A new federal rule expected to increase overtime pay for an anticipated 4.2 million workers nationwide starting Dec. 1 could cost the City of San Antonio $3.5 million per year, Assistant City Manager María Villagómez told City Council during its day-long 2017 budget goal-setting session on Thursday.
Villagómez outlined the impact of the new directive from the Obama Administration that widens the pool of salaried workers eligible for overtime pay of “time and half” for each hour worked after 40 hours in a single work week. Currently, anyone making more than $23,660 per year, a level set in 2004, is ineligible for overtime. The Overtime Rule more than doubles the salary threshold to $47,476.
“Too many salaried, white collar workers today are overworked, and their employers have no incentive to limit hours because they aren’t required to provide additional pay when employees work more hours,” a U.S. Labor Department overview of the rule states. The overview also notes that improved work-life balance, health, productivity, and other worker benefits will result from the “more appropriate salary threshold.”
About 1,300 salaried City employees – accountants, engineers, and budget analysts – make less than $47,476. Starting in December, they will be eligible for overtime.
“In the budget office, for instance, an entry level budget analyst makes $45,000, so today they are not eligible for overtime because they are professionals (exempt employees),” Villagómez said. “With this new regulation, they would be eligible for overtime – for instance during the budget season when we tend to work extended hours.”
Out of the City’s 7,800 civilian employees, about 2,800 are salaried.
Management and Budget Office staff and executives as well as those working in other departments will be pulling long hours over the next two months to prepare a budget proposal for council consideration in August and adoption in September, a draft document that will include recommendations on how to proceed on this and dozens of other fiscal matters.
“We are going to look at job classifications to see if there are some adjustments we can make to the City’s budget,” Villagómez said. The City’s Human Resources Department will also be looking into raising salaries above the new threshold to $47,800 to avoid overtime expenses.
The Overtime Rule requires an update of the salary threshold every three years starting in January 2020.
“Each update will raise the standard threshold to the lowest-wage U.S. Census region, estimated to be $51,168 in 2020,” according to the Department of Labor.
Council members Joe Krier (D9) and Mike Gallagher (D10) questioned if the rule will stick once President Obama leaves office.
“Is it indeed etched in stone?” Gallagher said.
The rule was created by the U.S. Department of Labor and announced in May. The next president could direct that office to change it.
“We really don’t know what’s going to happen next year,” Krier said.
In 1975, the rule provided overtime to 62% of workers, according Department of Labor. About 7% of workers are eligible today.
The City isn’t alone in its consideration of the new rule and its ripple effects, thousands and thousands of public and private employers nationwide are reviewing their payrolls.
One such ripple is salary compression: Now that some employees will be paid more, the wage gap between them and more tenured people/supervisors could narrow. More senior employees may be expecting a raise.
There are a variety of options private employers have, just like the City does, to manage the potential increase of payroll costs including converting salaried workers to hourly (non-exempt) workers.
“Communication strategies must be considered to minimize morale problems (or worse) arising as a result of, for example, workers being moved from salaried to hourly positions,” writes labor attorney Andrew Volin for CFO Magazine. “Many people attach great importance to their status as salaried exempt workers.”
City Council members, which are now paid San Antonio’s median family income of $45,722, are not eligible for overtime pay as they are elected officials, City attorneys said after the question was raised by Councilman Alan Warrick (D2).
“Just making sure,” Warrick said, half-jokingly, to laughter that rose from the dais and audience.
Top image: San Antonio City Hall. Photo by Iris Dimmick.