The Department of Labor recently released a new proposal to increase the number of salaried workers eligible for overtime. This follows a similar change proposed by the Department of Labor under the Obama administration, though it sets a different threshold.
You can read more about how to stay compliant under the new rule in this article.
What are the details of the new overtime rule change proposal?
Previously, salaried workers were eligible for overtime if they earned less than $23,660 annually, or $455 per week. That amount was set in 2004 and wasn’t updated since to keep up with inflation until 2020.
This amount is set in the Fair Labor Standards Act, which regulates everything from how long employers need to keep employee time card data to minimum wage and child labor restrictions.
The Department of Labor increased the amount to $35,308 per year, meaning that 1.3 million more salaried employees will now be eligible for overtime when they work more than 40 hours in a week.
How does this change compare to the previously scrapped proposed rule change under the Obama administration?
It’s similar, but covers fewer salaried workers. The Obama Administration previously sought to increase the salary threshold to $47,476 per year, meaning millions more salaried workers would’ve been eligible for overtime.
Some economists estimate that, under the new plan, 8 million fewer workers will be eligible for overtime. Conversely, this means the impact on businesses will be much smaller, and fewer businesses will need to make any changes at all.
One other major difference: the salaried threshold increased one time, and it can be increased in the future. The Obama Administration sought to tie the salary threshold to inflation and increase automatically.
How does this rule change impact employers? Workers?
It’s worth noting this change only impacts employers and employees where they’re working over forty hours per week. So while 1.3 million workers may now be eligible for overtime pay, they’ll only receive it if they’re actually working overtime.
How should business owners stay compliant under the new rule?
First, employers should investigate whether or not the change impacts them. Do you have salaried employees making less than $35,308 per year? Are they working more than forty hours a week?
If you do have employees that are now eligible for overtime, you have a few choices. You may want to increase their pay, especially if you believe that the overtime costs will exceed the pay raise.
Alternatively, you could consider hiring an additional employee, so that no one needs to work overtime, but it’s a competitive labor market so you’ll need to start hiring sooner rather than later.