New Overtime Laws: The Information You Need to Make The Best Payroll Decisions for Your Small Business

By: Emily Klaus | Marketing Associate

It’s no secret that small business owners and their essential management team include some of the hardest working employees in the labor force. They might go from being a sales associate to a janitor to the CFO all in the span of an hour or so. To say these small business owners and employees wear multiple hats is an understatement. Sometimes, these employees work more than 40 hours a week, clocking in at 50 or 60 per week. When these workers are salaried under a certain threshold, their pay per hour might end up being less than minimum. Luckily, a new law, effective December 1, 2016, will help even the playing field for those who punch in many hours.

Summary of the new law

First, not all of this law is changing. Non-exempt (hourly) employees will still receive time-and-a-half wages if they work 40+ hours in one week. Exempt (salaried) employees will still be ineligible for overtime pay.

However, the salary threshold in this law is more than doubling.The threshold for overtime pay, which hasn’t been changed since 2004, is currently $455 per week or $23,660 per year. Starting on December 1, 2016, the threshold will increase to $913 per week or $47,476 per year. This new number represents the “40th percentile of income for salaried full-time workers in the region of the US with the lowest wages (currently the South)”.1

Who does this affect?

This new rule was made with retail managers and assistant managers in mind. These employees are often paid more per year than the old threshold of $23,660, but are also often working way more than 40 hours per week, which in some cases, means that their hourly pay will end up being less than legal minimum hourly wage.

What can employers do to be in compliance with this law?

There are a couple of choices employers have in order to be compliant with this new law.

      • Employers can choose to raise salaried workers above the new threshold of $47,476 to avoid paying them overtime, OR
      • They can change the status of workers who make less than $47,476 from exempt employees to nonexempt employees, therefore making them eligible for overtime pay, OR
      • They can choose to keep an employee’s current pay and not allow he or she to work overtime. This would cap these employee’s work weeks at 40 hours per week.

The main point is to be proactive about making these changes. Employers, make sure you double check your payroll and the hours of your employees to ensure you are in compliance with the new law come December, as mistakes could be costly. Use the resources below for all the information you need to make the best payroll decision for your small business.

Although Jet Capital doesn’t offer funding to cover payroll expenses, we can get you fast working capital to help you purchase more inventory for the busy holiday season, launch a new marketing campaign, or make a key hire. Apply online or give us a call at 866-845-9674!

Resources:

  1. http://www.foxbusiness.com/features/2016/05/25/how-will-new-overtime-rules-affect.html
  2. http://www.forbes.com/sites/learnvest/2016/07/29/will-the-new-overtime-rules-mean-more-money-in-your-paycheck/#3b6eb5091208
  3. https://www.dol.gov/whd/overtime/final2016/faq.htm#1
  4. https://www.dol.gov/featured/overtime


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