Overtime Laws Are Changing in December

pay check statementThe rules for overtime pay are changing and small business owners need to know how these changes will impact their business.

Beginning December 1, 2016, the U.S. Department of Labor (DOL) will require employers to pay their employees overtime pay when they work more than 40 hours in a given week if those employees earn less than $913 per week ($47,476 per year). “White collar” workers who meet this salary requirement and perform administrative, executive, or professional duties as defined by the DOL won’t be required to be paid overtime. An administrative, executive or professional employee with total annual compensation of at least $134,004 is exempt without meeting the full duties test. This new rule also allows bonuses and incentive pay to count towards up to 10% of the new salary level.

There are some things you can do now in order to make sure that you’re in compliance with the new rules. For starters, take an assessment of your current salaries and job descriptions and determine whether you have any exempt employees who are already earning a salary above (or perhaps nearing) the threshold. You may also need to identify the non-exempt positions and shuffle workers around as necessary.

Your business will have three choices. You can either:

  • Increase exempt workers’ salaries so that they exceed the new overtime wage base;
  • Leave salaries at current levels and pay overtime for hours over the 40 hours per week threshold; or,
  • Limit workers’ hours to less than 40 hours per week so that you never need to pay overtime. Alternatively, some businesses can benefit from hiring additional staff and reducing the amount of hours worked by each employee, so that the same amount of work is performed but with less risk of exposure to overtime pay.

It may be that using a combination of the above approaches is the best option. Regardless of which method you use, always be sure to talk with your employees about any changes to their pay before making adjustments. Contact us today to discuss which method works best for your business.

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