DARKE COUNTY — On December 1, salaried employees will have greater opportunity to make more money if their work week exceeds 40 hours.
The U.S. Department of Labor announced new regulations that will double the wage threshold under which overtime pay is required when an employee works over 40 hours a week. The annual compensation threshold will increase from $23,660 to $47,476.
It will benefit 12.5 million workers by extending overtime eligibility to 4.9 million workers and making it easier for another 7.6 million workers who already qualify for overtime to prove their eligibility.
“It makes perfect sense to update these rules,” said Amy Hanauer, executive director of Policy Matters Ohio. “This will mean that workers are paid for the hours they work and will help overworked American families restore some balance to their lives — or at least get paid when they are required to put in extra hours.”
President Barack Obama lauded the threshold increase, saying, “If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones. It’s one of most important steps we’re taking to help grow middle-class wages and put $12 billion more dollars in the pockets of hardworking Americans over the next 10 years.”
Not everyone, however, is happy with the changes.
The National Retail Federation (NRF) believes the new regulations will place huge burdens on retail and restaurant employers. A study commissioned by the NRF and Oxford Economics, says:
“Raising the wage threshold from $455 to $984 per week, or more than $51,000 per year, would mandate overtime pay for an additional 2.2 million workers in the retail and restaurant industries. Assuming, unrealistically, that employers do nothing to alter workers’ hours, benefits, or hourly rate of pay to compensate for their increased costs, this would cost restaurant and retail employers $9.5 billion per year.”
The study contends, “On paper, the types of workers most affected by these regulations would be first-line salaried supervisors, such as assistant and department managers, store managers, office clerks, and administrative assistants. In reality, however, it is unlikely that many of these workers would see their takehome pay improve simply because they gained the potential to earn overtime pay.”
“Instead, in the wake of changing regulations, employers would likely use a variety of strategies to reduce the additional labor costs in order to remain competitive. Far more likely, employers who believe they cannot pass along higher labor costs to their customers will instead make significant adjustments in the structure of their workplaces to compensate for the billions of dollars of added wages the new regulations would impose.”
The study says that employers may use the following strategies to offset the costs, including:
- Lower hourly rates of pay to leave total pay largely unchanged;
- Cut bonuses and benefits in order to increase base salaries above the new threshold;
- Reduce some workers’ hours to fewer than 40 per week in order to avoid paying overtime, cutting compensation proportionally.
Not only will retail businesses and restaurants be forced to make adjustments — the regulations will affect other industries as well, even print publishers.
The National Newspaper Association (NNA), while agreeing that the threshold should be raised, nonetheless expressed its disappointment with the ruling, saying it would have “a harmful impact on the community newspapers NNA represents as well as the workers the increase is designed to help.”
“NNA agrees that the threshold needed to be raised but we told [Department of Labor] and the Obama Administration that doubling it was a mistake,” said the NNA in a press release. “We argued that community newspapers and their small-town employees would be unfairly penalized by [the Department of Labor’s] one-size-fits-all scheme, and that the agency should adopt a regional approach that accounts for differences in the cost of living between big cities and rural communities.”
The NNA says under the new regulations that “more than 30 percent of community newspapers would be forced to eliminate staff positions, 33 percent would reduce news coverage, and 42 percent would hire more part-time workers to replace full-time positions.” resulting in a degradation in the quality and quantity of local news reported by community newspapers. It will also limit career growth opportunities for reporters, who typically hope to build a reputation at a small newspaper so they can move to bigger markets.”
In Darke County, many businesses whose salaried employees will be impacted are currently making preparations to comply with the new overtime rules.
John Swallow, president and CEO of Second National Bank in Greenville, said that while he doesn’t have specific details, his organization has been working to be in compliance.
“Leaders from our human resources department and I are still analyzing the effects of the new regulations for our bank,” he said. “After more discussion and careful planning, we expect to be in compliance by the December 1 deadline,” he said.
Peggy Schultz, vice president of Human Resources at Wayne HealthCare in Greenville, said that while she believes the new rules will affect all businesses with salaried employees, it is “too early to comment on its impact.”
“The decision to change employment status from salary to hourly or provide a pay increase is individualized to any given company and its employee. Many of the specifics of the new ruling have yet to be fully presented. Webinars, white papers, and added dialogue are just now coming out,” she said.
Tyeis L. Baker-Baumann, president of Rebsco, Inc., a design/build contractor and custom fabrication company in Greenville, said her company has already made adjustments in anticipation of the December 1 deadline.
“Due to my involvement with [National Federation of Independent Business], I was already anticipating the changes. Consequently, effective January 1, 2016, Rebsco switched all but two people to hourly. It directly and immediately impacted three people and prevented two people from moving into salaried positions,” she said.
“Rebsco had already paid our salaried personnel for a 45-hour work week,” she said. “When the switch was made, the individuals who were directly and immediately effected did not suddenly make more money. The hourly rates were managed so that the rate for a 45-hour work week would remain the same. If they work 40 hours any given week, they make less than before. Obviously, if they work more than 45 hours in a week they make more than before. If they work 45, they make the same amount of money they did when working as a salaried employee.”
“The biggest impacts for those who moved from salary to hourly are the reduction of flexibility in hours and the reduction of pay on holidays and vacation,” she added.
Baker-Baumann says, “The reality of this change is that most businesses will simply monitor the hours their previously salaried/now hourly employees work with more scrutiny and do whatever is necessary to keep production up while keeping costs at a minimum. Consequently, these individuals will have lost most of the advantages and ‘prestige’ of salaried employees, but probably won’t make more money over a year and on the whole.”
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