppy’ year.
Mr. Carrick went on to share U.S. Census Bureau housing starts by MF, SSF, and geographical regions, each showing continuing upward predictions. He also examined construction starts by segments (hotel/motel, retail/shopping, private office building, transportation terminals, and industrial/manufacturing) — which were forecasted as slow, gradual growths into the year 2020.
He made a good point that this chart (showing YOY change versus current change): that all the red checkmarks showing “slowing down” does not necessarily mean negative change; rather that the rate of increase is not as fast.
All in all, it’s a mixed bag, with residential, power, highway and street, and sewage and waste showing the most promise in the year to come.
Q & A Session
Some cheeky soul inquired whether the Warehouse segment construction would increase due to marijuana legalization. Mr. Simonson responded, “yes” but also included the need for personal storage due to multi-family facility increase (decrease in on-site storage).
$50,000 Question – “Will there be a Recession?”
What is the likelihood of a recession in the next few years? Responses:
- Kermit Baker: reports “bettors” are saying a 25% chance in the next 12 months, but more likely to happen in 2019.
- Ken Simonson: Recessions are caused by three significant imbalances in the economy – so it’s unlikely.
- Alex Carrick: Optimistic on the US economy (labor markets good); but outside the country (i.e, China is racking up huge debt) there are conditions which affects the banking sector. However, the hardships the energy sector is experiencing at home could “spill over” to the banking sector – and shouldn’t tip the scales. BUT significant changes to the banking world are extraneous things to consider. Lastly – the political elephant in the room. Negative chatter about the economy and post-election changes to trade deals for example, historically been proven to be economic factors.
The Trump of All Questions
With so many issues that Trump opines about- a major tax overhaul, deportation of immigrants, the repeal of Obamacare – what’s in store for construction under a Trump presidency? All three of our economists seem a bit stumped by Trump.
- Carrick: Impossible to predict if Trump will do what he says. In the case of building a wall (paid for by Mexico) – Carrick says you would have to enforce trade sanctions, which causes trade wars. Which is not good for the economy. Or construction.
- Simonson: Companies will hold back on investments due to uncertainty.
- Baker: Uncertainty is the answer of the day. Historically, the economy does better in first half of the election year, after the decision has been cast for president.
Special Thanks to CMD Group
Shout out to CMD Group, who repeatedly allows us to share nuggets of these seasonal reports on the Construction economy.
Please note that CDM group has merged with three other legacy companies to form “ConstructConnect.” Follow them on twitter at @ConstructConnx and visit their website at http://www.constructconnect.com/.
Work Smarter + Faster. Not Harder!
The More You Buy, the More You Save!
Need to add more users to work more efficiently? Been waiting to add a module to expand your Sage accounting power? Now’s the time to buy in bulk and really save. Some restrictions apply.
Click HERE to see a partial list of what you can choose from! Or call us directly at 480-423-8300 to order. Expires June 30th.
2016 TUG National Users Conference — a Huge Success!
Guest post by TUG Executive Director, Nikki Augsburger
Attendance Up in AZ
Last month, 740 users of Sage 300 Construction and Real Estate, Sage 100 Contractor and Sage Estimating software converged at the Sheraton Wild Horse Pass Resort in Chandler, Arizona for the 2016 TUG National Users Conference (that’s an 11% increase over last year). Hosted by TUG, The Users Group for Sage 300 Construction and Real Estate, Sage 100 Contractor & Sage Estimating, the National Conference offers 4 days of learning, collaboration, networking and fun.
With 250 different sessions, more than 50% of which featured hands-on computer labs, attendees were able to learn about the software from fellow users and consultants as well as from Sage
directly through a variety of sessions including a Sage roadmap for each product. Attendees were also able to explore a variety of 3rd party solutions in the exhibit hall and even take a more in-depth look at some of these products during one of the vendor-sponsored sessions.
Of course, what would a conference be without the opportunity to kick back and have some fun with friends, new and old? This year, the Annual TUG Party is one attendees will be talking about for a long time, complete with live band karaoke, cowboy-style games, an old-time photo booth and two special guests (Corona and Oscar – “beer burros” who were dressed for the occasion!)
TUG 2017 – City of Lakes
Next year promises even more learning and networking opportunities and a chance to get out and explore a vibrant city as the 2017 TUG National Users Conference heads to downtown Minneapolis, MN at the Hyatt Regency Minneapolis next May 8-11, 2017. Hope to see you there!
A former construction contract specialist and Sage 300 CRE user, Tony does what most Sage resellers don’t: he demos the products himself (most Sage Business Partners rely on Sage sales engineers to do the deep dives). Why? Because Tony’s industry experience includes accounting, project management, and estimating — which mean he RELATES to your construction business needs.
The following product(s) are what Tony thinks are the best-in-class, are new launches to the market, or are just particularly great performers.
Hosting Sage 300 CRE in the Cloud
Why Swizznet? Tony describes his experience as a Sage BP, searching for the best solution to offer our Sage clients:
Over the past several years I have had the opportunity to work with numerous application hosting providers to aide our construction clients with their desire to move away from in-house IT and add remote access beyond typical means. It had been my experience that as we worked more and more with those providers, much like peeling back the layers of an onion, we were discovering deficiencies within either the infrastructure, client support, or technical assistance forcing us to move to yet another provider and recommend to our clients that they upend their business applications to migrate to the new provider. This obviously tarnished and ruined many of our client relationships. While it’s understandable that we would recommend them changing providers, it is not acceptable from any business partnership. As the co-owner and Vice President of Ledgerwood Associates, it became my goal, my mission, to find a hosting provider that is as committed to our clients as we are.
July 2015, while attending an event in New Orleans, I was introduced to Swizznet. Naturally, after more than a year into my endeavor to find the ONE hosting provider, I was hesitant, skeptical, and frankly tired of hearing the same sales pitch. From the first sentence of our conversation, I could tell, could feel, that something was different. Following the event, and after several months of discussions, presentations, and well contemplated decisions, we executed the partnership agreement.
I am happy to proclaim that with each conversation, transaction, and collaboration we have had with Swizznet, our experience has been nothing short of exemplary. Starting with best of breed hardware and software following right through onboarding and support, Swizznet’s entire team and business model continues to impress not only myself and our organization of technical consultants, but has exceeded our customer’s expectations monumentally. Email Tony or call 480-423-8300 to pick his brain or set up a demo!
Sage 100 Lunch & Learn in Salt Lake City
Let’s face it, QuickBooks Contractor is great for a small startup company; it shows the expected financials and has an easy learning curve. However, it was NOT designed with job-specific financial information that contractors, specialty contractors, subcontractors, GCs and commercial or residential builders need most. The focus of Sage 100 (formerly MasterBuilder) is based around THE JOB.
Kick off the Baby Shoes!
Sage 100 CON can do what QB can’t:
- Profit versus Cost on each individual Work Order
- Retention in AR invoice aging
- Detailed Change Order management
- Tracking of committed Job Costs
- AIA G702 703 Billing
Join us on Thursday, July 19, 2016 for a look at Sage 100 Contractor!
11:30 am – 1:00 p.m. MST | Ruby River Steakhouse | 435 South 700 East | SLC, Utah 84102
CRM is NOT an Address Book!
In the “old days” many of our clients thought of CRM as a centralized address book, where sales people enter their contacts. There was an ‘implied’ business need for the software: the risk of a salesperson’s Rolodex walking out the door. CRM does “store” contacts, but it transforms that data (and much more) into “relationship management.”
Answer and/or Solution
If a contact directory is all you need, stick to Outlook. BUT if you want to engage in business development, manage bids, monitor customer service, and build a pipeline of new and repeat business, CRM is your answer. If you aspire to outbound marketing with automated emails and Social Media integration, CRM is your solution! The difference is YOUR commitment. Do you simply want business intelligence, or do you want to do something WITH the business intelligence? CRM can do it all (and both reasons are still GOOD)!
Breaking it Down
Getting several departments to buy in and actually use a CRM system can be tough. Let’s break it down by functionality/benefits:
- Communication and process efficiency: CRM can streamline how you communicate internally as well as how you engage with customers. Contact info, appointments, tasks, opportunities, workflows – these simple business operations are most valuable when shared across the company – and they become company assets. CRM can also automate tasks, eliminate redundant information entries, and utilize templates for bids, contracts, service calls, etc.
- Business growth and sustainability: CRM can help acquire new business, create pipelines, report on productivity, perform fully integrated marketing campaigns…it is an integral tool from cradle to grave for pre-sales through customer service.
- Business visibility: Most CRM systems come with scores of reports (by department or roles), and the capability to customize and save. They usually include configurable dashboards and widgets that can display KPIs and financial health.
Implement an “Intentional” Success
The old saw that a software implementation needs “executive buy-in” holds water. A successful CRM system can be a catalyst for key organizational improvements, and the people at the top need to do more than just approve the budget. They need to communicate the value to the entire corporate team, by adopting and evangelizing the potential of the system. By choosing a CRM system that is quick to implement and easy for employees to learn – will help the company to realize the ROI on the investment at an early stage.
Sage CRM for Construction
With all the business benefits we’ve demonstrated, we’ve left an elephant in the room: Accounting. Great news for our LAI clients – Sage CRM now integrates with Sage 300 CRE. The CRM integration automatically synchronizes your Sage 300 Construction and Real Estate information from Address Book, Payroll, Service Management and Property Management seamlessly through to the Company and People tables within CRM.
Want to see Sage CRM in action? Click below, for a free demo.
Follow LAI on Social Media for immediate construction and technology news!
Twitter | Facebook | LinkedIn LAI Page | LAI Sage 300 CRE Users Group
Upcoming LAI Online Training and Networking Events:
It’s time to move your time entry to the cloud!
Join LAI and hh2 in this hour-long, live session to learn how to ditch obsolete pen & paper or excel spreadsheets and make timekeeping accessible from anywhere, anytime, on any connected device (phone, tablet, etc.).
Integrates with both Sage 300 CRE and Sage 100 CON
hh2 Remote Payroll streamlines and automates gathering, approving, and reporting job costed payroll data from remote job sites while syncing seamlessly with your Sage 300 CRE or Sage 100 CON accounting system. In addition to hh2 Remote Payroll, we will be covering reporting from the field and collecting your pay stubs.
hh2 Remote Payroll was created from the ground up as a cloud-based solution and has been tackling almost every conceivable problem that you could encounter from the field for over 14 years.
hh2 Remote Payroll simplifies the time entry process for employees and equipment, giving your employees time to focus on the areas of their job where they really excel.
With a full-featured website and apps designed to work with iOS and Android platforms, you can enter your time from anywhere at any time.
hh2 Remote Payroll is highly customizable to fit all your time entry needs and it seamlessly syncs from the cloud with Sage 300 Construction and Real Estate and Sage 100 Contractor.
After registering you will receive a confirmation email containing information about joining the training.
The Excel Conundrum
Sage Office Connector webinar
Excel is arguably the most widely used business application software on the planet. So why do advocates prefer to use it? Why do naysayers argue against using it?
Join us for this informative session and discover how Sage Office Connector can transform Excel, increasing how useful it is to your business while eliminating arguments against your use of easy to use yet immensely powerful technology.
We will show you how Sage Office Connector can streamline your reporting and analysis, improve the way you share vital business information and significantly enhance manual processes that may be tedious and prone to error. You will not only save hours of time preparing the Excel workbooks you currently rely upon, but you will also begin to see why thousands of Sage customers and tens of thousands of your peers utilize this powerful yet affordable technology to improve the way they use and share information.
What we’ll cover:
- Excel-based reporting
- Analysis and process enhancement
Join us for an informative presentation of the top reporting tool available for Sage Estimating, SQL Edition.
Learn how to:
- Create itemized proposals in Excel
- Explore your spreadsheet
- Create a summary of your group cost codes
- Drill into the details including subcontractor and supplier details
- View interactive estimate
- Excel-based view of the estimate sheet for Sage Estimating
- Utilize Excel capability for functions, filter, sort, subtotal, copy/paste and more
In addition to the reports on the Liberty Reports LaunchPad, learn how you can design your own Excel-based report.
Sage is excited to announce “Buyout for SQL Estimating.”
See how the new Buyout module works allowing you to “buyout” your estimate to different vendors and then create Purchase Orders and Subcontracts for those items.
Event 1 Webinar
The construction season is fast approaching!
Join us for this informative presentation and learn how you can gain greater control over your projects, better communication between the field and office and higher confidence from your Surety by creating integrated project cost forecasting that backs up your Work in Progress reporting using Sage Office Connector.
Shall We Dance?
A few years ago I took a few dance lessons. I learned some things about dancing, but I also learned a few lessons about “moving gracefully” in general. There really is a noticeable difference when you know what you are doing.
We can apply this concept to the way you navigate in Sage 100 Contractor. As I watch clients I can see that some are “dancers” and some have not yet learned the moves.
From setting defaults to using function keys, here are some ways you can look like a pro.
Use defaults to save time and effort.
Make life a little easier!
Hide or skip fields you do not need.
Right click in the grid and choose “Show/Hide Columns”. In the box that pops up you can check or uncheck boxes. NOTE- if you want these changes to be “permanent”, right-click again and select “Save Current Grid View.” This selection is USER SPECIFIC- what you do here only affects your own view.
If there are “non-grid” fields that are not used, the “Supervisor” can use the F7 field properties to “skip this field.” As users are entering data the field will be skipped. It is still available for entry if needed, so feel free to skip fields that are only used occasionally (example- the “reference” box on the AP invoice screen). This selection affects ALL USERS.
Move through the grid the way you want.
Did you know you can choose to have your cursor move to either the right or move downward when you press enter in most grids? Simply right-click in the grid and choose- the option will be at the bottom of the box that pops up. This selection is also USER SPECIFIC.
Set data entry defaults.
The “Supervisor” can use the F7 key to set a default value for a field. These choices affect ALL USERS. Common examples include setting invoice numbers to default to the “Next” number and defaulting date fields to the current date.
Use defaults to make report printing easier.
If you find yourself making the same selection for a particular report, or selecting the same report criteria over and over again you can stop this insanity by setting report defaults. There are two types of defaults here. One allows you to set a “default report”- when you enter a report printing menu your selected report will already be chosen. The other allows you to set up the report criteria (such as sorting by vendor in an AP invoice report) and save those selections.
Use Function Keys for smoother moves.
You are probably aware of the Function Keys and how these shortcuts can save time. But you may be able to refine your usage of these to get even more benefit.
F2- this key brings up a calendar. But, did you know that you can use it to smoothly insert a date into a field? With your cursor in any date field press the F2 key. Find your date, double click onit and that date will be inserted into your entry screen. While you are in the calendar screen, you can use the blue arrows in the upper left hand corner to easily move from month to month (the double blue arrows shown below).
F3- The calculator is well known, but did you know you can use this function to “do the math” and easily insert the result into the field? With your cursor in any numeric value field simply “do the math”- as soon as you press an operator (+,-,* or /) the calculator pops up. Finish the math then press the Enter key ON YOUR KEYBOARD twice- once displays the answer, the second will insert the result into your screen. This not only saves time, but will also reduce errors from manually typing an answer into the box after calculating elsewhere.
F4- This is one of my favorite shortcuts. You can use this to search for items in the lookup window. Type a few characters then press F4- the lookup window will be filtered to match what you typed. Going a step further- and this is what I love most- if you add an asterisk (*) then press F4, the resulting lookup window will include any matches that CONTAIN the character string you typed.
F5- Brings up the whole lookup window. Remember that the list can be sorted by any field that has an arrow in the header. So, the list below could be sorted alphabetically, or by vendor number depending on which arrow is selected (blue).
F6- This shortcut will open the screen where an item is actually set up. For example, if you are entering a part in a Purchase Order and want to “drill down” to see the part detail, F6 is an easy way to do it.
F8- this key will open the lookup window in a PICK LIST mode. You can select multiple items and populate your screen with all of them at once. This is handy in the Budget screen to select multiple cost codes. As items are selected they turn “red” so you can easily see what you have chosen.
F9- I find the F9 key to be misunderstood and underused. This key can be used to locate a record based on the chosen field, you can then “scroll through” the record based on that field. An example- in the AP invoice screen I want to scroll through all of the invoices for a particular vendor. Type the vendor into the field and press F9. The first “match” will appear. Then to scroll and find invoices for that vendor press the “Page Down” key on the keyboard.
The Desktop Can Make Life Easier.
If you are not customizing and using your desktop, you are missing an opportunity to make life easier. It is not necessary to use ALL of the tabs- you can customize any of the tabs, or put everything you want on the Home and Resources tab. You can add icons for your favorite menu options as well as favorite reports. It is possible to rename the icons, move them and draw lines and boxes to create a visual of your workflow.
To choose which of the desktop tabs (Activity Centers) appear, press the “settings” button in the lower left hand corner of the main screen. You can then check or uncheck the items that will be visible.
To access the Edit menu for the desktop, see the small blue button at the bottom of the screen. This opens a menu that allows you to add menu items to the desktop, move them, rename them and draw lines or boxes around them.
There is another option for adding your favorite reports to the desktop. Navigate to the report, then press the “Create Shortcut” button at the top of the screen. A drop down will appear allowing you to choose which Activity Center you wish to add the report to.
Finally, some people like the desktop so much that they want to hide the regular menu. To do this, simply press the “Hide Menu” button at the lower left hand corner of the screen:
Two to Tango
So, how did my dancing efforts turn out? Let’s focus on YOU moving through Sage 100 Contractor more effortlessly…
More about Sage 100 Contractor here. Call Ledgerwood Associates at 877-918-8301 today and we’ll match your needs to the best solution.
Ransomware: A Horror Story!
Submitted by Kyle Zeigler, Sage Senior Certified Consultant
“Da-dum, da-dum.” (Jaws theme)
This was the beginning line of an email I received at 5:44 a.m. Monday morning. The sender of the email is a controller for a company that has a number of remote employees. To access their company network, users log into a terminal server where they can launch Sage 300 CRE, check email, and work with other programs and files. It didn’t take long to determine that the network had been infected with a ransomware virus – a potentially catastrophic event and truly scary situation. Three days later, this client’s network is still down.
With ransomware viruses, software files are encrypted by the virus and users with no adequate backups must either sacrifice their data or pay to have their files unencrypted. If they choose to pay, it’s typically expensive and demands for payment don’t stop – it’s a multibillion dollar business for the hackers that produce these viruses!
Most IT people agree that their top priority is the protection of their employer’s software systems and data. This becomes more challenging when remote users have the ability to access email, browse the internet, and download files onto the company’s network. The ransomware virus that affected this client encrypted most of the Sage system files, as well as Excel, Word, .PDF, and other commonly used files. The client’s outsourced IT provider obtains nightly “snapshot” images of the application and data servers, but has had great difficulty restoring the images to the server.
The lessons learned from this situation are:
- Test your backup recovery process! It should not have taken 3 hours, let alone 3 days, to get this client back up and running. Backup recovery should be tested as least once a year, if not more often. Once a backup is restored, thoroughly test your ability to use the restored Sage system in all applications
- If users must access email while logged into a server using RDP (remote desktop protocol), instruct them to avoid browsing the internet on the company server, and avoid clicking on links or opening attachments or emails from people they don’t know or companies you don’t do business with. This is a best practice no matter what computer is being used!
- Make sure your antivirus and antimalware software is up-to-date.
- Ensure you have smart screen (in Internet Explorer) turned on.
- Have a pop-up blocker running in your web browser.
Backups are the Antidote!!
Because this client’s Sage system files were corrupted by the ransomware virus, a re-installation of the software will be performed. Had a backup of the system files not been available, this client would have lost all of their company’s software customizations. For the best possible protection, copy the 9.5 folder (\\[servername]\Timberline Office\9.5) to a secure location outside of your network (like on a thumb drive or other external hard drive). Also use Sage File Tools to back up your entire data folder(s) to the same external location on a regular basis. With these files in an easily accessible location, in a worst-case scenario where a server becomes unusable, the software can be installed on another server, local PC, or even a laptop, and users can be back up and running in a couple of hours. And you save the horror stories for Halloween!
If you need helping installing an update or upgrade, one of our skilled consultants at Ledgerwood Associates would be happy to assist you. Call us at 480-423-8300, and ask for Carolyn!
New Overtime Rules: What it Means to YOU
Salaried Employees Become Eligible for OT on December 1st
A change in the rules governing overtime has been coming for two years, with a sneak preview of proposed modifications last year. But on May 18, the Department of Labor (DOL) came out with its new final rules, which take effect on December 1, 2016. The rules will significantly raise the salary level used to determine whether employees are eligible for overtime and will affect more than 4 million salaried employees, according to the DOL.
The Obama administration’s goal was to reset the income threshold to the point it would have reached, with period inflation adjustments, had it not been frozen more than a decade ago.
Under the new rule, the wage threshold test is more than doubling from today’s $23,660 ($455 per week) to $47,476 ($913 per week). The limit will be adjusted every three years beginning January 1, 2020. Employees earning less than $47,476, regardless of their job responsibilities, are deemed non-exempt, and therefore entitled to overtime pay.
Exempt or Non-exempt?
Unless specifically exempted, employees covered by the Fair Labor Standards Act must receive pay for hours worked in excess of 40 in a workweek at a rate of not less than one and one-half of their regular rates of pay. Not only will employers have to pay the overtime, they’ll also be liable for payroll taxes on it.
Two tests determine whether employees should be treated as “exempt,” and thus not entitled to overtime pay:
1. A pay threshold test, and
2. A duties test, under which employees who “primarily perform executive, administrative, or professional duties,” are deemed exempt. Regulations spell out those criteria in greater detail.
Highly Compensated Threshold
In a related change, the pay threshold for “highly compensated” also went up — from $100,000 to $134,004. Employees earning above that higher amount, regardless of whether their jobs would be classified as non-exempt under the “duties” test, can still be treated as exempt, and thus not entitled to overtime pay.
So, beginning in December, whether employees whose pay falls between $47,476 and $134,004 are to be eligible for overtime pay as non-exempt workers will be determined by the same duties test that has been in place for years.
Note: Employees’ pay for purposes of determining their exempt/non-exempt status includes nondiscretionary bonuses, incentive pay and commissions, as long as those payments occur at least on a quarterly basis and don’t exceed 10% of the employee’s compensation.
Salaried employees who, thanks to the soon-to-be higher income threshold will be entitled to overtime pay, don’t need to be switched to being paid an hourly wage or to punch a time clock. However, for salaried non-exempt employees below the threshold, it’s important to track time worked to ensure that the hours:
a) Don’t exceed 40 hours a week, or
b) That employees are awarded the overtime pay they have earned.
Overtime pay will need to be determined based on calculating what the employee’s salary translates to on an hourly basis for a 40-hour workweek.
Here are some immediate steps to consider in response to the new rules. Start by answering these questions:
- How many of your employees will be newly classified as non-exempt?
- How many of them routinely work more than 40 hours a week? What would it cost you if they continue to work more than 40 hours per workweek and are eligible for overtime?
- What systems do you need to put in place to monitor employees’ hours carefully after the new rules go into effect? The DOL says employers “may use any method they choose for tracking and recording hours” as long as it’s complete and accurate.
Once you get a basic handle on this information, you’ll face more questions. Suppose, for example, that you don’t implement any changes and your payroll costs go up by more than you can manage. You would then need to address questions like these:
- What if we hire some part-time people to keep newly non-exempt employees from having to exceed 40 hours a week?
- Will it be more economical to give raises to employees who are currently earning somewhat less than $47,467, to get them to the exempt level and avoid having to track their hours and pay them overtime?
- Can we reduce or eliminate overtime hours?
- Can we lower the salaries or wages of employees who will become entitled to overtime pay so that, when they earn overtime pay, they will wind up earning the same amount as they did before?
- Can we make adjustments to our employee benefits program to offset the rise in payroll cost?
There are no easy answers. Each possible response raises its own issues. For example, if you’re currently paying for all or a portion of employee benefits such as group life and long-term care insurance, you could shift those over to “voluntary” (employee-paid) status. But doing so would certainly be a takeaway, and many employees would resent it — although perhaps not as much as an actual wage reduction.
No Free Lunch
Another way you could blunt the impact of cutting pay or benefits is to increase non-exempt employees’ vacation benefits. However, there’s no “free lunch.” Doing this could increase the total hours that non-vacationing employees would need to work to cover for their vacationing colleagues, thereby driving up overtime pay.
Any such adjustments would need to be considered in light of the overall competitiveness of your labor market and your total compensation package. Although other employers in your area will probably be facing the same pressures, losing valued employees might cost you more than having to pay some overtime.
Suppose you raise the pay of employees who are near the threshold and routinely work more than 40 hours a week, to keep them in the exempt category. That solves the overtime problem but could have negative ripple effects. For example, one issue is “pay compression,” or the narrowing of the spread in pay between high and average performers, veteran employees and new hires, or employees and their supervisors. Some resentment is inevitable.
That, in turn, could put pressure on you to give raises to employees already above the exempt threshold. That might be necessary as a way to restore the original spread and make things “fair” in the eyes of the higher paid workers. This assumes they will become aware of pay changes occurring among their colleagues. While that’s not often the case, it’s a safe bet that many will figure it out.
“Can We Talk?”
It’s also a safe bet that your employees will have heard about the impending rule change, and they’ll be looking to you for answers about how it will affect them. For most employers it’s probably wise to begin engaging employees on the topic, even if you haven’t mapped out the details of how you will respond. An honest “we’re figuring this out” answer can be better than silence.
For more information on the final rules, consult with your tax adviser.
Increase Your Speed in Creating Estimates
Use Template Estimates
Template estimates let you save time when you create estimates. If you have certain portions of jobs that are the same—for example, general conditions, locations, WBS codes, cover page information, addons—a template estimate can save you time during setup. To use a template estimate:
- Take off items and assign WBS codes and locations.
- Delete the items from the estimate.
- Set up the addons and cover page information. Take off any items that stay the same.
- To create a new estimate, select File > Copy Estimate (rather than New Estimate) and copy the template estimate.
- All of your addons, cover page information and items are already set up for you.
In addition, the locations and WBS values are already in the drop-down lists for you to select; you don’t have to type them again.
Want more examples in real-life job situations? Click the button below to set up a Sage Estimating Demo from Tony!