Barack Obama expands overtime pay to millions of US workers

The new rule means anyone earning less than $47,476 per year must receive time-and-a-half pay for working more than 40 hours per week

The number of salaried Americans receiving overtime pay will go from 7 per cent to 35 per cent under Obama's law

President Barack Obama has given millions of Americans a significant lift in their salaries, less than a year before he exits the White House.

The new Fair Labor Standards Act means that anyone earning less than $47,476 must earn time-and-a-half pay after working more than 40 hours per week.

That is double the amount of the current low-income threshold at $23,660, expanding the number of Americans eligible for overtime pay to 4.2 million people.

“Our whole mission here is about strengthening and growing the middle class,” Labor Secretary Tom Perez told NPR. “In order to do that, we need to ensure that middle class jobs pay middle class wages.”

The law aims to boost slow-growing incomes which have been eroded by inflation.

Republican house speaker Paul Ryan said the new law would be a "disaster" for the economy.

“This regulation hurts the very people it alleges to help,” he said. “Who is hurt most? Students, nonprofit employees, and people starting a new career. By mandating overtime pay at a much higher salary threshold, many small businesses and nonprofits will be unable to afford skilled workers and be forced to eliminate salaried positions, complete with benefits, altogether.”

In 1975, more than 60 per cent of salaried Americans were eligible for overtime, but inflation and legislatory changes during the George W Bush administration chipped away at those protections.

Today only about 7 per cent of salaried Americans receive overtime pay when they work extra hours, but the new rule will boost that to 35 per cent.

NPR reports that managers at many retail stores and fast food chains, who earn as little as $24,000, do not receive overtime even if they work 60 or 70 hours per week.

The new threshold of around $47,000 was scaled down from an initial proposal of $50,000 from the Labor Department after critics said it did not reflect pay scales in low-income regions of the US.

If Congress blocks the new law, which comes into force on 1 December 2016, it is likely President Obama would enforce a veto.