As many as 70,000 South Carolina workers could be affected by a change that would make more salaried employees eligible for overtime pay.
The rule from the U.S. Labor Department would more than double the threshold at which employers can avoid paying overtime, to $970 a week, by next year. Salaried employees earning less than $50,440 a year would be assured overtime if they put in more than 40 hours a week.
Right now, employers can often get around the existing rules: Any salaried worker who makes more than $455 a week, or $23,660 a year, can be called a “manager,” given limited supervisory duties and made ineligible for overtime.
Labor Secretary Tom Perez said Tuesday that the change would add up to about $1.3 billion in extra wages for many newly overtime-eligible workers. Others, Perez said, will benefit from having additional hours.
At the same time, he said, some employers could choose to hire new full-time or part-time workers to handle the work salaried workers had once performed.
The most likely age group to be affected would be workers between ages 35 and 54, according to the White House. Of the roughly 5 million total workers that could see an impact, 1.6 percent are from the Palmetto State.
Reaction to the proposal was mixed.
The hospitality industry, a major employer in the Charleston region and other parts of South Carolina, isn’t pleased. The American Hotel and Lodging Association called the proposed policy “disappointing” in a written statement Tuesday.
“The proposed changes to overtime rules will hurt our employees and severely impact small business owners, who will be unable to continue the pace of job growth that has been so vital to boosting the economy. ... The majority of jobs in the hotel industry start above the minimum wage and employers should have the flexibility to set salary parameters that foster a strong team environment and allow for good benefits, higher pay and workable schedules,” spokeswoman Vanessa Snider said.
South Carolina’s main hospitality trade group expressed similar concerns.
“We share the concerns of our national affiliates, the National Restaurant Association and the American Hotel and Lodging Association, that these proposed changes would negatively impact most members of the hospitality industry by limiting hours or reducing base pay to compensate,” John Durst, CEO of the S.C. Restaurant and Lodging Association, said in a written statement. “The new rules could also have unintended consequences that prevent the advancement and opportunity for many in our industry, creating barriers to our continued ability to grow and preserve jobs.”
Frank Knapp, president of the S.C. Small Business Chamber of Commerce, said he doesn’t think the change would have a significant effect. He also said the issue shows the need to link pay to inflation.
“We have to understand that what this does is it simply demonstrates the problem when you have these regulations or taxes that ... established some type of a standard, then they’re not indexed for inflation,” he said. “You have ... salaried workers’ overtime, you have minimum wage issues ... the government’s got to figure out that they’ve got to index these things to inflation.”
Knapp said if he’s paying $30,000 a year to a worker, he doesn’t expect the person to exceed a typical workweek.
“I expect them to work the 40 hours, but I don’t expect them to work more than that,” Knapp said.
Another business group feels the proposed rule would hurt small employers. Ben Homeyer, state director for the National Federation of Independent Business of South Carolina, said stores and restaurants would feel it the most.
“On its face, this is I think both detrimental to the employer and the employee,” he said.
The policy could end up hurting employment, Homeyer added.
“It looks great in a vacuum ... when it gets down to the small-business folks that actually have to do this, it’s a job killer for a lot of folks,” he said.
In some cases, businesses will find a way around the rule to avoid paying overtime. One way is to split a full-time job between two employees.
“What they may do is where you have ... one employee making over 24 (thousand), you may now get two employees making 12 (thousand),” he said. “They’re going to have to limit ... so they’re not going into the time-and-a-half (overtime pay). Once you hit that 40 hours and you’re then jumping up into that time-and-a-half, the cost gets really expensive for the business.”
Overtime rules covered 65 percent of salaried workers 40 years ago. That figure is down to about 12 percent now.
The National Retail Federation, a large trade group, says its members would probably respond to the proposed rule change by converting many of their salaried workers to hourly status. That could cost the employees benefits such as paid vacation, it said.
The Associated Press contributed to this report.
Reach Allison Prang at 937-5705 or on Twitter @AllisonPrang.