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BizReport : Research archives : May 26, 2016

SMBs: New labor laws could impact revenue lines

If new labor regulations are passed in the US, small businesses will have to change their way of doing business. One expert weighs in on what the proposed changes could mean.

by Kristina Knight

Kristina: Could you explain what the new labor law means for SMBs?

John Swanciger, CEO, Manta: The proposed regulations would almost double the current salary threshold for overtime requirements (from $23,660 to about $47,476 annually). Under the new rules, it's estimated that 211,000 small businesses and their 1.8 million workers would be required to provide overtime pay to any eligible employee whose salary is below the given threshold.

Kristina: What are the options available to small businesses to meet these changes?

John: In light of the looming changes, small business owners should explore all options by reviewing their employee records to confirm which workers are truly exempt from overtime pay. Simply employing salaried workers doesn't mean businesses are exempt from providing overtime wages, so it's vital to clarify worker classification to comply with FLSA regulations. Business owners should look at how many hours their employees work - in some cases, it makes more financial sense to keep current salaries and pay employees overtime. However, for employees that work many hours over 40, or for those who are already close to the new salary threshold, small business owners can raise salaries to match the new regulations and avoid overtime costs.

Kristina: How can SMBs determine which option(s) will help them comply with the law yet still make money?

John: Our research indicates that small business owners need to become better educated when it comes to worker classification - our recent poll found that 51% of respondents weren't sure if their salaried workers were exempt from overtime pay under the current federal rules. With this in mind, business owners should research and read up on the regulations to better understand the new overtime rules and their current salary environments. Now is the time to assess how the shift will impact their headcount and labor costs in order to make the appropriate changes. Implementing time-tracking tools that monitor employees' hours on a granular level can help small business owners make more informed decisions.

Kristina: There have been polls indicating SMBs support a $15/hour minimum wage increase, yet this poll seems to indicate the opposite. Which is correct? Or is the minimum wage stance dependent on location?

John: In our most recent poll, we found that small business owners are split on the issue of minimum wage - 51% of small business owners support a minimum wage increase while 49% oppose it. Of those who favor an increase, half support a $15 minimum wage, with the other half favoring an increase to $10 or $12 per hour. Since a significant number of small business owners pay their employees hourly wages rather than salaries, they're less likely to be aware of the overtime changes, as our overtime poll indicated. But the fact that they support a minimum wage increase is promising as more states look to New York and California as examples of how to approach these changes.

Tags: Manta, small business, SMB tips, SMB tools, SMB trends, US labor laws, US minimum wage

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