New Overtime Rules: 4 Options for Bar and Restaurant Owners

By Rachael Perry


Rachael Perry

November 14, 2016

Posted in Restaurant Management, Industry & Culture

Are you ready for the new overtime law change?

You probably didn’t open a bar because you wanted to become a labor law expert. But, most likely, that’s become a big part of your job. Well, get ready for another big change: December 1st is the roll-out date for the new Department of Labor overtime regulations that will impact roughly 85% of managers in local businesses. It’s part of an update to the Fair Labor Standards Act (FLSA), and discussions around the new overtime rules have been complicated.

Here are the basics of what you need to know.

Today, only salaried individuals earning $23,660/year or less are eligible for overtime. However, on December 1st, that cap will more than double to $47,476.

In other words, any salaried employees making less than $47,476 will now be eligible for overtime.

The good news is that, with a little preparation, you can minimize the impact of these new law on your bar or restaurant’s bottom line.

As a business owner, here are four options for dealing with the overtime law change for your establishment.

Pay affected employees time and a half overtime pay

This course of action is pretty much the same thing as doing nothing. Starting December 1st, you’d just have to pay overtime for any salaried employees making less than $47,476 and working more than 40 hours. Even though it’s the easiest option requiring the least change, it may not be the best for you.

Ensure your employees work 40 hours per week or less

Most manager-level positions in the hospitality industry are full time. If you choose this option, you have to be pretty vigilant about scheduling and coverage so that your managers don’t hit overtime.

Convert your salaried employees to hourly, factoring in overtime

By converting salaried employees to an hourly wage, and factoring in overtime when making the change, business owners could conceivably pay their managers the same amount of money for the same amount of work they’re already doing, without worrying about overtime.

Check out the overtime calculator to see what your employees’ effective hourly rates would be. If you decide to go with this route, be sure you’re tracking their wage rates against others on your staff—you wouldn’t want to end up with someone feeling like they just got a pay cut.

Raise employee salaries above the $47,476 threshold

This is probably your best option for managing the wage of any employee already hovering near the new legal limit. By increasing their pay to more than $47,476, they’ll no longer be eligible for overtime, which could end up saving you money long term. At the very least, the increase will be predictable and something you can budget against. And it’s a win-win for both the business and its staff, because your employees are getting a raise.

Ultimately, while this regulatory change seems scary, it should have a negligible impact on the bottom line of most bars and restaurants around the country.

Are you implementing any of these methods, or are you planning something else to comply with the new law? Let us know in the comments.



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