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Change in Overtime Regulation

 

Last month, the Obama Administration announced that the salary cutoff for overtime pay is being nearly doubled from $23,660 to $46,476 per year. This regulation, which will be effective December 1, 2016, will extend overtime compensation to workers whose annual salary is less than $46,476. An expected 4 million Americans will now be entitled to overtime pay within the first year of implementation. How does this affect small businesses? 

Minimum Wage Increase vs. Salary Increase
This regulation expanding overtime privileges is similar to the consistently increasing minimum wage, as both are components of the expansion of workers’ compensation. There are differences, however between the minimum wage and new salary regulation. The salary law does not mandate companies to increase their employee’s yearly earnings – it just entitles workers to overtime.

Impact on Small Businesses

Starting a business requires a sizeable initial investment. Once the business gets on its feet, arguably the most valuable investment may be its employees. Wage expense is an essential cost because employees help ensure the company continues and thrives. For companies that are marginally profitable, an increase in wage expense can be daunting to the bottom line

Small Business Resolutions

A survey distributed within a community of over three million small-business owners showed that over half were unaware of the upcoming regulation. Different ways to approach this change include the following:

  • Increase salaries - If current salaries are close to the $46,476 floor, increase your workers’ salaries to the point that their salary exceeds the cap and exempts them from overtime pay.