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Bob Jablonsky & Associates Blog

Do the New Overtime Rules Affect You?

by | Jul 7, 2016

Effective December 1, 2016, federal overtime regulations will change and may affect how you are paying your employees.  These overtime updates will affect 4.2 million workers across the country.

The new rules will raise the salary overtime-eligibility threshold from $455/week to $913 ($47,476 per year).  This new threshold will increase every three years.  Salaried workers already entitled to overtime will get increased protection.

Employers have a choice of three actions they can take to employees who become eligible for overtime that weren’t before.

  1. Pay time-and-a-half for overtime work.
  2. Raise worker’s salaries above the new threshold.
  3. Limit worker’s hours to 40 per week.

Let’s say you have an employee that earns $500 per week and works 50 hours a week.  Previously, you didn’t pay overtime, but beginning December 1, 2016, you will need to.  At $12.50 per hour, you would owe them the regular $500 plus 10 hours of overtime at $187.50.

Let’s say you have an employee earning $800 per week and they work 50 hours.  Previously, you didn’t pay overtime, but now you will need to consider it.  You could pay them overtime, which works out to a weekly pay of $1100.  Or you can choose to give them a raise to $913 per week – the new threshold – and continue to exempt them from overtime.  The latter is the lowest cost alternative.

In both cases above, it may be cheaper to hire an additional part-time worker to work the 10 extra hours per week.

You can find more about the new overtime law here:
https://www.dol.gov/featured/overtime/

And if you have any questions about your payroll, feel free to reach out anytime.

Bob Jablonsky is the founder of Bob Jablonsky & Associates. He has spent his career helping taxpayers resolve tax issues and get back on track with the IRS. In addition to tax resolution his firm also prepares hundreds of tax returns every year for both individuals and small to mid-sized businesses.

Bob is an IRS Enrolled Agent (EA), which is an elite credential issued by the Internal Revenue Service to professionals who demonstrate special competence in federal tax planning, individual and business tax return preparation, and representation matters. An Enrolled Agent license is the highest credential awarded by the IRS and is recognized across all 50 states. Additionally he is a CMA, or Certified Management Accountant, a designation for financial controllers and CFOs (Chief Financial Officers), as well as an Advanced Certified Quickbooks Pro Advisor.

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