Overtime Mandate: Impact On Small Business & The Skills Gap

A 113% increase; no this is not a Gallup election poll. 113% is the proposed government mandated percentage increase to the Department of Labor’s overtime exemption threshold. This mandated threshold hike has Congressional leadership worried about the unknown and unintended consequences that can accompany rigid government mandates. Further review of this mandate would appear to create a self-imposed strain on small businesses while widening the skills gap.

What is the regulation?

The proposed government mandate will create a new benchmark of $50,400 annually to meet the minimum requirements to be considered for an overtime exemption status. This increase would represent a 113% increase over the current threshold and could potentially affect millions of American workers. Although some employees may benefit from an initial increase in overtime compensation, all companies and employees will begin to feel the pinch this mandate will cause the U.S. economy.

Startups & Small Businesses 

From Seattle to Baco Raton, startups across the Nation are fueled by dedicated professionals who currently have the benefit of overtime exemption to focus on getting their companies off the ground. However, with this new government mandate, startups will have to cope by pulling capital from R&D to cover the cost of this proposed overtime mandate. This could potentially diminish a startup’s ability to create new jobs for industry pioneers. Similarly, small businesses already attempting to cope with the 2012 Healthcare mandate, will also be susceptible to the potential payroll burden this could place upon them. The mandate may force startups to be more concentrated on the time-clock than the opportunity to succeed.

Skills gap

The newly proposed government mandate could also have the unintended consequence of widening the skills gap. The current ability to utilize hardworking staff to pull “all-nighters” to get ahead in their careers, could quickly dwindle as a symptom of this mandate. The lack of opportunity could lead to a widening skills gap of inexperienced professionals by constraining their opportunities to learn. The skills gap in the United States is a very serious issue and further inhibiting the ability for potentially qualified applicants to learn could further compound this issue.

Final Thoughts

One of the benefits to this mandate will be a workforce with a strong proficiency in timekeeping software. However, with any well-intended government mandate, it is important to understand fully the consequences of rigidity in regulation. As we still deal with the aftermath of the financial crisis, it is important we be cautious before creating more rigidity for the backbone of startups and small businesses in our country. Many aspects of our workplaces should be examined for improvement opportunities, but instantaneous hikes in thresholds and minimums could cause more harm than good for our nation’s entrepreneurs.

This is a chance for you to begin to ask questions of your legislators and form your opinions of this new mandate before it is signed into law. Many parts of the 2012 Healthcare Mandate have been delayed years by Congress, which represents the need to take our time crafting such impactful legislation instead of rushing the process. Incremental changes over time can improve the stability of our economy, but 113% mandated threshold hikes may be too much, too fast. Do your research, make up your mind, and make sure your voice is heard whichever side you are on.

Connect with your Congressional Representative here

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Author: Taylor Bradley

Taylor Bradley SHRM-CP is a global HR Business Partner for the mid-sized Seattle startup. Taylor’s career has taken him to approximately forty countries where he has encountered a wide range of approaches to talent management and employee engagement. Taylor draws upon his international experience to provide innovative solutions to workplace challenges while actively advocating for the HR industry. You can connect with Taylor on LinkedIn or Twitter @T2Bradley

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