Starting on Dec. 1, more American workers—maybe even some who work for you—could be eligible for overtime.
This week, the Obama administration announced a new threshold for who could qualify for time-and-a-half.
Right now, if employees make less than $23,660 a year, their employer is required to pay them overtime, even if that person would otherwise be an exempt worker because of his or her job responsibilities—because he or she is a manager, for example.
In December, the threshold will more than double to $47,476. If you have an otherwise exempt employee who makes less than that, that person will still be eligible for overtime pay. (The last time the threshold was updated was in 2004.)
“The fundamental principle behind overtime pay comes from a Depression-era law called the Fair Labor Standards Act, which helps ensure that workers who put in more than 40 hours per week should generally get paid more for that extra time,” President Obama wrote in an email to supporters. “I directed Secretary of Labor Tom Perez and the Department of Labor to update and modernize the overtime rules and uphold that principle.”
The change means that approximately 4.2 million Americans could receive overtime pay. Over 10 years, that could be worth another $12 billion in their paychecks.
The threshold is scheduled to rise every three years; it’s set to climb to $51,000 in 2020. Bonuses and incentives will be allowed to count toward up to 10 percent of an employee’s salary threshold.
But business organization are warning that a higher threshold will force businesses to make changes that will ultimately hurt workers. Companies might lower an employee’s base pay, for example, or reduce their hours.
“Entry-level management positions are going to disappear and those employees will fall back into hourly jobs,” said Juanita Duggan, president of the National Federation of Independent Business. “Small businesses everywhere will be affected, but most of the damage will occur in places where the cost of living and the wage scale is much lower than it is in Washington, D.C., or Manhattan, or San Francisco.”
How should your small business respond to the rule change? Check out this expert advice from Belinda Waggoner of hr-haven.
