On Bauer Business Focus – a conversation on the implications of recent changes to the Fair Labor Standards Act concerning overtime pay.
C. T. Bauer College of Business Department of Management Chair and Professor Steve Werner stopped by Bauer Business Focus to discuss how an increase in the number of employees who qualify for overtime pay could impact businesses and employees.
“The main point related to overtime is that if you have a managerial job or professional job, then you can be salaried and you won’t get overtime,” Werner said. “There is a criteria though. There is a certain amount of money that you have to make to be able to be exempt so that employers wouldn’t have to pay you overtime. It was $23,000. Now it’s a little over $47,000.”
According to Werner, the change will affect an estimated 42 million people nationwide, and require businesses to adapt their pay structures to meet the new requirements.
“Part of the problem, businesses would say, with this is that one way to get around it is to pay people more. Pay people above the $47,000 threshold and they can work overtime and you don’t have to pay it. But if you do that, then you create inequities with people that were already in a higher paying job. Now they’ll have a job that’s paying the same, but their job was presumably higher paying because they had more responsibilities, or perhaps needed more education to do the job.”
Werner also pointed out other alternatives businesses could take to address the new change in the law.
“They could cut the pay of employees down to about where it would end up being the same once they got paid for overtime, but their salary would technically be lower. Or they could just pay for overtime.”
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