Retailers want nothing to do with it, small business owners say it’s just another example of President Barrack Obama’s unwillingness to play ball with them, yet labor activists cheer the idea that changes might be coming to employee overtime. In the United States, there are two common classifications for employees. First, there are the hourly employees, which receive a set amount of money per hour they work. The second classification is what is referred to as “salaried” employees.
For those who have ever held a position as a salaried manager, the concept is relatively simple. The employee receives the same compensation each week, no matter how many hours they work. Typically, these employees still have to punch in, and punch out on a clock – but they will not gain anything extra for working beyond the traditional 40-hour work week. Some of these salaried managers are even held to a longer work week, than the traditional 40-hour employee. Meaning, their salary is actually based on a 45-hour, or even 50-hour work week.
It might sound complicated, and a little unnecessary, but for those who are salaried, working overtime without getting paid is something that has always come with the territory. In order for those salaried managers to begin receiving overtime compensation, they have to make less than $24,000 per year. That equates to about $455 per week. So, imagine working a 50, or 60 hour work week – only to see your paycheck remain flat just above that threshold.
This is the problem that President Obama wants to correct. As someone who worked in the retail industry for a number of years, listening to them complain about profit margins that can’t handle this increased burden is purely laughable. However, the new threshold, which would essentially double that number, would put retailers in a unique position.
They could either accept the change, and give their employees a near-double raise in pay – if they feel as though the time-and-a-half benefit would cost more than that, or they could keep their employees pay where it is, but force them to pay their employees more in overtime benefits. The simple analysis here isn’t that complicated. While retailers go out of their way to ensure that non-management employees stay under the full-time, or benefit-time threshold, ensuring their managers stay under 40-hours, or giving them the ability to remain under 40-hours shouldn’t be that complicated.
The problem with the system the way it stands now is that part-time employees are even being reduced by some retailers. Many retailers are reclassifying their part-time associates to “part-time under 20” and “part-time over 20,” meaning that the number in their classification signifies how many hours they can work. By keeping those part-time associates under 20-hours, the companies themselves save a great deal of money by avoiding a lot of the new labor costs that have arisen as governments work to make employment more fair in the U.S. for everyone.
This is just the latest facet of the wage debate that has continued now for years. Some states are experimenting with massive increases in minimum wage, which is another part of the debate that is equally challenging to navigate – depending on which side you land on as an individual. Businesses are being pushed in different directions, and are going to have to start making tougher choices, passing the cost on to the consumer, or start getting used to smaller margins.
I think we all know which one of those things businesses will not elect to do. How President Obama will move forward will be interesting because this is something that he will not need congressional approval to actually put into action. If this does go forward, it will be one of the most drastic moves ever made in the labor movement.