New overtime rules — what they mean for your small business
How new overtime rules starting Dec. 1 will impact your overtime pay for managers
In less than a month, your overtime pay policy for managers could be changing. New overtime rules—also known as the “Final Rule”—go into effect December 1, 2016, and the impact to your small business could be big.
What is the new overtime law?
Starting Dec. 1, the salary threshold for employees being classified as exempt increases to $47,476—meaning any salaried worker making less than that will qualify for overtime pay. More formally, under the new overtime rules, no employee can be classified as exempt under the administrative, executive or professional exemptions (and therefore not eligible to receive overtime pay), unless he or she makes at least $913 a week ($47,476 annually).
The new overtime law also establishes that the salary threshold for exempt status/overtime pay will automatically update every three years, based on wage growth over time. The federal government says these new overtime rules will extend overtime pay eligibility to 4.2 million workers, helping ensure workers are compensated fairly for their hard work. But overtime rules haven’t always been this way.
Overtime pay—what’s changing Dec. 1?
The new overtime law nearly doubles the most recent salary threshold, which was set to $455 per week or $23,660 a year. The new overtime pay threshold of $47,476 comes after the Department of Labor conducted months of studies with employers, workers, unions and other stakeholders to develop the new overtime pay standard. It also carefully reviewed more than 270,000 comments from the public before making its new overtime law ruling.
How can you prepare for new overtime rules?
Your small business has three options for managing the new overtime law and the potential cost increases to your bottom line, as a result of additional overtime pay requirements.
- Increase exempt-employee salaries to $47,476
- You can increase employees’ salaries to the new $47,476 exempt threshold to avoid overtime pay for anyone making less than that annually. This could mean a significant labor cost increase for your small business and isn’t an option for managing new overtime rules for most small employers.
- Keep salaries the same and track/provide overtime pay (1.5x)
- If increasing salaries to the new overtime law threshold is not an option for you, you can choose to provide overtime pay for all employees making less than $47,476 annually. This will likely increase the amount of overtime pay you are currently providing to employees, as more employees will now be classified as non-exempt status under the new overtime law.
- If you choose to provide overtime pay instead of raising salaries, your business will need to track weekly hours worked for every employee earning less than the overtime rules threshold and give them overtime pay.
- Limit hours to 40 hours/week to avoid overtime pay all together
- To control costs under the Dec. 1 new overtime rules, you may also choose to limit hours for employees earning less than $47,476 to less than 40 hours/week, so you can avoid overtime pay altogether.
- If you choose to limit hours for non-exempt employees under the new overtime rules, be aware that you will need to track hours worked and you may end up needing to hire additional workers to cover all hours/shifts and avoid unexpected overtime pay costs.
Managing the new overtime rules—how Snagajob can help
Online sourcing, hiring and scheduling solutions can help employers track hours worked or find more workers if they choose to limit hours.
PeopleMatter Go—Snagajob’s online tool built specifically for small business owners and hourly workforces like yours—can help you manage new overtime rules and mitigate overtime pay increases. Go lets you post jobs to Snagajob’s #1 hourly marketplace of job seekers if you need to find more high-quality workers quickly (by Dec. 1) and includes a free built-in employee scheduling tool, so you can better track hours and overtime pay. Post a job and create your first schedule today for only $89/month.
Want to learn more about the new overtime rules, how it may affect your overtime pay policy and what other small businesses are doing to comply with the new overtime law? Save the date for our free “Top Employer Trends for 2017” webinar on Tues., Dec. 13 at 1pm ET/10am PT. In the meantime, watch our last overtime webinar.
Happy New Overtime Rules ‘ing,
The Snagajob Team