The federal government released a rule intended to initiate an economic boost to middle-class wages. The rule raises the salary threshold of workers entitled to overtime pay. The current overtime salary level threshold of $23,660 will be raised to $47,476. The government expects that an additional 4.2 million workers will be eligible to receive time-and-a-half wages for each hour they put in beyond the traditional 40 hours per week. The share of full-time workers who qualify for overtime wages fell from 62% in 1975 to 7% today, according to the administration. The new rule is slated to take effect on December 1, 2016 and is estimated to allow 35% of current workers to qualify.
The government anticipates that many companies will convert salaried workers to hourly employees, many of whom will need to punch a clock to track their hours. Others will maintain their status of salaried employees, but will have to monitor their hours and net the extra pay for working over 40 hours per week. Some employers are expected to raise some workers’ base pay to avoid paying overtime. Other employers will cut worker hours to no more than 40 hours per week, possibly bringing on part-time workers to pick up the slack. The new rule also details specific types of duties white-collar employees must perform to be exempt from the overtime requirement. The administration estimates that an additional 8.9 million workers may currently be misclassified.