Overtime Game: What Does New Overtime Rule Mean for Your Business?

June 20, 2016|

Woman Using Computer In Dark OfficeBy Jame Geathers, Owner, Jame Geathers Consulting

As you may know, on May 18 the newly revised overtime rules were released. While many applauded this as a victory for many workers, it also presents several challenges for employers.

With all the information and misinformation out there, you may be confused on what your business has to do to comply with the new rules. For starters, let’s clarify the revised rules. The updates to the overtime rule take effect December 1. That gives your organization a little more than five months to update salaries and position classifications.

Prior to this rule taking effect, the minimum salary for an exempt employee was $455 per week. With the revised rules, that amount will more than double to $913 per week. For many small business owners that amount is unfathomable.

Additionally, the minimum salary for highly compensated employees will increase from $100,000 per year to $134,004 per year. Also, that minimum amount is scheduled to increase every three years.

As a business owner you’re probably wondering what this means for your business. That depends.

If you currently have employees classified as exempt, you’ll first want to determine if they are classified correctly. The best way to do this is by using the DOL Wage and Hour Comparison of Duties Test. By comparing your employee’s position descriptions and pay against the test, you can determine if you need to make any changes.

If you are required to make changes to your pay structure, you do have options. If you have salaried exempt employees, you could raise their annual salary to meet the annual threshold of $47,476. When considering raising salaries, keep in mind that the salary threshold will be raised every three years so your salaries would also need to be raised to keep up with the requirement.

If that’s not in your budget, you may have the option to reclassify those exempt employees and have your employees sign an overtime policy that requires all overtime to be approved prior to being worked. This will at least allow you to somewhat control the overtime expense.

In addition to implementing the overtime policy, your organization could also hire temporary and/or part-time employees to cover some of the workload to prevent the need for overtime.

One note about creating an overtime policy: If an employee works overtime you must pay them time-and-a-half, even if you have a policy in place.

If you need assistance reviewing your employee classifications, salaries or creating policies, please contact us!

Jame Geathers is a Human Resources and Operations Professional with more than 12 years of experience in both the corporate and non-profit sectors. Jame has spent her career building and supporting HR infrastructures that have provided her employers and clients with the structure and policies that all start-ups need but owners may not have time to create and implement. For more information please visit the Jame Geathers Consulting website, www.jamegeathers.com or call (706) 496-9691.

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