On December 1, 2016 new overtime rules go into effect for salaried employees. Wait, salaried employees don’t get overtime, right? Not exactly, the previous rule stated that a salaried employee making more than $23,660 per year was exempt from overtime. However, the majority of salaried employees are hired at a higher annual salary than that threshold, so it was rarely an issue.
Not anymore. The US Department of Labor has extended the overtime rule to cover salaried employees making less than $47,476.00 per year ($913 per week). That means if you have a manager at a $40,000 per year salary and she works 45 hours per week, on December 1st you will be required to pay her 5 hour of overtime. That is an additional $144.20 per paycheck or just under $7500.00 per year.
Here are a few quick steps to make sure you are prepared for the change and aren’t caught non-compliant.
- Conduct an employee review. Confirm how each employee is categorized and determine if any are at or near the new salary threshold. For any employees you have currently classified as exempt you will want to review the FLSA duties test for their exemption status and salary. (Find that test here www.dol.gov/whd/overtime/fs17a_overview.htm). The test hasn’t changed, but now is an excellent time to confirm that you have classified all your employees correctly, and make any changes necessary.
- Positions to transition to non-exempt status. Now that you have determined which employees will be affected by the new rules, you have two options. A. Increase your employee’s salary to maintain the exempt status or B. Transition the position and to a non-exempt status. If you choose to transition all or some of your positions to non-exempt status, then you will need to determine the basis for pay (hourly or salaried) and rate of pay. NOTE: you must ensure that the rate of pay and hours worked meet the minimum wage requirements.
- Update Timekeeping Policies and Procedures. In the State of New Hampshire all employees should be tracking their hours worked, regardless of exempt or non-exempt status. Establish or update clear written employee policies for tracking time, how overtime will be approved, and any potential disciplinary action for failing to follow policies.
With this change to the overtime rules, I will not be surprised if labor audits become more frequent throughout 2017 for small businesses with employees. Staying on top of your employee classifications and making sure you are compliant with both the federal and your state’s Department of Labor regulations will save you hundreds and possibly thousands in penalties and fines down the road.
Would you like more information on this topic, or on how to empower both you and your business? Please contact us today.