New Overtime Rules – What This Means for Your Business

New Overtime Rules - What this means for your business

“…Millions of Americans lack the protections of overtime and even the right to minimum wage.” -President Barack Obama

Last year, the U.S. Labor Department (DOL), under direction from President Obama, proposed a rule that would “modernize and streamline” overtime regulations. These changes would affect 5 million working Americans, making them eligible for overtime pay or an increase in salary. The bold changes would also have a direct and tremendous impact on small businesses nationwide. Fast forward and now that rule could be approved as soon as July 2016.

What exactly does the new rule propose? In what ways will your small business be affected? How can you prepare for these impending changes? Read on for the answers to all your questions, plus tips on minimizing your small business’ cost when complying.

Who and what?

The changes to the Fair Labor Standards Act (FLSA) would result in more white-collar employees being paid overtime, unless their salaries are raised.

Increases in salary level for white-collar exemptions are as follows:

  • Exempt executive, administrative, professional and computer employees currently making $23,660 annually ($455 weekly) would instead make $47,892 annually ($921 weekly).
  • What the DOL refers to as “highly compensated employees” would see a pay increase from a current $100,000 annually to $122,148 annually.

The DOL also proposes an automatic increase in both of these salary amounts every year, and would give businesses 60 days notice of the new increased amount.

When and how?

Upon the DOL’s initial announcement, employers had a strong reaction, pushing for time to prepare for these substantial changes. At this point, the amendments to the FLSA can be expected to go through as soon as July. While this date is still tentative, it is known that at least some components of the new rules will go into effect before the year ends.

Employers will have some time to comply with the rule once it goes into effect, but with just a couple of months to prepare, businesses should be taking the most efficient and thorough measures to ensure they’re ready.

Where do I begin?

Business owners should be proactive and take this time to assess the changes their small businesses will have to make. Before you review your situation, ensure you thoroughly understand the FLSA changes.

  • Start with taking a look at which employees may be affected. Make sure you are correctly classifying employees’ exempt and non-exempt statuses.
  • Once you’ve surveyed your workforce, think about how you keep track of employees’ hours. It might make sense to implement some type of technology to help you keep track. This way you will know when employees are nearing that 40-hour boundary each workweek, and ensure you are always adhering to the minimum wage and overtime requirements.
  • Consider moving those employees that do not always work 40 hours per week to an hourly structure. In this situation, you might be subjected to paying overtime hours, but would not need to adjust salaries.
  • The final tip is simple: increase employee salaries to meet the new overtime threshold for exempt employees. In this case, paying more might actually save your small business money.

Reassessing your compensation and operation plans beforehand will allow you to make the changes while minimizing your costs. Each of the suggestions above come with strings attached, so be sure to carefully analyze how every approach will affect your business as well as your employees.

Eleva Solutions always has your business’ best interest in mind. We’re happy to help you understand and prepare for these changes before they become official. Reach us at 305-232-0832 today.