How Obama’s New Overtime Rule May Affect You

overtime ruleEveryone wants to be paid fairly for the work they do at their jobs on a daily basis, and ensuring that happens is one of several reasons why the U.S Department of Labor was created. But the recent announcement of the new overtime rule, which was announced on May 18, has left many with questions about how their jobs and pay may, or may not, be affected.

Luckily, in this case, the new overtime rules appears to be one that will work in favor of workers by increasing the number of people who are eligible for overtime rights by approximately 4.2 million, or more.

Overtime Rule Explained

President Obama has a goal to ensure that changes are made to overtime regulations which will extend overtime pay to workers who may have previously been exempt aka salaried workers. Before the new rule, workers earning an annual salary of $23,660 or more, were not allowed to be paid  overtime according to an overview published by the U.S. Department of Labor. This rule has no affect on workers paid hourly, as they are entitled to overtime pay for hours over 40 each week.

This means those salaried workers earning over $23,660 did not get paid for the overtime over 40 hours they work each week. In turn, they were barely making enough to survive, and in fact, many were making little enough to be below the official poverty line for a family of four. Clearly changes were needed to enable salaried worker to receive fair compensation for the work they perform.

How it Affect Employees

The new rule, goes into effect on December 1, 2016 and increases  the salary threshold  to $47,476, nearly double the previous amount.

One possible solution is that some employees might get a nice raise in their salaries so that they meet the new threshold of $47,476 annually, making them once again ineligible for overtime pay.

On the flip side, those who are not given raises to meet the new salary threshold will begin to receive overtime pay for the extra hours they put in over 40.

Those are both changes that would positively impact the employee’s pay, but employers are the ones on the hook for these increased costs. In order to combat them, another option employees might see is a reduction in their scheduled work hours in an effort to prevent them from racking up overtime pay at the expense of their employers.

How it Affects Businesses

If you’re a business owner, you might also be concerned about how the new overtime rule could affect your business. In an effort to keep costs down, some employers might elect to have more part-time employees and less full-time and salaried employees. This would result in the creation of more jobs to get the same amount of work done.

That might sound like a good side effect, but that would result in an overall increase in benefits paid by employers to their workers, which some businesses still may not be able to absorb financially. If they instead choose either to raise the salaries of their workers or pay overtime, they face similar financial impacts.

The Bottom Line

On the surface, the effects of Obama’s new overtime rule appear to be positive for the salaried employee, but negative for employers since they will have to absorb the costs related to their decision no matter which route they choose to take.

Plus, the creation of more part-time jobs and the elimination of some full-time jobs to help businesses save money does not help America’s workers. This may end up threatening the livelihood of the very workers the rule is supposed to be protecting by resulting in an overall pay reduction for employees rather than an increase in pay through either overtime hours or a salary raise to meet the minimum threshold.

Either way, skeptics feel workers could be negatively impacted by the new rule instead of gaining a positive result as the new rule was intended. Only time will tell if the effect of Obamas new overtime rule hurt or help salaried workers, employers, and the economy of our nation as a whole.

How do you think the new overtime rule could affect America’s workers?

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