New labor rules mean overtime pay for more salaried workers. How will this affect the seniors housing industry?
Change is overdue, but still difficult to manage
By Scott Stewart
Managing Partner, Capitol Seniors Housing
On the one hand, upping the minimum salary to receive overtime makes sense in that it hasn’t changed in 40 years. The current threshold of $23,000 is now actually below the poverty line!
That said, the salary levels impacted are in the sweet spot of what caregivers and dining staff make.
Each community will make its own adjustments with either tighter overtime policing, increased automation (and accompanying layoffs) or simply absorbing the blow and getting used to a lower NOI. In the end, however, the higher labor costs will be passed along to the residents of each community.
Employee turnover becomes more important than ever
By Randal Richardson
Stating the obvious, it will likely cost more to operate a community. That said, I think that strong operators with low employee turnover will see little impact as they will be able to manage to lower overtime use.
Operators with higher turnover will likely have higher overtime use to cover open positions and consequently could have more exposure to higher overtime expense. Additionally, changes to the Fair Labor Standards Act and an increasingly competitive labor market for professional managers and healthcare professionals could further magnify the impact of this rule change.
This minor change is part of bigger problem
By Aaron Koelsch
President & CEO, Koelsch Communities
Like most so called pro-labor laws, the new rule requiring employers to pay overtime to certain salaried employees brings to mind the old saying, “death by a thousand cuts.”
The new rule is simply one more cut, which by itself probably won’t have any noticeable consequences. But cumulatively, these rules absolutely drive up the cost of seniors housing.
Perhaps most concerning is the amount of time and energy that big government wastes on such tired liberal policy efforts instead of focusing on the many major issues our country is currently facing.
CCRCs won’t feel the brunt
By Mark Heston
Senior Vice President and Chief Human Resources Officer, LCS
It depends on the type of community. At LCS, we believe the impact to life plan communities, formerly referred to as continuing care retirement communities, will not be significant. There are very few positions affected.
However, the impact on other product types such as independent living, assisted living, memory care or a combination, will be more substantial.
We estimate an overall increase of 1 percent to 3 percent in total wage and salary costs at those communities, due to either higher salaries to meet the exemption threshold or new overtime expense. It will also lead to an increased administrative burden for ongoing monitoring to ensure compliance with the changed regulations.
Increased overtime pay can actually result in improved operations
By Jim Moore
President, Moore Diversified Services
The change in compensation threshold related to paid overtime for salaried employees is an equitable response to a current dilemma. This evolving business challenge can actually deliver favorable long-run results for a senior living organization.
Operators can sustain or improve cash flow from their future operations by executing four strategic steps: 1) establish realistic staffing and workload priorities, 2) sharpen job descriptions, 3) specifically define worker performance goals, and 4) closely monitor expected outcomes.
Strategic management adjustments can enhance staff performance and productivity by lowering the cost of necessary overtime. Properly executed, this will likely increase the return on investment on these necessary cost increases.