Accountants + Business Advisors

Common Questions About the New Overtime Rules


Common Questions About the New Overtime Rules

“Common Questions About the New Overtime Rules” by Susan Peirce, CPA, MTax | Principal – Audit & Assurance Sue Peirce head shot

Ever since the new overtime/exempt employee regulations were announced in May, many of our clients have been seeking answers on how these changes will affect their business. Given the uncertainty surrounding the updates, it’s important for business to take control of the situation and not let employee expectations get out of hand.

Of course, it can be difficult to make decisions if you’re not completely sure how the new rules will actually affect your business. Here are some answers to your questions about the new overtime rules.

Who Does the New Overtime Rules Affect?

The new overtime regulations change the salary threshold for “white collar” exemptions from $23,660 to $47,476, effective Dec. 1, 2016. This means the rule change does not affect non-exempt employees who are already entitled to overtime pay under the Fair Labor Standards Act. However, white collar exemption employees are affected if they fall under three general requirements:

  • Fixed salary with no reductions based on quality or quantity of work or partial days
  • Said salary must meet a minimum amount
  • Job duties meet statutory definition for one of the categories

Can I Continue to Pay Salary?

Yes, you can still pay employees on a salary basis. The difference is that employees now covered by the new salary range need to be paid overtime if they work more than 40 hours. If they always work less than 40 hours, you don’t have to worry about this regulation.

However, there can be some confusion as to who exactly qualifies as a professional for the white collar exemptions. If you’re unsure about who qualifies as an exempt employee in your industry, it might be time to contact a labor law attorney to clarify the situation.

 Image of a time clock. Contact AGP about help with the new overtime rules.

Will the Department of Labor Really Check to See if My Business is Compliant?

With the sheer number of employees affected by the new regulations, the Department of Labor may become overwhelmed after the overtime rules go into effect. However, that doesn’t mean that businesses don’t need to worry about Department checks. The Department of Labor is really good at following up on complaints from workers, so a disgruntled employee may lead to an inspection whether the complaint is valid or not.

What Should I Do with My Employees?

While some employees may think that they’ll be getting raises, the reality is that most employers will not be giving employees significant adjustments. Instead, employees can receive changes in hourly rates so that they would make the same amount as they did before once their usual overtime is included. Others can look into making their business leaner and finding inefficiencies. This can help employees complete their jobs in 40 hours instead of needing overtime.

Of course, you’ll also need to make sure your employees are informed before you take action. It’s important to have an open dialogue with your employees about the new OT rule changes so that they don’t end up with false expectations. The average employee isn’t going to do a lot of research on the new regulations. Instead, they’ll pick up on headlines and snippets about how the overtime changes can lead to raises for employees.

Some of your workforce may come to expect raises when that isn’t the reality of the situation. Have a conversation with employees to let them know how the rules will actually impact them.

Can the New Regulations Bring Up Other Issues?

The new regulation serve as a great opportunity to uncover potential payroll issues and areas for improvement, such as fixing the inefficiencies referenced earlier in the article. One part of this is looking into position descriptions and identifying what employees are being asked to do. There may be opportunities to cut out unnecessary tasks or outdated practices that can add extra hours.

Businesses can also use the new regulations as an opportunity to keep compensation in line for all employees. Compare salaries versus hourly ranges and make sure that everything is in line with where it should be.

Can I Get Help with the Overtime Rules?

As with many rule updates, there’s a lot to cover with the new overtime regulations. Apple Growth Partners can help businesses prepare for the Dec. 1 deadline by looking into job descriptions, figuring out how they’re paying employees, and protecting themselves against upset workers. Contact Apple Growth Partners today to learn more how a good team of accountants and business advisors  can help guide your business through the new overtime regulations.