Overtime Rules Changes
Question: I heard a big change in overtime rules is coming. Can you give me some insight as to what I can expect?
Answer: In June 2015, the Obama administration announced its plan for major changes to the current overtime policy, and the administration finalized them during the last month. The overtime changes focus on the decision to allow a larger percentage of workers to be paid overtime to better reflect the current economic status. This change should affect an estimated “nearly five million workers” before the end of the year.
How do the overtime rules changes affect me?
Previously, employees were not eligible for overtime unless their income was less than $23,660 a year. With the new rules in effect, that amount has risen to $47,476 a year. The professions this most helps are managers and other salaried employees in retail stores and fast food establishments. If you are an employer, those payments are coming out of your company’s pockets. It might be time to start preparing for higher payroll costs.
Do overtime rules impact any specific professions in a different way?
A few jobs remain out of reach to overtime regulations. When overtime protections were first created, there were a few jobs that were excluded, including teachers, doctors and lawyers. The updates haven’t changed for them. They still are either not guaranteed overtime pay or are subject to special provisions. Even some professions that are only related to one of those three categories are excluded. For example, the athletic coach is under the same umbrella as a teacher, despite having very different job descriptions. This remains true even under the updated regulations.
Is anyone opposed to these changes?
Business owners have concerns about the changes to overtime rules. Some groups have pointed out that if a company is forced to pay its workers more, it may be less willing to hire new employees. Some companies may even have to let some workers go. The American Council on Education also released a statement, saying: “The new rule will turn many lower-level, salaried employees into hourly workers who are eligible for overtime pay. But requiring such a dramatic and costly change to be implemented so quickly will leave many colleges with no choice but to respond to this regulation with a combination of tuition increases, service reductions and, possibly, layoffs.”
Is there anything else these overtime change mandates cover?
There are a few other details. For instance, the salary threshold will be raised every three years to account for inflation. It will also keep the threshold at the bottom 40% of wage-earning Americans. It raises the “highly compensated employee” threshold from $100,000 to $134,004. That allows employers to make a clear distinction between who deserves overtime and who the company already pays enough. And, it allows bonuses and incentive payments to be counted as up to 10% of the new salary level.
Who benefits the most from these changes?
Statistically speaking, women benefit the most. The average unmarried woman’s income is about $35,154, which is well within the new guidelines. Before, female workers were making less than their male co-workers (the average male salary is about $50,625). Under the new changes, women will likely be eligible for overtime pay, which may lower this gap by quite a bit.
What do these changes mean on a larger scale?
It’s difficult to say at this point. They will, without question, bring much-needed funds to hard-working employees across America. Those employees will then spend that money, feeding it back into the economy, which could result in a more stable economic environment all around. Business owner groups are right in that having to pay employees more would result in companies wanting to hire fewer employees. That would then lead them to hire less, bringing up the unemployment rate. The first signs of who is right will be within the monthly unemployment figures. Jumps in unemployment could point toward an economic slowdown.
From a personal finance standpoint, seriously affected companies are mostly in the retail and food preparation industries. It might be prudent to hold off on new purchases of securities in these areas until these changes have shaken out. Workers getting a pay bump may also be facing greater job insecurity, so it would be wise to use the new raise to build an emergency fund.
What resources can I access to find out more?
Whitehouse.gov released an overtime changes fact sheet which should help with any further questions you might have. You can always go right to your employer and ask how it plans to handle these changes, but the White House is a better source for broad scale information. Talk to your friends and co-workers to ensure that everyone is benefitting from these implementations exactly as they should. It is your right to arm yourself with as much information on this as you can. After all, it’s your salary on the line.