Despite the seeming simplicity of the concept, overtime pay has been a topic on which there has been much back and forth over the years. Perhaps the most notable sticking point that employee rights advocates on one side and employers on the other keep running into is the notion of exemption – which employees qualify as exempt from overtime for payroll purposes?
This has been the subject of some debate and policy decisions in recent years. In fact, a new proposed rule may represent a comprehensive change to the current employee exemption requirements.
The state of overtime
Overtime is ostensibly fairly straightforward – the guidelines state that any employee who works more than 40 hours in a regular working week is eligible to receive overtime pay, at a rate of 150 percent of his or her standard wage.
However, in practice this guideline has been complicated by exemptions. For example, the well-known “white-collar” exemption applies to most executive positions, computer- and IT-related professions and sales jobs. While these positions usually work more than 40 hours a week, that’s deemed to be a feature of the type of job rather than an employer demand requiring additional compensation.
The new rule
The new overtime rule has been sent to the Office of Management and Budget. Until the OMB rules on the proposal one way or the other, we won’t know the specifics of the provisions it entails. However, given the recent climate of pay equity, it stands to reason that the bill and its proponents are trying to shrink the list of exempt employees.
This all comes on the heels of a directive from U.S. President Barack Obama, who in 2014 indicated that the overtime exemptions needed to be reduced.
How are employers affected?
Any changes to the rules governing overtime exemptions will likely spell significant development and restructuring for companies. As the Society for Human Resource Management noted, one of the most important things business owners can do is to ensure they have updated and accurate reporting pertaining to job duties and classes. This will facilitate a smoother, more timely analysis in the event that new exemptions come into play.
Companies who are feeling overwhelmed by the potential change on the horizon are encouraged to work with PEO companies. They can offer valuable HR services, and are much more financially attainable for small-business owners than maintaining an in-house HR department would be.