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How Small Businesses Can Prepare for New Overtime Rules

Recently, the Department of Labor released a final ruling allowing more than four million people to qualify for overtime pay beginning December 1, 2016. Employees working more than 40 hours in a week who qualify as hourly/non-exempt should expect to receive 1.5 times the hourly rate to compensate for overtime work.

The overall goal is to provide more protection to America’s workforce. With changes to the minimum exempt salary during various stages of this law more people were considered exempt or given titles to make them exempt from the overtime pay ruling. As time went by from 1975, in which 62 percent of full-time workers were covered, to today with only 8 percent protected, it was time to make a change.

Here are the main modifications to the ruling, as stated by the USA TODAY article, “Strategies: How new overtime rules affect small business”

  • “Increases the minimum salary threshold at which a full-time salaried worker can be exempt from overtime rules from $23,660 to $47,476 annually, or from $455 to $913 weekly.
  • This level will be adjusted every three years.
  • Employers can include non-discretionary bonuses and commissions to comprise up to 10% of the salary level.”

Exempt Employees

  • Usually executives, administrative and professional employees (EAPs) as well as outside sales and technology employees
  • Do not qualify for overtime pay

Non-Exempt Employees

  • Covered by Fair Labor and Standards Act, and state and city labor laws
  • Paid minimum wage following state and federal law
  • Qualify for overtime pay (1.5 times their hourly rate when working more than 40 hours)

So what are the next steps? USA TODAY provides some great tips to small business employers with full-time employees who are paid less than $913 per week. There are many factors to consider.

Here are a few different paths you can choose:

  • Don’t change salaries, but watch overtime hours carefully and consider eliminating them altogether.
  • Meet the new minimum salary and don’t pay overtime.
  • Don’t change salaries and pay the overtime amount.
  • Decrease salary and pay overtime.
  • Hire employees to spread out the overage of worked hours.

This change affects many businesses and employers. There is plenty of time to make the necessary changes before the December 1 enactment, but each option has plusses and minuses to consider. If you have any questions about this ruling, please contact BenefitMall to discuss your questions with a knowledgeable advocate, and also visit the Department of Labor Wage and Hour Fact Sheet for more information. 

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