New Federal Regulation Will Impact Small Businesses

New Federal Regulation Will Impact Small Businesses

In less than six months business owners – of large and small enterprises- will have to prepare for a new law, the Overtime Rule. Effective December 1, the regulation seeks to create a fairness for employees by being provided greater compensation for their workload, or shift their workload allowing for greater free time.

In plain language, this Rule will encourage employers to pay overtime after 40 hours or increase employee compensation to nearly $50,000 year. Of course, it is not quite that simple so business owners are encouraged to seek counsel from their attorney or accountant.

However, what is clear is the intention behind the law. It will work to improve company culture and enhance quality of life.  The extra time off work will give people more time to participate in extracurricular activities, personal development, and familial tasks that will lead to a more productive team member.

As we prepare for the new rule to take effect, we should also consider reviewing our overall Human Resources process. This is a great time to review the five mistakes below, according to, and make some necessary adjustments.

  1. Rushing through the hiring process

The reason small businesses speed through the hiring process is to get the work done. There are times when the job description is vague and policies and procedures are not outlined.  Taking your time allows for analysis of the current process – identifying what works and what should be nixed. Slowing down the process also creates a culture of efficiency over speed. “27% of more than 6,000 HR professionals reported a single bad hire costing more than $50,000” according to a 2013 CareerBuilder survey. That money could go to increasing salaries of your current team, and adding greater responsibility.

  1. Employees and contractors are misclassified

Boy, oh boy the blurred line of employee versus contractor can get your business into serious trouble. Do you know how your current team is classified? Knowing the differences between the two could save you thousands. So what should you do? Be very clear in the beginning about the terms of the relationship you are engaging in. For now, you should take an inventory of all of your current relationships and set boundaries going forward.

  1. Employee handbook is outdated

Somewhere on your computer you have an employee manual that has not been revised in several years and probably doesn’t reflect the company you have today.  Behind accounting and having your legal affairs in order, the policies and procedures manual can drastically cut out a lot of employee confusion and violations. As an example, your book should explicitly outline the way overtime is handled. Does it need to be approved? How does your team keep up with their hours? What happens when someone works more than their allocated hours? See! You need an updated employee manual. To do that effectively conduct regular meetings to discuss new terms, receive feedback, and update everyone on the changes.

  1. Little or no employee training

In a small business employees are sometimes asked to dive in head first without understanding their role, company culture, or office politics. As an employer take the time to invest in your employees through a uniform onboarding. The employees will appreciate your investment in them and channel their productivity for the benefit of the work environment.

  1. Inadequate documentation

Put everything in writing. Are you having some employee challenges? Write it up for your own records. Do you have an evaluation process? If not, create one that provides feedback – constructive and positive. But when having things in writing is most important is when an employee leaves or is terminated. Having a record of performance, or lack thereof, can be the difference between spending any extra revenue on bonuses or a lawsuit.

Does this all seem so complicated? Well, it is. And as a small business owner you should have support as rules, regulations, and laws directly impact your business and its finances. The Nashville Business Incubation Center provides mentoring, accountability, and consulting with subject matter experts that can carefully guide you through this type of process. To learn more about how your business can participate in the traditional incubator or Incubator Without Walls, virtual incubation, visit