The Fair Labor Standards Act overtime rule, which is set to take effect December 1st, is a major sticking point for both candidates, according to a recent article published by The Society for Human Resource Management (SHRM).
Democrat candidate, Clinton, is in favor of keeping the overtime pay rule, established by President Obama, which assures that exempt workers earning less than $47.5k annually, should be re-classified as non-exempt and paid overtime. Giving workers fair pay for hard-worked long hours is the main focus of the overtime rule.
Republican candidate, Trump, opposes the overtime rule, which potentially puts small business owners in the difficult position of deciding whether to raise the pay of salaried managers or struggling to pay them overtime.
The outcome of this issue will have a stronger impact on cities where the cost of living is low versus cities where the salaries are already much higher.
Here are some other issues small business owners will face in relation to adopting the overtime rule:
- Whether raising salaries to meet the exempt point or biting the bullet to pay overtime, the small business owner will undoubtedly need to cut out some positions or replace seasoned workers with less experienced ones that will accept a lower wage.
- Newly re-classified nonexempt managers stand to lose many of the perks, benefits, bonus or promotion opportunities they enjoyed as salaried workers, not to mention the flexibility of their work schedule, when required to work by the clock.
- It’s note-worthy to mention that small business owners may also incur costs associated with compliance issues with regard to accurately tracking the additional hours worked by the re-classified non-exempt managers.
- Inter-office morale may be affected by the perception that a raise in pay for reclassified managers should imply a raise in pay across the board for all staff. The overtime rule does not allow for all possible scenarios in various industries and economies.
Meanwhile, the general tone of the Democratic Party is empathetic to under-paid salaried workers. Those in favor of the overtime rule, and hoping for raised income levels, are quick to respond with these points:
- The overtime rule has no effect on schedule flexibility because workers earning more than $50k generally have more flexible workdays anyway, compared to those that earn less.
- Overtime rule, once it’s in place, will positively affect office morale because as reclassified non-exempt workers earning overtime pay, they will be happier not working unpaid hours.
- There’s no reason to believe that bonus and promotion opportunities will be withheld from re-classified managers seeking to move up in the company hierarchy.
- Major point to consider is that the salary threshold is badly in need of updating. When making a theoretical comparison to its 1975 peak level, with inflation counted in, to date, the average person earning $50k would easily be at $64k annual salary.
According to Lisa Horn, SHRM Director of Congressional Affairs, while an increase of the salary threshold is warranted, the overtime rule is just too extreme, seriously affecting both employers and employees.