Newly proposed federal rules would change which employees are eligible for overtime, and businesses are scrambling to understand how they’d be affected and how to manage the changes needed to comply.
“The biggest change on tap: a near doubling of the level of income threshold below which workers will be automatically eligible for overtime pay if they work more than 40 hours a week,” writes Jeanne Sahadi writes for CNN Money. “That will affect millions of workers who currently make between $23,000 and $50,000, who are currently considered exempt from overtime because of their managerial duties.”
While the White House argues the new rules are good for the middle class, they’ll also drastically affect how companies hire and manage employees. Groups representing businesses are lobbying against the change.
“Making more employees eligible for overtime by severely restricting the exemptions will not guarantee more income, but instead will negatively impact small businesses and drastically limit employment opportunities,” Randy Johnson of the U.S. Chamber of Commerce said in a statement. “Additionally, many reclassified employees will lose benefits, flexibility, status, and opportunities for advancement. This change is another example of the administration being completely divorced from reality and adding more burdens to employers and expecting them to just absorb the impact.”
While the rules are still being sorted out and the final version won’t go into effect until 2016, businesses are already evaluating how to manage them. Many companies are starting by tracking how many hours their employees actually work, write Rachel Feintzeig, Rachel Emma Silverman and Lauren Weber for the Wall Street Journal.
They’re looking into strategies to ensure newly eligible employees don’t work more than 40 hours a week, and implementing monitoring software to let managers know if an employee is approaching 40 hours and still has more shifts scheduled. “The proposed rules raise questions about measuring work done out of the office in small increments, such as responding to an email at 9 p.m. or dialing into a conference call on a Saturday,” according to the Wall Street Journal.
Other challenges to businesses include questions of workplace flexibility, salary caps and other ways of dealing with the cost and scheduling implications of the proposed rules, Stephen Miller writes for the Society of Human Resources Management. “The automatic wage adjustments will influence employers’ compensation decisions on merit pay and contribute to salary compression,” Miller writes. “Adjustments also will have ripple effects for HR policies and have consequences for workers’ compensation, payroll taxes and employee benefits.”
And, because it’s not illegal for employers to adjust employee pay to make sure their overall compensation doesn’t increase, the new laws don’t necessarily mean a windfall for employees, Miller writes. ”Employers will likely cap or eliminate access to overtime work or adjust salaries to ensure that an employee’s total wages will remain the same,” he writes.