President Barack Obama recently announced plans to raise the overtime salary threshold in an effort to increase household incomes.
The overtime threshold was introduced with the Fair Labor Statistics Act, which also brought about a federal minimum wage and the 40-hour workweek.
Here are some pros and cons to having the threshold:
1. Employees make more money.
When workers spend extra time at work, they are compensated for the sacrifice in time they make to be there. Employees are typically paid time and a half for working more than 40 hours a week, according to the Houston Chronicle
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2. Employer has increased productivity.
By having an overtime threshold, employees are guaranteed the extra pay for extra work and have an incentive to keep working at their best.
1. Too much overtime can lead to burnout.
The bonus in wage for working overtime can be a great incentive, but it can also be destructive if done too much. Excessive work can burden an employee, forcing them to slow down and not do as great of work, which could ultimately lead to a decrease in productivity, the Chronicle reported.
2. It costs more.
Required overtime pay means that if employees work over 40 hours, employers will have to take more out of profit in order to pay them for their extra labor. The required time-and-a-half pay can add up to a large expense for businesses.
3. There are ways to get around the threshold.
Currently, employees paid hourly and salaried employees who make less than the threshold of just over $20,000 earn overtime. Some workers who are paid more than that may earn overtime based on their specified duties. Nonetheless, businesses have been able to maneuver around paying overtime by listing workers as administration even if they are not doing managerial duties, allowing them to skirt the requirement, PBS reported
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4. Employees may get less time.
By enforcing an overtime threshold, businesses, especially those who don’t provide many benefits, may opt to hire other laborers to avoid paying overtime, according to Olympic Staffing Services
. This means laborers could miss out on their opportunity to make extra money. The business will, however, have to deal with the additional costs of hiring and training new employees.
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