The department of labor has proposed to come out with a rule regarding overtime pay. Businesses are apprehensive about the consequences of this bill since it may make more employees eligible for overtime and increase operational cost. As employers companies are worried about the fallout of this new rule. However, it must be said that if you read between the lines, you can very well manage the hike, if any. However, to do that you need to get the facts straight.
What is There in the Proposed Rule
By the new rule, the Department Of Labor endeavors to raise the salary bar for not paying overtime. This means that more employees will now become eligible for overtime. This will increase the fixed costs of the company. Those employees who were not eligible for overtime would now be eligible for it. The proposal is to enhance the salary level for not paying overtime to $679 per week, up from $455 per week. This would obviously lead to a rise in the number of employees eligible for overtime. The overtime rule also proposes to review and update the salary threshold periodically.
What are the Consequences
The Fair Labor Standards Act states that certain classes of salaried employees like those who have advanced scientific knowledge and learning in specific subjects and people in positions such as managers need not be paid overtime if they make $455 or more per week or $23,660 or more per year. If the proposed hike comes into effect it would take the ceiling to $679 per week which implies that a significant number of employees would become eligible for overtime pay.
The rule comes with a rider. To determine one’s eligibility for overtime, he or she has to comply with a guideline. This guideline dictates that the employer is exempt from paying overtime to an employee if his duties come under the following categories:
- Project managers and VPs
- HR employees, PR reps, marketers, etc.
- Professionals requiring knowledge and learning such as dentists, lawyers, accountants, etc.
- Professionals requiring the invocation of creativity like musicians, writers, actors, etc.
- Software engineers, computer system analysts, etc.
- Enterprise salespeople
So the consideration for being eligible to earn overtime is not the title of his job, but the real nature of his or her job.
How to Manage it
Since your finances are likely to take a hit it the rule comes into effect, you need to be prepared. But to do that you need to first, have an estimate of how much an effect it is going to have. Once you have it done, you can take the following steps:
- Review salary and duties while making sure compliance with federal rules.
- If there is any new employee coming under the ambit of overtime, consider increasing his or her salary so that it crosses the threshold of eligibility.
- Reschedule employees working so that they don’t need to spend extra hours.
- Cut costs elsewhere to make for an overtime budget.
- Hire more employees so that the work can be spread among many individuals and people need to log minimum overtime hours.