Flexibility and Overtime Among Hourly and Salaried Workers: When You Have Little Flexibility, You Have Little to Lose
EPI Briefing Paper # 385
19 Pages Posted: 22 Apr 2015
Date Written: September 30, 2014
Currently low-wage workers who are paid a salary and work overtime do not have the same protections as workers who are at the same earnings level but paid on an hourly basis. Specifically, under Fair Labor Standards Act (FLSA) overtime work protections, all hourly workers must be paid at least “time-and-a-half,” or 1.5 times their regular pay rate, for each hour of work per week beyond 40 hours. Only salaried workers making below $455 per week (equivalent to $23,660 per year) qualify for the same automatic protections. Salaried workers making $455 a week or more only have the right to earn overtime pay if their duties are determined to be nonexempt duties. This means that employees who make as little as $23,660 per year may have no limit on their weekly work hours nor earn any pay for working beyond the standard 40-hour workweek. In this time of stagnant wages despite rising labor productivity, slow economic recovery of household purchasing power, and increasing income inequality, proposals to include low-salary workers in overtime (OT) coverage by lifting the salary threshold to at least $50,000 are timely.
Some of the debate over raising the threshold hinges on the idea that salaried workers newly eligible for overtime pay would become more like hourly workers because their employers would need to track these workers’ hours. Thus, it would be useful to see how similar salaried workers in the targeted pay ranges are to their hourly paid counterparts in terms of work schedule flexibility, frequency of overtime, and levels of work-family conflict and work stress. Specifically, given concerns that extending automatic OT protection to these low-salaried workers would “hurt the very people it is intended to help,” we examine whether salaried workers stand to lose flexibility by gaining OT protections. Using data from the General Social Survey (GSS), this report looks at workers in different pay brackets and explores the relationship between pay status (being paid on a salary basis or an hourly basis), work flexibility (being able to vary one’s starting and ending times, to take time off during the work day for personal or family matters, and to refuse requests to work overtime work) and outcomes such as work-family conflict and work stress. From the GSS we use pay brackets that most closely approximate the existing and proposed OT-protection eligibility thresholds.
Following are the key findings of our analysis:
There is a notion that salaried workers have more flexibility at work than their hourly counterparts. This is not the case at the pay levels that would be covered by an increase in the OT threshold. In general, salaried workers at the lower (less than $50,000) income levels don’t have noticeably greater levels of work flexibility that they would “lose” if they became more like their hourly counterparts.
Hourly workers paid at least $22,500 but less than $50,000 have slightly less ability to adjust their starting and ending times, but the differences, while not trivial, are not large enough to constitute a serious loss of flexibility among such workers. There is therefore little danger that effectively “converting” salaried workers paid up to $50,000 to hourly status by raising the overtime pay threshold to $50,000 would markedly reduce their work scheduling flexibility.
Generally it is the salaried workers much higher up the pay distribution who have a lot more flexibility to vary their start and end times and these workers will not be affected by an increase of the OT pay threshold to the modest levels discussed here.
Contrary to a common assumption, salaried workers at the affected pay levels appear to have no more ability to take time off for personal or family matters than do hourly workers at the same annual earnings levels. Thus, effectively “switching” employees from salaried to hourly by requiring employers to track their hours for purposes of overtime pay would not reduce, and might even increase, this important element of work flexibility.
If we consider mandatory overtime to be an indicator of inflexibility in one’s work schedule, salaried workers have about the same or even greater likelihood of having to work mandatory overtime than hourly workers in the same pay brackets affected by an increase in the threshold. Thus a shift in the OT threshold would if anything provide the newly eligible workers with greater flexibility to refuse overtime work.
Salaried workers at the affected pay levels either report greater work-family conflict and work stress or report greater incidence of the conditions (such as mandatory overtime work) associated with such conflict and stress. Thus in terms of outcomes they have little to lose and in fact something to gain from falling within new OT thresholds.
Because the salaried work force starts out with higher work-family conflict, a de facto declassification as hourly might slightly reduce their work-family conflict. Levels of work stress are slightly higher among salaried workers than hourly workers, thus work stress would likely not increase.
While working irregular shifts is a condition associated with greater work-family conflict (generally and for salaried workers), transforming salaried workers above $22,500 into hourly workers does not threaten to make these workers’ schedules any more irregular. Because salaried workers in the affected pay brackets already work mandatory overtime at the same frequency as hourly workers and more days of overtime in general than hourly workers, raising the overtime threshold for them would not increase and in fact could decrease the work stress and work-family conflict associated with mandatory overtime.
Finally, to the extent that the policy leads employers to curb overtime, this could create work hours for the underemployed workers who need them (a topic to be explored further in an upcoming EPI report).
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