By Jim Wong, CPA | November 2, 2016

Big changes are around the corner for U.S. businesses of every size—beginning Dec. 1, 2016, a new rule goes into effect that dramatically increases the number of professionals eligible for overtime pay. The Fair Labor Standards Act (FLSA) is upping the threshold for working professionals to receive time-and-a-half overtime pay from $455 per week, or $23,660 annually, to $913 per week, or $47,476 annually.

What does this mean for employers? Well, it means that nearly 193,000 employees in Illinois and about 4.2 million white-collared workers nationwide will soon become eligible for overtime benefits. December will be here before we know it, so it’s important for employers to take the necessary steps in order to prepare for this change.

Exploring different options and planning ahead is one of the most important steps that employers can take to prepare for the changes surrounding overtime pay. Additionally, employers should be aware that this change marks only the beginning. The article states, “Under the new rule, the salary threshold for overtime pay will automatically be adjusted every three years.”

I recently came across an article that nicely summarizes what to look out for with these changes. Learn 9 Things Employers Should Know about New Overtime Regulations below.

1. Familiarize yourself with what the rule means.
This is a pretty straightforward step, but many employers are not fully aware of what this new rule means. In fact, a recent study says, “one out of five employers were not aware of the final rule, and 55 percent did not think it applied to them.”

2. Determine how many employees will be effected. 
Conducting an audit of employees who are likely to be affected by this rule is vital. Knowing exactly which team members are currently classified as exempt from the overtime protections of the Fair Labor Standards Act will need to meet the duties test for their exemption as well as the salary threshold.

3. Track employee nonexempt time. 
Employers need to be aware of their employees who make below the $47,476 threshold and determine time spent working from home as well in order to manage the numbers properly.

4. Determine which employees will become nonexempt. 
As I mentioned, it’s essential for employers to track nonexempt employees and keep track of their working hours. Once that step is complete, companies should consider whether to increase their salary levels to maintain exempt status or transition the employee to nonexempt status.

5. Develop a strategy. 
This is another very important step in order to ensure consistency and clarity—having a strategy will allow everyone to be on the same page in terms of overtime pay. According to this article, a few questions employers should ask advisors are: Should we increase budgets for our essential staff? Should we consider hiring more staff or revisiting our compensation model for specific employees? This will also let companies make financially sound decisions in the future, as well.

6. Update timekeeping system. 
If an organization has several team members who will need to track their hours, employers might consider revamping their timekeeping system. In fact, attendance software might be a helpful tool to keep track of the hours various nonexempt employees are working.

7. Create and implement training procedures. 
This is another straightforward tip that needs to be reiterated—developing and implementing updated procedures is essential to any company’s success, especially when it comes to new rules and regulations.

8. Keep employees in the know. 
This goes hand-in-hand with the previous step—be sure to implement clearly articulated procedures when new changes go into effect. Employers should be sure to maintain a level of transparency and be ready to answer questions and communicate exactly what will change for nonexempt employees.

9. Start preparing now. 
We are less than one month out from the changes. If employers have not begun to prepare for the change, the time to begin preparation is now. Experts say companies should, “look at how different scenarios will impact their bottom line and determine how they will move forward, to best avoid wage claims and other issues.”

The clock is ticking! It’s important for businesses to be ready for the upcoming changes regarding overtime pay. Do you have other suggestions for how employers should prepare for Dec. 1? Comment below and let us know.

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