On December 1, 2016, the salary threshold for overtime pay is set to nearly double from $23,660 to $47,476, by way of the Fair Labor Standards Act. For business owners, this means salaried employees earning less than $47,476 will now need to be paid overtime for any time worked over 40 hours in a given week. This is no small change, and small business owners in particular are poised to be hit hard by these new regulations. 

The regulations bring with them positive outcomes for the segment of workers who might have been working 70 hour workweeks at a minimum wage salary, with no account of overtime pay. However, for small business owners facing such a marked change in how they pay their employees, it has implications for everything from company culture to the company’s bottom line — and in the end, how many people a company can employ while still making ends meet. 

For many business owners, the change already seems unmanageable, and has caused a certain level of grief — from wondering how to maintain the standards of pay and benefits that they’ve established over the years to simply negotiating the details of a complicated new regulation. 

At my own company, we’re also coping with the grief, and found a helpful way to make our way through the process and illustrate the perspective for other small business owners as well. We call it (with apologies to Elisabeth Kübler-Ross): The Five Stages of (Overtime) Grief. 

Stage 1: Denial – Small business owners think, “This couldn’t possibly apply to me. How will I comply with these regulations and still remain profitable?" 

Stage 2: Anger – "I’m doing my absolute best for my employees right now and everyone is happy. Why is this happening?" 

Stage 3: Bargaining – “I’m sure we can work this out somehow. Maybe I can give pay hikes to put workers above the threshold, rather than reclassifying the workers to hourly.”  

Stage 4: Depression – “I’ve analyzed costs and don’t think we can manage. But, if we don’t comply, the penalties are steep. Not only that, how do I maintain a positive company culture when compensation and benefits are bound to be affected?”  

Stage 5: Acceptance – “We can do this, but we’re going to have to do it together and we’re probably going to need some help. December 1st will be here before we know it.” 

Once you’ve made it to stage five, you’re probably ready for some practical advice. Well, to come to terms with the new rules and begin proactively making decisions, businesses need to be systematic about their approach. 

Here’s how you can navigate the journey and make the best decisions for your organization come December 1^st: 

Look at your actual numbers

Take an honest look at the salaries of your employees and evaluate the actual amount of hours each employee is working week-to-week. By getting a read on the current state of work and overtime hours, proper decisions can be made on how to adopt the new rules. If you don’t already havea reliable time and attendance system in place to track employee hours, make sure you get one. Whether you use software or have your employees punch in and out, a tracking system will help you to get specific with your numbers. 

Make compensation adjustments now

Don’t hesitate on tough decisions. Once you’ve analyzed workers’ pay and time statistics, make a call as soon as possible on which compliance method to take for each employee. Business owners can choose to increase salaries to meet the minimum threshold, pay overtime to those now eligible to receive the pay rate, eliminate overtime altogether in the company, or make a reduction in base salary to afford the overtime changes. 

Outline enforcement rules

A good deal of the resistance to the new regulations stems from the enforcement concerns associated with overtime standards. In order to stay within the boundaries, set up specific protocols for employees working overtime, such as whether it is allowed or not, who is limited to core hours, etc. While these changes may be tough, the legal issues that could arise from lack of adoption could be more damaging to a small business. 

Communicate with your staff

Wherever there’s confusion, there’s usually a lack of communication. Once you’ve analyzed your numbers and figured out how you’re going to comply as a company, hold a meeting with your employees to communicate a) what the new regulations mean for your business, b) how you’re going to comply with the regulations as an organization, and c) how the new policies will affect employees on an individual basis. Provide clarity wherever you can, encourage questions, and reassure your employees that you’re committed to them as individuals and to upholding the company culture you’ve worked to foster prior to the new regulations. 

It’s absolutely possible to examine all of the aspects of the new regulations and come to accept the outcome, while still maintaining company culture and profit margin. By honestly examining the status of your workers and how the new rules will take effect, owners can make smart, calculated decisions to help make the overall transition much smoother.