So the new overtime regulations have been announced. If you’re a small-business owner, what do you need to know and what should you do?
The new regulations, which go into effect Dec. 1, require employers to pay salaried employees earning less than $47,476 overtime pay when working more than 40 hours per week. This is double the previous minimum threshold of $23,660.
If you have employees who make less than $47,476, you basically have three options: Raise their pay to the new threshold so they continue to be exempt from overtime, pay time and a half to those who work more than 40 hours per week, or cut their hours to 40 per week and either absorb the work yourself or hire additional part-time staff to handle it.
Any way you look at it, it’s going to cost small-business owners. How do you decide the best course of action?
First, take a look at the numbers. On average, how many hours of overtime do your employees work per year? Multiply that number by 1.5 times the average employee hourly pay. The resulting sum is an estimate of what you can expect to pay to comply with the new law, provided everything remains the same.
Then add up how much it would cost to raise your employees’ salaries to $47,476, and compare the two figures.
Of course, this is a simplistic approach. Business owners can choose any number of possibilities to suit their company’s needs — perhaps a better idea would be to promote one or two or even a few of the hardest-working employees to positions at or above the threshold and keep everyone else’s workload to 40 hours. Perhaps cutting hours and hiring a few part-timers makes more sense. Crunch the numbers to see what might work best for you.
Then take operational matters into consideration. Here are a few key elements to keep in mind:
• If you choose to change an employee’s status from exempt to non-exempt, salaried to hourly, it may feel as if it’s is a demotion.
• Non-exempt employees’ hours must be tracked diligently and accurately. This means putting a time-keeping system in place, and making sure everyone complies, which can be a difficult habit to instill. A note: If you have staffers who work from home or another remote location with no management, timekeeping can be a tricky matter, leaving you vulnerable to lawsuits. Yet taking away the work-life balance formerly enjoyed by remote employees will leave a bitter taste in the mouth.
• If you are reducing staff hours to 40 per week, be sure to draw up new schedules and share them with your staff well in advance. This will give you and your employees time to work out any kinks.
• Reallocating duties and redefining job descriptions is essential if the goal is to avoid overtime pay.
Finally, be sure to check with HR advisors or labor lawyers to ensure proper compliance by the Dec. 1 deadline.