
How New Over Time Law Will Affect Business Owners
The business owners, long been working and setting salary scale plans based on the law of 2004, now have to inculcate major changes in a structured manner to bring cohesion between what the law requires of them and what is practically possible for them from the business point of view.
Some of the major effects of this law on the business owners and organizations have been discussed below. If you have questions you can always call 407-344-1012, visit
www.freedomtaxfl.com, or email info@freedomtaxfl.com and talk to a business accountant.
1.Tough Decision Making Is Required
The most resonating of effects on the business owners will be to confront hard decision making regarding compliance with the new overtime law. Opting out of complying with it is out of question since this law is across the board, be it small and medium enterprises or established corporations.
Now the question remains as to whether the employees earning below the cutoff be given due overtime, or the overtime hours be limited or finally, the salaries be raised above the cutoff to escape the long term effects of the law.
Business owners that previously addressed these questions in a quite non-structured and 'as-we-please' kind of manner are now posed with a dilemma that they cannot escape. All three scenarios described above, in one way or the other, will require business owners to let go off at least some percentage of their profits in favor of the workforce, which this law aims to benefit. Limiting or completely eradicating overtime hours is the only way the monetary effects of the law can be avoided; the opportunity cost of this will obviously be lesser work done in a day.
2.Job Role Definitions Can No Longer Be Ignored
Because of the Duties Test that this new overtime law entails, employers and business owners cannot get past loosely defined job roles; that are set to benefit their own selves. This is quite impactful in that the businesses having a larger percentage of workers will have to bear greater compensation costs. Changing the job titles and roles as per convenience no longer remains an option.
Since the Duties Test is applicable across the board, business owners now have to adhere to the standard it sets regarding the determination of job roles. For businesses that hire less administrative and executive staff, this Duties Test comes off as a red sign; either increase the staff that is exempt from the law (whose salaries are generally higher) or start loosening your pockets. Either way, the costs are set to increase for business owners.
3. Far Reaching Impacts With Threshold Raise On Intervals
As briefly mentioned in the introduction, this threshold raise is not a stagnant one, unlike the past where decades would go by without an increase; which meant that businesses did not have to account for increased inflation rates and cost of living while determining the overtime pay scales for employees. Since this rule will be refreshed with partially increased thresholds every three years, businesses now have to prudently make decisions based on how they will be impacted a few years down the lane.
The reason why this worries business owners so much is its unprecedented nature; a rule of such a far-reaching disposition has not been passed ever before in context of wages and overtime. Therefore, business owners now have to think long term; getting by the current year somehow is no longer an option.
4.Cutting down on non-exempt employees
Businesses may have to let go employees that are non-exempt from the law. This means a lot of time will be taken by re-structuring the way their organization works, hiring new employees and making sure that the majority staff stays exempt of overtime. Apart from the monetary setbacks that this may pose, the time factor in this scenario is the most critical and impactful.
For a business that has been run on a standard track for quite a few years, changing structure to lessen the blow from new overtime law is not an easy one. Changing structure means transforming the job roles and increasing the percentage of decision-making executive staff. This implies a complete change in functioning; which has its own costs that are unavoidable.
Therefore it is only a matter of determining which opportunity cost is lower; that of letting go employees and changing structure or that of keeping employees and paying them the due overtime.
5.Lesser Flexibility
Business owners, who previously allowed their employees the flexibility to work according to their schedules and gave them the leverage to work from home, will now have to take back these advantages from the employees, impacting employee satisfaction. Because employees now have to track their work hours closely and only those hours spent at the workplace will be accounted for, business owners will now have to let go of these benefits. Such flexibilities make employees satisfied with their organization and it is less likely that they think about leaving.
Moreover, business owners show reservation over the fact that this law does not take into consideration the quality and quantity of work. Which is to say that an employee may or may not be giving his best, or may as well be spending only half the time doing the actual work, he will still be eligible based on the extra hours he spent at work. It affects business owners in that the employees may slack in work but just cash on the hours.
6.Closer Scrutiny Required By The Businesses
The businesses that choose to keep employees from working more than 40 hours per week now have to keep a close check on them so that they may not spend time attending to personal engagements such as casual phone calls. Apart from being inconvenient, business owners feel that it is quite uncalled for and does not come off as something decent. Previously, the main concern used to be getting the work done, whichever way employees may find convenient regardless of time. Now that the rule applies, it has gotten trickier to keep track of how employees are working, more so in big corporations.
Moreover, some argue that you cannot have a strict distinction or wall between your personal and professional lives. There is no button that you can press to switch on or off between two aspects of your life. So it is quite difficult to stop an employee from attending calls, because business owners might not be aware of the importance it carries for the employee. Therefore, 'keeping a check on employees' time is not as straight forward as it sounds.
7.Impact On Small Businesses
Under the new overtime law,
businesses that earn less than $500,000 of revenues annually will not be required to adhere to this law. This sounds simple, but there are quite a few considerations that make this exemption less clear and simply understood. Even if the company earns under the defined scale, an employee of that company may still be eligible based on the kind of work he engages in. For example, employees that engage in commerce activities out of the state such as interstate sending and receiving of goods, looking over credit card transactions made in a similar capacity and regularly making calls and emails to keep in touch with relevant matters will still be eligible for overtime payment under the Fair Labor Standards Act (FLSA). Therefore, companies earning fewer revenues but having employees that look into out-of-state matters as part of their job will have to be paid, impacting the already limited profit margins of small businesses.
source:
http://freedomtaxaccounting.com/how-new-overtime-law-will-affect-business-owners/