Payroll Accounting: Employers, are You Ready for New Overtime Rules?

Employers, this change is major, so please pay attention: new overtime rules are effective December 1!If you’re not ready yet, now’s the time to start planning—especially if you think the changes don’t affect you; they probably do.Many employees who were previously exempt from being paid overtime by virtue of their status as a  supervisor, professional, or administrator with an annual wage of at least $23,660 ($455 weekly) are about to find themselves in new territory, and their employers will feel the pinch.We can all agree a wage of below-$2,000-per-month doesn’t give anyone in the United States a high standard of living. Still, low wages enable manufacturers and other employers to keep prices down and keep more people working.The Department of Labor, under the directive of the President, doubled the minimum salary to be exempt from overtime to $47,476 ($913 weekly) for these employees when they work more than 40 hours a week.Employers must plan how to remain competitive while staying within the law. The new rules apply to all employers, including nonprofits with gross receipts of $500,000 per year or more, so not many can dodge this change.Per the Department of Labor, the options are:

• Pay time-and-a-half for more than 40 hours per week
• Raise workers’ salaries above the new threshold
• Limit workers’ hours to 40 per week [Of course, if that restriction reduces production, you may need to hire more workers.]
• Some combination of the above [treating some employees differently than others]

Cost, of course, is the primary concern, although employers should be prepared to deal with potential morale issues as well. Employers may start collecting time cards from their employees for the first time.Increasing salaries or paying more overtime may be beyond the financial capabilities of the organization. Small business owners are seldom multimillionaires who can afford to share the wealth without impacting the stability of the company.How will you decide what works best for your company? One option is to visit ComplianceHR and make use of a free tool that compares the cost of giving salary increases, paying overtime, and adjusting pay rates so that employees make the same each week/year even with overtime pay.Whatever you decide to do, remember to prepare a carefully crafted communication plan for your employees, so they understand what must be done and why. If you’re unsure of how to do this, consult a professional public relations firm.The holiday season is coming quickly…even if you’re a Christmas Eve shopper, don’t put off this one till the last minute!If you need accounting guidance from a CPA, trust the team at Patrick & Robinson CPAs. We’re preparing a more detailed newsletter with payroll tax tips next month, so contact us if you’d like a copy: Office@CPAsite.com or 904-396-5400.Remember, we’re here for you!