How the DOL’s New Overtime Law May Affect Your Contracting Business

A person using a calculator and a laptop on a desk while working on their contractor license.

The way that your contracting business handles overtime pay depends on a number of factors. Starting next year, the U.S. Department of Labor has set a few new rules concerning them. Specifically, the new minimum salary threshold for employees who don’t get overtime pay is about $35,000 per year. There’s a lot of aspects of the new law to understand, and they may affect your contracting business. Here’s what you need to know.

What Is Overtime Pay?

The concept of overtime pay is pretty easy to understand, even if it’s something that you don’t have a lot of experience with. The average workweek is 40 hours. People who work more than that in a seven-day period may be eligible to receive overtime pay. As a general rule, overtime pay is time-and-a-half. This means that if you’re paying someone $20 per hour for work, overtime is usually $30 per hour for the extra hours worked.

What Are the General Guidelines Concerning Overtime Pay?

There are several guidelines handed down by the DOL that businesses usually have to follow. These include:

For anyone over the age of 16, there isn’t a limit on the number of hours someone can work. This means that if you have a big push to finish a project and you’ve got employees willing to double their shifts to get it done, you’re not limited by a cap on hours. However, this also means that hours worked during the week get counted during the week. Employers can’t legally average the time between two consecutive workweeks to avoid giving overtime pay.

How Does the New Law Change Overtime Pay?

Of course there are exceptions to the rule, like supervisors who have an annual salary instead of an hourly wage. The nature of those exceptions are related to the new law. The DOL sets a wage minimum for U.S. businesses to hire employees who aren’t eligible for overtime pay. In short, if you want to hire someone who may work overtime but won’t get paid extra for it, you have to pay them a certain amount. That number was last changed in 2004 and used to be $23,660 per year, or $455 per week.

Starting next January, the minimum threshold will be $684 per week, or $35,568. Employers can use commissions and bonuses to cover up to 10 percent of that minimum. However, as a business, you’d need to be able to prove that you give that income at least annually. This requirement reduces the number of companies trying to cut down the minimum by promising income they don’t actually intend to pay.

How Does the Limit Affect Construction Businesses?

The way it affects your business depends on how you hire workers and the way you structure hours. If you plan to hire people who are willing to work overtime for the same annual wage, you’ll need to pay them more than you might have a year ago. If you’re working as an employee with the goal of starting your own business, keeping track of overtime rules may help you protect your own rights.

It’s worth keeping in mind that hiring people with an annual salary with the intent of scheduling them for a lot of unpaid overtime tends not to work out long-term. Employees are usually more productive when they get regular breaks and have the incentive to put in longer hours as needed. This is especially true in physically demanding fields like construction.

Running a company with employees requires a lot of knowledge about the way you have to pay them. Paying attention to changes in employment laws helps you stay on track as you grow your contracting business. To get started building a career that you’ll be proud to have, visit CSLS today!