Accountants + Business Advisors

8 Things About the New Overtime Rules Every Employer Should Know


8 Things About the New Overtime Rules Every Employer Should Know

8 Things About the New Overtime Rules Every Employer Should Know by Sue Peirce, CPA, MTax | Principal – Audit & Assurance Sue Peirce head shot

Over the past months, we’ve presented several webinars on the new overtime/exempt employee regulations and have had the privilege of working with a number of our clients on addressing the issues arising from the change in the salary threshold for “white collar” exemptions from $23,660 to $47,476 as of December 1, 2016. The issues for our clients have been diverse. For some, the current wages being paid are so close to the new threshold that a minor increase resolves the issue.  For many others, there is no question that the employees who are currently under the threshold will need to be paid overtime beginning in December.

What You Need to Know About the New Overtime Rules

The new salary threshold for “white collar” exemptions from $23,660 to $47,476 goes in to effect 12/1/2016. Here's what every employer needs to know about the new overtime rules.

  1. Employees can still be paid on a salary basis. There is nothing in the new regulations which prohibits paying non-exempt employees on a salary basis. However, if the employee works over 40 hours, beginning December 1, 2016 overtime must be paid.
  2. Nothing in the Fair Labor Standards Act or in the new overtime rule prohibits flexible work arrangements. There is no requirement that workers have a predetermined schedule and nothing prohibits an employee and employer from mutually agreeing to working wherever, whenever or however.
  3. If you are changing an employee to a non-exempt classification, are you also changing the workload if the employee has historically worked more than 40 hours or will they be allowed to work limited overtime? This decision needs to be made now, not after the regulations go into effect. Talk to your employees as soon as possible. A number of employers have been impressed with employee’s ideas to resolve this conundrum.
  4. Position classifications – the current definitions of executive, administrative and professional duties are not changing. The administrative classification has raised the most questions. In order to be exempt, the employee must supervise. Paying an employee on a salary basis does not mean that the employee is exempt.
  5. The Society of Human Resource Managers (SHRM) has suggested that one way to sell employees on transitioning from exempt to non-exempt status is to position the move as a definition of structure.
  6. Monitoring employee hours – there are many businesses that do not require the front office to use a timeclock. The hours are simply tracked “on good faith”, on a spreadsheet or manually on a piece of paper. It is important to maintain accurate time records for front office staff. This will enable you to develop alternative strategies that make it possible to shift the workload from expensive overtime hours to others who are paid at regular or a lower rate.
  7. Once you’ve decided your plan of action, review the impact on the equity of your compensation program. Compensation needs to be commensurate with the position and skills required. The days of keeping compensation to oneself are gone.
  8. Review your employee handbook and policies. We’ve heard from employment law attorneys with whom we work that employers should include policies addressing social media and data privacy; bring your own device to work; reasonable accommodations; retaliation; unauthorized overtime; working under the influence of alcohol, illegal and legal drugs that impair while on the job; and the intention to treat all employees equally and fairly.

If you have questions about how the new overtime rules effect your employees, contact your trusted Apple Growth Partners advisor for more information.