While the financial world continues to acquaint itself with the Department Of Labor’s (DOL) Fiduciary rule, and the impact it will have on the industry, another DOL ruling is looming just around the corner.
Effective December 1, 2016 an estimated 4.2 million employees will become eligible for overtime compensation.
The new DOL overtime regulation will raise the current overtime rate for employees from $455 a week, to $913. That means employers will have to pay overtime compensation to any employee making less than $47,476 annually ($913 weekly). To account for wage growth, these numbers will be updated every 3 years.
For many this is welcome news. Since the Fair Labor Standards Act in 1975, 60% of salaried workers in the U.S. were eligible for overtime. Over the years inflation and regulatory changes have weakened the rules in place, and today only about 7% of salaried workers receive overtime compensation. According to DOL Secretary, Tom Perez, this new ruling will cover about 35% of salaried workers.
In order to comply with the rule, employers have 4 options:
- Pay time-and-a-half for overtime work
- Raise employees’ salaries above the new threshold
- Limit employees’ hours to 40 a week
- A combination of the above
Those who oppose this regulation argue that it will lead to layoffs and hiring freezes as employers attempt to offset the new costs. Though there haven’t yet been any attempts to block the ruling, many feel that any attempt would most certainly be vetoed by President Obama.
Despite these criticims Secretary Perez says there’s a number of ways employers can comply with the new rule, “People are going to get at least one of three benefits,” Perez said. “They’re either going to get more money … more time with their family, or everybody is going to get clarity.”
For more information on the overtime rule, take a look at the DOL’s summary.