The New Federal Overtime Law: Here's How it Works and 4 Ways it Will Affect Your Paycheck

MILWAUKEE — The Department of Labor announced an updated regulation that increases the salary threshold for paid overtime. That's a lot of technical language that could mean something very simple: You could stand to make more money.

Well ... maybe. 

The new rule, explained:

Here's how Fast Company puts it: If a worker makes less than $47,476, they are eligible for extra compensation if they work more than 40 hours a week, regardless of their job title or description. The Economic Policy Institute estimates that there are more than 8 million people who will now be more easily classified as eligible for the extra compensation, since they were considered exempt before due to their job descriptions.

Employers have a variety of ways to comply: They can raise these workers’ salaries to make them exempt from the overtime threshold, pay the mandated time-and-a-half overtime for those who do work more, or simply make sure employees aren’t working overtime.

4 ways your paycheck will be affected

CNN Money did an excellent job explaining how the new rule will affect your pocketbook. Without further ado:

1. You'll start getting overtime: Right now, if you're a salaried worker who makes between $23,660 and $47,476 and have some managerial duties you are considered "exempt" from overtime pay. Under the new rules, if your income is between the two numbers mentioned above, and you work more than 40 hours in a week you must be paid time and a half.

2. You'll get a small raise. If you earn just under the new threshold, your employer may decide to just raise your base pay by a few thousand dollars to avoid having to pay you overtime.

3. No more pay, but your hours could be limited. If you regularly work long hours but don't get paid overtime today, and your status changes to "non-exempt" under the new rules, your boss might not let you work more than an 8-hour day to avoid having to pay you overtime.

4. No more pay, but you still work long hours. Even if you become eligible for overtime, you may still end up working long hours but not get paid a dime more, because your employer could lower your base hourly pay to offset any overtime you'll be owed.

There are even more scenarios that CNN Money said could play out. You can read them here.

Who Loves the New Rule:

President Barack Obama says it strengthens the middle class:

"We're strengthening our overtime pay rules to make sure millions of Americans' hard work is rewarded," President Obama said in a statement. "If you work more than 40 hours a week, you should get paid for it or get extra time off to spend with your family and loved ones."

Who Hates it:

Chris Reader, Director of Health and Human Resources Policy Wisconsin Manufacturers & Commerce predicts dire consequences:

Overall, the rule is expected to cost employers over $1 billion annually. While that does mean additional money in the hands of a small percentage of workers, it also likely means benefit cuts elsewhere, reduced pay for many, reduced status from salaried to hourly, and less money for investment by the employer into R&D, expansions, and new hires.

Speaker Paul Ryan calls the new overtime rule a disaster:

“This regulation hurts the very people it alleges to help,” he said in a statement released this week. “Who is hurt most? Students, nonprofit employees, and people starting a new career. By mandating overtime pay at a much higher salary threshold, many small businesses and nonprofits will be unable to afford skilled workers and be forced to eliminate salaried positions, complete with benefits, altogether.”

A little Background on the historical numbers

The Journal Sentinel reports that President Obama's call to raise the federal minimum wage from $7.25 an hour to more than $10 has been stymied by Republicans in Congress. The share of full-time workers who qualify for overtime has fallen from 62% in 1975 to 7% today, according to the administration. The new rule, which would take effect Dec. 1, would allow 35% of workers to qualify.

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