Last week, the Obama Administration proposed change to overtime regulations that sounds like great news for workers, but many small businesses are already wondering how this would change the way they pay staffers. They could cut employee hours or eliminate perks like bonuses because they don’t have the money for overtime for employees who routinely work 45 or 50 hours a week. The proposed change would be particularly hard for owners who rely on managers to oversee their day-to-day operations. It could also force some owners to raise prices or cut the services.
The overtime hours proposal might impact automotive dealers.Car dealers may have to pay more to employees who work more than 40 hours a week or tweak pay plans to avoid doing so.
White-collar workers such as managers are exempt from overtime pay if they make a salary-based compensation of more than $455 a week, or $23,660 a year.
But President Obama wants to change the overtime rules.
His proposal would more than double that salary floor to $970 a week, or $50,440 a year. Doing so would expand the number of workers eligible for overtime from about 8 percent of the salaried work force to about 40 percent, covering 5 million more workers in the first year of its implementation, according to the U.S. Department of Labor. The department explains the rationale behind the proposal on its website.
The salary threshold was last changed in 2004. If Obama’s proposal is adopted, both the dealer and the employees may be impacted in a negative way. That’s because many dealership employees prefer that a certain percentage of their compensation be salary. The dealer might have to reduce that salary amount to achieve overtime exemption. A large impact could be felt by those who get the majority of their pay from salary.
The proposed regulation would not affect the commission-based employee such as salesman, F&I managers, or mechanics. They would be exempt.
Employees must also meet white-collar definitions to be exempt from overtime pay. That means the employee must be a professional, such as a full-time accountant, or an executive, meaning the person directs a department such as a sales manager, he said. Or the employee must be in an administrative role, definitions of which vary widely. In short, the administrative burdens from this proposed regulation would add yet another headache to small businesses already taxed plenty by the Affordable Care Act, new IRS regulations, and much more.
NARFA knows how much the new and complicated legislation is affecting your small business. We look to ease those burdens and have full administrative support to ensure you can focus on running and growing your business. More importantly, we keep the health of your small business at the top of our priorities which is why we continue to create fully compliant employee benefits programs to fit your needs.