3 Things You Need to Know About the New Overtime Rules


As an entrepreneur, you’ve learned to play the game. But what happens when the rules change? By now you’ve probably heard that some changes are coming to overtime pay regulations. Wondering what exactly are those changes, and how will they impact your business? Not to worry, we’ve got you covered. Here are three things you need to know about the new Overtime Rules.

The threshold for determining who must be paid overtime will double.

Since 2004, salaried employees making less than $23,660 per year or $455 per week must be paid 1.5 times their equivalent hourly wage beyond 40 hours worked in a given week. Starting December 1, however, that figure rises to $47,476 or $913 per week. This means any of your salaried employees who earn the rough equivalent of $23/hour or less will be owed overtime pay for any time they work more than 40 hours in a week.

It also means you may need to start tracking your salaried employees’ hours to determine whether they are eligible for overtime pay. Previously, certain job duties were exemptfrom this requirement, including those that are classified as administrative, executive, professional or managerial. This was known as the “white-collar exemption.” Under the new rules, an employee must meet both the “duties test” AND the “salary test”. Going forward, if they aren’t paid above the threshold, it won’t matter what duties they perform.

These changes apply to nearly all businesses.

Unlike other regulations that do not apply to small businesses with fewer than 50 employees, such as the Affordable Care Act, this overtime rule applies to nearly all businesses. The only exceptions include those that have less than $500,000 in sales or business AND do not conduct ANY interstate business, including shipping, phone calls, etc. These are exceedingly rare, and you can likely plan on your business not being exempt.

You do have some options.

While this regulation is not being phased in, there are options. For instance, you could raise currently exempt employees’ pay above the threshold to maintain their exempt status. Or, business owners can reclassify an employee so that they are non-exempt, or eligible for overtime compensation and track their hours to either make sure they do not work more than 40  per week, or how many past 40 per week they work. Employers can convert a currently salaried employee to the same amount of income as an hourly wage, or they can keep that employee on a salary and track hours worked past 40.

These rules may be difficult for many businesses to comply with. But every challenge is an opportunity, and this is no exception. You should consult with your HR specialist to make sure your business takes the proper steps. And as always: Learn, Pivot, Repeat.