New Overtime Rules Won’t Benefit As Many As Expected


Millions of employees could be eligible for overtime for anything worked over 40 hours under new proposed OT rules. But all the ballyhoo about the change overlooks one important factor.

Overtime overhaul not all it’s cracked up to be

About a month ago, I told you there would likely be new rules for payment of overtime and now those new proposed rules have come out. The prior federal rules limited eligibility for OT to a narrow set of workers, specifically those who earned less than $23,660. Under the new rules, anyone earning up to $50,400 will be in a position where their employer is required to pay OT for anything worked over a 40-hour week.

So someone who is salaried right now and works how many ever hours it takes to get the job done will be paid the equivalent of an hourly wage with overtime — even as a manager or a supervisor — up to $50,400. (Lawyers, doctors, teachers, and outside sales personnel are exempted.)

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The interesting thing is if you inflation-adjust pay, this was how it used to be 2 generations ago. But then we moved heavily away from that in recent years, which gave employers more latitude in how OT was paid.

I’m expecting these new rules will go into effect fully over the next couple of months, but we don’t have an exact date yet. When they do go into effect, you will be in a position where if you routinely work 50 hours and get paid a flat amount, you pay would go up 37.5%. So it could potentially mean a much fatter paycheck.

Yet let’s look at this from a business standpoint: If I am an owner of a business and have to comply with the new rules, I am going to change how I employ people and how I use them in the workplace. So there’s no way that employers are going to boost their payrolls by 37.5%. That’s not going to happen. Employers will just adjust the nature of jobs, job descriptions, and the work itself.

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A small segment of people will benefit from this, but as a practical matter overall, business owners are in business to make a profit. So they will adjust how people work, how many hours they work, and all the rest to keep the wages under control.

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