United States-based employers are appointing fancy managerial titles to their employees to pay them less, said Harvard and the University of Texas.
According to Federal Law, all employees are entitled to overtime pay unless they earn at least US$684 a week and are part of the management.
And the use of fancy titles is causing 73,000 employees nationwide an average US$3,194 a year–or US$4 billion a year in total.
However, career management author Minda Zetlin said that misclassification of job titles could actually cost companies more.
To begin with, it won’t work everywhere. Many U.S. states have their own, more restrictive, rules about overtime.
At the same time, the exemption for management isn’t based on someone’s title. It requires that the employee pass a “duties test,” which includes regularly directing the work of at least two other employees and having hiring and firing power over them. There are also overtime exemptions for administrative and professional positions, both of which have their own duties tests.
Misclassifying nonexempt employees also puts employers in danger of both disciplinary action from the federal government and lawsuits from employees who should have earned overtime but didn’t.
However, the best reason not to practice title inflation is that companies risk creating a whole lot of ill will. It can generate resentment and distrust once the scheme is revealed.
Remember, reputation and trust is everything in a business. The loss of these two may be a higher price than the overtime pay that some employers are avoiding to give to their employees.