New Overtime Regulations: Next Steps. June 15, 2016

Transcription

1 New Overtime Regulations: Next Steps June 15, 2016

2 Welcome PR Restaurant Group Frank McLaughlin Gray, Gray & Gray, LLP

3 What we will be covering today: The Current Law Upcoming Changes to the Law Calculation of the Business Impact Business Case

4 The Current Law Salary Basis Test: Predetermined amount of compensation each pay period that cannot be reduced because of a variation of quality or quantity of work Salary Level Test (since 2004): Must meet a minimum specified amount: $455 per week = $23,660 a year HCE = $100,000 (Almost Always Exempt)

5 The Current Law Duties Test: Exemptions based on: Executive Retail and Service have additional restrictions Administrative Office or non-manual work directly related to management Matters of significance and judgement Professional Lawyers, Accountants, etc.

6 What are the goals of the DOL? Salary to be tied to wage percentiles: Salary limit to be 40 th Percentile HCE limit to be 90 th Percentile Costs employers about $250 million per year Transfer income from employers to employees: $1.1 - $1.2 billion

7 Upcoming Changes to the Law Salary Level Test: Must meet a minimum specified amount: $913 per week = $47,476 a year HCE = $134,004 (Almost Always Exempt) Automatic updating of salary every three years Bonuses and incentive payments to satisfy no more than 10%

8 Calculation of Business Impact (Disclaimer Assuming your employees pass the Duties Test) Step 1: How many employees are salaried? Step 2: Do theses employees make more or less than $47,476 a year? If employees are paid more, remove employees from calculation and move to Step 4 for other considerations If employees are paid less, move to step 3

9 Calculation of Business Impact (Disclaimer Assuming your employees pass the Duties Test) Step 3 calculating cost: 1. Find the average amount of hours over 40 hours that the employees work 2. Find the hourly rate of the employee Multiply the hourly rate by 1.5 for overtime rate 3. Multiply average amount of hours over 40 by overtime rate 4. Multiply the amount by 50 weeks (vacation time removed) 5. Add base salary amount to calculated overtime

10 Calculation of Business Impact (Disclaimer Assuming your employees pass the Duties Test) Step 4 Other Considerations Compression, Human Capital, Spin Step 5 Make Decisions

11 Any Decision You Make Will Cost You Money The Only Decision is Which Option Will Cost You Less Have to Think About Human Capital

12 Scenario and Impact Facts of Scenario: Own 3 business units (Offices, Divisions, Restaurants, etc.) 3 Salaried Employees in each unit 1 Employee making $50,000 1 Employee making $45,000 1 Employee making $40,000 All Employees work an average of 45 hours per week

13 Scenario and Impact Step 1: 9 Salaried Employees Step 2: Three of the Employees make over $47,476 move to Step 4 10 Employees make less than $47,476, move to Step 3 3 Employees make $45,000 3 Employees make $40,000

14 Step 3 - Calculate cost: On average, the 9 Employees work 45 hours per week Hourly Overtime Rate: $45,000/52 = $865/40 = $21.63 X 1.5 = $32.45 $40,000/52 = $769/40 = $19.23 X 1.5 = $28.85 Weekly and Yearly Additional Cost: $32.45 X 5 = $ X 50 = $8, $28.85 X 5 = $ X 50 = $7, Total Cost Per Employee: $45,000 + $8, = $53, ($5, Over Salary Limit) $40,000 + $7, = $47, (Under Salary Limit)

15 Step 3 - Calculate cost (cont.): $45,000 Employee: Give raise to $47,500 Total Cost to Company $2,500 x 3 = $7,500 $40,000 Employee: Do not give raise Total Cost to Company $7, X 3 = $21, (Higher Side) If you supplement that 5 hours with a lower level employee $15 X 6 = $90 X 52 = $4,680 X 3 = $14,040 (Lower Side) Total Cost: $29, ($9, per unit) $21, ($7, per unit)

16 Scenario and Impact Step 4 Other Considerations: How are you going to make up the hours? What will that conversation look like? Can you spin? Compression: How do you explain to employees that they were making $10,000 more than a lower level employee and now basically the same? Step 5 Make the Decision: The employees close to the $47,476 threshold are an easier decision, but how much do you have to give them?

17 Questions? PR Restaurant Group Frank McLaughlin Gray, Gray & Gray, LLP

18 Contact Us LET S MEET Gray, Gray & Gray, LLP 150 Royall Street Canton, MA LET S TALK (781) LET S CONNECT PR Restaurant Group

19 Disclaimer The content of this webinar is intended for educational purposes only. This webinar provides a brief summary based on our understanding and interpretation of current law. All tax references are to federal tax law only, unless otherwise stated. The information contained in this webinar is general in nature and is based on authorities that are subject to change. It is not, and should not be construed as accounting, legal or tax advice or opinion provided by Gray, Gray & Gray, LLP. The material presented may not be applicable to, or suitable for, specific circumstances or needs, and may require consideration of non-tax factors and tax factors not described herein. information. Contact Gray, Gray & Gray or another tax professional prior to taking any action based upon this Changes in tax laws or other factors could affect, on a prospective or retroactive basis the information contained herein; Gray, Gray & Gray assumes no obligation to inform the reader/webinar attendee of any such changes. PR Restaurant Group The material presented in this webinar is not intended to, and cannot be used to, avoid IRS penalties. material supports the marketing and promotion of accounting services. This Seek advice based on your particular circumstances from independent tax, legal accounting, insurance, investment and financial advisors.