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What Does The New Overtime Rule Mean For Your Wallet?

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A change in overtime rules for workers throughout the United States is rapidly approaching. 

Although most Americans are focusing on changes coming in January, one new federal rule will affect millions of workers beginning December 1. Under the new rule, salaried workers making less than $47,776 a year will be newly eligible for overtime under the Fair Labor Standards Act.

This is a significant increase from the current threshold, under which employers don't have to pay overtime to salaried white-collar workers who make over $23,660 annually.

Why is this changing?

A basic tenet of the FLSA is that workers must be paid 1.5 times their regular hourly wage for any time worked beyond 40 hours in a week. The "white collar exemption" was originally designed for workers who were expected to be more highly paid, with better benefits and job security, according to the U.S. Department of Labor. In 1975, the salary threshold covered more than 60 percent of full-time salaried workers, but today it covers only about 7 percent, leading the DOL to determine the rule was overdue for an update.

What will change?

If you're currently salaried, don't receive overtime and make less than $47,776, you're likely to see some changes to either your work schedule or compensation in a couple weeks. Exactly what these changes look like will vary depending on your workplace and position, but many employees will see at least one of the following:

  • More free time: Employers may respond to the rule by making sure you don't often work more than 40 hours a week. For salaried workers used to 50- or 60-hour work weeks, this could be a dramatic shift in their work-life balance.
  • Higher take-home pay: Some employees could see a boost to their salaries to bump them over the new threshold. Those still under the threshold would see a boost to their take-home pay whenever they do work more than 40 hours a week.

To make sure the new threshold keeps up with inflation, the new rule includes an automatic update every three years, based on Census wage data. The DOL estimates the threshold will increase to about $51,000 in 2020.

If you think the new rule might affect you, now is a good time to talk to your human resources department or supervisor about changes to expect on December 1. 

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