The number of people eligible to receive overtime will increase dramatically under a new law, which increases overtime exemption just over 100%. This is forcing business leaders to reexamine the way they compensate employees.
The Naperville Area Chamber of Commerce’s most recent legislative meeting held a panel discussion on what those changes mean for local businesses both small and large.
“Currently, if you make $23,600 a year or more, you’re exempt if you meet certain criteria as far as your job duties. Now, it’s going to raise up to $47,000 a year, almost double for everybody. So if you’re making that or under, you’re going to be eligible for overtime,” said Ray Sanguinetti, Attorney with Rathje and Woodward LLC.
Under the new rule, employers have several options to comply with the changes. Increase employees salaries to meet the new exemption level, keep salaries as is, but pay required overtime, reduce employees salaries or pay rate so earnings don’t change after overtime pay, or simply eliminate the need for overtime by hiring more workers.
In part, the reason for the large jump is because the overtime regulations haven’t been updated since 2004.
“The percentage of workers subject to overtime decreased from something like 60% down to like 7%, and so that is just because of the inflation overtime and the static nature of our salary requirement. So we changed it in what appears to be one swoop, but ultimately we’re trying to bring it up to speed with the economy,” said Dieera Fitzgerald, Deputy Regional Administrator for the Midwest Regional Office of the Department of Labor.
The increase in overtime pay could spell trouble for local small businesses, not-for-profits, and the way all businesses are run.
“I think this is probably going to hurt more than help the employees it’s trying to help. When you have a small office with few employees, and often time you have to pretty much have all hands on deck, I think this is going to create a little turmoil,” said Christine Jeffries, President of the Naperville Development Partnership.
“When I used to work for other employers you had to work 50 hours a week or more just to get ahead, and so what are you going to do about the intrinsic motivation about an employee who really wants to work more, want to work hard? Do you have to pay them the time and a half, do you have the money to pay time and a half?” said Robert Slayton, President of Robert Slayton & Associates Insurance.
The Department of Labor will continue to clear up any questions and confusion with the new law before it goes into effect December 1.
Going forward, a new salary threshold of overtime pay will be calculated every three years, with the next one in 2020.
Naperville News 17’s Alyssa Bochenek reports.
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