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New Overtime Rule Presents Challenges for Hiring Entry-Level Management Roles

With the passing of the new overtime rule, the Department of Labor more than doubled the cut-off for overtime pay. This has major implications for employers, as they will be forced to overhaul the compensation structure and job classifications of many early to mid-management positions by the effective date of December 1st. As organizations undergo these changes, talent acquisition specialists will face challenges as they adapt their practices to the dynamics of this new landscape.

To remain compliant with the new overtime rule, and avoid incurring additional costs, many organizations will be pushed to reclassify salaried, entry-level management roles with exempt-level benefits as either hourly or nonexempt positions. Juanita Duggan, President of the National Federation of Independent Businesses spoke to this trend stating,“Entry-level management positions are going to disappear and those employees will fall back into hourly jobs.” Hiring professionals are expressing concern about how these changes will impact their ability to attract recent college graduates and other qualified professionals seeking entry-level management positions.

Hiring Managers and Recruiters Will Be Forced To Adapt

If entry-level management positions do indeed disappear in favor of hourly roles, recruiters and hiring managers will be forced to revise the criteria that they use to evaluate candidates. Furthermore, they will need to re-evaluate their job branding efforts and refine how they attract candidates to these reclassified jobs. Kristi Jones the manager of talent acquisition at H&R Block highlighted this point, explaining, “It will be an especially hard selling point to recruit for managers—to tell people they are expected to manage a team as an hourly worker. A lot of people tell me they don’t want to punch a clock. Another selling point we’re losing is with benefits, which are different for hourly associates.”

Declining Employee Morale Could Lead to Higher Employee Turnover Rates

Outside of making it harder to attract new candidates coming in, these job reclassifications may also increase employee turnover rates. Employers are already reporting overwhelmingly negative feedback from their employees about the prospect of being reclassified as non-exempt workers. Many employees view this as a form of demotion and a cheap move by employers to cut costs at their expense. Considering these negative associations, reverting employees to a non-exempt status can be incredibly detrimental to employee morale and their overall sense of worth.

Robert C. Barber of AT&T noted on this point, explaining, “The change to nonexempt adversely affects employee morale not only because of the loss of independence and flexibility in performing their work, but because of the concern that the change reflects a lack of trust in and misperception of their skills and professional trade.” If employers do choose to switch their entry level management positions to nonexempt, we anticipate a significant decrease in employee buy-in which will inevitably lower retention rates. This means that recruiters and hiring managers will need to begin adjusting their practices to hire more frequently for more temporary positions. To adapt to this new environment, they should look into lean hiring practices and consider applying a supply chain management concept to recruiting.

If Employers Do Meet Pay Levels for New Threshold, Pressure Is On Recruiters to Find the “Right” Candidate

Alternatively, if employers would like to avoid some of the issues above, and keep their entry-level management positions as exempt, they do have the option to bump up pay levels to meet the new threshold of $47,476. In these cases, because employers will be making a larger investment in the position, there will be even more pressure on recruiters and hiring managers to hire the “right” candidate. As a result, their time to hire may increase because they will need to spend more time sourcing and vetting candidates. Furthermore, under this scenario, once the ideal candidate is found, it will be essential that there is a system in place to effectively close them.

DOL Overtime Rule Resources

Regardless of which route your company chooses, it is essential that you have all of the tools and resources in place to make informed decisions. Below, we have provided links to several resource centers and an article, all of which offer you everything that you need to know about the new overtime rule.

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