New Overtime Rules' Impact Reaches Far Beyond the Obvious

Wow - interesting analysis...

Analysis: Overtime Salary Threshold Will Rise to $70,966 by 2020 The number of employees who are currently exempt from the mandate to be paid time-and-a-half overtime if they work over 40 hours per week will drop dramatically in 2020, according to new figures compiled by WorldatWork. The data demonstrates the Department of Labor’s final overtime rule will significantly erode the wage configuration of the U.S. workforce over the next 15 years. Under the final rule, the annual salary threshold for exempt positions will jump from $23,660 to $47,476 (or from $455 to $913 per week), and will be automatically updated every three years to maintain the threshold at the 40th percentile of weekly earnings of full-time salaried workers in the lowest wage census region. “Because of the U.S. Department of Labor's auto-update mechanism, there exists the real danger that the exempt classification will head to near-extinction in just 15 years,” said Kerry Chou, WorldatWork senior compensation practice leader. With the first update occurring on Jan. 1, 2020, “the change in 40th percentile of salaries could be raised as high as almost $71,000,” according to Chou. “While the Labor Department estimated that the threshold will be raised in three years to around $51,000, it misses the fact that once employers reclassify employees who are exempt today to nonexempt by Dec. 1, 2016, they will not be counted in future calculations as they will lose their salary status and become hourly workers. This will cause the 40th percentile of exempt employees to ratchet upward faster than the department's current estimates of projected increases.” Chou expects that a rapid decline of the exempt workforce will occur throughout the 2020s, ending in 2032 with just 14.4 percent of the nation's current exempt workforce remaining exempt. A chart created by WorldatWork illustrates the significant increases in the salary threshold that will take place every three years under the Labor Department's own formula. - See more at: https://www.shrm.org/hrdisciplines/benefits/articles/pages/corporations-weigh-overtime-compliance-strategies.aspx?utm_source=SHRM%20Workplace%20Compliance%20_%20PublishThis_NewTemplate%20(35)&utm_medium=email&utm_content=June%2010,%202016&MID=01476150&spMailingID=25709831&spUserID=MTM1MzAwODg2NTA0S0&spJobID=821589671&spReportId=ODIxNTg5NjcxS0#sthash.eoFyY6Yi.dpuf

The Department of Labor (DOL) has announced an updated regulation that increases the salary threshold for paid overtime from less than $455 per week to $913 per week. Before, salaried workers were only entitled to paid overtime if they made less than an annual salary of $23,660. Today, employees who earn yearly salaries of $47,476 or less will be entitled to paid overtime if they work more than 40 hours a week. What The New Rule Means According to the DOL, these new rules will extend new overtime protections to 4.2 million workers in the United States. The Economic Policy Institute (EPI) has a much larger statistic, saying that these changes will impact 12.5 million Americans. This difference is a result of the DOL not including employees who were mis-classified by their employers in its count. This is because earlier rules exempt "high-level" workers from overtime, and based this on what was called a "duty test." Many employers seized on this opportunity to change job descriptions to make it seem as if lower-level employees were performing more expert tasks, thus exempting them from overtime. This new rule makes things much clearer: If a worker makes less than $47,476, they are eligible for extra compensation if they work more than 40 hours a week, regardless of their job title or description. The EPI estimates that there are more than 8 million people who will now be more easily classified as eligible for the extra compensation, since they were considered exempt before due to their job descriptions. Employers have a variety of ways to comply: They can raise these workers’ salaries to make them exempt from the overtime threshold, pay the mandated time-and-a-half overtime for those who do work more, or simply make sure employees aren’t working overtime.