Is your small business ready for the changing overtime regulation? Unfortunately, the odds might be against you and your business.

In the coming months, it’s highly probable that we will see the current version of the Fair Labor Standards Act (FLSA) revised to meet the requirements of the 21st century work force. This 77-year old law created a provision that says employees who make less thank $23,660 a year must be paid at least time-and-a-half for each hour they work beyond 40 hours. Proposed legislation, supported by President Obama, will raise that threshold up to $50,440. Why does this matter? It’s important because you will be responsible for paying overtime to any employee who does not make at least that amount. For small businesses and start-ups in the U.S., that’s a significant number of the workforce.

While it is not yet a law, Business Insider predicts that more than 5 million Americans will be impacted within the first year alone. If your small business may be in that number, here are a few tips to get ahead of the curve before this legislation become mandatory:

1) Conduct an audit of your workers earnings and job classification categories. This is the first step in catching up with the new overtime regulations because you have to account for where you are today. You need to know which employees currently earn salaries above the overtime threshold, which employees make less than the overtime salary threshold, and how often your salaried workers under the threshold work more than 40 hours on a consistent basis.

2) Reassign job duties so that workloads are less likely to surpass 40 hours in a work week. While you don’t necessarily have to do this, it’s a wise thing to do if you want to curb overtime costs. You’ll want to involve your managers in this conversation so that they can speak more directly about who does what in your office.

3) Update your employee handbook to reflect policies that comply with new legislation. Every time a new law changes, you’ll want to revise your employee handbook. This is important because employees need a place to refer back to about updates instead of bombarding you with calls and emails. Also, you don’t want to be caught with an outdated policy on the books in the event that an employee files an overtime claim with the Department of Labor. Your written policies can either harm you or protect you!

4) Communicate the changes to your employees. If you’ve found that some employees need to be converted or impacted in any way, it’s important to communicate this as soon as possible. Let the employee know what is changing, why it’s changing, and how it will impact their paycheck. If you are unsure of how to do this, speak with our Client Care Associate who can connect you with our HR team.

5) Brace for overtime pay law changes as inflation rises. If the new law passes, one of the key components of the plan is that the overtime threshold would rise as inflation rises. This means that you must be mindful of rising payroll costs and adjust your business strategy and budget accordingly.

In summary, change is coming and we want to see your business succeed. Set aside time to handle these action items or let us be responsible for them on your behalf. The sooner you prepare, the easier it will be to adjust to the change!

Are you worried about how to become compliant with new overtime pay regulations? Speak with our team today!