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Tax Advisory: One more thing – Another challenge for business owners

By Denise Felber, HoganTaylor Tax Partner

Business owners have a new challenge resulting from a recent revision by the U.S. Department of Labor (DOL) regarding the rules defining non-exempt employees under the Fair Labor Standards Act (FLSA). With the potential of increased labor costs from additional overtime pay effective December 1, 2016, owners need to review and revise their business plan immediately. This involves:

  • Review of employee roster, including
    • job description and responsibilities,
    • salary or hourly wage, and
    • the current hours incurred on a weekly basis,
  • Consideration of cost efficiencies from
    • benefits of automation,
    • addition of part-time positions,
    • job elimination and combination, and
    • reduction of benefits.
  • Calculation of additional payroll costs due to reclassification of employees,
  • Change in systems used to track employee hours.
  • Change of product pricing and production, and
  • Evaluation of maintaining a continued business existence.

To be an exempt employee (i.e., no overtime pay), the employee must have “white-collar” job responsibilities and a minimum weekly salary. The employee’s responsibilities cannot include manual labor and must be administrative or supervisory in nature (i.e., “white collar”). The change has increased the weekly salary threshold from $455 to $913. (“Highly compensated employees” are automatically exempt with an annual salary of more than $134,000.)

Links to informative articles are included below.

https://www.dol.gov/featured/overtime

https://www.shrm.org/legalissues/federalresources/pages/overtime-overhaul.aspx

http://www.foxbusiness.com/features/2016/05/25/how-will-new-overtime-rules-affect.html

http://money.cnn.com/2016/05/23/pf/new-overtime-rules/

If you require assistance in reviewing your business plan, payroll costs or other related matters, HoganTaylor LLP has resources to provide assistance on tax and management matters.