New Fed Regs Cripple Growth

To paraphrase an old adage in organizational design, “To create the best organization, demote everyone.”  In most companies, people get promoted for doing a good job in their current position and/or someone leaves.  With promotions come more responsibility, more accountability and normally managing people.

Like most people, I was ill-prepared for my first management role which included little guidance, little mentoring and little room for error.  In our organization, we realize the step to management is big for young adults and have attempted to create paths to management which ease employees into assistant manager and manager roles.

At the end of 2016, the federal government is changing overtime rules and increasing the salary threshold for “managers” to $47,476.  This means anyone making less than that amount must be eligible for overtime.

Similar to the sweeping movement to increase minimum wage, which crippled small employers ability to hire employees with no experience (how many of your teenagers can now get jobs?), this law cripples small employers ability to promote and grow talented employees.

Let’s use our business as an example.  We typically look to have 1 manager for every five employees.  On average these managers make $40,000 annually for an expectation of 48 hours of work or about $16.67/hour on average.  These expectations are spelled out and agreed to by employees before taking management roles.  Most (not all) good workers are happy to trade 8 extra hours a week for a 25-50% increase in wages.  This new law leaves me with 2 options.  1) Increase the wage of 20% of my staff by 20% or more likely 2) Change these employees from salaried to hourly which decreases their annual pay from $40,000 to $33,000

Considering these are usually early 20-somethings with limited to no college education, I think its a pretty good wage.  More importantly, these opportunities to learn management are giving young adults tools they need to advance their careers throughout adulthood.

These changes that mandate wages are severely limiting employers’ abilities to recognize and reward good, hard working employees and eliminating the meritocracies that help both small companies and young adults thrive.

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