Earlier this summer, the Department of Labor updated the Fair Labor Standards Act (FLSA). The regulations regarding overtime pay for white-collar workers were last updated in 2004. The new changes take effect Dec. 1.
If you are a business owner, it is fairly likely this will affect your business, so please make sure you familiarize yourself with the changes and work with someone to determine a strategy, as appropriate.
The FLSA requires certain employees that do not fall under an exemption to be paid overtime if they work more than 40 hours a week. The change taking place in December is in the dollar threshold for which exempt employees can be excluded from overtime pay requirements.
Some of the professions and positions that can be exempt from the overtime pay rules are:
- Learned professionals (CPAs, for example)
- Creative professionals (musicians or writers, for example)
- Law or medicine (must hold a valid license or certificate)
- Teachers who hold a certificate (those without certificates may still be subject to overtime rules)
- Outside sales
- Computer occupations
- Executive employees
- Highly compensated employees
- Administrative employees (certain duties must be met to qualify)
If the employee is paid at a certain salary level, he or she is exempt from tracking time and overtime pay. Previously, the salary level was set at $23,660. With the new regulations, the salary level increases to $47,476.
If the employee is considered exempt but is paid under $47,476, then you must track his or her time to monitor and pay overtime. If you have an exempt employee you are currently paying $45,000, it may save you time, money and headache to go ahead and bump compensation above the $47,476 limit.
Another notable change with the new regulations is that beginning Jan. 1, 2020, the salary level will be updated every three years.
We encourage you to be proactive and start evaluating any changes you need to make now. There are strategies you can employ to optimize this potential additional expense.
Adam Shay, CPA (N.C. License Number 35961), MBA, is managing partner of Adam Shay CPA, PLLC. He focuses on minimizing taxes and improving the financial results of entrepreneurs, and is actively involved in supporting the Wilmington entrepreneurial and startup community. For more information, visit http://www.wilmingtontaxesandaccounting.com/ or email him at [email protected]. He can also be reached by phone at (910) 256-3456.