A new federal law goes into effect on Dec. 1 that could potentially affect millions of workers across the U.S.
Businesses have been scrambling to prepare for the onset of the Fair Labor Standards Act, which changes the threshold for overtime pay to $47,500. Salaried workers who make less than that are eligible for overtime pay when they work more than 40 hours in a week.
As the rules currently work, companies can avoid paying overtime to full-time salaried employees making as little as $23,660 by classifying them as “exempt.” Those workers aren’t entitled to overtime pay even if they work more than 40 hours a week.
The law that goes into effect on Dec. 1 changes that. The White House said the 40-hour workweek has eroded over the years, with workers putting in more hours without being compensated for them.
What does that mean for companies? They’ll have to anticipate higher payroll costs, either by paying out more in overtime or raising the salaries of employees so they hit the $47,500 threshold to become exempt employees.
Companies could also make changes to paid time off, bonuses and incentive plans to compensate.
The salary threshold will be updated every three years. Based on projections, it is expected to rise to $51,000 by Jan. 1, 2020, after the first update.