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How Much Will The New Labor Law Cost Your Business?

Among the many provisions of the Fair Labor Standards Act (FLSA) are those governing which employees should be paid overtime. Those provisions have been updated and the new standards take effect on December 1, 2016. The changes will potentially have an adverse effect on your small business.

Existing Guidelines

A recent article in Florida Business Daily explains that, in the past, you weren’t required to pay overtime to salaried employees who earned more than $23,660 annually. Salaried employees included those who performed executive, administrative and professional (EAP) duties. This is the so-called duties test and white-collar exemption.

Big Changes

Under the new regulations, you will be compelled to pay overtime to salaried employees who work more than 40 hours a week if their gross pay is less than $913 weekly or $47,476 annually. This means that you may now owe overtime pay to your higher-earning employees as well as your lower-paid employees. The white-collar exemption and duties test applies only to employees earning more than $913 weekly. Employees who earn more than $134,004 annually are generally exempt under the highly compensated employee (HCE) guidelines.

Comp Time Eliminated

The FLSA defines small businesses as those with annual sales of less than $500,000. If your business grosses more than $500,000 a year, then the new regulations apply and you are liable for paying the additional overtime. You also need to be aware that you are no longer allowed to offer comp time in lieu of paying overtime.

All Options are Expensive

There are a few options. For example, you can pay the required overtime, but reduce an employee’s basic salary. You can raise salaries so that employees earn more than $913 a week. You can cut hours. You can hire temporary staff. Whatever way you choose to stay in compliance with the new FLSA standards, you are looking at additional payroll system updates and administrative costs.

Seek Professional Advice

While the changes apply to large companies as well as small businesses, entrepreneurs and small business owners will find them more burdensome to implement. Advance planning is needed to adjust budgets for the increased costs and to update policies and procedures. Businesses must also make sure their employees understand the new overtime rules to avoid legal challenges. There’s little time left before December 1. Consulting promptly with an experienced business law attorney at Heekin, Malin & Wenzel can help you understand and comply with the new standards.


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