The Department of Labor in the United States recently released a policy change to the Fair Labor Standards Act (FLSA). This act stated that workers would get paid time and a half for each hour after 40 hours of work. However, workers would only be eligible for overtime pay if they earned less than $455 per week or $23,660 in an annual salary. Those paid more than this amount would not receive overtime pay.

The new policy changes this threshold to $913 per week or $47,476 in an annual salary. The purpose of the policy is to “modernize the rules” and “put more money in the pockets of middle class workers”, according to an article on the Department of Labor website. It is to provide better compensation to employees working more and more hours. The regulation will take effect on December 1, 2016. This will affect more than four million American workers in the first year of implementation.

How will this affect small business owners?

Small businesses with hourly employees will be most affected by the new rule. Business owners will now have to consider hiring more workers if they are not willing to pay time and a half to their current employees. Another thing business owners can do to avoid tightening budgets is to increase the salary of current workers to above the new maximum which will excuse them from paying overtime.

Business owners will also need to ensure their employees are aware of the changes that may take place once the law is in effect. Employees may already be aware of the law. However, employers will need to be transparent with their workers so they can ensure easy transition to the new law.

Employers will also have to track hours for employees who are paid below the new threshold of $47,476. There are many tools to track employee time and attendance but you need one that caters to your specific business rules and industry. Celayix provides a comprehensive set of solutions to track employee time and attendance and allows businesses to extract this information into reports. If you would like to speak to our Account Executives to learn how we can help once the new regulation takes effect, please contact us at sales@celayix.com.

For more information on the overtime law change, you can visit the United States Department of Labor website.