Small busi­nesses pre­pare for over­time rules

Daily Local News (West Chester, PA) - - BUSINESS - By Joyce M. Rosenberg

Small busi­ness own­ers are rush­ing to get their com­pa­nies — in par­tic­u­lar their em­ploy­ees — ready for an up­com­ing change in over­time rules.

With fed­eral reg­u­la­tions that are ex­pected to af­fect the pay­checks of 4.2 mil­lion work­ers go­ing into ef­fect Dec. 1, hu­man re­sources con­sul­tants say they’re see­ing a surge in calls from own­ers seek­ing help in com­ply­ing. Many busi­ness own­ers have pro­cras­ti­nated, hop­ing Congress might put the reg­u­la­tions on hold or a fed­eral court would take a sim­i­lar step in re­sponse to a law­suit filed by a coali­tion of 21 states. But with five weeks to go, there’s no in­di­ca­tion own­ers will get a re­prieve.

“We’re telling clients, ‘You need to get your act to­gether. This is hap­pen­ing,’” says Rob Wil­son, pres­i­dent of Em­ployco, an HR provider based in West­mont, Illi­nois.

Chris Wil­liams, a Trav­el­ers ex­ec­u­tive whose job in­cludes ed­u­cat­ing busi­ness own­ers about la­bor law com­pli­ance, re­cently en­coun­tered pro­pri­etors at a hu­man re­sources meet­ing who didn’t know the law was chang­ing.

“The ques­tion was raised of the au­di­ence, ‘How many of you are ready for this rule?’ Only about 50 per­cent raised their hands,” Wil­liams says.

The reg­u­la­tions about dou­ble to $913 a week from $455 the thresh­old un­der which salaried work­ers must be paid over­time. The higher level is in­tended to off­set in­fla­tion, which has eroded the old lim­its. In an­nual pay terms, it rises to $47,476 from $23,660. But there won’t be a blan­ket in­crease for all work­ers whose pay falls be­low the new thresh­old — fed­eral reg­u­la­tions specif­i­cally ex­empt some em­ploy­ees like com­puter pro­gram­mers and of­fice work­ers from hav­ing to be paid over­time. Many em­ploy­ees who will be­come eli­gi­ble for over­time work in restau­rants or re­tail as man­agers or su­per­vi­sors.

Own­ers are look­ing for ways to com­ply with the law with­out see­ing their la­bor costs soar. Some with em­ploy­ees whose salaries are close to the $47,476 thresh­old may give them small raises to keep them ex­empt. Oth­ers may switch salaried staffers to hourly pay and keep a close eye on their sched­ules to avoid run­ning up big over­time bills. In many work­places, own­ers may re­dis­tribute some tasks so no one has to stay past the end of a shift.

The reg­u­la­tions will af­fect the pay of 17 em­ploy­ees at Wilkin­son Sup­ply, a Raleigh, North Carolina-based com­pany that sells plumb­ing, kitchen and bath­room fix­tures and dec­o­ra­tive items. Five em­ploy­ees whose salaries are close to the new thresh­old have got­ten raises, pres­i­dent Ken Wertz says. Twelve are be­ing switched to hourly pay, with their sched­ules stag­gered so the com­pany show­room will be staffed through­out the day.

Wertz re­al­izes there will be times when he won’t be able to avoid pay­ing over­time.

“If you’re work­ing with a cus­tomer and you go over (the end of your shift), ob­vi­ously you can’t stop work­ing with a cus­tomer,” he says.

But be­cause Wilkin­son has com­pe­ti­tion, the com­pany can’t pass those over­time costs on to cus­tomers.

The reg­u­la­tions are cre­at­ing a jug­gling act for some own­ers who need to con­tain costs and also main­tain morale. Some em­ploy­ees, par­tic­u­larly those on a man­age­ment track, may feel like they’re get­ting a de­mo­tion if they are paid by the hour.

Own­ers need to speak openly with em­ploy­ees about the reg­u­la­tions and the im­pact they’ll have on ev­ery­one — the work­ers and the com­pany, Em­ployco’s Wil­son says. They need to let staffers know they have to com­ply with the law and also keep com­pa­nies healthy.

“Em­ploy­ees are go­ing to be mad at the owner or su­per­vi­sor, not the gov­ern­ment,” Wil­son says. “There needs to be ed­u­ca­tion about what the law is.”

Own­ers can get a ground­ing in the law from the La­bor Depart­ment’s web­site, Wil­liams says.

Fran­chise com­pa­nies are try­ing to help their fran­chisees with the tran­si­tion.

The Fa­zoli’s restau­rant chain has been shar­ing in­for­ma­tion with own­ers of its 91 fran­chise lo­ca­tions about how it will change staffing at its 123 cor­po­rate stores, CEO Carl Howard says. The Lex­ing­ton, Ken­tucky-based com­pany plans to keep the gen­eral man­agers who over­see a restau­rant’s op­er­a­tions ex­empt by giv­ing them raises. But other man­agers will have to go on hourly pay.

The restau­rants are likely to run up some over­time when there are va­ca­tions, ill­nesses and bad weather, Howard says.

“It’s the cost of do­ing busi­ness,” he says.

In about 20 states, own­ers are also fac­ing likely in­creases in the min­i­mum wage at the start of 2017.

Stephen Fo­fanoff, who coowns the Jig and Lure Fish Co. restau­rant in Port An­ge­les, Wash­ing­ton, has to fac­tor that into his em­ploy­ees’ com­pen­sa­tion when the over­time rules take ef­fect. The state’s min­i­mum wage is $9.47 an hour, but vot­ers will con­sider a bal­lot mea­sure next month that could raise it to $13.50 by 2020. Even with­out the vote, the min­i­mum wage may rise along with in­fla­tion un­der a 1998 bal­lot mea­sure.

“We’re def­i­nitely hav­ing to re­think com­pen­sa­tion from the ground up to meet the new le­gal re­quire­ments,” Fo­fanoff says.

The restau­rant’s staff of 18 has two man­agers who will re­ceive raises to keep them ex­empt. Other staffers of­ten work more than 40 hours a week, and they’re likely to see their du­ties change to keep a lid on over­time, Fo­fanoff says. He and co-owner Christo­pher Warnock are con­sid­er­ing profit-shar­ing as a way to mo­ti­vate and re­ward his staff.

“Our think­ing is to re­ward our em­ploy­ees as much as we can when the busi­ness is prof­itable, pro­vide a safety net for them that stays within our pay­roll bud­get when sales are lower, and meet the re­quire­ments of the law,” Fo­fanoff says.


Ken Wertz, pres­i­dent of Wilkin­son Sup­ply, poses for a pic­ture in the com­pany’s show­room that sells kitchen, bath­room, plumb­ing and dec­o­ra­tive items, in Raleigh, N.C. Small busi­nesses such as Wilkin­son’s Sup­ply are pre­par­ing for an im­pend­ing change in over­time.

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