It’s arguably the best time in history to be an hourly worker. All around the world, there is a resurgence of laws and legislation dedicated to improving workers’ rights and conditions. From pending U.S. legislation to raise the federal minimum wage to the U.K.’s recent increase in the national minimum wage, governments are listening to workers’ calls for support and taking direct action.
Businesses are listening, too. While big business used to push back on workers’ rights in favor of maximizing profits, the tide is turning. McDonald’s recently announced that the company would no longer lobby against minimum wage increases. Amazon boosted its minimum wage to $15 per hour, with Jeff Bezos publicly challenging the company’s competitors to meet or beat that rate.
Of course, minimum wage is just one of many agenda items in the battle for fair working conditions. Another important front for workers, and especially for hourly workers, is overtime. Here, too, the landscape is changing. Companies should prepare themselves for the future by understanding overtime’s complicated history, current proposed changes and its possible impact on future operations.
The history behind America’s overtime rates
Currently, only about 11 percent of the American workforce meets the qualifications to receive required overtime pay from their employers. That’s because the Fair Labor Standards Act exempts companies from paying overtime for any employee that makes more than $23,000 per year.
This number has remained unchanged for 15 years, with its last revision back in 2004. Many people have said that it’s time for a change—the Obama administration, the Trump administration and the American people themselves. According to Fortune, a Public Policy Polling survey showed that 65 percent of respondents supported required overtime pay for people making $75,000 and under.
When the Obama administration tried to bump up the current $23,000 figure to $47,476, though, it encountered resistance and ultimately was rejected when a federal district judge in Texas ruled against the raise.
Renewed efforts to increase overtime options
In March, the U.S. Department of Labor proposed a new, scaled-down effort that would require companies to pay overtime for any employee making $35,000 or less. This change would extend benefits to an additional 1.2 million people.
While fewer people stand to benefit than under the previous proposal, the Trump administration is hoping that the less extreme change will be able to surmount any legal challenges.
A likely win for workers
Aside from the figure alone, there are additional differences that makes the current proposal more likely to pass.
The first is due to an unprecedented amount of economic growth in recent years, meaning that competition for workers is stiffer. The “battle for talent” used to apply only to white-collar professions like tech workers. With a national unemployment rate of just 3.8 percent, though, even those in hourly worker positions find that employers are eager to recruit and retain hardworking, responsible employees. With so many gig economy options for workers to choose from, like Uber, Lyft or TaskRabbit, hourly workers have more choices than ever before. That puts workers in a better bargaining position, and companies may need to be more amenable to offering overtime.
Additionally, as an optimist might venture to say: perhaps we really are moving to a more fair, just world in which all workers can expect to work in a safe environment, in proper conditions and for an acceptable level of pay. If so, the more time that passes, the more companies will be held to higher standards. One can certainly hope.
How businesses can make the best of required overtime
Increased costs will always be a burden for businesses, but required overtime pay can also be framed as an opportunity. When more people are satisfied working hourly jobs, businesses will be increasingly able to hire said employees to meet their needs. In turn those workers are likely to consume more products and services which will help businesses. And Companies will also garner the flexibility to ramp staffing up and down to meet changing demands.
In the end, positive working conditions are fundamentally better for society. This, in turn, makes favorable working conditions good for businesses. The businesses that will come out on top are those who are prepared to adapt and who welcome change with open arms.
Steven R. Power is the Global President of Deputy. With a proven track record of building highly successful technology companies over almost 20 years, he has extensive executive leadership experience in rapidly scaling high growth US and global SaaS, ecommerce, and digital media organizations. Prior to joining Deputy, Steve has worked in an executive leadership capability for a several high profile leading publicly listed and venture backed organizations including CCO at Catapult Sports (ASX:CAT), EVP at Web.com (NASDAQ:WEB), President at Yodle, President at BigCommerce, Founder and CEO of ReachLocal’s Australian Operation. Steve was also part of the leadership team that scaled ReachLocal Inc to over a half billion dollars in annual revenue across 15 countries and listed it on the NASDAQ. He received a Bachelor in Commerce and Arts from The University of Melbourne and is also a former Officer in The Australian Army.