An Employer’s Perspective on the DOL’s Overtime Rule Changes

Employers across the country are reacting to the Department of Labor’s (DOL) overtime rule changes that are set to take effect on December 1st, 2016.

For anyone unfamiliar with the overtime rule changes, under the Fair Labor Standards Act, the minimum salary for employees to be exempt from overtime is increasing from $23,660 to $47,476 per year.

Although two lawsuits have been filed to challenge the ruling, one backed by 21 states and another backed by a coalition of business organizations, it is the observation of the Legislative Director for Mile High SHRM (Society of Human Resource Managers) Colin Walker (Fairfield & Woods) that the lawsuits have only a remote chance of succeeding to delay or nullify the new regulations.

As the CEO of an organization that is affected by DOL’s new overtime rule changes, here are my observations.

At our company, we pay employees a fair wage – good even!  We understand that adjustments are needed in order to protect workers at various ranges of the pay scale. However, the DOL’s regulations are too much, too fast.

Rather than talk concepts, here’s how this rule affects our day-to-day operations.

Any employee we hire that is paid less than $47,467 per year must now be paid by the hour.

At our software company, we’re hiring technical, white-collar people that are smart and technologically savvy. And… maybe those  employees are in their first job, or bridging the gap from a new industry – for example, retail work to office work. Our salaries are in the ballpark for the type of exempt work we expect, but they aren’t all above the new pay threshold, either.

USA Today outlines some of the choices we could make, and without going into detail about why some would work for us and others will not, I’ll let you know what we’ve decided to do, after careful consideration.

  1. Keep salaries the same, eliminate or reduce overtime. Be sure to monitor activity and hours to limit overtime.
  2. Raise salaries to the new minimum, enabling you to require unpaid overtime of qualified employees.
  3. Keep salaries the same, pay overtime. This is financially beneficial if overtime is limited or irregular and current pay is at the low end of the present minimum. Be careful tracking employees’ hours.
  4. Lower wages, pay overtime. This results in your expenses staying the same, but will certainly create disgruntled employees and high turnover.
  5. Hire more employees. If you regularly need a lot of overtime from current employees, you may want to consider hiring additional hourly workers to pick up the extra hours.

 

Our conclusion: we’ll raise salaries. We’re lucky we can. I cannot imagine what employers in more challenging situations must be facing. Larger companies might laugh at this amount, but we all come from somewhere. For us, I’ve estimated the cost to be around $75,000 – $100,000 to comply.  So, we’re looking at our 2017 plans and adjusting accordingly.

$75k – $100k is close to two new headcount we could add. It’s the cost of our office buildout. It’s the cost of one highly skilled employee. It’s marketing dollars we’d love to spend to acquire new customers.

And beyond that…implementing the changes so soon disrupts our business.

  • We’d have to implement new time-tracking mechanisms
  • We’d deal with morale issues, and employees feeling less valued as they go hourly
  • We’d create unpredictable, variable overtime costs
  • We’d burden our small accounting firm with complex, weekly overtime calculations, incurring additional costs
  • We’d saddle my crazy-busy managers with wage management, taking the focus off of company goals that benefit all of us.
  • We’ll be confronted with the cost of our existing benefits as salaries rise.

I agree that the regulations needed updating, but the voices of companies like ours have been buried as the DOL marches ahead. I personally urge Congress to stand with 21 states, multiple business associations and small businesses to pass either S. 3464 or H.R. 5813. Give businesses like ours a chance to react fairly over time.

The views represented here are solely those of Julie Rieken, not of Trakstar, Inc.