Ever been to a horror movie? I get stressed about them whenever I get suckered into going. During the first 70 minutes of every horror film, there’s the threat of something bad lingering just beyond the frame. Then it happens: The door opens, the chainsaw slashes and you jump in shock at the (barely masked) terror to be feared. The last 20 minutes are intense, worrying about survival before the sunny moment at the end when my heart rate returns to normal.
With the DOL’s overtime rule released this week, employers throughout the country just discovered what the scary monster looks like and everyone will be running around trying to understand and survive. So what does it mean?
Overtime rules were adopted originally during the Great Depression to do two things: encourage a 40 hour work week (and therefore create more jobs) and create a financial penalty for employers and reward for employees if they work beyond that 40-hour threshold. But over the years, changes were adopted by Congress and the White House to recognize that some jobs were not hourly, and instead the employee would be paid a salary for doing the job (and not necessarily a set number of hours per week).
Like many things, a small number of employers abused the salary rules and so the reaction was to set a minimum salary for management and professionals to strike a balance between overtime and time expectations. That minimum threshold was set at $433 per week ($23,660 annually) in 1992, but there was no inflationary adjustment mechanism set when it was adopted.
So on one hand, the threshold ought to be adjusted to reflect the significant different value of money in 2016 versus 1992. But the jump to $47,476 (or $913 per week) is going to be a huge deal to many employers (including some agencies).
What to do?
There’s a number of ways that employers could deal with this, but one thing to help them with is the tradeoff with the cost of benefits. The economic realities will mean that some may consider dropping health insurance or other employee benefits to have enough money to pay overtime. What you need to do is help your client understand it and how relatively cheap benefits are compared to salaries and overtime.
What else should you do? Bring together experts to help walk your clients through their options. Show your value as more than just a person selling something. Complain about bureaucrats, but don’t tell them that Congress will undo these new regulations.
Do like most have done over the last six years: Move on to help them solve their real problems. Because if you don’t, the scary ending might be your relationship with your client.
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