Bernie Sanders, the Vermont senator, recently proposed new legislation that would change federal overtime rules. The new law, if passed, would require employers to pay a minimum 1.5 hours of overtime for each hour worked past 32 hours in a week. Currently, overtime kicks in at 40 hours per week.
The requirement would phase in over a few years. There’s just one problem: somebody has to pay for it. For business owners, this isn’t an ideological argument.
Say a company employs 100 people. And, for argument’s sake, say that each employee earns $50,000 annually for a 40-hour workweek. Assuming 50 workweeks, that’s about $1,000 per week or $25 an hour.
Under Sanders’ proposal that employee would make $25 per hour for the first 32 hours and then be paid overtime of time and a half, or $37.50 for the additional eight hours to make it a 40-hour workweek. Which means that for a full week the employer is now paying $1,100 per week or $55,000 per year for 50 weeks. That’s $5,000 more for each employee.
And it’s actually more than that. You have to add in federal and state taxes that an employer pays – about 7% of wages, which adds $350 more per year. A small business that employs 25 people would then be paying an additional $133,750 more per year under Sanders’ proposal.
If they had 50 employees it would be an added cost of $267,500 per year. Well, you can do the math from there. And I’m not including other benefits – retirement plan contributions, workers compensation, etc – that are usually calculated as a percentage of wages.
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