Changes to the Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) is a federal law that requires employers to pay ALL employees overtime if they work more than 40 hours per week UNLESS an employee fits within a certain exemption. Exemptions require a two-factor analysis for each position (except the outside sales exemption): 1) Salary Threshold and 2) Job Duties Test
Changes to this law, effective January 1, 2020, are the salary threshold for the executive, administrative, and professional exemptions. Under the federal FLSA, this will increase from $23,660 ($455 per week) to $35,568 ($684 per week).
The total annual compensation requirement for “highly compensated employees,” subject to a minimal duties test, will also increase from $100,000 to $107,432. Employers may use commissions, nondiscretionary bonuses, and other incentive compensation to satisfy up to 10% of the salary requirement, provided that these payments occur no less frequently than annually, and subject to a single “catch-up” payment within one pay period of the close of the year.
The below is the high-level summary of the changes to the FLSA. There are also several fact sheets that break this down even further and can be found by clicking here.
It is a two-step process to determine if an employee should receive overtime:
Salary Threshold:
- Paying someone a salary does not mean they are exempt.
- The Illinois law did not change, it is the same lower threshold, but they recommend following the federal threshold to make sure you are in compliance.
- If the employee makes under $35,568 ($684 per week) then they should be paid overtime.
- This amount can include non-discretionary bonus and commission, but only up to 10% ($3,556)
- The employer can do a catchup payment at the end of the year.
- If the employee’s compensation is over this threshold then move to step 2.
Job Duties Test:
- If the employee makes more than the threshold and they meet one of the following criteria, then they do not need to be paid overtime. (We give you a high-level overview of the six below, however you can find a more in-depth explanation by clicking here.)
Executive:
- To qualify for the executive employee exemption, all
the following tests must be met:
- The employee must be compensated on a salary basis (as defined in the regulations) at a rate not less than $684 per week;
- The employee’s primary duty must be managing the enterprise, or managing a customarily recognized department or subdivision of the enterprise;
- The employee must customarily and regularly direct the work of at least two or more other full-time employees or their equivalent;
- The employee must have the authority to hire or fire other employees, or the employee’s suggestions and recommendations as to the hiring, firing, advancement, promotion, or any other change of status of other employees must be given particular weight.
Administrative:
- To qualify for the administrative employee exemption, all
the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
- The employee’s primary duty must be the performance of office or non-manual work directly related to the management or general business operations of the employer or the employer’s customers;
- The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance.
Professional:
- To qualify for the learned professional employee exemption, all
the following tests must be met:
- The employee must be compensated on a salary or fee basis (as defined in the regulations) at a rate not less than $684 per week;
- The employee’s primary duty must be the performance of work requiring advanced knowledge, defined as work which is predominantly intellectual in character and which includes work requiring the consistent exercise of discretion and judgment;
- The advanced knowledge must be in a field of science or learning;
- The advanced knowledge must be customarily acquired by a prolonged course of specialized intellectual instruction.
Outside Sales:
- To qualify for the outside sales employee exemption, all
the following tests must be met:
- The employee’s primary duty must be making sales (as defined in the FLSA), or obtaining orders or contracts for services or for the use of facilities for which a consideration will be paid by the client or customer;
- The employee must be customarily and regularly engaged away from the employer’s place or places of business.
The salary requirements of the regulation do not apply to the outside sales exemption. An employee who does not satisfy the requirements of the outside sales exemption may still qualify as an exempt employee under one of the other exemptions allowed by Section 13(a)(1) of the FLSA and the Part 541 regulations if all the criteria for the exemption is met.
Highly Compensated Employees:
- The regulations contain a special rule for “highly compensated” employees who are paid total annual compensation of $107,432 or more. A highly compensated employee is deemed exempt under Section 13(a)(1) if:
- The employee earns total annual compensation of $107,432 or more, which includes at least $684 per week paid on a salary or fee basis;
- The employee’s primary duty includes performing office or non-manual work;
- The employee customarily and regularly performs at least one of the exempt duties or responsibilities of an exempt executive, administrative, or professional employee.
Thus, for example, an employee may qualify as an exempt highly compensated executive if the employee customarily and regularly directs the work of two or more other employees, even though the employee does not meet all the other requirements in the standard test for exemption as an executive.
Computer Employees:
- To qualify for the computer employee exemption, all
the following tests must be met:
- The employee must be compensated either on a salary or fee basis at a rate not less than $684 per week or, if compensated on an hourly basis, at a rate not less than $27.63 an hour;
- The employee must be employed as a computer systems analyst, computer programmer, software engineer or other similarly skilled worker in the computer field performing the duties described below;
- The employee’s primary duties must consist of:
- The application of systems analysis techniques and procedures, including consulting with users, to determine hardware, software or system functional specifications;
- The design, development, documentation, analysis, creation, testing or modification of computer systems or programs, including prototypes, based on and related to user or system design specifications;
- The design, documentation, testing, creation or modification of computer programs related to machine operating systems; or
- A combination of the aforementioned duties, the performance of which requires the same level of skills.
The computer employee exemption does not include employees engaged in the manufacture or repair of computer hardware and related equipment. Employees whose work is highly dependent upon, or facilitated by, the use of computers and computer software programs (e.g. engineers, drafters, and others skilled in computer-aided design software), but who are not primarily engaged in computer systems analysis and programming or other similarly skilled computer-related occupations identified in the primary duties test described above, are also not exempt under the computer employee exemption.
The Construction Industry Under the Fair Labor Standards Act (FLSA)
Characteristics
Businesses involved in this industry are engaged in the activities of new construction or reconstruction. The repair or renovation of existing commercial and/or residential structures, as well as roadway and bridge construction, are also a part of this industry. The following work activities are included in the construction industry: painting, sandblasting, tuckpointing, roofing, guttering, spouting, water well drilling, installation of flooring, and landscaping.
Coverage
A business in the construction industry must have two or more employees and have an annual gross sales volume of $500,000 or more to be subject to the FLSA. Individual coverage applies to employees whose work regularly involves them in commerce between states (“interstate commerce”). Any person who works on or otherwise handles goods that are moving in interstate commerce or who works on the expansion of existing facilities of commerce is individually subject to the protection of the FLSA and the current minimum wage and overtime pay requirements, regardless of the sales volume of the employer. Other persons, such as guards, janitors, and maintenance employees who perform duties which are closely related and directly essential to such interstate activities are also covered by the FLSA.
© Individual Advantages, LLC 2020
The post Changes to the Fair Labor Standards Act appeared first on IA Business Advisors.
A personal development plan is a tool to build your influence. However, neglecting your plan erodes your positive influence over time. We’re here to help.
Hopefully, by delivering S.M.A.R.T. praise, you can boost your employees’ performance and create a culture of recognition that drives long-term success.
Discover how to navigate change with purpose by reframing it as improvement. Learn how the S.M.A.R.T. framework fosters resilience, intentionality, and measurable growth for individuals and organizations.
Hello, team! Mary here, continuing our journey through the I in Team series, where we empower you to find , be , and build your influence. Cultivating a growth mindset is imperative for self-actualizing. It’s a theory created by Stanford psychologist Carol Dweck , and it’s the belief that we are intelligent with abilities that will help us face and overcome challenges. People with a growth mindset tend to love learning and are resilient. If you don’t already, you can have a growth mindset , too. Here are some of our top tips for embracing challenges. Embrace Effort If you want to grow, you need to understand that effort is the only way to mastery. Your hard work and talent will be rewarded if you remain resilient in the face of challenges and treat them as learning opportunities. When you experience failure , reframe it. Instead of viewing it as something negative, have gratitude toward it for teaching you something new. There is always something to learn from failure, thus allowing you to continue to grow. When you do have a win, pause to celebrate your progress. Acknowledging your small wins and improvements helps reinforce the belief that growth is possible through continual effort. Embrace Challenges To grow, you need to be challenged. As stated, you need to fail. Without challenges, you don’t give yourself the opportunity to win or fail, so you deny yourself the ability to learn. Actively seek out challenges that push you outside your comfort zone. The more you embrace challenges, the more accustomed your brain becomes to seeing them as opportunities for growth instead of threats. Over the long-term, this will help you develop mental toughness. When setbacks happen, bounce back and remind yourself that it’s just a temporary obstacle. Resilience will help you continue on your developmental path. Seek Feedback Many people shy away from actively seeking feedback, however, feedback is extremely valuable. It helps you gain insights on how to improve and grow. Having a mentor or someone in the field who has experience will be excellent sources for reliable feedback. If you’re nervous, consider first cultivating a sense of curiosity. By exploring new ideas, techniques, and approaches, you prime your mind for actively seeking new information. Doing so will help you discover creative solutions to challenges you will inevitably face. Surround Yourself with Positive Influence Our entire platform revolves around positive influence, so, as a brand, we are constantly encouraging you to adopt a growth mindset. But it’s not just us! Anyone who pushes you to do your best and who believes in your developmental potential is someone who is a positive influence in your life. These positive, supportive environments foster a growth mindset. Be sure to challenge your negative self-talk (if you have any). Positive self-talk is being a positive influence on yourself. Use phrases like, “I can do this,” and “This is an opportunity to improve.” Don’t miss out on our positive influence: The Ripple Effect (TEDx Talk by Brian Smith) Daily Influence Podcast Individual Influence: Find the “I” in Team Positive Influence: Be the “I” in Team Responsible Influence: Build the “I” in Team Bottom Line Developing a growth mindset is the only way to progress as an individual. If you have no practice with this, start slowly by embracing your effort and developing positive self-talk. Look for people in your life who encourage you and ask for feedback from trusted mentors. Don’t shy away from facing challenges, but don’t give up when you experience failure. Look at every moment as an opportunity to learn and be sure to pause to celebrate your victories. You can do this!
Tax season is here , and businesses are facing one of the most significant shifts in tax policy in recent years. With over 60 tax provisions changing in 2025—including corporate tax rate adjustments, the expiration of key deductions, and increased IRS reporting requirements—navigating compliance while optimizing financial strategy is more complex than ever. Failing to stay ahead of these changes can lead to unnecessary tax liabilities, missed deductions, and potential penalties. That’s why businesses are turning to IA Business Advisors , whose S.M.A.R.T. (Strategic, Measurable, Attainable, Realistic, Timely) Management™ approach ensures your business remains compliant while maximizing financial opportunities during tax season. Why the S.M.A.R.T. Approach is Essential for Tax Planning IA Business Advisors employs the S.M.A.R.T. Management™ approach to help clients navigate complex challenges, such as the 2025 tax changes. This methodology emphasizes: Specificity – Tailoring tax strategies to fit your business’s unique needs. Measurability – Ensuring financial data and tax obligations are precisely tracked. Attainability – Implementing realistic financial strategies that align with your goals. Relevance – Adapting tax solutions to current regulations and economic conditions. Timeliness – Addressing tax compliance and planning proactively, avoiding last-minute stress. By applying S.M.A.R.T. principles , IA Business Advisors assists businesses in developing tailored strategies that ensure compliance and optimize financial outcomes during tax season . The 2025 Tax Landscape: What Business Owners Need to Know Before diving into why outsourcing bookkeeping is the S.M.A.R.T. way to handle tax season, let's examine some of the most impactful tax changes in 2025: 1. Corporate Tax Rate Uncertainty The Tax Cuts and Jobs Act (TCJA) of 2017 reduced the corporate tax rate from 35% to 21%, providing major relief for businesses. However, this provision is set to expire at the end of 2025, potentially raising tax rates again unless Congress intervenes. Strategic tax planning is essential to mitigate financial impacts. 2. Small Businesses Face Higher Tax Burdens Many small businesses operate as pass-through entities (LLCs, S-Corps, sole proprietorships), where income is taxed at individual rates. The 20% Qualified Business Income (QBI) deduction , which significantly lowers tax liability for these entities, is also set to expire after 2025. This could mean a sharp increase in tax bills for business owners. 3. Reduced Deductions & Credits Several beneficial tax provisions are phasing out or changing, including: Bonus Depreciation : The 100% bonus depreciation for capital investments will drop to 50% in 2025, reducing immediate tax relief for equipment and property purchases. Research & Development (R&D) Deduction : R&D expenses must continue to be amortized over five years instead of being deducted immediately, impacting cash flow for businesses investing in innovation. State Tax Adjustments : Several states are decoupling from federal tax provisions, making compliance more complex for businesses operating in multiple states. 4. Increased IRS Scrutiny & Reporting Requirements The IRS has tightened financial reporting requirements, and businesses must provide more detailed records for income, deductions, and tax credits. Stronger enforcement measures mean that errors, discrepancies, or missing records could result in audits and financial penalties. With these changes, precision in bookkeeping and tax planning is more critical than ever . The best way to ensure compliance, minimize tax burdens, and optimize financial planning is to outsource bookkeeping to tax experts who stay ahead of evolving regulations. The Benefits of Outsourcing Bookkeeping for the 2025 Tax Season 1. Ensure Compliance & Avoid Costly Mistakes Tax law is intricate, and 2025 is bringing more complexity than ever before. Even small bookkeeping errors can lead to penalties, delays, or an IRS audit. By outsourcing to IA Business Advisors , you ensure that: Your financial records are meticulously maintained All tax law changes are applied correctly You meet reporting and compliance requirements 2. Maximize Deductions & Reduce Tax Liabilities Many businesses overpay in taxes because they fail to capture all eligible deductions and credits. With our expertise, we help you identify and maximize tax-saving opportunities, including: Energy-Efficient Building Deductions (Section 179D) for sustainability upgrades Work Opportunity Tax Credit (WOTC) for hiring employees from targeted groups Qualified Business Income (QBI) Deduction for pass-through entities Employee Retention Credit (ERC) for businesses keeping their workforce intact Disabled Access Credit for improving accessibility in your business 3. Stay Prepared for the IRS's Stricter Reporting Standards With the IRS ramping up compliance enforcement, financial record accuracy is more important than ever. We help you: Prepare for IRS reporting changes and audits Ensure accurate record-keeping to meet IRS standards Seamlessly transition to mandatory digital tax filing 4. Save Time & Resources – Focus on Growing Your Business Managing your bookkeeping in-house can be time-consuming, costly, and stressful. Outsourcing frees up valuable resources so you can: Focus on business growth instead of tax paperwork Reduce overhead costs associated with in-house accounting staff Ensure your financial data is always up to date and audit-ready 5. Implement Smart Tax Planning Strategies With potential corporate and individual tax rate increases, businesses need to plan strategically. IA Business Advisors can help you: Accelerate income recognition to benefit from lower tax rates now Defer deductions to offset higher taxes in the future Optimize depreciation deductions to maximize tax relief Future-Proof Your Business with IA Business Advisors The 2025 tax season isn’t just about compliance—it’s about strategy. Outsourcing bookkeeping is a proactive investment that ensures your business stays financially healthy and well-positioned for growth, even amid shifting tax regulations. With IA Business Advisors , you’re not just outsourcing bookkeeping—you’re gaining a trusted financial partner who will guide you through tax season with precision, efficiency, and expertise. Don’t Wait—Get Your Books in Order Now Tax season is in full swing, and the longer you wait, the harder it becomes to stay ahead of deadlines and maximize tax benefits. Let us handle the complexities of bookkeeping and tax planning so you can focus on what you do best—growing your business. Contact IA Business Advisors today and take the stress out of bookkeeping and tax season!
Prioritizing your well-being in a busy world can seem elusive, but it doesn’t have to be. With good intentions, you can take the time you need for yourself.
We always like to say that you don't need a new year to set new goals, but I think we can all agree how good it feels to have something feel new energetically.
Driving with Clarity: Why Your Small Business Needs a Cash Flow Model Running a small business is much like driving a car—you need clarity to stay on course. At IA Business Advisors, we believe clarity comes from making decisions grounded in S.M.A.R.T. principles: those that are Specific, Measurable, Attainable, Realistic, and Timely. Yet, too many small business owners rely solely on their income statements. While valuable, these statements function like the rearview mirror: they reflect where you’ve been, not where you’re headed. If your goal is to grow or address cash flow challenges, focusing only on past performance can leave you unprepared for what’s ahead. That’s where a Cash Flow Model—your windshield view—provides clarity and empowers you to lead your business with confidence.
By grounding decisions in continuous learning, you support not only your growth but also strategic progress for your team and organization.
Written by: Mary Smith
