Major overtime pay hike

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The Obama administration made final a long anticipated change to overtime pay that will entitle millions of additional American workers to overtime pay when they work more than 40 hours in a week.  

The minimum salary at which a worker can be exempted from time and a half wages for every overtime hour he works will more than double, from $23,660 to $47,476. The threshold was last raised in 2004, during the Bush administration.  

“This is a big deal to be able to help that many working people without Congress having to pass a new law,” Ross Eisenbrey of the Economic Policy Institute, a liberal advocacy group, told the New York Times. “It’s really restoring rights that people had for decades and lost.” 

Vice President Joe Biden, speaking on behalf of the administration, frames the policy change as an attempt to return to a time when there was less economic inequality. In 1975, he points out, 60 percent of U.S. workers qualified for overtime, while only 7 percent do today.  

“The middle class is getting clobbered,” he says. “If you work overtime, you should actually get paid for working overtime.” 

Employer groups are furious, however, saying that the change will only hurt the workers it intends to help.  

As they have over the past year in opposing the proposed change, business groups say that employers will be forced to cut hours or the base pay rate for many who are now required to receive overtime pay.  

The Society for Human Resource Management also argued that the new policy could lead to curtailing of benefits.  

“Does it make sense for us to continue to provide this benefit,” says Bobbi Kloss, HR director at Benefit Advisors Network, in an article from SHRM. “Should we shift those costs over to the employee, or should we even just eliminate it?”  

SHRM also notes that some experts cautioned against any rash decision to try to make up for the increased overtime costs by trimming benefits.  

Jennifer Donnelly, vice president and national practice leader for organizational effectiveness at Sibson Consulting, says that the finances have to be balanced with the potential cost to morale that such decisions could have.  

“That’s going to be the biggest long-term issue for organizations to balance when they’re thinking through how best to transition employees [into hourly/nonexempt status] and manage all the costs associated with the range of benefits,” she says.