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By the numbers: Breaking down future overtime costs

A Pennsylvania business owner spells out the possible cuts for state officials at hearing

Bob McCafferty’s industry exists on a profit margin of 6 percent “if they do everything right and do not have any theft or heavy waste.”

The business owner of a successful brewpub in the college town of Slippery Rock, north of Pittsburgh, was among those who spoke against the federal government’s pending overtime rule changes at a Harrisburg hearing Tuesday.

“This proposed overtime salary threshold paints a wide brushstroke across the cost of living of any an all locations,” he stated. “It also demands all businesses of all types with various profit margins that they must operate within these new broad mandates or close.”

McCafferty and his wife own North Country Brewing Co., which opened in 2005 as a brewpub with 52 employees, and now includes a second restaurant, a cannery and a 64-acre farm. Overall, he has 117 employees, but already has had to eliminate three positions with the new regulations pending, he said.

Breaking the numbers down

McCafferty provided these figures from his business to illustrate the impact of the new overtime law:

— His payroll is now $2,412,964 a year, and of that, management is $1,030,696.

— To pay the salary increases required by the new regulations would cost $1,222,782 a year, and “we can’t remain open by meeting the proposed salary thresholds, as that increases payroll by $192,085” a year, he said.

— To make all 15 entry-level managers hourly, at 45 hours a week, would increase payroll $80,412. The alternative is to eliminate 15 entry-level management jobs and hire part-time, 30-hour-a-week workers, he said.

— He may have to eliminate $70,000 in community donations.

Can’t hand out $7,000 to $20,000 raises

The overtime changes, to go into effect Dec. 1, among other steps will double the salary level, from $23,660 to $47,476, under which employees working more than 40 hours a week must be paid overtime.

With the pending overtime changes the talk of many business owners, two state Senate committees, Appropriations and Labor & Industry, held a joint informational hearing Tuesday to hear from restaurant, higher-education, nonprofit and other officials.

McCafferty added that “for our business to be viable, we just simply cannot hand out $7,000-to-$20,000-a-year raises for entry-level positions such as line leads, sous chefs and/or front-of-the-house managers. It is simply mathematically impossible, no matter how you look at it.

“Every one of our employees have names, lives and are considered part of our family,” McCafferty added. “However, this new regulation, as with other across-the-board regulations, has forced us to consider the impact and do the simple math of it in order to plan our longevity.”

Also, Lancaster restaurant official Robert Commero, who testified with McCafferty, said the new overtime regulations fail to take into account how things work in the restaurant industry which employs 557,000 people in 24,930 restaurants in Pennsylvania.

Expect restaurant owners and top leaders starting later this year to have to work more and “cut middle-management hours and compensation plans,” said Commero, general manager of the Pressroom Restaurant & Bar.

David O'Connor
Dave O'Connor covers York County, manufacturing, higher education, nonprofits, and workforce development. Have a tip or question for him? Email him at [email protected].

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