How to Prepare Your Business for the New Overtime Rules

How to Prepare Your Business for the New Overtime Rules

0 Comment

Update: On Tuesday, a U.S. District Court blocked implementation of the new FLSA rules— originally scheduled to go into effect next week—citing that the rules would have caused an uptick in state government costs and the changes would have eventually led to layoffs. The long-term future of the rule remains to be seen. Read more about this change here, and share with us your thoughts on the change in the comments!

 


 

The 2000 movie “Boiler Room,” starring Ben Affleck, is a cult classic because it contains some of the most iconic business, sales, and entrepreneurial quotes of all time. Affleck’s character, Jim Young, boldly proclaims the following: “They say money can’t buy happiness; but look at the… smile on my face!”

Over 120 million people are employed on a full-time basis in the United States, working away for what many say can’t buy happiness, i.e. “money,” even though without money the things that surely make us happy wouldn’t be attainable at all. Some of these things include (but aren’t limited to): living in safe areas, supporting a family, driving our favorite cars, taking vacations, attending entertainment events, donating to our favorite causes, and pursuing higher education for enlightenment.

Now, on Dec. 1, 2016, new rules for overtime pay are expected to go into effect, barring a potential ruling that would reverse them. What would the new rules mean for workers and employers?

Read: How an SBA Loan Can Fuel Your Business

Overtime Pay

The concept of “full-time work” came about in a major way from President Franklin D. Roosevelt’s New Deal, which was a series of liberal programs that were implemented between 1933 and 1938. On June 25, 1938, he signed into law The Fair Labor Standards Act (FLSA). FLSA introduced the 40-hour workweek, otherwise known as full-time work, but also the FLSA brought forth a national minimum wage, restricted employment for minors, and created what’s known as “overtime pay.”

The overtime pay aspects of FLSA determines whether certain employees are eligible for overtime pay, and if so, what range of payment they should receive. Overtime is considered to be hours worked over 40 hours a week and FLSA requires that most employees be paid at least federal minimum wage and time-and-a-half for hours worked over a 40-hour benchmark.

Since the original regulation passed in 1938, there have been various amendments added, including FLSA Section 13(a)(1). FLSA Section 13(a)(1) exempts executive, administrative, professional, outside sales reps, and certain computer employees from overtime pay, as long as they are paid a salary of at least $455 per week ($23,660 a year) and meet other individual requirements under a “duties test.”

Financial Health—signup free

Pro Tip: Take charge of your financial health today with a FREE Nav account. We'll protect and monitor your personal and business credit, so when it comes time to find financing you're prepared on all fronts.

The New Overtime Rules

On Dec. 1, the salary threshold is expected to increase from $455 per week ($23,660 a year) to $913 per week ($47,476 a year). This would benefit over 4 million workers in the executive, administrative, professional, outside sales rep, and certain computer employee categories. The other individual requirements for exemption will (for the most part) remain the same for each of the categories,  according to the U.S. Department Of Labor. Click the links below for more information on each category.

 

Read: What Does a Donald Trump Presidency Mean for Small Business?

Overtime: It’s About Time

For more information on this update, check out this video from the U.S. Department Of Labor.

With all this in mind, there are two hearings at the end of November regarding opposition to the rule, and might impact whether it will actually go into effect. President-elect Donald Trump had also stated in his campaign that he would exempt small businesses from the rule, so watch for possible changes in the coming year.

Even if the new threshold goes into effect on Dec. 1, 2016, it doesn’t mean that employers will necessarily increase the salary thresholds for executive, administrative, professional, outside sales reps, and certain computer employees to the new $913 per week mandate. It also doesn’t mean that employers have to pay time-and-a half for overtime work. Instead, employers have the option of limiting their hours to no more than 40 hours per week.

It’s debatable what this new law would do across the board, such as either increasing salary thresholds or limiting employee hours to no more than 40 hours. However, if the regulation begins on Dec. 1, we will all be watching the ramifications of this new mandate.


More answers to pressing questions

Business Credit Cards for Bad Credit

What Is a Good Business Credit Score?

How to Establish Business Credit

Rate This Article

This article currently has 2 ratings with an average of 4.5 stars.

About the Author — John Tucker has over ten years of professional experience in Commercial Finance and Business Development. Tucker is also an M.B.A. graduate and holder of three bachelor's degrees in Accounting, Business Management, and Journalism. To connect with John Tucker, feel free to send him a connection invite via LinkedIn at: www.linkedin.com/in/johntucker99

Have at it! We'd love to hear from you and encourage a lively discussion among our users. Please help us keep our site clean and protect yourself. Refrain from posting overtly promotional content, and avoid disclosing personal information such as bank account or phone numbers.

Reviews Disclosure: The responses below are not provided or commissioned by the credit card, financing and service companies that appear on this site. Responses have not been reviewed, approved or otherwise endorsed by the credit card, financing and service companies and it is not their responsibility to ensure all posts and/or questions are answered.