What the new overtime rules mean for you and your small business.
If you have not already heard, the Obama Administration has set forth new overtime standards in the workplace, changing the amount an employee can make before being exempt from overtime pay, regardless of whether the employee is salaried or not. These new rules go into effect on December 1, 2016 and what alarms me is how many people tell me that their employers are either not prepared or are completely unaware of what the new rules mean for them.
At first glance, it would seem like the new rules would be a victory for workers, as they would extend overtime pay protections to over 4 million workers. But let’s get into the specifics of the new rules and why the new rules won’t be the blessing workers are hoping for. It will be a headache for businesses, that are unaware of the rule change or simply don’t understand what it means for them.
The old standard set the exempt amount for overtime at a fairly low amount, $23,452 in annual income. This means until December 1, 2016, if your annual income is more than $23,452, then you aren’t eligible to collect overtime. Starting December 1st, if your annual income is less than $47,476 you will be eligible to collect overtime if you work more than 40 hours in a week.
The Obama Administration has brought the exempt-amount more in line with the rate of inflation and the rapid rise in cost of living over the last decade. Unfortunately, the Obama Administration hasn’t decided to bring these changes along in phases, and the new law will go into effect on December 1, 2016.
What does this mean for small business owners with employees? It means that if you have salaried employees that make less than $47,476, you are going to have to make sure that they don’t work more than 40 hours in a week or they’ll be entitled to overtime. You are also going to have to look at your business model and decide whether giving your employees a raise will make your business better off in the long run. If you have the ability to increase their wages to above this exempt amount, then it will allow you to operate the business the same way you have been, without making changes.
There are two ways to deal with this change, and they’re both contingent on your business being proactive.
- Give raises to your employees, and put their new annual salaries at or above $47,476, and continue to have them work overtime like they did before.
- Have workers work 40 hours per week and do not allow them to work overtime unless you are prepared to pay for it.
Remember, while it seems like these situations are hard to navigate, I’m available to help make the process easier. I can do a consultation with you over the phone or in-person, and I conduct seminars on-site here in San Diego where I sit down with you and your management team to explain how the new rules will affect you and how to make sure your business will be in compliance going forward.
If you’re in San Diego today, call and schedule your on-site seminar today, so that I can help you make sure that the new OT laws are not going to be a problem for you and your business.