If you have salaried employees, you want to be aware of a significant rule change concerning overtime that may have a huge impact on your business. How important it is? Well, if you aren’t aware, it’s important for you to start planning now.

Major Changes to Fair Labor Standards Act 

The Department of Labor recently published changes to the Fair Labor Standards Act, set to begin December 1st, which will impact practically every employer who has salaried workers.

New overtime rules nearly double the threshold from $23,660 to $46,467. This means any salaried employee making LESS than $46,467 is non-exempt from overtime.  The rationale behind the rule change is that overtime regulations have not kept up with inflation, and the threshold has not changed since 1975.

Here Are Your Options

For salaried employees making less than $46,467, you have several options:

  • Pay your employees overtime when they work more than 40 hours a week.
  • Give them a pay increase so they are over the threshold
  • Start paying them hourly

The rules don’t go into effect until December 1, 2016, so you do have time to examine your situation and prepare.

What You Can Do to Prepare

First, go through and re-examine how you pay your employees, what their workflow is, and how many hours they put in for you. Only a careful analysis will reveal how you need to adjust their pay structure, if at all. If you don’t have one already, make sure you have systems in place to monitor how many of your workers go past a 40 hours week. You may be surprised how many employees are working after hours. Use your existing managers or supervisors to help you keep track so that you have all the data you need when it comes time to make a decision.

Finally, if it looks like your business requires many overtime hours – it might be a good time to revisit what activities are truly essential.

Need More Info on Implementing the Rules?

As always, there are some exceptions and other details that can help you in communicating with employees and implementing the rules. We recommend you speak with a tax professional if you have further questions about the new overtime regulations. PDM’s tax experts can help advise you on the best course of action. Contact us; with our years of technical experience, advanced training, and cutting edge technology, we are your financial partner.