Small Business Owners Brace for Impact As New Overtime Rule Set to Take Effect

Date: November 01, 2016

Owners are gearing up for changes as a new overtime rule will affect small businesses across the country.

Small business owners are racing to comply with new regulations. 

With the Department of Labor’s overtime rule set to take effect on Dec. 1—despite legislation aiming to stop it—business owners are doing their best to prepare for the change, according to a recent article from The Hill


The rule raises the pay threshold for who can qualify for overtime from $23,660 to $47,476 a year. The Department of Labor estimates about 4.2 million workers will become newly eligible for overtime pay. 

Small businesses have been fighting hard against the legislation. Among other challenges, 21 states filed a 30-page lawsuit against the federal government to block the new overtime rule, according to Forbes

But with the overtime rule still on track to take effect, owners are left with two options—either turn salaried workers into hourly workers, or raise employees’ pay above the new threshold. 

There’s no clear answer as to which is the “better” option. Randy Bradley, owner of a Burger King franchise in Ottumwa, Iowa, and Kirksville, Mo., went with the first option, while retail giant Wal-Mart went with the latter. 

Some companies are implementing both options. Ken Wertz, president of Raleigh, N.C.-based Wilkinson Supply, gave raises to five employees and switched 12 from salaried to hourly, the Winston-Salem Journal reports. 

Rob Wilson, president of Westmont, Ill.-based Employco, encourages owners to discuss the regulations and their effect with their employees. 

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

These rules will affect states differently. Nonprofits in Connecticut attended an explanatory seminar in July to learn more about the law’s changes, “as many of their employees have salaries right around the threshold and far fewer options than for-profit companies have to make up the difference in paying overtime.” 

Meanwhile, Montana businesses employ an average of about eight people, less than the nation’s average. John Hart, regional advocate for the Small Business Administration, said the rule would affect Montana differently compared to other states with higher average salaries

“It means the economics are different here than they would be in urban areas,” Hart said. “This will have a broader effect than in Colorado, Utah, or other higher-income areas.” 

Ultimately, it’s up to the owners to decide what the best option is for their business. 

“There’s no uniform, standard business model,” Hart said. “Everyone varies.” 


Small Business Asks DOL to Delay Its Controversial Overtime Rule 

NFIB Warns that Overtime Rule will Increase Costs and Push Salaried Employees into Hourly Jobs 

Proposed Overtime Rule Changes Would Harm Small Businesses and Their Employees

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