Outside Insights | November 2016 | By Guest Author

What to Do Now That the Overtime Rule was Blocked

While the controversial rule was delayed, quick-service operators would be wise to stay prepared.
If the overtime rule goes into effect, operators throughout quick service will need to comply. Thinkstock

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Restaurant managers have a huge list of things they constantly have to think about: ordering the best ingredients, promoting their restaurant, keeping an eye on competition, and becoming the best restaurant they can be. When dealing with their staff, the list is equally as long: remaining in compliance with federal, state, and local regulations; handling scheduling, timesheets, and related documentation; and retaining employees in a low-unemployment environment, are just a few examples.

Manta, a small business consultancy, noted in a July 2016 study that 40 percent of small business owners spend one to five hours per week on regulatory matters and another 21 percent spend six or more. Now, that list of regulatory issues could get longer.

In 2014, President Obama gave guidance to the Department of Labor to update the overtime regulations, which led to an increase in the salary exemption to $47,476 scheduled for December 1. Based on this new rule, any salaried employee making less than $47,476 would be eligible for overtime, impacting roughly 85 percent of American managers at local businesses, according to Homebase’s customer analysis report.

The average restaurant or food service supervisor today earns $32,140 annually. As a result, it’s safe to say that if the law does pass, much of a quick-service restaurant’s staff could be eligible for overtime.

Last week, a U.S. District Judge in Texas blocked this new overtime regulation. This injunction was nationwide and will prevent the new rules from going into effect on December 1. There are still a lot of unknowns. In the meantime, here are some things you should know:

Your business does not have to make any changes by the December 1 deadline.

You can continue to monitor, track, and pay overtime as you were previously.

If you’ve already made the changes, experts recommend keeping them.

The injunction is a temporary measure, and the regulation could still be implemented in the near future. It may also be more work or impact on your team to unwind the decision.

This ruling applies to all businesses.

Even though the block came from Texas, the overtime rule and the injunction apply to all states.

If that changes and the rule does go into effect in the future, owners and managers will then have several strategies they can pursue:

  • Pay affected employees time and a half overtime pay
  • Ensure employees work 40 hours per week or less
  • Cut employee hours to fewer than 40 hours per week to account for built-in overtime
  • Raise employee salaries above the $47,476 threshold

For three of these four options, maintaining detailed scheduling and timesheet records will be necessary. However, multiple studies have noted that approximately 65 percent of companies with 50 or fewer employees still handle scheduling via pen and paper. In the new overtime environment, manual scheduling can lead to payroll errors that can result in dissatisfied employees and potential litigation. Indeed, a recent ADP report notes that up to 70 percent of employers are not in compliance with FLSA regulations.

Quick serves represent a mature market segment that will be characterized by flat growth over the next few years. Mazzone & Associates’ Industry Report, released in February 2015, notes segment revenue growth to increase at an annual rate of just 2 percent, to $219 billion through 2019. In this environment, owners/managers must look for every way possible to increase revenues and income through efficient operations.

Innovative software and hardware technology can come to the rescue. Software solutions help quick-service owners/managers remain in compliance with the web of regulations that can change monthly, facilitates maintenance of accurate timesheets and records, encourages optimal allocation of staff and minimizes the opportunity for employee dissatisfaction and misunderstanding, and provides core information about the business that enables improved short- and long-term business planning.

Today’s advanced software offers a myriad of features designed to help operators stay ahead of the curve.  A few examples of these capabilities include:

Anytime, anywhere scheduling: Owner/managers can organize employee schedules from any location on any computer.  They can color code specific days or activities, create templates and factor in outside influences, such as weather.  Employees can list their availability and work out shift trades and covers.

Smart timesheets: Employees can easily track their time, breaks and tips.  Owner/managers can rapidly export timesheets to payroll. These services also highlight incorrect entries for potential compliance issues, and, importantly, calculate overtime where it applies.

Simple time clock: Owner/managers can turn any tablet or browser into a time clock, set up multiple time clocks at a location, and then consolidate information from these time clocks.

Workforce trend reporting/analysis: Track workforce costs and activity by role or department, monitor attendance and adherence to schedules, and learn more about shift performance are three key features today’s reporting and analysis tools provide.

On the hardware side, there is a new generation of POS systems that are rapidly becoming the business focal point of quick serves. Operators can easily customize them for the distinct needs of their restaurants, and they can contribute to both creating a more pleasing dining experience as well as improving operating efficiency. Several new POS systems feature app markets that allow business owners to customize their systems, just like consumers customize their mobile devices.

For example, all of the employee timesheet and management features listed above are available via apps. Other apps enable a brick-and-mortar business owner to create an online presence and start selling in as little as an hour. Others still enable quick serves to sync their POS data with their QuickBooks, Xero or other accounting packages.

How to Get Started

While the new regulations have been put on hold, here is what owner/managers can do to ensure they will be in compliance if the regulations are implemented in the near future. A few first steps should include:

Review, review, review: Review the existing team, their roles and responsibilities, and strengths and weaknesses. Make adjustments based on this assessment, and then utilize the new information provided by timesheet and scheduling data to analyze results.

Dig in deep on time spent: Understand in detail how your team is spending its time. Are managers spending time on activities better handled by a team member on the floor? Are there manager activities that can be eliminated completely? Take the opportunity to revisit activities that might push managers into overtime.

Assess technology: As you assess your team, assess the technology that supports you and your team. It’s time to eliminate the paper schedule, punch cards and old school inventory management. New and affordable technologies are available to simplify these essential tasks and save you valuable time.

Count every minute: The average local business has nearly 40 minutes of early clock-ins per day—adding nearly $3,000 in extra wages annually, according to Homebase’s customer analysis report. Work with your team to stay compliant with the schedule and prohibit clocking in early for shifts.

Stay on top of labor expenses: Check labor expenses in real-time throughout the day to stay on track. With more people eligible for overtime, give yourself better tools to monitor daily activity.

With just 7 percent of U.S. salaried workers covered by overtime protection, down from 62 percent in 1975, updated overtime regulations were overdue. The good news is that operators can use the implementation of these regulations as an opportunity to take a new look at their businesses to streamline operations, which will help contribute to a healthier bottom line in a flat growth environment.

John Waldmann is the CEO of Homebase, a fast-growing provider of employee scheduling and time-tracking software to restaurants. John founded the company in 2013 to make life a little easier for his childhood friend, who had just opened a salad restaurant. Homebase moved them off paper, excel and antiquated systems. Today, Homebase provides free online tools and mobile apps for managers and employees to save time, manage labor costs, and reduce stress—serving over 50,000 locations in all 50 states.
 
Mark Schulze is the leader of Clover’s App Market, as well as Co-Founder of Clover. Mark has been with Clover since its conception and through the process of becoming an independent subsidiary of First Data Corporation.Prior to Clover, Mark built the publisher business for Quantcast, now serving over 20 billion of impressions a day across thousands of publishers. Before Quantcast, Mark ran product and engineering for Match.com, an IAC company. Starting his technology career in 1995, Mark ran several groups at AOL including AOL Shopping, Small Business and Community before leaving for Intuit and eventually AltaVista. Product focused, building terrific customer and merchant experiences is what drives Mark.
 

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