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Millions of American Workers Now Eligible for Overtime Pay

The Department of Labor has altered a rule that will make millions of Americans newly eligible for overtime compensation. Previously, any employee making less than $23,660 was eligible for overtime pay. The department has raised the threshold to $47,476. That would make 4.2 million more Americans eligible for overtime pay and it is expected to boost wages for workers by $12 billion over the next decade.

Employees making less than the threshold will still be subject to a “duties test” that also determines their eligibility. The test determines if employees primarily perform executive, administrative or professional tasks. If so, they become exempt from overtime pay. The Department of Labor instituted an additional change that allows employers to count bonuses and commissions toward as much as 10% of the salary threshold.

The U.S. Chamber of Commerce and the National Retail Federation both expressed displeasure with the rule, arguing that businesses will be unable to afford the increased labor costs and timekeeping systems associated with the new regulation. In effect, companies will either convert salaried employees to punch-in, punch-out hourly workers or lift employees’ base pay to the new threshold to avoid paying overtime.

“Whenever the government steps in, businesses will always look for a way to keep costs down,” said Rich Carollo vice president of marketing at Lion Circle (asi/67620). “This can bode well for the companies that only have one or two employees at this pay level, but some might find it easier to just create more part-time jobs instead of full-time.”

Andy Shuman, general manager of Rockland Embroidery (asi/83089), said the new rule won’t affect the company aside from making a couple of modifications. But, Shuman said, he can see how problematic it would be for administrators if those modifications doubled.

“It seems to work against the way many companies are trying to build their workforce,” Shuman said. “It adds an extra administrative element in monitoring telecommuters’ payrolls.”

Decorating consultant Marshall Atkinson said the new rule could affect how companies hire. “I can see some companies offering lower starting salaries for open positions knowing that they are going to have to add in some overtime that they might not be used to paying,” Atkinson said.

“You’ll probably see more managers get a bump to get over the threshold of the $47K limit so they won’t have to have their time tracked,” Atkinson added.