Note: A federal judge ruled against the U.S. Department of Labor overtime rule on November 22, 2016. The ruling means the overtime rule will not go into effect on December 1, 2016. An overtime rule still might go into effect at a later date. We’ll keep you updated as more information is available.
The DOL’s new overtime rules for exempt employees dramatically increased the salary threshold in May 2016. The salary threshold is the minimum salary you must pay an employee for an employee to be exempt from overtime.
Previously, the salary threshold was $24,660. Now, the threshold is $47,476. That is a 101% increase in the salary overtime law.
For most small businesses, that 101% increase will have a huge impact.
State Executive Director of NFIB California, Tom Scott, said in his federal overtime rule guest commentary, “Ultimately, this new rule would reduce opportunities for promotion, reduce workplace flexibility for many workers, and entangle small business owners in new piles of paperwork. All this and yet it may not mean more take home pay for many workers.”
The DOL changed the salary overtime law with the hope that Americans will take home more income. The DOL estimates that the overtime rule will benefit over 4.2 million employees across the country.
Due to the salary threshold increase, many employees who are currently exempt from overtime will become nonexempt. Businesses will either have to increase employee salaries or require the newly nonexempt to start recording their time and attendance. Whenever a nonexempt employee works overtime hours, businesses will have to pay overtime wages.
But in reality, many small businesses cannot afford to spend more on payroll. Payroll is already the biggest expense for small business owners. Small businesses with fewer than 10 employees spend over two-thirds of their total expenses on employee-related expenses. And, small businesses with more than 10 employees spend over half of their total expenses on employee-related expenses.
If you are a small business owner, it is probably not practical to increase your payroll budget. But, you still need to find a way to comply with the new salary overtime law.
How you can comply with the new salary overtime law
Complying with the overtime rule will be difficult for many small business owners.
You have four options when it comes to complying with the overtime rule. To find out what they are, check out the infographic below.
Do you need to start keeping track of employee time? Try Patriot’s online time and attendance software. Employees can enter their own time or use a time punch. Then the timecards automatically filter into the online payroll, saving you time. Try it all for free.
Share Our Roadmap to Overtime Compliance Infographic on Your Site.
This is not intended as legal advice; for more information, please click here.