Is Your Restaurant Prepared for the New Overtime Rules?
The Department of Labor’s new overtime rules will take effect on December 1, 2016. So, if you have been putting off crunching the numbers, it is time to take a hard look at your restaurant’s operations, determine the impact of the new overtime law on your bottom line and evaluate your options.
The first step in this process is to identify each employee on your payroll by name and position and determine who is exempt from the overtime rule. It does not matter whether an employee receives salary or is paid an hourly wage. “Exempt” and “non-exempt” is strictly based on a worker’s duties and weekly pay. The new overtime threshold for salaried employees is $913 per week, $47,476 per year. Unless an employee meets a “duties test”, anyone who earns less than that amount and works greater than 40 hours a week must be paid time-and-a-half for the additional hours.
Among those employees exempted by the “duties test” are “executives” and department managers who supervise two or more employees. Also exempted are “administrative” workers who do non-manual work such as marketing directors and HR directors. The test here is determined by whether the majority of an employee’s job can be considered managerial. Does your chef perform hands-on work, or is management his/her primary responsibility? A sous chef who, on the other hand, spends most of their time cooking, probably would not be considered exempt.
In determining an employee’s salary, employers can use nondiscretionary bonuses and incentive payments, such as commissions to satisfy up to 10% of the standard salary level.
The next consideration you will need to make is whether it may be better to pay an employee for overtime or to raise his/her salary above the $913/week level. You will also need to consider how you will handle communicating this information with an employee, informing them that because they were no longer exempt from overtime pay, they will now need to “punch a clock.”
Finally, best practices demand that you prepare job descriptions for each employee. And, that you have a procedure in place to properly track every employee’s time. You do not want to deal with an unhappy employee who will contact the Department of Labor.
For more information, contact us at [email protected] or 312.670.7444. Visit ORBA.com to learn more about our Restaurant Group.