Don’t you just love new government regulations?
(And I say that with my strongest southern drawl, as in: Isn’t that just precious??)
You might have heard that the White House unveiled new overtime rules recently (on Wednesday, May 18th). It’s obviously been all over the news, and debate is raging about them. And it’s true that we Newtown Square, PA business owners always brace ourselves a little when the federal government “decides” for us what is in our best interest.
But political questions aside, it’s probably something that you and your business should get a handle on — BEFORE December 1st, when they go into effect (and sometime sooner than November would probably be wise).
Yet there’s also a good chance that your business might be exempt from them, and it wouldn’t be prudent for you to make rash decisions before getting full clarity.
This, of course, is why we are here. (Among other things, of course!)
If we are handling your books or payroll, we’d love to be a resource for this issue. And even if not, we really are here for you.
In fact, I’m hoping that my Note this week will give some clarity and perhaps set your mind at ease about how you can best prepare.
Newtown Square, PA Business Owner’s Guide To The New Overtime Rules
“I’ve never known any trouble than an hour’s reading didn’t assuage.” – Arthur Schopenhauer
First, let’s clear up what exactly is being changed by these newly-announced overtime regulations.
The current rules expire November 30, 2016 and they dictate that salaried workers making more than $455 a week (or $23,660 a year), do not qualify for overtime pay. The new changes more than double that threshold to $913 a week (or $47,476 a year).
So, starting on December 1, any full-time, salaried employee who makes less than $47,476 per year will be entitled to “time and a half” pay for every hour above 40 hours worked per week.
However, there are important exemptions to the new rules that you should know about before making any decisions.
The overtime rules exempt certain categories of employees: that is anyone who perform duties that are mainly executive, administrative, or professional. Those employees would not be entitled to overtime and could remain exempt (i.e. salaried as opposed to hourly). There are further exemptions for those who are classified as “outside sales” or “computer employees”.
I suggest that you take a look at the Department of Labor’s factsheet and put your various full-time employees (if you have them) through the “duties test” that describes the different duties that qualify employees for exemption from overtime pay under the Fair Labor Standards Act (FLSA), first passed in 1938.
And “small business” is actually not really exempt — even though the FLSA is technically only to cover businesses with over $500K in annual revenue. Your business is still covered by the FLSA (and must pay overtime) if it is engaged in what Congress calls “interstate commerce” — that is, it conducts business between states. Interstate commerce covers more than you might think, including making phone calls to or from another state, sending mail out of state, or handling goods that have come from, or will go to, another state.
If your operation is so small or local that it isn’t covered by the FLSA (and this will be a pretty rare occurrence), it still might be covered by your state’s overtime law.
This is something to take seriously, and if your business is needing to make adjustments, it’s a good idea to consult with a legal labor expert. But that said, and though I can’t deliver official legal advice, I can pass along what I’ve seen from some of the experts…
1) Salary adjustments
Check to see if you can afford the new salary floor ($47,476) for FT employees, if they are not exempt from the requirements. If you can’t, then you best keep a keen eye on the hours worked for that stuff, lest you have to pay overtime.
Every Newtown Square, PA business with non-exempt staff will need to make a determination about how they will pay their people. Here’s an article about some of those hard choices that some are already making.
2) Operational adjustments
Firstly, perform that aforementioned “duties test” by putting each of your FT employees’ roles through the various exemption standards on the DOL Factsheet (again, found here). If a change in exemption status (because of the new salary thresholds) is discovered, you’ll have to handle their hours and pay differently.
And perhaps obviously, this will be a sensitive issue with your employees that you’ll want to handle with care and sympathy. Changing someone from salaried to hourly might feel like a demotion, and could also shift the “work-life rhythm” for said employee.
Secondly, you will need to have good time-tracking software in place. If you already employ PT staff, it’s likely that you have this in place already, but certain (now non-exempt) salaried employees will need to utilize it, which will also cause disruptions that you should plan for.
The good news (if you can call it that) is that we have time to prepare for these changes. We’d love to be a resource to you moving forward, and would also be glad to recommend specialized experts in different matters who could give you fully authoritative advice.
We are in your corner.
Feel very free forward this article to a Newtown Square, PA business associate or client you know who could benefit from our assistance — or simply send them our way? While these particular articles usually relate to business strategy, as you know, we specialize in tax preparation and planning for Newtown Square, PA families and business owners. And we always make room for referrals from trusted sources like you.
Warmly,
Stephen Venuti
610-353-0686
Stephen J. Venuti, CPA, MST, LLC
