Getting Your Small Business Prepared for the New Overtime Rule

A new overtime rule has been set to go into effect as of December 1, 2016, which raises the salary ceiling for exempt employees from $23,660 to $47,476. This has sent many small business scurrying to implement changes, so as to avoid non-compliance expenses and fines levied by the Department of Labor, which is behind the new requirement. Here’s what small businesses will need to do, to prepare for the effects of this new overtime rule, and remain in compliance.

Begin tracking time

It will be important to begin tracking time for salaried workers, so a determination can be made on whether it’s necessary to reduce their workload, re-classify them as non-exempt, or actually raise their salaries. In most cases, raising salary will probably not be the preferred option, so that means more employees will be eligible for overtime, unless their workload is kept under the 40-hour limit.

Assess employee workload

The new rule makes it critical to evaluate the workload for all employees, so as to avoid potentially numerous cases where an overtime threshold would be reached. Once an understanding of the total employee workload has been achieved, the possibility of a re-distribution of work may smooth out workload spikes for individuals.

Evaluate budgeting

Businesses should conduct formal calculations to determine what percentage of employee working hours is straight time and what percentage is overtime hours. This will provide a clear picture of the current budgeting for overtime, and this can then be used as a basis for establishing a threshold under the new guidelines.

Communicate with those affected

When the changes go into effect, it might well have a very negative impact on some employees, so it would be a good idea to identify those employees who would be most affected, and communicate candidly with them. It’s very possible that transitioning employees who are currently salaried, into an hourly status would be considered by them to be a demotion, so this needs to be addressed up front, to avoid ill will and disillusionment with the company.