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Change in Overtime Rules – Small Businesses

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Small business owners are seeking assistance as they rush to prepare employees for an upcoming change in Overtime Rules and the clock is ticking. With about a month to go, procrastinators are finding themselves scrambling as there’s no indication of a reprieve. Many business owners were hoping Congress might put the regulations on hold or a federal court would intervene in response to a lawsuit filed by a coalition of 21 states. That hasn’t happened yet.

Some do not even know the law is changing and HR providers are urging clients to get their acts together. On December 1st, federal regulations are expected to affect the paychecks of 4.2 million employees. At the same time, in about 20 states, owners are also facing a double-whammy. Along with changes in Overtime Rules, increases in the minimum wage areexpected at the start of 2017.

Most tax preparers and accountants deal with small businesses. Are you sure your clients are aware of tax labor law compliance? Do you understand it well enough yourself?

It’s not the same for every business across the board. There won’t be a blanket increase for employees whose pay falls below the new threshold. Federal regulations specifically exempt some employees from having to be paid overtime; for example, office workers. On the other hand many restaurant and retail managers or supervisors will become eligible for overtime work.

Are there ways in which owners can comply with the new Overtime Rules without seeing their labor costs mount? Yes, there are options.

Giving employees whose salaries are close to the $47,476 threshold small raises will exempt them. Another way to be in compliance would be to switch salaried employees to hourly pay. If this is done, supervisors will need to keep a close eye on schedules to avoid big overtime bills. They may discover redistributing certain tasks will help avoid the necessity of employees staying beyond the end of a shift. Staggered schedules can insure coverage of production and service hours.

For most small businesses there will be times paying overtime can’t be avoided. For instance, if an employee is working with a customer and his or her shift ends, he or she might not be able to stop working with a customer. Employers have a few options: they can pass the rising costs onto their customers, or if this would place them out of the running with competitors, they can absorb the cost.

Restaurants are likely to be impacted greatly when employees are sick, on vacation or affected by bad weather. Fortunately, franchisees are receiving support from their corporate franchises.

The biggest challenge business owners face is maintaining trust and morale among staff members—especially those who are salaried who must be changed to hourly. Even if the job doesn’t change, employees’ sense of stability might be affected. A smooth transition is important and can be facilitated by communication and education. Rewarding employees also builds loyalty and job satisfaction.

Advise your clients to be prepared: employees will be tempted to “shoot the messenger,” blaming employers or supervisors for the changes instead of being upset with the government. Owners need to speak openly with employees about the new regulations and the impact they’ll have on everyone.

As business laws evolve, there are always two sides. Many employees are likely to benefit by the new laws and employers may just have to chalk it up to a cost of doing business.

For more information visit the Labor Department website.

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