The president’s proposal to expand overtime pay for millions of workers may help better compensate some hourly managers for the work they do, but many small business groups aren’t too thrilled about the measure.
Under the plan, the salary threshold for employees who are eligible to receive overtime pay will be raised to $50,400, from $23,660 — which covers nearly five million Americans, according to the White House.
Trade groups say that it can be an expensive move for small business owners.
The measure will likely hit small restaurants and retailers hard, as well as businesses in parts of the country where the cost of living is low, Beth Milito, senior legal counsel at the National Federation of Independent Business, said in a statement.
“Employers will be forced to limit hours for their workers and eliminate management positions,” she said.
In an op-ed outlining the proposal, President Obama said the move would help close the wage gap between wealthy Americans and the middle-class.
“Right now too many Americans are working long days for less pay than they deserve,” Obama wrote in The Huffington Post.
But the move comes as surprise to some who were involved in early policy discussions.
“This plan would be very disruptive for how salary plays into the other types of benefits that small businesses provide their employees,” Karen Kerrigan, president and chief executive of the Small Business and Entrepreneurship Council, said. The group met with White House and Labor Department officials last summer to discuss overtime rules, she said.
The proposal also doesn’t appear to take into account the overall benefits package that businesses provide employees, she said, but instead takes an isolated approach to salary.
“One standard for the entire country doesn’t really take into account the many differences around the country,” she said.
Republicans have opposed the move in part because they say it would potentially discourage some employers from creating jobs.
The overtime rule will end up taking from Americans’ paychecks “in the form of fewer hours and less work,” Rep. Steve Chabot (R-Ohio), chairman of the House Small Business Committee, said in a statement. “I hope that the president will let us do our job on tax and regulatory reform, because that’s what small businesses are telling us they need most,” he said.
The National Retail Federation, which also opposes the plan, said the move would hurt workers’ pay in the long run. A study commissioned by the federation said employers would likely hire more part timers and cut base pay and benefits to keep peoples’ compensation the same overall.
“Turning managers into rank-and-file hourly workers takes away the career opportunities offered by private sector entrepreneurs and job creators that are the true path to middle-class success,” David French, the federation’s senior vice president of government relations, said in a statement.
The president’s plan is open for public comment and will not be finalized until next year.