4 Employer Concerns about New Overtime Law

The Department of Labor recently announced changes to federal overtime rules that would impact the lives of working Americans.Currently, salaried workers who make more than $23,660 annually can only receive overtime pay if they are not classified as administrators, executives, or professionals. With the new change, all individuals qualify for overtime if they earn $50,440 or less. Raising the threshold for automatic coverage means that earning overtime is no longer contingent on worker classification. The groups that will benefit the most from this are:

  • Women
  • Minorities
  • Workers who are less educated

According to Ross Eisenbrey, vice president of the Economic Policy Institute, the current salary threshold for overtime is “badly out of date.” The last time the overtime threshold was significantly raised in 1975, it covered 61 percent of salaried employees. Since then two big things have changed:

  1. Inflation. Inflation has risen while the threshold has not, leaving some employees earning less than minimum wage under the current overtime rules.
  2. Increased productivity. Productivity has increased by 64 percent while average wages have grown by just 6, due to the growing number of employees working more hours and not being compensated for them.

The Small Business Administration Office of Advocacy has raised a few concerns about the proposed overtime rule:

  1. Compliance costs. The significant compliance costs and paperwork burdens on small entities, particularly businesses in low-wage regions and in industries that cooperate with low-profit margins.
  2. Duties and responsibility vs. pay. The lower salaries that are paid to many entry-level professional, administrative and executive employees in small businesses do not suggest that their duties are any less exempt than their higher paid counter parts.
  3. Less flexibility. Small businesses have less flexibility in labor models than larger ones.
  4. Less access for opportunities. Larger businesses sometimes have access to large pools of temporary or part-time employees; small businesses frequently do not have this type of bench strength.

If your small business is facing some of these challenges regarding the new rule, please reach out to Millenium Staffing.

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