4 ways the new overtime rules may affect your paycheck

The new overtime rules may affect your paycheck. Check out these 4 ways you might be noticing a difference.

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Thanks to a major change in federal rules, millions of employees around the country will now become eligible for overtime pay.

Everyone's first assumption is that the rule change will mean bigger paychecks. But that may not necessarily be how it plays out for everyone.

Today, the only way you're automatically eligible for time-and-a-half pay when you put in more than 40 hours a week is if you earn less than $23,660 a year ($455 a week). But effective Dec. 1, 2016, that threshold will rise to $47,476 ($913 a week).

One of four changes could occur if your pay falls between the old and the new threshold:

  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, such low-paid managers would be reclassified as "non-exempt." That means, when they work more than 40 hours in a week they must be compensated at time and a half. It also means you and your employer will have to keep close track of their hours.
  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, said Tammy McCutchen, a management-side lawyer with firm Littler Mendelson.
  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.

But there's a big downside here: If you put in fewer than your normal 50 hours one week, you'll essentially see a pay cut because you will only be paid for the hours you work.

That may feel all kinds of wrong. But it is not illegal.

The federal government can't tell employers how much they should pay their employees so long as they're paying at least minimum wage under federal and state laws.

That said, "it's very hard for employers to lower someone's pay when they're not being demoted," said Judy Conti, federal advocacy coordinator of the National Employment Law Project, which strongly supports an increase in the overtime threshold.

Still, Conti predicts, if employers choose that route "they'll start seeing a lot of turnover."

Potential effects on your benefits: Sometimes companies offer less generous benefits to non-exempt employees than they do to their exempt staffers.

So some workers who are reclassified as non-exempt under the new rules may find changes to their vacation accrual schedules and health benefits. Or they may no longer be entitled to bonuses or profit-sharing.

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This article was written by Jeanne Sahadi from CNN Money and was licensed as an article reprint from May 16, 2016. Article copyright 2016 by CNN Money.
The statements and opinions expressed in this article are those of the author. Fidelity Investments cannot guarantee the accuracy or completeness of any statements or data.
This reprint is supplied by Fidelity Brokerage Services LLC, Member NYSE, SIPC.
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