Payroll Overtime Changes – How does this impact your small business?

This year the U. S. Department of Labor enacted updated regulations that will expand payroll overtime protections to SALARIED workers by increasing the previous salary exclusion from $455/week ($23,660/year) to $913/week ($47,476/year). This increase in pay threshold for salaried workers may impact you – so please read our quick summary to help determine what changes you may need to make (if any) for your salaried employees.  These new rules will become effective on December 1st, 2016.

Payroll Overtime Changes

• If you pay your employees hourly, then regular Fair Labor Standards Act (FLSA) rules still apply that requires overtime (time and a half) to be paid to employees who work greater than 40 hours each work week
• Salaried positions fall under two categories according to the Department of Labor (DOL):

EXEMPT positions: Executive, Administrative, professional, and outside sales (now a narrower classification than before). However, if these employees are salaried at less than $913/week, you will be responsible for tracking hours and paying the exempt salary overtime rate (a calculation different then standard hourly overtime).

NONEXEMPT positions: all other salaried positions including “blue-collar” positions as described by the Department of Labor. You will be responsible for tracking hours and paying standard time and a half overtime beyond 40 hours of work in a work week.

We recommend that you adhere to recordkeeping requirements as listed in Fact Sheet #21 set by the Wage and Hour Division (WHD) which includes your employees information, time beginning and ending each date, the date, total hours worked, and listed regular hour wage rate for each employee; regardless of exempt or nonexempt status. Since WHD will be increasing scrutiny of correct classification of employees (exempt vs. nonexempt) and overtime pay, it is best to have a single timekeeping policy that includes the details above.

Because we are not employment attorneys, we can not offer assistance on employee classification of your salaried employees. Feel free to review the FLSA’s description or contact your business attorney regarding how to classify your employees.

Are you ready to take on the challenges of new payroll law? Does your company need assistance in processing payroll and navigating the complexities of payroll regulations? Please feel free to contact us to see how we can help!