The changes to the Fair Labor Standards Act (FLSA) are imminent – and it will affect businesses large and small. The deadline for complying with the new overtime rules is fast approaching, leaving many business owners with questions. So what’s going to change and when? Here’s what you need to know:
- What are the actual changes and when do they take effect?The salary threshold for employees exempt from overtime pay will go up to $47,476 on Dec. 1, 2016. That’s more than double the current threshold of $23,660. This means that employees making under $47,476 must be paid time-and-a-half if they work more than 40 hours a week.
- What does your average small or medium-sized business leader need to know right now?The change is in less than two months, so leaders need to start preparing for the changes. Different companies will be affected in different ways but all organizations should review how the FLSA regulations will effect them.
- How do businesses determine what changes to make to their payroll?The first thing any business owner should do is an audit of positions. How many workers fall below the $47,476 threshold? How much more would they need to be paid in order to be above it? How much overtime are they working on average?
The second step is to put together a plan of action. If only a few workers are making less than $47,476 a year, it could make sense to increase their salaries to be above the minimum to avoid paying overtime. If a company has a large number of exempt employees who make less than $47,476, the financial burden on the company to raise their salaries might be greater than that of hiring additional staff or limiting overtime.
- Is there anything else to be aware of or prepare for?In addition to the “salary test,” which is determined by whether or not an employee makes over $47,476 a year, the “duties test” can also establish if employees are eligible for overtime pay.
Under the duties test, employees who perform certain duties are deemed exempt and do not qualify for overtime pay.
- When should business owners take action?The new FLSA regulation goes into effect on Dec. 1, 2016, meaning businesses need to start determining a plan now. Beyond the audit of positions and determination of a plan, businesses need time to communicate any changes to employees who will be affected.
A major employment regulation change like this can be stressful and, when performed incorrectly, detrimental to an organization’s morale, efficiency, and bottom line. Don’t let the FLSA changes negatively affect your business – Smart HR can help. Learn more about our outsourced HR services here.