More work, more pay? New rule extends overtime to millions
More pay could become a reality for millions of U.S. workers who now toil long hours without overtime under a new rule issued Wednesday by the Obama administration.
The rule seeks to bolster overtime protections that have been eroded in recent decades by inflation. A diminishing proportion of workers have benefited from overtime regulations, which date to the 1930s and require employers to pay 1 1/2 times a worker’s wage for work that exceeds 40 hours a week.
In the fast food and retail industries in particular, many employees are deemed managers, work long hours but are paid a flat salary that barely exceeds the income of the hourly workers they supervise who receive overtime pay.
Under the new rules, released in draft form last summer, the annual salary threshold at which companies can deny overtime pay will be doubled from $23,660 to nearly $47,500. That would make 4.2 million more salaried workers eligible for overtime pay. Hourly workers would continue to be mostly guaranteed overtime.
The White House estimates that the rule change will raise pay by $1.2 billion a year over the next decade. Some employers, though, might choose to reduce their employees’ additional hours to avoid paying overtime, thereby making the workers’ schedules more consistent.
“Either way, the worker wins,” said Vice President Joe Biden on a conference call with reporters Tuesday.
Business groups, however, argued that the changes will increase paperwork and scheduling burdens for small companies and force many businesses to convert salaried workers to hourly to more closely track working time. Many employees will see that as a step down, they said.
In Columbia, where most of retailer Jewelry Warehouse’s 56 employees are hourly-paid, discussions began last year about the impact the new rule might have, according to Elizabeth Ulloa, company bookkeeper. The result is likely to still cause at least some payroll adjustments.
“We will have to re-look at things to see if that (salaried employee) just needs to be changed to hourly or if they need to be kept on salary and increase the pay at that point,” Ulloa said Wednesday. “It is a possibility of payroll increasing, but at this point we are not real positive on how much of a change it’ll make.”
Jewelry Warehouse, which has three retail locations in the Columbia area, said salaried employees are not currently paid overtime and four employees could be affected by the rule change.
In many cases now, salaried employees may work 30 hours per week normally, then ramp up to 40 hours or more during busy periods. But their take home pay is consistent week to week. If those workers are switched to hourly employment, there could be weeks when the employees are needed less, which means they might work fewer hours. In those cases, the pay would fluctuate.
“This will probably affect the employee far worse than it will affect the employer,” she said.
Several groups, including the nation’s two largest human resources organizations, strongly opposed the new overtime rule even thought the threshold eligibility was reduced from the original plan’s $50,000.
“While the amount came down, there was still a real concern that that amount was way too high, with an increase of over 100 percent, ” said Patrick Wright, who directs the Center for Executive Succession in the Darla Moore School of Business.
The Southeast will disproportionately feel the effects of the new rule because wages are lower here, Wright said. “In South Carolina, if you’ve got (salaried) people that are working at $30,000 right now, it’s not at all feasible to almost double their salary,” Wright said.
“Now employers are going to have to figure out how they’re going to handle that,” he said.
Staff writer Roddie Burris contributed.