Feds Change Overtime Rule. Will it Impact Your Hiring Strategies?

On December 1, 2016 the new overtime rule will go into effect, extending overtime protection to 4.2 million workers who are not currently eligible under federal law.

Although the new overtime rule is designed to benefit employees, the significant jump in the salary threshold, from $23,660 to $47,476, may cause many companies to find creative ways to avoid overtime pay in order to protect their profits.

Four potential, unintended shifts in hiring strategies

Hire Part-timers:
If an employee is currently working significant overtime, employers may choose to split the job responsibilities and hire two part-time employees instead. This would eliminate overtime pay and potentially cut benefits eligibility for a number of employees.

Stagnant Salaries:
What if you are trying to keep your team below the 50 employee threshold? Hiring part-timers may not be an option. Instead, employers could stall raises for those who qualify for overtime and expect employees to earn their raises by working overtime hours. Discretion bonuses may also be reduced or eliminated.

Status Symbol:
Employees previously exempt from overtime could lose their perceived professional status if converted to non-exempt. Punching a time clock or being paid hourly instead of salary may deflate their egos. Those who don’t work much overtime and are just under the $47,476 threshold may seek other employment with higher pay to regain their professional self-image.

Exempt Turnover:
If employers push more work to exempt employees, burnout and turnover could result.
Exempt employees, especially those just over the new threshold and who are already working lots of overtime, the overtime change may be the catalyst for them to seek new employment.

It will be interesting to see how the new overtime rule plays out. Yet, change will certainly occur with consequences that affect both employees and employers.

For more information about the new FLSA overtime rule, click here

Concerned about how to navigate the new changes? Call us at 317-578-1310.