Being in the Know of the Overtime Rule Change

Business owners must be in the loop of the overtime rule change which was implemented by the Obama administration on May 18, 2016. The final update of the overtime regulation will affect over 4 million workers, and will boost the financial status of workers. You must try to review the rules so that you know what you can do to compensate your workers properly.

overtime rule change
Image attributed to saphatthachat/freedigitalphotos.net

Some of the Provisions of the Overtime Rule Change

·  The salary level. The final rule states that the standard salary level is approximately at the 40th percentile of the worker’s earnings of workers who are working full time.

·  The yearly compensation requirement of highly compensated workers that are subject to duties which are minimal, sets the yearly equivalent of 90th percentile of full time workers.

·  Updating of overtime rule will be done every three years.

·  Initial increase of salary level effective December 1, 2016 is 455$-913$ per week.

Furthermore, the Department of Labor determined the type of employees who are exempt from the overtime rule change. This means that you don’t have to pay overtime wages of whose employees under the exemption rule such as those with executive, professional and administrative duties, but you are required to pay overtime for the non-exempt. This will have an impact for small businesses because the threshold will increase every three years.

How This Would Impact Your Company

The overtime rule change would mean a swell in paychecks of working people and this would have an implication to your company because this needs strict compliance on your part. Those among you who have a business in the restaurant industry, hotels, hospitality business will be affected. Construction firms as well as those in the retail business are also affected due to the nature of the business itself. Professional firms such as architectural and accounting firms, which has a seasonal business will be grossly affected.

This may mean that you may have to change the way you employ or pay wages, most especially when you are dealing with entry level workers because their pay might increase by 30% and that is a big dent on your own company. Some companies might opt for hourly wages so that the wages will become neutral.

Some Considerations for Small Business Owners

The impact on your company would depend on the number of employees you have that would fall under the non-exempt rule. Some of the things that you can do is to pay your employees close to the threshold set by the Department of Labor. If your line of business necessitates that employees need a lot of overtime, then it would be prudent to raise their salaries as well. You can compare the cost it would incur when you raise their salaries and the amount paid for the overtime work. Another option is you may opt to pay for overtime, but set the salaries less than the said threshold.  Some of these decisions are going to be tough on your part. The overtime rule change will greatly impact your business so you need to communicate this concern with your employees to achieve a win-win solution.

You may also like...

Leave a Reply

Your email address will not be published. Required fields are marked *