The Obama administration introduced expanded overtime rules for salaried employees in May 2016. The Department of Labor stipulated that workers who earn $47,476 or less must get overtime pay at time-and-a-half regardless if these people are salaried or hourly. Experts said this affects more than 4 million workers. Here's what the rules could mean for business professionals.
Raising the Threshold
The overtime rules raise the minimum amount that salaried employees must earn to get overtime pay. This means anyone making $47,476 or less per year deserves more money per hour for working more than 40 hours during a pay week. Anyone making over that amount as a salary isn't affected. The old amount was $23,660, which means more workers can get overtime. These changes must be in place by Dec. 1, 2016.
The changes are designed to help people earn money for what they actually work. Back in 1975, 62 percent of American workers got overtime pay. That percentage plummeted to 7 percent by 2015. The Obama administration hopes this makes work and salary more fair for the lowest-paid workers in the United States; however, there are certain stipulations in the overtime rules.
Salaried Versus Hourly
Workers who earn a salary get a base pay no matter how many hours they spend at the office. The updated overtime rules only affect those people. Employees who clock in as hourly employees already earn overtime pay no matter how much they make. This move changes things for salaried workers, which could change the hours worked or the pay received.
HR departments have a few options. Companies can move salaried staffers to hourly workers to better track time spent on the clock. This means companies may cut hours of workers or hire more people to make up for lost productivity. HR might also consider raising the pay of those on salary to more than $47,476. Human resources departments should perform cost analyses to figure out the best way to proceed when classifying employees.
Overall Effects
The White House hopes the overtime rules either give overworked employees more time off to spend with family or give them better pay for the time spent at work. Some companies may choose to lower base salaries for new hires to compensate for paying more overtime. A few experts are calling it a "career killer" that prevents highly motivated and dedicated employees from proving their worth by putting in more hours. A worker who proves he goes above and beyond the minimum could be seen as a candidate for promotion.
Employers and employees both face some interesting decisions with these overtime rules. Do workers flee for better pay at other companies? How does this play out in a competitive job market? Should employers cut benefits to compensate? Statistics and surveys for 2017 should start to bear these issues out after the rules take effect.
Photo courtesy of hywards at FreeDigitalPhotos.net
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