How the hot Overtime Law Changes Will Affect Small Businesses

President Obama recently signed an executive order calling for brand new rules on overtime pay. Currently, salaried workers in executive, administrative and professional positions aren’t eligible for overtime pay in the event that they make over $455 every week. The President suggested $600 or $640 because the new threshold – the present standards for brand new York and California.

Let’s put this in layman’s terms. There are numerous arguments for this new overtime law change. Per the White House, only 12% of salaried workers are currently legally required to receive overtime pay, and the brink hasn’t been raised because the mid-1970′s. Additionally, following the commercial downturn, company profits have bounced back, with profits of S&P 500 companies doubling since 2009 . However, wages haven’t followed suit.

President Obama said :

“Overtime’s simple idea — you probably have to work more you ought to receives a commission more. In case you go above and beyond to aid your employer and help the economy succeed, you then should share for your success.”

What About Small Businesses and the recent Overtime Law?

Unfortunately, these new overtime law changes, if enforce, will probably disproportionately affect small businesses. While most large firms can absorb new regulatory costs, small businesses have less revenue to spread the prices across. As Marc Freedman, the chief Director of work Law Policy on the U.S. Chamber of Commerce  explained :

“Similar to minimum wage, these changes in overtime rules will fall most harshly on small and medium sized businesses.”

It’s predicted that some small companies will see a big increase of their payroll costs as lower-level employees working 50 or 60 hours per week become eligible for overtime.  Within the current economic environment, many small businesses don’t have the available revenue to hide these additional costs. The overtime pay changes can also potentially devastate startups, which frequently rely upon long hours and under-paid dedication from their employees to be able to get off the floor.

This new overtime law change also will negatively impact many small business employees. The changes would endanger employee jobs (as many small business owners could be forced to reduce the choice of workers they employ) while ignoring the numerous legitimate explanation why employees may match overtime even without extra pay – like getting experience, developing their skills, or positioning themselves for a promotion.

What Are Your Options?

While a proposed rule will not be predicted to come back out until the autumn, small business owners should get thinking about how they could mitigate these costs now. Some companies can have the revenue to only pay for his or her newly eligible employees outright, but many small businesses don’t have that luxury. Those already under financial constraints might need to think about raising their prices or reducing their employee numbers.

There also are any other measures small businesses should envisage to mitigate these possible regulatory costs. As opposed to hiring full-time employees to produce a needed service, small businesses can economize by hiring contract workers or outside service providers. These entities are dictated by contract law instead of employment law, and so aren’t eligible for overtime or benefits. They are able to also dictate their very own payment terms.

As Paul Christiansen explains in a recent article :

“The corporation is the magic strategy that may open up opportunity, freedom, flexibility and selection for both startups and their service providers.”

Small businesses owners also needs to consider investing in an automatic time-tracking system. If the hot overtime law is modified, it is going to be more important than ever to trace how employees are spending their time for you to be sure that no unnecessary overtime hours are logged. a completely integrated system may also show small business owners which employees are profitable to the corporate, making any budget-induced staff cuts easier.

If the brand new overtime law changes take effect inside the coming year, many small businesses will face additional payroll costs. But with the ideal preparations, these costs may be mitigated.

Obama Photo via Shutterstock

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