Q:  I manage an office in a small company and supervise a small staff of hourly employees.  My salary is $37,440 and between coming-in early to open, covering lunch breaks and making sure everything gets done, on average I work 50 hours a week.

How is the new overtime rule going to affect my paycheck?

A:  After much anticipation, the new overtime rule is finally out and will take effect Dec 1, 2016.  “New overtime rule” is a bit of a misnomer, because the only thing that’s “new” is the minimum yearly wage for exempt employees going from $23,660k to $47,476.  That’s right, it doubled.

How it will affect you depends on how your employer applies the new rule.

Currently you’re exempt (from overtime) because you manage others, and you make over $23,660.  Whether you work 40hrs or 50hrs, your paycheck is the same.

After Dec 1, in order to keep your exempt status, you’ll not only have to continue managing others, you’ll also have to make over $47,476.

So, your employer has a few options.

Option 1.

Employer keeps your pay unchanged, your exempt status ends (because you don’t make enough) and you become hourly and eligible for overtime.   Now you must track your time carefully so you can be paid for those 10 extra hours.

Result:  Your workload is the same (50 hours).  Your paycheck is  fatter, because you get overtime.

Option likelihood?  Virtually zero.

This is the outcome the Department of Labor intended and wants the most. This would put the most money in worker’s pockets, and help to strengthen the middle class.  But this is also very expensive for business.  In your case, paying you overtime would cost your employer $14,040 (520 hr/year at $27/hr.)

Option 2.

Employer increases your pay to $47,476 (you can work extra hours without overtime)

Result:  Your workload is the same (50 hours) or may increase if employer now expects more after that 10k increase.

Option likelihood?  Slim to none. 

This is still very expensive, business likely can’t afford to give $10,000 raises out of the blue.

Option 3.

Employer reduces your hourly rate so that you can be paid 40hrs regular plus 10hrs overtime but your paycheck is the same. (This takes fancy math skills).

Option likelihood?  Possible.

This will not be well received by workers  (and it’s not what the DOL wants to happen), but it’s what many business will be able to afford.

But, don’t despair, there are better and  more likely options.   Some include shifting your workload,  and maybe even getting extra help.  We’ll explore them next week.

©Copyright Eva Del Rio

Eva Del Rio is creator of HR Box™ – tools for small businesses and startups. Send questions to Eva@evadelrio.com