Changes in overtime pay

The Department of Labor is changing how you pay your employees for overtime, if you are. Along with the outcry by some for an increase in minimum wages, came a decree by the U.S. Government to assure that employees were being fairly compensated for hours worked. This brought about recent DOL overtime changes that will be taking place this year.


Suffice it to say that some are not at all happy with these changes and rightfully so. It was noted that nonprofits and government entities with fixed budgets would not be able to meet these new requirements as they had not accounted for additional funds for payroll. Wouldn’t that pertain to any employer? What small business out there is socking away 40% more for payroll than they planned on in case there is a substantial need to add to it?


Employees who work an hourly wage are very happy to see that enforcements are coming to ensure their just pay. Indeed some hourly employees have been getting gypped out of what they were entitled to. There are also considerations in the new DOL overtime changes that the casually informed may not be aware of. These changes will significantly impact how a small business owner classifies their employees: hourly versus salaried. Pay attention to the new salary requirements or set yourself up for potential lawsuits and fines if you are not complying.


3 Key Things Small Business Owners May Overlook With DOL Overtime Changes


Salaried does not exactly mean exempt - Now that the overtime rules have changed, many small business owners may assume that if everyone becomes a salaried employee that this will mean their employees are exempt from hourly pay and thus overtime pay for hours of 40 or more. Not so. The minimum salary requirements to be considered a full-time salaried employee according to the government has changed dramatically, much to the chagrin of a lot of small business owners. The minimum salary requirement for a full-time salaried employee under the white-collar exemption has gone from a paltry $23,600 to a $47,000 to $50,440 minimum. That is more than twice what it was before. Did you plan for that in your budget this year? While that exact number is still being hammered out at the DOL, it is still a cavernous gap from the old number to the new.


You also can’t just declare someone a salaried employee. The DOL has duty requirements to determine what a white-collar and thus salaried employee is and is not. You should refer to the DOL guidelines in this area to make sure you are properly classifying your employees.


You might find that as you review these guidelines for the first time that some reclassification was necessary as it was not done properly the first time. You will need to make that correction and then educate your employee on why the corrections are necessary and how they will handle accounting for their hours for payroll going forward. For some, especially those not used to clocking in and out, this will a frustrating change. For others, it may give them the overtime pay they should be getting under the new DOL overtime changes.


Certain Job Roles Are Still Exempt And Some Not- Sales positions with a salary and a commission structure will still be exempt from most of these requirements. Since sales positions are usually base salary plus commission based on performance, they will be paid and compensated exactly the way they always have. Sales positions have a relatively low salary as an incentive to drive higher sales commissions, so this will not affect your sales people in any way.


For your employees that are sometimes performing white-collar duties and then sometimes performing non-exempt performance duties, this may get pretty dicey for them. How they track and manage which hours are spent doing what will likely cause a lot of small business owners to shift duties around so that the correct duties match the corresponding exempt and/or non-exempt employee.


Computer professionals making over $27.00 an hour are exempt from the DOL overtime changes. Their hourly rates will remain unaffected under the new provisions. While this might be disappointing for them, it should curb some overtime expenses for you.


Licensed, fee-based professionals, such as doctors and lawyers, are exempt because of the way they are compensated. Since their pay accounts for fees based on exactly what they do per client or per patient, there are no new provisions.


Most retail positions will remain unaffected as well. Any retail employee being compensated via a commission structure that satisfies the DOL guidelines is also exempt from these changes.


You Will Have To Consider How You Manage Payroll Now - If you are not efficiently managing payroll now, these new provisions will only worsen your problem. The DOL has no sympathy for outdated payroll functions or claims of ignorance to the new rules on the part of small business owners. All small business owners are highly encouraged to see professional assistance with payroll in light of these strict and unforgiving provisions.


A PEO Is A Great Way To Manage Payroll, Benefits And Labor Laws


PEOs offer the small business owner a wealth of help and resources for outsourced HR. Like most small business owners, these types of functions fall to the bottom of the pile when it comes to daily tasks.


If you are concerned about how these new DOL overtime changes will impact your payroll budget, perhaps it is time to consider a PEO to save money on overhead costs? The savings on benefits and payroll fees can help offset the cost of hourly wage and salary increases. Before you think about scaling down your headcount in response to these changes, talk to a PEO broker like PEO Spectrum today about how a PEO can help you keep your head above water and your business out of hot water with the DOL.

If you’d like to find out more about how PEOs can help you provide great benefits and payroll management at less than you are paying now, contact us today for a free consultation.

Related Posts


You renewed with ADP and just got your new rates. They undoubtedly went up, but the question is did they go up more…

Read More

We have a current client that used our PEO Comparison Service and found a new PEO that offered better service, a better payroll…

Read More

PEOs provide a cost-efficient way for small businesses to have the HR resources and employee benefits usually reserved only for large corporations. But…

Read More

Subscribe for best practices & industry updates