The overtime rule announced earlier this season is forcing smaller businesses to adapt.
After almost 30 years as a business owner, I know just how much employer laws make a difference small businesses. The newest Department of Labor (DOL) change to place a wrench within an employer’s payroll budget may be the new overtime rule.
Small enterprises should adapt and discover solutions quickly so that you can survive. Fortunately, there are actions you can take now to get ready for the brand new overtime rules.
The DOL overtime rule determines which employees are exempt from overtime. Employers don’t need to pay overtime to exempt employees. If a worker is non-exempt, employers have to pay overtime for overtime hours worked.
ON, MAY 18, the U.S. Department of Labor passed a fresh overtime law that may make 4.2 million exempt workers non-exempt. The brand new DOL overtime rule changes the white-collar exemption and which employees can receive overtime.
To be exempt, a worker must get a salary and also have executive, administrative or professional duties. Those two qualifications usually do not change with the brand new overtime rule.
Gleam third qualifying factor to be an exempt employee: The worker should be paid a lot more than the salary threshold. The salary threshold is defined by the DOL in the overtime rules.
The brand new overtime law escalates the salary threshold, making fewer employees exempt from overtime. Prior to the rule changed, the salary threshold was $455 weekly, or $23,660 each year.
The brand new salary law raises the threshold to $913 weekly, or $47,476 each year. The increase is a bit more than double the prior salary threshold. That’s quite the jump.
But, that’s not absolutely all. The salary threshold isn’t the thing that is complicating small company payroll budgets. The minimum salary threshold will automatically increase every 3 years predicated on wage growth. The first automatic increase may happen on Jan. 1, 2020. Which means more employees can be exempt as the threshold rises.
The brand new rule also updates the salary level for highly compensated employees. Employees must receive at least $134,004 each year to be highly compensated.
Smaller businesses aren’t exempt from the overtime law and must comply by December 1.
How big is the overtime law’s impact depends on the amount of non-exempt employees a business has following the salary threshold increases.
The overtime law won’t affect the businesses, that have all non-exempt employees with the brand new threshold. Non-exempt employees always must be paid overtime for working a lot more than 40 hours weekly.
If the increased salary threshold creates newly non-exempt employees at a business, the overtime law could have major effects on payroll costs. To remain compliant, employers with exempt employees may need to adjust their businesses.
Employers will have to either pay employees higher salaries, or pay overtime wages. Small enterprises have several options for handling the overtime rule changes.
Option 1: Increase employee salaries above the salary threshold.
To pay a lot more than the threshold, employers have to pay salaries over $47,476 each year. Raising salaries my work for businesses that already pay salaries near to the new threshold.
Businesses with employees that work a whole lot of overtime may also want to improve salaries. Employers should estimate the amount of overtime hours employees work, and calculate the price.
Comparing the price of overtime pay against the expense of increased salaries might help employers decide how to regulate employee wages.
Option 2: Pay employees significantly less than the salary threshold, and pay overtime wages.
If a worker is paid below the brand new salary threshold, they are nonexempt. Employers have to pay newly nonexempt employees at least one . 5 times their regular purchase any overtime worked.
To avoid overtime costs from accumulated, employers can cap the amount of hours employees could work every week.
Small enterprises may need to make some tough decisions when the brand new overtime rule makes effect. For managing changes to regulations, employers can take the next steps.
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1. Explain the brand new overtime law to employees.
As a practiced business proprietor, I’ve spent lots of time speaking with employees. I’ve learned that building relationships with employees makes coping with change easier for the whole company.
If you’re your small business owner, you understand that the brand new overtime law will not just affect your business; in addition, it affects your employees’ lives.
The more you retain your employees informed, the simpler it’ll be to transition your company. Explain exactly what will happen when the overtime rule changes and the way the salary threshold works.
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2. Clarify changes within the business.
Speak to your employees about how exactly your business will adapt to the brand new overtime law. Let employees find out about any changes with their pay, schedules or job duties. Clarify you are not randomly making changes, but you need to comply with regulations.
Your employees may be concerned about the way the new rule will influence their pay and hours, or what goes on when salaried employees become hourly. But, the change could possibly be positive for your workers. If employees work overtime often, they’ll earn extra pay. Or, you may choose to provide employees raises to push salaries over the threshold.
Alternatively, if you opt to reduce wages or hours to cut payroll costs, your employees could possibly be upset. To save lots of employees from working the same job duties for less pay, you could adjust their responsibilities to complement the brand new pay and schedule.
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3. Train employees on timekeeping.
If employees become non-exempt with the brand new salary threshold, the hours they work ought to be recorded. But, some employees, especially salaried workers, may be not really acquainted with timekeeping systems. You should show all employees how exactly to keep an eye on hours worked.
Assuming you have nonexempt employees, you will require a timekeeping system. If you may use paper or a spreadsheet, the easiest timekeeping option is online time and attendance software.
It’s also important that your supervisors and managers understand your overtime policy. Supervisors might help enforce the overtime policy; reply to your employees’ questions; and ensure that your business stays compliant with overtime rules.
Note: this article isn’t intended to provide legal services. You should seek specific legal services from your own att