The Payroll Blog

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new proposed overtime rules - a row of clocks

How to Handle the New Proposed Overtime Rules

Posted On
Stefan Schumacher

You've probably heard a lot of rumblings lately about new overtime rules under the Fair Labor Standards Act (FLSA).

You have not, we're guessing, read the 300-page document outlining these proposed rule changes entitled "Defining and Delimiting the Exemptions for Executive, Administrative, Professional, Outside Sales and Computer Employees."

These changes could, however, impact you as a small business owner, and you'll want to be prepared, just like you would with any change in regulations.

According to an update from law firm Ogletree Deakins, the new rules address the following salary thresholds necessary for white collar workers to be considered exempt from overtime:

  1. Weekly salary to be considered exempt would go from $455 to $921 - and this could go up to $970 or an annual salary of $50,440 per year by the time the rule is final.
  2. For highly compensated employees, they would have to earn $122,148 annually to be exempt from overtime, as opposed to the current level of $100,000.
  3. An automatic system would be put in place so the salary levels go up in accordance with the economy.

How Does the Small Business Owner Prepare for the Overtime Changes?

If you aren't familiar with the Fair Labor Standards Act, you can learn more here about what it is and why it matters.

With most feeling that proposed regulations will be issued sooner rather than later, it is a good idea for companies to prepare in the best way possible.

The more prepared you are for upcoming changes the easier it will be to adjust your business accordingly. A Society for Human Resource Management article goes on to share five steps for preparing for proposed revised overtime regulations:

  • Review current job descriptions to ensure they accurately depict job responsibilities
  • Identify exempt and non-exempt positions, with a focus on those that may be in the "gray area."
  • Make sure supervisors and managers are aware of these proposed regulations. Furthermore, prepare them for the changes that are sure to come.
  • Develop a contingency plan for the changes you will make in the event of an increased minimum salary threshold.
  • Devise a strategy for establishing pay rates and work schedules if an employee is converted from exempt to nonexempt status.

In a perfect world, everything would stay the same regarding business rules and regulations from one year to the next. In the real world, this never happens. As a business owner, it is imperative to stay current with any and all changes that will impact your organization. Failing to do so could cause you a lot of trouble down the road.