Overtime rules over time
Over the past six years, Massachusetts has slowly raised the minimum wage from $8 per hour in 2010 to $10 per hour this year. The next step in that plan calls for an increase to $11 per hour in January of 2017.
Although a rising minimum wage is something many businesses actively root against, companies can at least appreciate the state's policy of a series of incremental increases over time. Even if a only small number of employees are impacted, a sudden rise in the required wage for many entry-level positions can have a ripple effect throughout a company and lead to instability, or even turmoil. Rather than hitting employers with a huge increase all at once, a set of well-spaced, steady increases give everyone more time to adjust to what would otherwise be a sudden jolt to the system.
We believe the federal government should adopt a similar phase-in philosophy on the new overtime-exemption rule. Approved in May, the U.S. Department of Labor gave businesses across the nation a little more than six months to adjust to new rules saying any salaried employee making less than $47,476 annually must receive overtime pay for all hours worked above 40 in a week. This new exemption level is more than double the previous threshold of $23,600.
It is hard to argue that the previous threshold of $23,600 is fair. Could anyone think that an employee working excessive hours with no extra pay, earning a salary lower than the federal poverty line for a family of four ($24,300) was remotely equitable? Hardly, but the doubling of that level in one fell swoop also has the potential to be materially disruptive to companies, and a six-month window is insufficient to implement that kind of large increase.
Now three months away from the Dec. 1 deadline, the actual difficulty in prudently implementing the colossal change is proving daunting to many businesses. It seems clear that the Labor Department should break up the rollout into at least two or three phases. The move will impact 86,000 workers in Massachusetts alone, and 4.2 million people nationwide. Clearly the threshold needs raised, just a little less suddenly.
Advocates of the change say that companies should just start tracking the hours of salaried employees and either keep them to 40 – or fewer – per week. And if they go over 40 hours a week, pay them overtime and simply adjust the other financials of the business.
Sounds simple, but anyone running a business recognizes the implementation of that approach is much more complex than it sounds. It is an overhaul of the business models in many levels of a company, forcing owners and executives to spend a lot more time and attention making time-value judgments than ever before.
Employees working in salaried positions are compensated for the responsibilities and demands of their job, not necessarily the hours they put in to accomplish those tasks. Shifting a number of these positions to an hourly wage can change the way these positions are perceived and valued.
In the majority of cases, the responsibilities of a salaried position probably surrounded a 40-hour work week anyway, but the idea that some weeks might require 42 hours of work while others require 38 hours of work is no longer an even exchange for the employer and the salaried employee. Managers who used to be able to let salaried employees work at their own pace and in their own way to accomplish their job's responsibilities will need to more carefully track employees' time. Most employees who are good at their jobs don't want to be micromanaged and value the independence that comes from their position and performance.
By phasing in the change, employers will be able to see how the new rules impact the varying levels of employees. The phasing in could start at $35,000 and over a few years grow to the target of $47,476, or even $50,000 if properly spaced.
No doubt the retailer who relies on a $30,000-a-year store manager to work up to 60 hours a week in order to keep everything running smoothly will have to figure out a new way to make up those responsibilities, and probably should have anyway. A nonprofit that relies on a $42,000-a-year case manager to be available day and night to provide services for a needy population whose demands don't fit neatly into a 40-hour week will have to implement much more complex processes to meet both the letter and spirit of the new law.
The Labor Department got it right by identifying that the old $23,600 base pay was patently unfair.
However, more than doubling the salary threshold for which people must be paid overtime with just six months notice is also unfair.
The minimum wage didn't increase from $8 to $16 in less than a year, and something as complex as overtime pay for salaried employees shouldn't have that kind of trajectory either.
WBJ Web Partners
Most Recent
Most Recent
0 Comments