Manufacturers must deal with new OT rules

Small manufacturers especially will have to revamp some of their pay packages to blunt the impact of the new Labor Department overtime rules, which take effect Dec. 1. The rules, which have been contemplated for a few years, essentially increase the number of lower-paid workers who will be eligible for overtime, generally catapulting midlevel managers into the overtime universe.

The Labor Department does this by increasing the annual salary at which employees must be paid overtime from $23,660 to $47,476 a year. About 35 percent of full-time salaried employees will be eligible for time and a half when they work extra hours under the new rule, up significantly from the 7 percent who qualify under the current threshold, according to the Labor Department. The Labor Department estimates that the rule would boost the pay of 4.2 million additional workers.

The Labor Department extended an olive branch to businesses by scaling back the threshold from the $50,440 level proposed last year and allowing bonuses to count toward up to 10 percent of it. While the agency took the unprecedented step of ensuring the threshold will be automatically updated, it indexed it to salary growth in the lowest income region of the country and set the increases to occur every three years instead of annually.

“This regulation creates barriers to opportunity, severely limiting flexibility and dramatically increasing red tape, especially for small manufacturers who cannot afford the burdens of a 99 percent salary increase for management employees who are exempt from overtime pay,” said Rosario Palmieri, vice president of labor, legal, and regulatory policy, National Association of Manufacturers.