Will the New Overtime Rules Impact Your Bottom Line?

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Effective December 1, 2016, business owners must provide overtime pay to salaried employees who earn less than $913 per week or $47,476 per year. This is a substantial increase to the Department of Labor’s Fair Labor Standard Act (FLSA)’s previous salary level of $455 per week or $23,660 annually.

While the FLSA ensures minimum wage and overtime protections for most employees, the employers are exempt from paying overtime to employees who meet all of the following three criteria:

  1. Paid a predetermined and fixed salary that is not subject to reduction because of variations in the quality or quantity of work performed
  2. Paid a salary that meets a minimum specified amount, which is now $913 per week or $47,476 annually
  3. Perform job duties that primarily involve executive, administrative, or professional duties

For the first time under the FLSA, employers can use nondiscretionary bonuses and incentive payments such as commissions to satisfy up to 10 percent of the salary level. In order for these payments to qualify, any nondiscretionary or incentive payments must be paid quarterly or on a more frequent basis.

Restaurant and hotel owners generally pay a vast majority of their workforce an hourly wage and therefore would pay their hourly employees overtime regardless. The new rules could result in now paying overtime to restaurant managers and assistant managers, as well as department managers or assistant department managers in a hotel.

Going forward, restaurant and hotel owners will now need to maintain overtime data for their salaried employees as any potential overtime pay would be calculated on a weekly basis.

Aronson LLC is available for consultation on tax and business management topics for restaurants. Please contact Aaron M. Boker, CPA at 240-364-2582 or aboker@aronsonllc.com for more information.

 

About Aaron Boker

Aaron Boker has written 11 post in this blog.

As a senior manager in Aronson LLC's Tax Services Group, Aaron Boker is a proactive advocate for his clients, which include restaurants, hotels, C corporations, S corporations, partnerships, individuals, trusts, and private foundations. In addition to his tax compliance and planning work, he is committed to building the firm's hospitality industry practice and has a deep understanding of the unique business issues faced by companies in this market. Aaron's clients benefit from his dedication to excellent service and his commitment to his work as part of a results-driven tax team committed to staying at the forefront of the profession.

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