On May 18, 2016, the United States Department of Labor announced that it is increasing the salary threshold for jobs exempt from overtime from $23,600 annually to $47,476 annually. If you have an employee who is paid $47,476 or less on a salaried basis, you will be required to keep time records for all hours worked and to pay overtime for work in excess of 40 hours in any given week. This new rule becomes effective December 1, 2016.

The Fair Labor Standards Act requires that ALL employees be paid overtime if they work 40 or more hours in any given week. However, in addition to making $47,476 or less, the employee’s position must not fall into a category that is exempt from overtime. Exempt categories include all professional, executive, administrative, computer and outside sales positions.

Bottom line: It’s going to be important to classify employees’ positions correctly and to track hours to ensure there are no grey areas that can get you into trouble. It’s tough enough running a small business. The last thing you want is the Department of Labor breathing down your neck.

There is no doubt that this will have a significant impact on many small businesses. Plan ahead and make sure you understand the full financial impact of this new regulation on your business.