Restaurants likely to be hit hard by new DOL overtime rule

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On December 1, the new overtime rule from the Department of Labor will take effect, raising the salary threshold for exempt employees from $23,660 to $47,476 a year.

While many industries will be impacted by this new rule, restaurants may be hit the hardest.

According to the U.S. Bureau of Labor Statistics, the average restaurant manager in the U.S. makes $46,690 a year, while assistant managers earn a little more than $35,000 annually, and other currently exempt employees bring home about $31,000 a year.

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The catch? Most of these employees work well over 40 hours a week.

At Lockton, we partner with more than 90 food service employers across the country and run a National Food Service Consulting Group representing more than 50 unique restaurant concepts.

Time and time again, we hear our clients say restaurant managers regularly clock 50-60 hours a week.

Important decisions
That’s a lot of overtime — and a significant challenge for food service employers who must make some important decisions:

  • Do we increase salaries to meet the new minimum threshold for employees who regularly work overtime to keep them exempt?
  • Do we reclassify the position as nonexempt and calculate a new base pay rate for employees that will keep total annual pay constant or near constant even with new overtime hours/ premium?
  • Or, do we add additional employees to avoid paying overtime?

Many employers will use a combination of some or all of these methods, depending on financial and cultural needs. Regardless, all must make a decision — and soon.

While coming up with the best solution or mix of solutions is definitely daunting, it’s just the beginning.

Once employers have a game plan, they must start communicating that plan with employees. We recommend utilizing a variety of channels, including one-on-one meetings, email, print (posters, postcards, letters mailed home) company intranet, town hall meetings, internal social media/chat.

Also see:9 FAQs about the DOL’s overtime rule.”

Open and honest communications are absolutely critical. And don’t wait — the earlier you begin communicating with employees about the changes, the more engaged and supportive they will be.

We know it’s a lot to take in. The next few months will likely be tough, especially for those in the restaurant industry.

But there are solutions that benefit the bottom line — and employees. To learn more about these solutions and the new overtime rule, join Lockton for a complimentary webcast on Wednesday, August 31 at 1 p.m. CDT.

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