Under the new rules finalized today, those who earn a salary of less than $47,476 a year will automatically qualify for overtime pay of time-and-a-half if they work more than 40 hours a week. Previously, those who earned more than $23,660 were exempt from overtime pay. The new rules will affect 4.2 million workers in the U.S. when they go into effect starting Dec. 1.
First, here we go again with Obama enacting a fairly radical change in the national economy via executive action. Is this a good idea? I don’t think so, but we don’t even get to debate it, do we? There was no debate. No hearings. Nobody in Congress had to vote on it. This was just something that Obama and his minions did. And it’s not like they increased the threshold by 5% or 10%. They more than doubled it.
Second, on the merits of the rule change, it once again ignores the real world ramifications. Or does it? It might be that Obama is well aware of the negative consequences but figures that the positive press the he will get outweighs the consequences that other people will suffer. In any case, this introduces a significant cost increase for businesses and they can’t just print money like the federal government. It has to come from somewhere. So, here are just a few things that businesses are likely to do to employees impacted by this rule in response:
- Increase salary to $47,477 for a few, fire a few, and work the remaining employees harder
- Switch employees to hourly, drop benefits, and hire more to cover the workload
- Focus purely on outcomes. Employees will be required to get their work load done in 40 hours even if it used to take them 50. If they can’t hack it, fire them and find someone who can.
- Strip out things like PTO, training, team meetings, professional development, etc. from the schedule to allow for more direct work.
- Outsource to either 1099 workers or overseas
But, of course, Obama gets to pat himself on the back for “helping the common man” or some such nonsense.