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Strategies for Responding to the New Overtime Rules

Posted by Gene Byler Posted on July 09 2016

By Gene Byler

If you’re a business owner, chances are you are well aware of the legislation that will change how employers pay workers for overtime, effective December 1. bad news is that your business will probably be affected at some point. The good news is that you have until Dec. 1 to develop a plan that allows your business to meet the new requirements while minimizing the negative financial impact to your bottom line.

New law basics

Let’s take a look at the legislation.

The last major change in the law regarding overtime pay was made in 2004. So you’ve been operating under those old rules for 12 years, unless your company hasn’t been around that long. The new regulations increase the salary threshold needed to qualify for overtime exemption from $455 per week ($23,660 per year) to $913 per week ($47,476 per year.) and affect 4.2 million workers.

The new law also automatically updates the salary threshold every three years, based on wage growth over time, increasing predictability.

Any business that employs workers with salaries under the new threshold should consider their best course of action or face paying thousands in higher wages. Your company could also be subject to employee lawsuits for failure to comply with the rules. Your business is NOT exempt, no matter how big or small it is.

These regulations may be in response to several recent lawsuits filed by mangers and assistant managers in recent years. Workers at Chipotle, Dollar General, JPMorgan Chase, Bank of America and Wells Fargo have filed lawsuits claiming their overtime hours are not being compensated appropriately. In many cases, the duties of hourly employees are being done by salaried personnel since they don’t get paid the overtime.

What can you do?

There is no one-size-fits-all way for businesses to prepare for the new overtime rules. Employers have a variety of choices, such as:

  • Raise your managers’ salaries to keep them exempt
  • Make no changes and simply pay out the overtime to the affected employees
  • Keep non-exempt salaried workers under 40 hours per week
  • Hire additional workers without benefits to cover the overtime previously worked by those managers.

Business owners need to start planning now in order to determine which response is best suited for their business. That process is best navigated with the assistance of an employment attorney and a professional accounting firm.

An accounting firm can assist you in determining which employees are likely to be affected, help with tracking non-exempt employees’ hours, help you update record keeping procedures, and advise on how to clearly communicate changes to policies and procedures to employees.

If you need help developing a plan to ensure that your business will comply with the new overtime rules, contact a CPA in our Salem or East Liverpool office.