From The Editor | October 21, 2016

A CFO's Take On FLSA Changes

Erin

By Erin Harris, editor-in-chief

Erin Harris

With the Fair Labor Standards Act (FLSA) December 1st deadline looming, most retail executives are keenly aware of and concerned about how the overtime regulations will affect their employees and their businesses.  Come December 1, the new salary requirements will apply to the FLSA’s executive, administrative, and professional exemptions. Employees who do not meet the new salary requirements when the final regulations become effective will no longer qualify for one of these exemptions, which means they will have to be paid overtime compensation when they work more than 40 hours in a work week.

I caught up with Jim Thompson, CFO of Cavender’s Boot City and IRT editorial board member, to get his input on how the overtime regulations may affect employee morale, the organization, and the overall customer experience. Here’s what he had to say.

The retail industry offers its employees numerous opportunities for career advancement. How might the new overtime regulations affect their growth potential?

Jim: Depending on the position, the new rules have the potential to limit careers in retail and deter people from entering the profession.  Many positions are moving from salary to hourly.  Overtime will be controlled closely, limiting new hires’ exposure to projects and senior management.  Additionally, salaried positions have a professional persona.  Changing those positions to hourly may result in lower morale of those impacted by the change, and new graduates looking for professional positions may be less willing to accept a position at an hourly wage rate.

As CFO of Cavender’s Boot City, what are some of the things you pay attention to most with regard to the FLSA changes?

Jim: Compensation is always a very personal and sensitive issue.  In the short term, properly communicating the change to those impacted by the new rules is extremely important.  We’re spending a great deal of time on that right now.  Being sure that we are in compliance with the new rules is a longer term focus.  Systems will have to be updated for the pay changes, and managers hiring new people have to understand that some positions are now paid at an hourly rate.  Retail by nature is head-count intensive, so if there are a lot of changes to be made, the risk for mistakes is higher both in data entry and communication to the field.

How might the proposed changes affect the overall customer experience?

Jim: A higher part-time work force, fewer employees, and/or employees resentful of being moved from salary to hourly have the potential to negatively impact the customer experience. Even changes in the back office can impact what happens in a store.  We have to be very aware of that and try to find ways to keep our employees engaged.