When the Department of Labor finalized the Fair Labor Standards Act (FLSA), employers with salaried workers had good reason to wonder how it might affect them. According to White House policy analysts, an estimated 4.2 million workers’ salaries could now include overtime pay if they put in more than 40 hours a week on the job. An additional 9 million may also become eligible, depending on their duties and the size of the companies for which they work. With such a significant change set to take effect by December 1, employers are gearing up for the change and talking with their Certified Public Accountants now.
Who Is Eligible for Overtime Pay?
Salaried personnel whose incomes fall below the threshold of $47,476 per year will now be eligible for overtime pay at a minimum of one and a half times their regular wage for any hours worked beyond the first 40 in a week. This rule isn’t entirely new; the previous threshold figure was $23,660, and many employees in management positions were exempt. Currently, about 7 percent of salaried workers are eligible for overtime compensation.
Are Some Salaried Workers Exempt?
To achieve eligibility, employees must not only be paid under $23,600 but also pass the “duties test,” a set of job duties that determine which salaried employees are owed overtime pay. Under current laws governing overtime, many managers and supervisors are exempt, but these exemptions are set to change under the FLSA. Some executives, administrators, and personnel in creative positions and sales will become eligible for overtime. For business owners, classifying personnel accurately will be an essential element of compliance and one you should discuss with your business’ accountant.
What Does the FLSA Mean for Small Businesses and Non-Profits?
According to the Notice of Proposed Rulemaking (NPRM) that the Department of Labor published at the end of last year, regarding the FLSA, businesses grossing more than $500,000 annually are not exempt. This figure includes non-profit organizations, but only applies to “activities performed for a business purpose” and not to charitable activities the organization undertakes.
How Can Businesses Prepare for the FLSA?
– The first step in preparing for the coming changes to compensation is an assessment of current salaried workers’ status and job duties. Job titles alone do not determine eligibility; a review of duties within organizations that have salaried employees currently earning below the threshold and working more than a 40-hour week is essential.
– Talk to your company’s CPA to understand the effects of the new law and plan your strategy for compliance. For some companies, the change may necessitate raises for key employees. For others, hiring more personnel to ensure that workers reduce or eliminate overtime could be the answer. Your financial planner can help you create a roadmap for implementation that puts you where you need to be by the December 1 deadline.
– Work with a New York accountant to determine whether the state’s overtime laws take precedence over the federal regulations. According to the Department of Labor, state laws that uphold a “more protective standard than the provisions of the FLSA” are to be followed first. Exemptions according to job duty, gross income, or industry vary between state and federal regulations, and working with a New York CPA who is aware of these points of variance ensures optimal protection for both employees and employers.
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