Plain and Simple: Bright Business Insights July 2016 | Page 2

OVERTIME PAY CHANGES MAY HIT YOUR BOTTOM LINE Learn How You’ll be Affected by New Salary Requirements In May, the U.S. Department of Labor (DOL) announced its final ruling on the regulations governing the exemption of certain classes of employees from minimum wage and overtime pay protections of the Fair Labor Standards Act (FLSA). The final rule, which goes into effect Dec. 1, 2016, sets an updated salary and compensation threshold for executive, administrative and professional (EAP) employees to be considered exempt. It also amends the salary basis test to allow employers to utilize non-discretionary bonuses and incentive payments to satisfy up to 10 percent of the new standard salary level. Here’s What You Need to Know What You Should Do Now Though this rule doesn’t go into effect until Dec. 1, 2016, you should start preparing now. Here’s what you can specifically do: • Start quantifying how much this new salary requirement will cost you. Identify the employees it will affect and calculate your costs. If you have affected employees, you’ll have three options: m m m Increase their salaries so they are above the $47,476 threshold. Limit their hours worked to no more than 40 hours per week (so no overtime is due). Begin paying overtime when applicable. • The DOL more than doubled the salary threshold, requiring employers to now pay workers who earn up to $47,476 ($913/week) overtime pay. • Provide training for management and supervisors on law updates. This will help ensure consistency of employee communications. • Employers must implement this rule by Dec. 1, 2016. • • Any employee who makes less than $47,476/year will have to be paid on an hourly basis, or an employer can increase that employee’s salary to the minimum amount. Inform employees about how they will be impacted. Be transparent with your employees and help them prepare for these changes. Share with them what is happening and why so they understand that any change that takes place is not a reflection on their performance. • Employers will be required to pay workers overtime if they choose to move them to hourly. • • It’s estimated that employers will spend $592.7 million to comply with this new regulation. • The salary threshold will be updated every three years. So, every three years, you will need to re-examine your staffing and budgeting as it relates to this salary requirement. Resist the temptation to reclassify employees as independent contractors. The classification of employees is a complex matter in and of itself. If you intentionally or unintentionally misclassify workers, you could face financial consequences. • Based on wage growth projections, the threshold is expected to rise to more than $51,000 by Jan. 1, 2020, when the DOL issues its first salary threshold update. Now’s the time to understand how the new rule will affect your business as well as what you will do to comply. There are planning opportunities surrounding pay and bonus structure to mitigate the impact the final rule may have on your business. Give me a call if you have questions about the new rule and how it will affect your business or if you need help navigating the change and implementing a plan that works for your business and employees. Why These Changes … And Why Now? The DOL anticipates the rule to automatically extend overtime pay eligibility to 4.2 million workers and says the American worker will see more money in their pockets or more free time to improve work-life balance as a result of the measure. Furthermore, the DOL sees this change as an effort to improve workers’ health and increase productivity through improved morale and reduced turnover. by: Brian Kempf CPA, Principal 212 N. Washington St. Millersburg, Ohio 44654 [phone] [email protected]