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President Obama’s new overtime rules raise the overtime annual salary threshold to $50,400 from $23,600. This change will expand overtime protection to include nearly 5 million workers in 2016, as stated by the President, and reported in Huffington Post.
According to the President, “a hard day’s work deserves fair pay,” and the reform will be good for lower salaried workers who have been putting in long hours of overtime with no additional compensation. The President also stated that the change will benefit employers who are already compensating their employees fairly, as they can no longer be undercut as easily by businesses that have been underpaying their workers with the prior overtime threshold.
As discussed in an article on NPR News, under the old rule, any salaried manager who made more than $23,600 a year could be required to work extra hours with no additional pay, while overtime was strictly limited for non-salaried employees. Employers often misclassify workers as managers – yet at lower salaries – to avoid paying overtime.
Updating the Fair Labor Standards Act with a significantly higher overtime threshold can help put an end to this abuse. In the future, employers will be forced to hire more workers, as opposed to overworking existing salaried employees, or pay their salaried employees overtime rates at time and a half, unless they make more than $50,400 a year.
Some employers consider President Obama’s proposed changes to be unrealistic and burdensome, as discussed in a Rochester Home Page article. New business owners interviewed for the article stated that the change will affect their plan to convert from hourly to salaried employees as the business expands.
One of these owners said that he would simply hire more employees for lower-skilled positions, and if he did hire salaried workers, he would limit their hours to no more than 40 per week. The existing overtime threshold for salaried workers is below the poverty level for a four-person family, according to the Rochester Home Page article.
A Washington Post story on the subject reports that, according to a well-known economist, the change could have the advantage of creating additional jobs. Workers get paid time and a half for their overtime hours. Employers may decide to hire more workers to avoid paying time and a half – hence more jobs may be created.
Some salaried employees may find themselves in the position of working fewer hours instead of being paid for their overtime after the reform goes into effect. Although this may not pad the pocketbooks of those workers, at least they will have more personal time free, and hopefully a higher quality of life.