Overtime is one of the most hotly debated topics in the professional world. The classifications previously outlined by the U.S. Department of Labor governing which employees are eligible to receive overtime pay and which aren’t have been criticized by HR services professionals, and as a result, a change is in the works.
For small-business owners, these changes may seem like corporate and legal minutiae, but it’s in every executive’s best interest to pay attention to these adjustments. Not only can changes to overtime classifications affect how you manage your personnel, it may also have an indirect but no less important effect on overall productivity in your office. That may sound like a total nonsequitur, but here’s what you should be aware of.
What is the rule changing?
The current Department of Labor classifications for overtime employees cap eligibility at $23,660. That means that any full-time employee who makes more than this amount – an amount below the national poverty line, according to the Society for Human Resource Management – could be exempt from earning overtime pay. However, one of the most significant changes currently on the table would increase this overtime eligibility threshold to $50,440.
While on the surface this seems like a good thing for employees, more of whom will now be eligible to receive overtime compensation, there are concerns among the HR world as well. For example, the SHRM noted that one main point of contention is that the money for increased overtime pay may likely come from compensation budgets, which could jeopardize an organization’s ability to offer competitive salaries for new hires, or provide pay raises for existing staff members.
Believe it or not, not all workers are keen on the changes to overtime classifications, especially those who are on the cusp of the threshold. The SHRM noted that some employees who undergo a reclassification from exempt to non-exempt status may actually see their shift in overtime eligibility as a lowering of status within the company, since overtime eligibility has historically been a concern primarily affecting hourly workers.
Other people within the HR world have noted that the rule may require some retailers to pay assistant managers the same amount as general managers, due to differences in overtime eligibility, which many workers within the sector view as an injustice.
If you’re unsure as to how your business may be affected by the changes to the overtime rules, working with PEO companies may be the solution.