A plan on overtime pay from the Obama Administration in late June has given operators a new concern. The proposed rule would raise the annual threshold for those who qualify for overtime, making more salaried employees eligible for time-and-a-half pay when they work more than 40 hours.
“This will ultimately force thousands of employers to shift the pay status of their workers from salaried to hourly, causing some employees to earn less pay and fewer benefits,” said the International Franchise Association in its initial retort. The specific fear for restaurants: what to do about managers.
“I do expect it to go through,” says David McDougall, CEO of 59-unit Back Yard Burgers. While the Administration has not specified when the new threshold might go into effect, operators are preparing. Says McDougall, “in some cases, we would move our GMs to hourly at the same compensation they are today.” He adds:
But it’s not just about overtime pay; there still needs to be more clarification from the White House on the benefits operators can offer hourly GMs, says McDougall. Currently, Back Yard Burgers offers insurance, paid-time off and monthly bonuses. If the rules change, depending on what they become, the incentive to be a GM may shrink. “The underlying concern is that most people aspire to move up the ranks ... By moving GMs to hourly employees, their mindset may be different when they approach certain situations,” McDougall says.