Starting this December, there will be new overtime rules that will make up to a third of employees eligible for OT pay. Anyone making under the $47,476 threshold will be eligible for OT pay for work over 40 hours. While it has employees jumping for joy, it has many businesses scrambling to figure out how to best comply with the rules while not breaking the banks. Restaurants aren't excluded. The new regulations have been estimated it'll cost retail & restaurants more than $745 million to comply to the new rules.
It got us thinking. How are restaurants planning on attacking the new standards? We asked the subscribers of The Daily Rail and The SportsTV Guide how they plan on dealing with the new overtime rules.
While the answers vary, one thing you simply cannot do, is hope it goes away. In fact, the Department of Labor (DOL) has been particularly aggressive about pursuing restaurants for wage payment violations. Therefore we are encouraging you to make a plan and get ahead of this change.
Here are five steps you should take in advance of the change to make sure you are ready and not reacting…or worse hoping you won’t get noticed.
5 Steps to Get Ahead of the OT Rule Changes
1. Start having all managers clock their hours. This way you will know how many hours they are working and see how far out of compliance you are with you’re under $47,476 salaried employees.
2. Calculate the hourly rates. Based on the average hours, you can then calculate your manager's effective hourly rate based on the new overtime rules.
The calculations looks like this: (Wkly Salary / (40hrs + 1.5x Hrs Above 40)).
So here is a real world example. You have an AGM you pay $40k/year. Their weekly salary is 769.23. They work on average 50 hours per week: (763 / (40 + 1.5(10)) = $13.87 is their effective hourly rate. This will help you determine if you should simply increase their salary or convert them to an hourly rate.
3. Calculate the total Management Hours. Next, calculate the required hours needed to accomplish all of your tasks. It’s a lot of stuff when you actually memorialize it: Inventory, scheduling, bookkeeping, expediting, training, HR admin, etc. This is the total hours you need covered. Can you substitute an inexpensive hourly supervisor and keep your team at 40 hours per week? Do you need to start training opening and closing supervisory staff? These are hourly staff that can have a key, open the restaurant or close out the day.
4. Decide if it's better to just give your managers raises. If you have managers that are very close to the threshold of $47,476 it may just be easier to give them the increase. It’s clean and then there is nothing to fret over.
5. Make the switch. Armed with the conversion from manager to hourly, decide which managers will be converted to hourly and which hours you will cover with Key Supervisor personnel.
It doesn’t have to be scary and you really do have to address this issue. So do these five steps and then make informed decisions from there. Either way, December 1st is just about 100 days away, so now is the time to get this resolved.
What's your plan for the new OT rules? Let us know via email or leave a comment below!