By Ray Birch
MASSENA, N.Y.—New labor guidelines that would make millions more U.S. employees eligible for overtime pay is expected to impact credit unions—not only in their budgets but also in how they interact with their communities.
Under the proposal, issued last month by the Labor Department, salaried workers earning less than $50,440 would be eligible for time-and-a-half pay when working more than 40 hours in a week.
The national cost for the rule, if accepted in its current form, is estimated by the Labor Department to be $1.5 billion in additional wages in the first year on top of $593 million in administrative costs in year one. Those administrative costs are projected to fall sharply in the second year.
While the rules, out for public comment until Sept. 4, won’t be finalized for months, employers are already reported to be turning to new software that alerts supervisors when salaried workers are approaching overtime, and forcing decisions around possibly switching some salaried staff to hourly.
Bump Up Salaries
Scott Wilson, CEO of the $482-million SeaComm FCU here, said the rules may make it worthwhile to give raises to salaried staff who earn just below the proposed rule’s cutoff.
Scott Wilson, SeaComm FCU
“I would think if they are close to the minimum it would make sense,” said Wilson, who said his credit union already has intricate time tracking system in place. “As an industry we have always been focused on what is the ‘right thing.’ However, you still have to manage the needs of the business and decide what factors should be considered to justify the pay.”
Cathy Tama-Troutman, HR VP from the $4.4-billion Pennsylvania State Employees CU in Harrisburg, Penn., also sees the rule necessitating giving some staff a pay raise.
“Most likely credit unions will find it advantageous to bump salaries of staff right at the threshold,” she said. “Staff who develop community relationships and lead community events like branch managers are good examples.”
NAFCU Senior Vice President of Government Affairs and General Counsel Carrie Hunt expects the rule will impact credit unions, but also pointed out CUs today already have to be very cognizant of overtime issues under current labor laws.
“I am not suggesting that this proposed change would not have an impact, it certainly will,” said Hunt. “But it is not as if we are going from zero miles an hour to 100. It will be a shift. And I anticipate that some positions within credit unions will be reclassified as exempt versus non-exempt.”
Community Involvement Impacted
The rule is also expected to have an effect on how much time a credit union dedicates to serving the community.
“Will CUs have to think twice about asking the branch manager to participate in that weekend community event? Of course,” said Wilson. “If the credit union pays less than the minimum standard it will be essential to have the manager focus on their primary functions of operating a branch to meet the needs of the members. For us efficiency is always a priority, especially since 2008, and therefore as an organization we maintain a low overtime cost today. We really encourage flex time in order to meet that goal. I am certain that is the same with many credit unions.”
Tama-Troutman added that many credit unions will revisit the number of activities that they support each year. “Though flexible scheduling and reassignment of duties may help minimize this additional expense,” she said. “Salaried staff who fall under the new thresholds will need to understand that their daily time will be tracked and that working past their scheduled time will need to have supervisor approval.”
Carrie Hunt, NAFCU
Noting that the additional time branch managers spend in the community is important, Wilson said that if an organization is required to pay overtime, the organization will have to determine if the community event makes sense from an ROI perspective.
“That said, the manager then must decide if an event that is public relations driven is worth participating in, versus what will my OT budget look like for the pay period,” he explained. “That is an unfortunate fallout of these future overtime exemption standard changes.”
Hunt agreed that anytime there is additional compliance that the rules can have a “cooling effect” on CU practices. “I suspect that some credit unions may feel a greater impact than others. I think this issue will be very unique to each CU—their employee base, how big they are, a whole host of factors.”
Hunt said that NAFCU plans to comment on the rule.
“We don’t want something to negatively impact our members,” stated Hunt, adding that NAFCU strongly supports fairness for employee pay. “But we will take a close look at any potential unintended consequences of the proposal.”
Too Soon To Tell
CUNA said it’s too early to tell how the rule might affect credit unions.
“We do know this proposal will impact credit unions. We’ve heard from our members on this issue and are continuing to engage with them,” said spokesperson Vicki Christner. “CUNA put out a comment call asking for feedback by August 27, and we’re compiling member input to provide to the Department of Labor about how this proposal will effect credit unions.”
Wilson acknowledges it will affect earnings.
“Compensation is a huge part of any organizations’ budget,” he said. “Anytime, you have to pay more for the same amount of work it effects your bottom line.”