Your Guide to the New Overtime Rules and Payroll

Your Guide to the New Overtime Rules and Payroll

As you are probably already aware, the U.S. Department of Labor has changed the rules governing overtime pay to include larger numbers of salaried workers who will have to be compensated for putting in extra hours beginning December 1 (2016). The rule increases the overtime threshold from $23,360 to $47,476 annually.

Businesses, trade groups, and nonprofits are already voicing opposition to the rule change despite not having any real recourse. It is the law of the land barring any change of heart by the Obama administration and the Labor Department. That means payroll services providers need to begin preparing alongside their clients right now.

The two biggest concerns of the law are:

  • the need for employers to begin tracking the hours of more employees; and
  • the fact that the overtime threshold is being nearly doubled instantly, rather than incrementally.

Regardless of how anyone feels about the rule changes, it is going to affect nearly every small and mid-sized company in America. Consumer prices will also be affected as retailers and wholesalers will have to raise prices to offset higher labor costs.


Tracking New Overtime Hours

The biggest beneficiaries of the rule changes in real terms are lower and middle managers who typically occupy that 'no man's land' between hourly workers and well-compensated upper management. These are the grocery store managers, restaurant managers, and entry-level team leaders who manage small groups of employees throughout the retail, hospitality, and industrial sectors. All of their working hours will have to be tracked by their employers and reported to payroll service providers to ensure workers are paid properly.

What does this mean for payroll services companies? In the long-term, not much compared to how they operate now. The short-term is another matter. Payroll databases will have to be modified to accept new data tracking the hours of these workers so that they get paid. Taxes paid on behalf of such employees will also change, but most of that is automated anyway.

The biggest change for payroll services is the fact that some salaried workers will be reclassified as hourly workers who are no longer eligible for all the same benefits they were getting before. Payroll companies will have to recalculate benefits accordingly. This could touch everything from health insurance to sick days to retirement fund contributions.


Keeping You On-Track and Compliant

We understand that complying with the overtime laws and regulations can be complex and frustrating, especially when new laws are introduced. That’s why at BenefitMall we create solutions that help keep you and your employees on track for hours and pay. Our time and attendance solution, TimeFocus, can help with all your scheduling needs, including scheduling to avoid overtime. That’s a big perk. Using an automated time and attendance solution can help keep your company compliant and free from the costly non-compliance penalties. Remove the worry and start today.

 See how TimeFocus can keep you compliant today.


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