Image source: Rethinking Education
New federal rules on overtime time may put PR agencies in a quandary, requiring the firms to undertake a cultural shift. Many PR corporate departments may also need to re-organize their pay structures and staff organizations.
As of Dec. 1, nearly all salaried employees earning less than $47,476 a year will be eligible for time-and-a-half overtime pay under the new Department of Labor rules. That’s a huge jump from the current $23,660 limit.
Many Employees Affected by Rule
The change will impact a large number of PR employees. PR firm account coordinators earn an average salary of $37,500, and assistant account executives earn $40,750, according to the PRWeek 2016 Salary Survey. Even many account executives receive salaries below the overtime limit.
Clearly, PR agencies and managers face the choice of significantly increasing salaries of junior staff members or paying them overtime – or risk legal actions and accusations they have violated the Fair Labor Standards Act. Employees can file class action lawsuits for failure to pay overtime and obtain unpaid wages, punitive damages and attorneys’ fees.
Profits at Stake
Dworin Consulting estimates that the changes could lead to a 10 to 20 percent reduction in profits of many PR agencies, and a 2 to 5 percentage point decrease in margin. Other groups have estimated the impact even higher, it says.
“The profit margins many agencies make are dependent on junior-level employees, whom they don’t have to pay as much, working long hours. That’s what enables the whole financial model,” Paul Roetzer, founder of PR 20/20, told Hubspot.
PR managers likely feel flummoxed. The new rule requires a cultural shift at many agencies offering PR, marketing and advertising services. Especially in PR, junior employees typically work long hours and often must remain reachable by phone or email during off hours. Reorganizing work schedules and reclassifying employees may be especially difficult since managers may not track the often-long work hours of employees.
Greater Vigilance Required
“Managers will need to be more vigilant about how and when they assign work, and what time of day they expect it to be completed,” advise Michael C. Lasky and Jessica Golden Cortes, attorneys at the David & Gilbert LLP law firm, in an article for the PRSA. They recommend establishing clear policies how and when managers communicate with non-exempt employees.
Managers need to understand the potential financial consequences of asking employees to perform work outside of the regular business day, they add. Managers may also wish to limit after-hours communications with non-exempt employees so that junior-level employees are not encouraged to work “off the clock” without express approval.
Managers would be well advised to learn about the intricacies of overtime rules by consulting experts and examining the Department of Labor’s guide. For instance, the rules do not require employers to pay overtime for training and travel time in some situations.
Other Options
Agencies have other options beyond the obvious raising salaries, according to HubSpot. They can:
- Hire more people at a lower starting salary, allowing funds to pay overtime.
- Shift overtime work to higher-paid senior staff.
- Hire more freelancers.
- Raise rates and pass costs along to clients. Although desirable, that might be the least likely option.
Bottom Line: New federal overtime rules require many PR firms to change how they handle their junior employees. Companies may need to overhaul employees’ work schedules, employee assignments, and company hiring practices. Some observers predict the new overtime rules will end the agency financial model.
William J. Comcowich founded and served as CEO of CyberAlert LLC, the predecessor of Glean.info. He is currently serving as Interim CEO and member of the Board of Directors. Glean.info provides customized media monitoring, media measurement and analytics solutions across all types of traditional and social media.
