Overtime pay could pad your paycheck soon (maybe)

Money 4

Watch those paychecks, people, this could be the Summer of Overtime.

Or, y’know, not.

But if you are on a modest salary, you just might among the roughly 5 million employees moving into a whole new category and your payday could get a bit sweeter.

Because the Labor Department and the Obama administration are moving closer to approval of the biggest change to overtime rules since 1938, the second term of Franklin D. Roosevelt.

The Fair Labor Standards Act, one of the landmark changes of the New Deal, revised the rules for how a huge swath of the American economy would operate, reshaping the relationship between employers and employees.

FDR 1

As amended over the years, it applies to most workers, although not to many tipped employees, home care service workers and – right now, salaried employees who make more than $455 a week, which is about $23,660 a year.

So, employers are not required to pay overtime to many people who work 50 hours, 60 hours or even more in a week.

But that ceiling is likely to change: the Labor Department has proposed moving that line up to about $50,440. And if – that is, when the president – signs off on the idea, that will make an estimated 5 million people eligible for overtime.

In Georgia’s economy, where the average pay is about $45,000 a year, there are roughly 4.5 million workers and like more than 100,000 people affected by the overtime changes. A lot of people who might be on salary now – truck drivers, managers of fast food restaurants, even “professionals” like accountants and lawyers – could be eligible.

And that’s when the real questions start.

Because for the larger economy, it could be a sort of real-time experiment. When the FLSA was passed, most of the economy was either agricultural or hourly workers.

Unlike minimum wage changes, there haven’t been many opportunities to study the impact of such a change.

The administration and its supporters are looking for the changes to mean the equivalent of a raise for millions of modestly-paid workers who will then have much more spending money – which they are almost certain to spend.

But, as this reporter said on WGPB radio Tuesday morning, the story doesn’t have to play out that way.

And certainly, some critics say, it could end up hurting workers, lowering pay and cutting jobs.

The ultimate story will be written by hundreds of thousands of employers who have employees suddenly eligible for overtime.

How will they respond? There are a lot of factors in the equation.

If they don’t do anything at all, they’ll face higher payroll costs. And they might just choose to do nothing – especially if they have healthy profit. But what about companies – especially smaller operations – whose profit margins are thin, who have high payroll costs or whose business is shaky?

For those firms, higher payroll costs could be an incentive to find alternatives. Maybe they can cut overtime by automating some of the work. Maybe they’d prefer to cut overtime by hiring more workers.

And the ability of employers to act may depend on whether there is a deep labor pool in their sector. That is, if there are lots of jobseekers, a company can likely cut hours or cut pay. But if the workers are in high demand, those kinds of changes will probably mean losing employees.

And of course, one way to deal with higher payroll costs is to raise the price of whatever the company is selling. And the more competitive the sector, the harder it is to raise prices.

Companies will have to take a hard look at the equation.

One complication: Businesses are always better at dealing with challenges that can be predicted. They may be unhappy about higher costs, but it’s better than uncertainty.

And in this case, uncertainty is a given. It’s an election year. The current president will be leaving office in January. And rules written by one administration can be unwritten by the next.

  To hear the WGPB segments on overtime and the discussion between Celeste Headlee and AJC economics writer Michael E. Kanell, click here.

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1 comments
Carr Sherrell
Carr Sherrell

Sorry. Not good enough. Remove the cap all together if you work 50 plus hours you should be paid for it at your rate. I worked for a slime bucket Real Estate company who stiffed me on about 20 hours of overtime, went to our good friends at the department of labor and that's when I found out that if you make more than minimum wage your company does not have to pay you at all. You have to take them to court on your dime to get your money.