By Jennifer Carter, Staff Writer
On Dec. 1, salaried employees who make less than $47,476 per year will be eligible for overtime pay if they work in excess of 40 hours per week under the revised Fair Labor Standards Act.[1]
Employers will have to make choices in how to adjust low-salaried workers’ pay. At first glance, it appears employers will pay out much needed additional money to the overworked masses. In reality, however, employers have other options that may not play out so well for their employees.
It is clear that requiring a company to pay employees more will also require the company to cut down costs in other areas. CNN Money predicts that benefits packages will shrink for employees who will be affected by the change.[2] Furthermore, the Society for Human Resource Management (SHRM) suggested that employers will reduce the amount of low-paying positions available, which are often entry-level; they may also only hire more experienced employees who they can justify paying more.[3] SHRM also noted that the law will encourage employers to reduce the salaries of over 40-hour per week employees to make up for overtime pay.[4]
Eater.com, the go-to website for information and news in the food-services industry, pointed to one likely outcome that easily translates into the corporate world. It states that “businesses could slowly combine certain managerial duties into the workflow of lower-wage salaried workers and chip away at the ranks of middle management.”[5]
The possibilities for reorganization in an industry are truly endless. Come December, many businesses will look for ways to increase efficiency and redistribute workloads to maximize their output in 40 hours. Absorbing a position — and, subsequently, that position’s salary — and delegating the work will result in added pressure to perform on those who just surpass the required overtime pay cut-off.
Unfortunately, large businesses are much more adept at cost-effectively reorganizing responsibilities than most mom-and-pop shops. USA Today referred to the new rule as “a harsh blow to small businesses” and points out that the law will cut into already small margins of profit.[6] It is presumable that small businesses that rely on low-salary employees to work over 40 hours per week may not recover after paying out the required overtime money.
Furthermore, every three years, the salary rate that triggers required overtime will be adjusted.[7] This means that businesses that struggle with the increase may find it necessary to shut their doors three years down the road.
Ideally, the goal of the presidential action to “put more money in the pockets of middle class workers — or give them more free time” will be achieved without detrimental effects on the economy as a whole.[8] The beginning of the new year will show if these results are realized.
Sources
[1] https://www.dol.gov/featured/overtime
[2] http://money.cnn.com/2016/05/17/pf/overtime-rule-change-paycheck-effects/
[3] https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/overtime-benefits.aspx
[4] https://www.shrm.org/resourcesandtools/hr-topics/compensation/pages/overtime-benefits.aspx
[5] http://www.eater.com/2016/5/18/11696664/obama-overtime-labor-laws
[6] http://www.usatoday.com/story/opinion/2016/05/19/overtime-national-federation-of-independent-business-editorials-debates/84621270/
