How Obama’s Overtime Reform Proposal will change Small Businesses?
Last year, President Barack Obama directed the Labor Department to come up with a new version of our existing overtime law. This summer, they returned their recommendations. The centerpiece: lifting the overtime pay requirement from workers making $23,360 a year to $50,440. What does that mean? Overtime pay for 5 million workers, nearly half of the workforce.
When the overtime wage law was first passed in 1975, it covered 60% of workers. Since then, that number has dropped to 8% – so many have argued that a change is overdue. This would be a massive jump, though, with far-reaching consequences for both workers and businesses large and small. The specific vary quite a bit by profession and industry, with some fields, such as human resources, receiving boosts of over $5,000 annual pay average, while other fields – such as, well, agricultural field work – receiving much smaller annual bonuses, as low as $200 per worker.
The changes aren’t cut and dry for each industry. Only 5% of those affected will be management or financial workers, but those workers will receive the biggest boosts, of roughly $5,400 annually for the average worker. The biggest sector of workers affected will be in the service industry, but those workers will receive an average boost under $1,000 apiece. Office and administrative support workers, the second largest area, will receive under $400 on average. Those bonuses aren’t massive, but those two areas will comprise nearly 40% of workers affected. We break these fields down in-depth in the infographic itself.
The average salaried worker works 130 extra hours a year – that’s three whole work weeks! Changes to overtime reform would require employers to pay 1.5 times the hourly rate for any work over 40 hours in a single week. The overtime reform proposal only applies to salaried workers, so overtime pay wouldn’t change for hourly workers. This might encourage some employers to favor hourly wages over salaried pay.
Right now, it looks very likely that this reform would be implemented next year, and there is some chance it could still be implemented in 2015. Because this has the potential to have such massive effects, it’s important that small businesses and their workers familiarize themselves now with the effects it is likely to have on them. That way, businesses can prepare and make sure they don’t see a huge spike in expenses they’re not ready to handle.
That way, businesses can avoid scenarios where they might have to let employees go or cut other expenses to make ends meet under the new overtime reform policy. Check out the infographic for more details on the law’s effects, and read the accompanying article at Fit Small Business for even more information.