Overtime Pay Rule: Negative Impact on Businesses, Workers

May 18, 2016 –

Talk about unintended consequences on the middle class, the Obama Administration’s regulation requiring overtime pay for 4.2 million workers will result in massive negative hardships for most employers and their workers.

When the U.S. Department’s regulation takes effect in December, the upper limit for salaried employees receiving overtime pay will skyrocket from $23,660 to $47,474 when they work more than 40 hours a week.

The regulation will hurt a wide array of sectors – from retailers and fast-food chains to universities and nonprofits.

ID-100143633 adamrConsequences

As a result – the average American’s workweek currently 34.5 hours a week – is likely to decrease and the average worker income and hours will likely decline further.

My sense is the regulation will impact the nation’s unemployment rate – countless companies will be reticent about hiring employees.

Many will cut workers’ hours, slash their benefits and perks, and eliminate bonuses.

Businesses are likely to rethink telecommuting. Fewer workers will be allowed to work from home. Comp days, a valuable perk for working moms, will be a thing of the past.

In another way, you can also look for reductions – flexible work schedules. Yes, employers will be forced to implement inflexible work schedules.

All of this also will mean an upsurge in 1099 workers and contract workers.

Starting wages for new workers will be lower.

Many workers will be demoted because employers can’t afford thinner profit margins.

Scaled back

Ostensibly, the Obama Administration walked back its idea concerning overtime pay in 2015.

The administration originally set a threshold of $50,440. It also indicated employee bonuses could count as much as 10 percent of the threshold.

Now, the threshold will be automatically adjusted every three years. But it’s keyed it to salary increases in the nation’s poorest region.

Education will be impacted – higher institutions of learning will do less hiring. For example, universities, under fire for charging high tuition, will be hiring fewer postdocs.

A postdoc is short for postdoctoral fellow or associate – a person who has a doctoral degree and works in mentored jobs to polish the resume.

Universities will likely pay higher salaries to current employees but will strategize to keep them exempt from the new overtime pay requirement.

Some workers are delighted. But they’re only thinking about their immediate futures, not long-term for their careers, and certainly not about the big picture.

Personal case study

The rule will be a disincentive for ambitious, talented workers who want to go the extra mile to help their employers and their careers.

Long before becoming a consultant, when I was a young employee, my mentor gave me a wonderful suggestion that enhanced my career.

He advised me to work 40 hours and then work an additional four hours for free. That extra 10 percent insured that my productivity remained strong.

It caught the attention of senior management and it gave me a competitive edge over my peers, which led to promotions to management and, of course, pay increases.

It’s a practice I continued as a consultant, and led to similar results with clients. Some of whom have lasted 15 years or more.

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“For in reason, all government without the consent of the governed is the very definition of slavery.”


-Jonathan Swift


Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.

Photo courtesy adamr at www.freedigitalphotos.net

Seattle business consultant Terry Corbell provides high-performance management services and strategies.