Clock is ticking for small businesses
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The clock is ticking for millions of small business owners. On Dec. 1 of this year, they will have to be ready for wrenching changes in the rules for overtime pay. For workers at small businesses, these changes could result in fewer hours, lost benefits, and demotions.

Earlier this year, the Department of Labor changed the salary threshold below which workers must be paid overtime. The salary threshold will more than double from its current level of around $23,000 to over $47,000. The adjustment will hurt about 44 percent of small businesses, according to a recent NFIB survey of small employers.

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Small businesses often operate on razor-thin margins and business earnings continue to be sub-par in this so-called economic recovery. They don’t have room in their operating budgets to absorb higher labor costs, and most don’t have HR departments that can implement big changes to their workforce and payroll systems.

One of our members, Albert Macre, runs a small accounting firm in Ohio. For much of the year, his salaried employees work fewer than 30 hours a week. During peak season, they can work more than 40 hours. They appreciate their salaried jobs because they offer more flexibility and more experience, which can lead to higher management positions.

Mr. Macre told a Congressional committee recently that, to keep employee take-home pay consistent, he is contemplating a system of salary advances to be recovered during those overtime months. In other words, he’ll pay employees more during one part of the year and then cut their salaries during the slow times.  You can imagine how complicated that will be for his business to implement and how disruptive it will be to his employees. 

Macre’s company does the books for other small businesses, so he is seeing dozens of other owners go through the difficult process of adapting to the rule. Employees are losing the managerial positions and flexibility that they sought. The unfortunate truth hurts - the government can demand businesses to pay more, but they can’t conjure new revenue to make those pay increases possible.

Making matters worse is the looming deadline by which small businesses must make the big changes necessary to be in compliance.  The final rule was published in mid-May with a compliance date of Dec. 1.  For retail businesses especially, that comes right in the midst of the make-or-break holiday season.

It's not just businesses who are concerned with the rule.  Many charities and non-profit organizations, universities and colleges, and local and state governments have also come out in opposition due to the dramatic increase on all employers.  A coalition of business groups, including NFIB, and a coalition of 21 states have filed separate lawsuits challenging the legality and constitutionality of the DOL’s rule.  

NFIB has opposed the rule from the beginning because of the potential damage it will cause for small businesses.  We are working every angle during this crucial time, as our members would expect nothing less.

Two weeks ago, we formally petitioned the DOL to extend the deadline to June 1, 2017. Even the regulators who wrote the mandate should want to help as many businesses as possible meet the requirements.

In Congress there appears to be a bipartisan consensus, even among supporters of the Overtime Rule, that a Dec. 1 deadline is entirely unrealistic for small businesses.  Rep. Kurt Schrader (D-Ore.), for example, has authored legislation that would implement the rule over a period of four years.  Rep. Tim Walberg (R-Mich.) has introduced a bill that is expected to receive a vote in the House on Thursday.  The bill would delay the rule until 2017, giving Congress more time to pass the Schrader bill.

The clock is ticking, and small business owners need relief before Dec. 1. NFIB has asked all three branches of government to lend a hand. The question now is, whether any of them will act to help millions of small businesses and tens of millions of workers.

Juanita Duggan is President and CEO of the National Federation of Independent Business (NFIB).


The views expressed by authors are their own and not the views of The Hill.