New Payroll Rules Coming Soon! What to do about salaries, pay raises, and paperwork.

Do you have staff members who are paid a fixed weekly or monthly salary, regardless of how many hours they work? If so, consider this your heads-up notice—the US Department of Labor has updated rules for who can be paid this way. The new rules take effect December 1, 2016.

It’s a BIG change. Currently, all employees making less than $455 per week must be paid overtime. Under the new rule, that jumps to anyone making less than $913 per week. If your overtime-exempt person makes close to the new $913 cutoff, your cheapest option may be to give them a pay raise. The other thing to consider, though, is whether their job duties really qualify for one of the exemption categories. Hint—if they spend most of their time caring for horses, they don’t qualify.

So you have some people who are great, but they’re not $913 a week great. What can do you?

If you really, really want to pay them a salary it has to be for a fixed number of hours per week. If they work more than that, you pay them overtime. You have to make sure that the salary portion works out to at least the minimum wage, and the overtime portion to one-and-a-half-times minimum wage. And you need to keep a record of when they actually worked, to prove you paid them properly.

The other option, one I recommend for most clients and jobs, is to pay hourly wages; an agreed hourly rate for the first 40 hours, one and a half times that for anything over. One or both of you keeps track of their hours, and puts them into the payroll system. No, it doesn’t have the panache of a “salary”, but it doesn’t have the legal issues, either. In the end, it isn’t going to cost you any more than the whole salary-plus-overtime game. It might even save you money, if you have the misfortune of hiring flaky people. (In the horse world? No, we never get those…!?!)

If all this has your head spinning, don’t despair.  Our help can range from a one-time review of your situation so you have peace of mind, to setting up recurring payroll management services that handle the nuts and bolts for you.

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