This summer the Department of Labor is expected to introduce new rules to restore overtime pay to millions of Americans — rules that require no congressional approval. From the fearful protests coming from Republican leadership, you’d think the sky was falling. “This mandate on employers will hurt the lowest paid American workers the most, by reducing their opportunities for a promotion or a better job,” said Senator Lamar Alexander of Tennessee, the chairman of the Health, Education, Labor and Pensions Committee.
As with most changes to federal labor laws, new overtime rules slated to take effect Dec. 1 have left some business owners worried.
The move more than doubles the minimum salary required for employees to be exempt from overtime pay, essentially expanding the number of OT-eligible employees by 4 million.
Business groups like the U.S. Chamber of Commerce are worried the new rules will hurt the bottom line for small businesses. Some say the changes are too dramatic and should be eased into effect.
We’d venture to guess that no matter the timeline, some business owners and groups will always oppose moves that potentially raise their payroll.
We say “potentially” because business owners have options to cope with these changes.
Hourly workers are generally eligible for overtime pay when they are on the clock more than 40 hours per week. But salaried workers earning more than about $24,000 annually are not. Businesses use this low threshold to wring countless hours and work out of more employees.
Businesses should value most their most productive employees. And while many do, the current OT system allows many other employers to actively or passively exploit those who are dependable and willing to “work until the job is done,” regardless of how many hours it takes.
If your best employee is a manager making $30,000 a year working 60-70 hours a week, you the employer have three choices.
1. You can maintain the status quo, hoping the employee can’t or won’t seek a better-paying job elsewhere.
2. You can tell the employee to go home as soon as they hit 40 hours and hope to somehow to find another 20 productive hours elsewhere.
3. Or you can compensate them based honestly on what they bring to your business’ bottom line.
Some businesses say they may replace some full-time positions with part-time workers, as is their right.
But we hope employers look at what they’ll get in return for the price of these new OT rules: talented, hard-working employees who truly feel valued and will return that feeling in kind.
Employers who don’t wish to expand their overtime payouts can limit workers to the number of “regular” hours they’re mandated to work each week. In many cases, that’s far easier said than done because many jobs can’t be completed in 40 hours, even by the best of employees.
Half a century ago, overtime pay was the norm, with more than 60 percent of salaried employees qualifying. These are largely the sorts of office- and service-sector workers who never enjoyed the protection of union membership. Today, if you’re salaried and earn more than $23,600 dollars a year, you don’t automatically qualify for overtime: That means every extra hour you work, you work free.
Under the new rule, everyone earning a salary of $47,475 a year or less would be eligible to collect time-and-a-half pay for every hour worked over 40 hours a week.
A 2014 Gallup poll found that salaried Americans now report working an average of 47 hours a week — not the supposedly standard 40 — while 18 percent report working more than 60 hours. And yet overtime pay has become such a rarity that many Americans don’t even realize that a majority of salaried workers were once eligible.
Under the restored salary threshold, employers would have a choice: They could either pay you time-and-a-half for your extra hours worked, or they could hire more workers at the standard rate to fill your previously unpaid hours. The former would grow your paycheck. The latter would increase your leisure time while directly adding more jobs to the economy. Either would be great for workers and great for economic growth.
When it comes to labor standards, Senator Alexander and his Republican colleagues always sing the same old trickle-down tune: If wages go up, jobs must go down. Yet it never turns out to be true.
Paying employees for the time they work is hardly a radical notion. It will ultimately improve life for those who work the hardest.