Pending: Changes in Overtime Pay – Brigade Bookkeeping

July is a super month because it’s the month our great nation was founded nearly 230 years ago. I’m a first generation American, so Independence Day has a lot of meaning to my family, who fled a communist country for freedom. This is where I founded Brigade Bookkeeping and where every week, I get to tell you about the latest accounting news that could affect your business.

This week, I want to inform all employers and employees about a new proposal that would increase the number of employees who could qualify for overtime pay. Currently, employees who earn a salary of $23,660 a year or more are not eligible for overtime pay. But under the new proposal by President Obama, the threshold would rise to $50,440 annually.

It’s called the overtime threshold. According to the Department of Labor, only eight percent of workers qualify for overtime pay today. in 1975, 62% of employees qualified for the overtime threshold. So now, President Obama and the Department of Labor want to change the threshold to keep up with the cost of living.

The number of employees who would qualify for overtime benefits would increase to approximately five million. Labor Secretary Thomas Perez says the new rules could also add as much as $1.3 billion directly to workers around the country.

But what about the cost to employers? The Obama administration says employers should expect costs between $240 million and $255 million per year. Here are a few things to know or consider when it comes to the overtime threshold:

• NO AFTER HOURS EMAILS – In some careers, salaried employees, especially at the manager level, are expected to look at their emails and reply even if it’s after hours. Currently, salaried workers could reply without getting overtime (OT), but if the new proposal takes effect, an email reply could be considered on the clock and could cost you. In some parts of the U.S. where a similar state law already exists, companies actually shut down work servers.

• MORE HOURLY WORKERS – After doing the math, it may be more cost effective to hire someone hourly, rather than as a salaried employee. If the current job requires lots of overtime hours, you may want to consider this option. Talk to your accountant to see if this is a cost effective solution.

• STRICT OVERTIME BUDGET – If this new proposal goes into effect, employers would have to create new after hours policies and then make sure workers stick to it; if they don’t, it could wind up costing you, the employer, big bucks.

A lot of employees are thrilled about the potential increase in the overtime threshold. Employers should be prepared for it. If you need more information about this change and how it would affect your bookkeeping, call or email me anytime.

Happy Independence Month everyone! God bless America!