What the New Overtime Rules Mean for Your Small Business
If you’re a U.S. business owner, then you’ve probably already heard about the new overtime rules that have recently been passed by the state administration and are set to take effect by the end of the year. You’re probably also eager to understand how and if these changes are going to impact the way in which you run your business.
Thankfully, they don’t take effect until December 1, 2016, giving you some time to understand them and see if you need to make any changes to the way you pay your employees, especially those working overtime. Here’s a rundown of the most important changes.
Essentially, the Department of Labor wants to help middle class workers have a chance to make more money by increasing the overtime threshold.
According to the current overtime rules, workers who make more than $455 a week ($23,660 a year), don’t qualify for overtime. Once the new rules take effect, these thresholds will be more than doubled ($913 a week, $47,476 a year).
This will mean a huge increase in the number of American workers who are qualified to earn extra money if they work more than 40 hours a week.
The percentage of U.S. workers who qualify for overtime is at an all time low, falling from 62% percent in 1975 to only seven percent today. These new regulations hope to bring that percentage back up to at least 35% in order to provide middle class workers with more opportunities to be fairly compensated for overtime work. Millions of American workers will be effected positively by these changes.
What Does it Mean for Small Businesses?
It might sound pretty confusing, but here’s an easy-to follow example that should help you to understand the basic concept:
Say you have an employee that you are paying $45,000 a year – someone who very regularly works more than 40 hours a week. Under the new rules, that employee will now be entitled to overtime compensation at a rate of time-and-a-half for every extra hour he or she works above the weekly 40-hour threshold.
However, there are compensation rules that might leave some workers who might be within this salary bracket out of the equation, namely those who perform administrative or executive duties.
Defining Job Descriptions
You are going to want to look at the job descriptions that apply for every position in your business in order to see which workers will be affected by the new rules.
The government has already provided a duties test that will enable you to define which employees could potentially qualify for exemption.
So if you’re a manager of a coffee shop that sometimes pitches in as a server when your cafe gets really busy, you may not be able to do so anymore. Conversely, your position could be redefined so that these types of roles are included as part of your everyday tasks.
Additionally, you might also want to look into how these new rules will affect white collar workers as well so that all your bases are covered.
How to Comply to the New Overtime Rules
There are many new rules that you are going to have to be aware of and there will certainly be changes on the horizon, no matter what type of business you are running. Here we have compiled some tips on how to comply with the new rules, depending on what’s best for your business.
Raise Salaries to Enable Exemption
If you have managers, administrators or executives that are on the verge of being exempt according to the new overtime rules, you might want to increase their wages in order to obtain exemption. If you choose to do so, you need to make sure that the the duties of those employees are in line with the duties prescribed to executive, professional and administrative workers.
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Pay Overtime When Necessary
If you have employees that are now overtime-eligible thanks to the new rules, but you don’t require them to work overtime that often, the best thing to do is to pay them the same salary and give them overtime pay when they earn it. This is a good approach for workers who do not work more than 40 hours a week every week – employees who see a spike in their work hours that takes them over the 40-hour threshold every now and then, but not very regularly.
Distribute Hours More Effectively
The best thing you can probably do is streamline your employee scheduling process in an effort to create work schedules that do not require anyone to work overtime shifts. You can use an employee scheduling software (like ours) to get a better overview of your distributed shifts and put more effort into creating balanced and more evenly distributed work shifts for all your employees to decrease the chances of needing one or several employees to work a lot of overtime hours on a regular basis.
There’s Still Much to Learn
While many business experts have already started dissecting these new rules and are trying to figure them out and offer tips to U.S. business owners on how to deal with them, there is still a lot of work to be done.
There are still a lot of gray areas that need to be better defined in order to clearly understand who the workers in your company are that will be affected by these changes and whether your business will be affected at all by these changes and if so, how exactly.
And while we have tried to give you expert opinions and links to government resources on these matters, speaking to a legal professional about these changes and how they will affect your organization is definitely the smartest route to take right.
How Humanity Can Help
If you’re already using Humanity to schedule your employees and manage your business today, you’re probably breathing a sigh of relief while reading this. Why? Because using Humanity can really help you a lot when it comes to managing these new overtime rules and how they affect you and your staff.
Keeping Better Records
Another important thing to know about these new overtime rules is that the Fair Labor Standards Act (FLSA) demands that employers keep very good records of how they are paying their staff.
There are no requirements when it comes to what methods you use to keep track of all this. Then why not use a tool that has been helping thousands business of all sizes, all around the world, do this for years now?
Humanity helps you to not only create and organize your team’s work schedules, it does so much more. You can keep perfectly accurate records of all the shifts you create and even export them for bookkeeping and archiving purposes.
Better Time Tracking
If you’re a small business that has remote employees working for you, you’re going to need a more accurate way to keep track of their work hours now. This especially goes for remote employees who were previously exempt from these rules but will no longer be.
Humanity’s TimeClock feature is the perfect employee time and attendance tracking solution for this. You need to implement a system that is going to make sure that you are paying accurate overtime wages to your remote workers based on their hours worked, which is why you need a reliable tool like Humanity – especially if your current system is an out-dated, error-prone method like using Excel spreadsheets or pen and paper.
Our TimeClock tool allows your regular employees to clock in and out of shifts, clock in and out of breaks and enables you to keep perfect time and attendance records. We also have features that allow remote workers to clock and and out from anywhere, letting employers know where they are working from by through GPS tracking.
Not only that, Humanity also gives you the ability to define terminals from where employees are allowed to clock in and out, so that no one can cheat the system.
Best of all, these features are built into our web application, so you’ll never have to buy another bulky, expensive stand-alone time and attendance tracking solution again.
Payroll and Built-in Overtime Features
Humanity’s Payroll features are also incredibly robust. Using them, you are able to organize all of your time and attendance reports and take all that employee work data directly to payroll either by processing it yourself or easily exporting all of the data to a third-party payroll provider.
One of the Payroll features that our clients love most is the built-in overtime options. You can easily take full control over your entire process right within Humanity, thanks to our incredibly flexible overtime features that allow you to perfectly define all of your rules and let them run on autopilot once you’ve created them.
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