Punch the clock

State of the Industry Report - 2016 State of the Industry Report

Companies are making big changes to overtime following new rules from the Department of Labor.

Subscribe
October 21, 2016
Kate Spirgen
© Matt Collins

Get ready. Beginning Dec. 1, everything you thought you knew about overtime is changing. Starting in a few weeks, any employee making less than $47,476 annually will be eligible for overtime pay, more than doubling the former threshold of $23,660. And for the first time, employers will be able to meet up to 10 percent of the salary level with bonuses and commissions.

The rule will impact 4.2 million workers, according to the Department of Labor.

In response to the new overtime rule, employers can:

  • Pay time and a half for all work performed over 40 hours per week.
  • Raise workers’ salaries above $47,476 per year.
  • Limit workers’ hours to no more than 40 hours per week.
  • Combine any of the above.

Moving forward, the salary level will be increased every three years beginning in 2020 based on the 40th percentile of full-time wages in the region where that level is lowest. But it’s not just how landscapers are going to pay their staff, they’ll also have to keep records.

“Landscape and lawn care professionals should be aware that these new regulations will change the way their employees are paid, but most importantly, the record-keeping requirements to track hours for salary and hourly employees is now even more important than ever before,” says green industry consultant Jason Cupp. “I’ve seen cases in the DOL that have been decided by the lack of proper record-keeping, so that is paramount.”

Beau Hartman, manager of Hartman Landscaping in Zanesville, Ohio, had been planning to create more salaried positions in the coming years, but says that’s now impossible. Instead, he’ll have to move his employees from salaried to hourly.

Hartman Landscaping’s revenue falls into the $800,000 to $1 million range with a staff of 12 crewmembers, Hartman and one office staff member. He started the business in 2005 and the it became his primary source of income in 2011.

Hartman says salaried positions were something he had just started considering two years ago.

Only two of his staff will be directly impacted by the Department of Labor changes, with his operations manager being the most affected.

Hartman had planned on creating a third salaried position but says he is no longer able to do that due to the changes. He had also been planning to move a couple of his snow team members to a salary of about $25,000 in the next few years, but now that idea is impossible.

“We don’t really have much choice other than to go back to hourly,” he says.

Rich Arlington, owner of Arlington Lawn Care, an all-season, full-service landscape construction and maintenance firm in Erie, Pennsylvania, says 31 of his 41 employees will be affected by the change. He’s been preparing by putting new rules in place, and educating and training employees.

“We have instituted a rigid no working after hours policy and have made it a termination offense if they break the policy,” he says.

Arlington Lawn Care has also stopped supplying company cell phones to all employees except executive and on-call staff.

The employee reaction.

The response from his staff was negative but Arlington has told them that they need to get out and vote if they want to see anything change.

Hartman says he was surprised by the reaction he got from his employees when he first discussed the changes with them a few months ago. He was expecting them to be in favor of the possibility of more overtime to earn some extra money, but that wasn’t the case.

“They liked the fact that they didn’t have to worry about timecards,” he says, adding that they’ve worked at the company long enough to know what is expected of them, and they enjoyed knowing that they would have the same paycheck every week no matter what.

He says his operations manager expressed concerns since he knows the cost of running a small business and agreed to the salaried position knowing that he might be working 50 or 60 hours one week and 30 the next, but that it would all even out.

“We’re a small company so it’s definitely tough to get up from $23,000 to $47,000 or $48,000,” Hartman says. But since his operations manager is not far under that threshold, he is hoping to move him back to salaried position in the next couple of years.

“But in the meantime, he’s going to have to go back to punching that time clock along with the other guys as well.”

Hartman originally started offering salaried positions primarily to retain employees during the off season. “It made it a little bit easier to stomach the fact that we’re going to have more guys here through the winter that might now be doing very much some days aside from maintenance and some sales.”

The man-hour costs.

Overall, Hartman is expecting an increase in labor costs, but isn’t quite sure how much that will be yet. He plans to reevaluate hourly pay for his workers and make sure that they’re happy with where they are. “It will probably increase our costs slightly. I don’t think it will be too terrible though,” he says.

While he would like to increase the billing rate, Arlington says that in the current climate, customers are wanting more for less. “There is no way to increase our price to the client so we cannot increase pay to the staff,” he says.

In terms of selling jobs, Hartman expects his capacity to remain generally the same, but says it will make it more difficult to bring on a new team member or offer a year-round salaried position. “We can’t offer a mowing crew $48,000 a year here in Ohio,” he says. “I wish I could but unfortunately, I can’t.”

Arlington also doesn’t expect to sell fewer jobs or service fewer accounts. He plans to just keep selling and hire more employees to make up for the end of overtime.

The biggest challenge, Hartman says, will be getting his crews to remember to clock in and out again.