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Consultant Roberto Castellón, whose areas of expertise include finance, access to capital and business operations, spoke with Hardware Retailing about national overtime changes that are set to take effect Dec. 1.
Castellón works for a Florida branch of America’s Small Business Development Center (SBDC), which provides small business owners with free business consulting and low-cost training services. SBDC is a U.S. Small Business Administration resource partner.
The new overtime rules come from the U.S. Department of Labor, and require that hourly employees earning less than $47,476 per year be paid time-and-a-half for any hours worked over 40 hours per week. To be considered salaried, or overtime exempt, an employee must earn $913 per week or more.
These overtime changes are concerning for many small business owners, and just last week, the U.S. House of Representatives voted to delay the start date, Hardware Retailing reported on Sept. 30. However, as indicated by many experts, it most likely will still roll out on Dec. 1. Below, Castellón shares his insights on the impact overtime changes may have.
Hardware Retailing (HR): How will the overtime law changes immediately impact small businesses?
Roberto Castellón (RC): It’s not impossible, but it’s a tricky thing to labor over that on paper. I think most business owners are going to reach out to financial professionals or are going to go to their accountants. It’s going to put stress on them. It’s going to incur costs. I think, at the end of the day, payroll will increase across the board for everyone.
HR: How do you think most small businesses will react to this?
RC: I think there are going to be a lot of conversions from salary to hourly wages.
I think you’re going to have to hire new people. I think the best solution is to convert the folks to an hourly wage, and under no circumstances can anyone work more than 40 hours.
HR: What do you think the impact on small businesses will be?
RC: There will be an increase in the payroll expenses and operating expenses.
I think there’s going to be a shakeout. The ones at the bottom, that are barely holding on now, may close because it’s not worthwhile to stay in business.
HR: What else can businesses do?
RC: You do the best you can to minimize the impact. It’s going to affect retail in an inordinate fashion. I believe it’s going to have an effect across the board until prices go up. The issue is the transition from the day the law kicks into place, to when product price stability occurs. If you’re barely making it, there’s no space for you to absorb this cost.
HR: What do you think the overall effects of the new regulations will be?
RC: From a social perspective, I think it’s going to better the lives of a lot of people. Nothing ever works all bad or all good. We don’t know what’s going to happen, but any time government tweaks the economy, there are always issues.
From the U.S. Department of Labor
In May, the U.S. Department of Labor updated overtime regulations, which are intended to “extend protections to 4.2 million workers across the U.S.,” according to the federal agency.
For more information, click here to read the Department of Labor’s detailed answers to questions about the new overtime law changes. To view the final version of the rules that will take effect Dec. 1, click here.
