New Labor Bill Changes Overtime Pay Rules for Workers Receiving Employer Child or Dependent Care Benefits

The newly proposed Empowering Employer Child and Elder Care Solutions Act aims to tweak how your paycheck is calculated if your employer helps you out with childcare or eldercare. Specifically, this legislation amends the Fair Labor Standards Act (FLSA), the federal law governing wages and hours, to make a key change in how overtime is paid.

The Fine Print on Your Overtime Rate

Here’s the deal: under current law, your overtime rate is based on your “regular rate” of pay, which includes more than just your hourly wage—it factors in many types of compensation. This bill (in Section 2) clarifies that the value of any employer-provided payments, reimbursements, or services for child or dependent care cannot be included in that “regular rate” calculation for overtime purposes. Essentially, if your employer pays for your kid's daycare or your parent's home aide, the value of that benefit is now officially excluded from the calculation used to determine your time-and-a-half rate.

The Trade-Off: Benefit vs. Paycheck

This change creates a classic policy trade-off. On one hand, the intent is clear: it removes a financial disincentive for employers to offer these benefits. If an employer knows that offering $500 a month in care assistance won't raise their overtime liability across the board, they are much more likely to offer the benefit. This is great news for the growing number of people juggling work and family care responsibilities—a huge concern for the 25-45 age group.

On the other hand, for employees who regularly work overtime and receive this benefit, the practical effect is a lower effective overtime wage. Why? Because the value of that care benefit is no longer inflating the base rate used to calculate time-and-a-half. For a worker relying on those overtime hours, this could mean less money in their pocket per extra hour worked, even if they are still getting the care benefit. It’s a subtle but important shift in compensation structure: the benefit is protected, but the value of your overtime hours is based on a slightly smaller pool of compensation.

Who Feels the Change?

This bill is a direct signal to employers that they can invest in care solutions without fear of increased labor costs across their entire workforce. For employees, the impact depends entirely on their work schedule. If you never work overtime, this is a clear win—you get the care benefit with no change to your pay. But if you’re pulling 50 or 60 hours a week, and your employer provides significant care assistance, your overtime earnings will be calculated using a lower base rate than they would have been under the previous interpretation of the FLSA. This change applies immediately to all workweeks starting on or after the date the law is enacted, meaning employers and payroll departments will need to update their systems quickly.