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Anyone had time to digest the new OT rules yet?

I haven't had time to research yet; so I'm hoping for the benefit of combined resources through Proformative. I have a client in a highly seasonal industry. During the winter months, their total staff is about 40 people, but during the spring, summer and fall, their employee numbers grow to about 100. If the company is forced to pay time-and-a-half for their salaried employees during the growth season, how do they recover during the winter months when salaried employees are being paid for 40 hours a week and working only 28?

Answers

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

They don't. They need to rethink their Salary people and/or hire additional staff in excess of the 100 as to minimize total salaries paid.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

Do they earn commission or bonus? The only real option is to make them hourly and budget the OT or as Wayne says, they would need to hire more people in the busy season so they don't have to pay the OT.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

Here is another angle.... Look for other revenue streams to maximize salaried employees during the off season.

On a related note, I cringe when I hear/read management say they are "forced" to pay overtime. The word (perspective) just does not sit right with me! The new OT rules just increases the threshold to $47some thousand for exempt employees.

Our default is to look at the cost when we can look at the top line.

Topic Expert
Wayne Spivak
Title: President & CFO
Company: SBAConsulting.com
LinkedIn Profile
(President & CFO, SBAConsulting.com) |

Not always feasible, but a good idea nonetheless...

Kate West
Title: Consulting CFO
Company: The C Corps
(Consulting CFO, The C Corps) |

Yes, we've already developed a strategy to make the most of the off-season.

Apologies for using the term "forced": please understand it's NOT related to paying the employees; it's having FEDGOV dictate another requirement for small businesses to know/remember.

The industry is highly competitive; the salaried employees have been with the business for several years; and the company has not made a profit. The owner funds shortages from his own pocket, and he is still generous with bonuses.

Thank you for the input.

Ross Anderson, CPA, MBA
Title: Controller
Company: TFS Capital
(Controller, TFS Capital) |

@Kate West. It's not another requirement. It's an update to an old requirement to bring it more in line with its original intent and purpose. The standard was already there, but had it moved with times and been adjusted for inflation from the time it was enacted to now it believe the amount would have been more than the 47k it is moving to. They are salaried based on a yearly amount, meaning their work also should be judged as a yearly amount and not just what their seasonal workload is, meaning 28 hour weeks in the winter are not relevant as they are balanced out by the busy season workload.

If the owner has yet to turn a profit, the overtime rule update most likely is not a difference maker unless the owner is either seriously underpaying people or skirting OT rules (the salary amount is one of a few requirements that have to be met to be OT exempt). There should be adjustments that can be made, such as moving someone from salary to hourly that will help.

Topic Expert
Christie Jahn
Title: CFO
Company: Prime Investments & Development
(CFO, Prime Investments & Development) |

What doesn't make sense to me is in business where a salaried worker may earn 50% of their pay as commission or bonus, we are only allowed to factor in 10% from the commission. It would make more sense in my opinion to say as long as their annual salary totals to $47k the way you get there shouldn't matter. The helps with seasonality issues.

EMERSON GALFO
Title: CFO
Company: C-Suite Services
LinkedIn Profile
(CFO, C-Suite Services) |

You have to bear in mind the context of the "low salary"/50% commission structure.

Hopefully an eye-opener (paradigm shift) for those with the business/cost model....

In essence, the company is OFFLOADING PART OF THE BUSINESS RISK TO THE EMPLOYEES (WITHOUT BEING PART OWNERS). Let's just say that the employee is receiving 40% less salary. That 40% is the employee's contribution to the risk taking which the business owner/company could be (the better word is...SHOULD BE) taking. Upsides are not risks, the overall business risk are what's being distributed. Sure, the employees knew and agreed to this coming in but for most employees, they cant do anything about it and just accept it as norm/given, it still does not change the context.

WE HAVE SUPPLANTED PERFORMANCE WITH RISK (or is that the other way around....I am now confused...but you get my point...lol)

Something that has become a norm just to skirt paying full salary. The concept is no different for the waitstaff/tips and the restaurant/food service business or what has become norm. I applaud restaurants not depending on tips for their waitstaff's subsistence.,

Let's put it into another context.....START-UPS. Sure, initially, startups pay their employees below market rates, but the upside and having a slice of the pie (stock options) take the sting out of it. And the decision factor is (employee), is my rate reduction worth the upsides of my piece of the pie?

LOL...i think i went too deep on this....my apologies!

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