New proposed changes to overtime rules would really make things a lot different for a large number of professional and white-collar workers who are currently salaried.
Resources on the United States Department of Labor website show the department is looking at a Notice of Proposed Rulemaking (NPR) that would reset the levels triggering required overtime pay for salaried employees. These types of “rules” don’t mean anything unless they go through the review process and actually get enacted, and many salaried workers doubt this will ever happen, but if it does, it’s going to change take-home pay in a big way.
The Status Quo
Currently, the salary threshold for required overtime is about $23,000. That means employees under this threshold are required to be offered overtime pay, even if they are on a salary. According to a description of the proposed new rule, the threshold would rise to over $50,000 for 2016.
This is a big deal for companies for a variety of reasons. It’s extremely common to have salaried workers under $50,000 who are not currently eligible for overtime pay. But these individuals are looking at their paychecks and wondering if they’re losing out to others who may get a lower hourly rate, but still qualify for overtime, especially in high-pressure jobs where fewer numbers of people work longer hours.
Changes
Essentially, for someone who earns say, $35,000 a year, the new overtime rule would greatly change their take-home pay. If that person’s on a salary and regularly works a few hours of overtime per week, the resulting hundreds of dollars per month could add up to $3000-$5000 or more.
That means a lot of changes for companies, too. Businesses would no longer be able to fill in gaps by using salaried workers without triggering higher labor costs. They would have to honor every single salaried employee’s extra hours as if they were overtime hours — not straight pay, but time and a half. That would require either ponying up a lot more money, or trying to find a way around the problem. These kinds of big upheavals can cause headaches for a CFO or whoever is at the wheel.
A Way Forward
Changes to requirements for salaried workers make the same kind of sense as changes to the minimum wage. They allow for changing markets and environments and changes in the ways that people are compensated over time, depending on the conditions that they work in. That’s the idea behind cost of living or COLA raises, and behind a lot of the reforms pushed by the New Deal that have supported workers and their families for the last half a century.
Here’s one thing that a company can do if they don’t feel they have a way out of this — temporary workforces allow for the kinds of labor hour reductions and wage management handling that can otherwise leave the company in a bind. By spreading out the labor pool, the company gets relief from necessary overtime allocations, without adding new employees and benefits packages to the equation.
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