Retail Results Mixed, Impact of Change in Overtime Rule, Scrutiny of Company Credit Cards

Hey, everybody, it's Gene Marx, and welcome to this week's edition of the Paychex THRIVE Week in Review podcast. Thank you so much for joining us. This is the podcast where we take a few stories out of the news that impacts you and me as business owners and talk just very briefly about them. So, let's get to the news, shall we?

The first comes from Wall Street and the retail industry. According to CNBC.com, Walmart hit new highs this past week and Target dived more than 20% after their earnings releases, as the two rivals diverge even more. Let me explain to you why.

Both discounters are contending with price conscious shoppers, but Walmart reported improving trends with discretionary merchandise and sharper gains with online sales. It says here that Target posted its biggest earnings miss in two years and cut its forecast. The company spoke about a deceleration in discretionary demand and blamed higher costs caused by the rush to move inventory ahead of a short-lived port strike in October. 

On the company's earnings call, the CEO, Brian Cornell, described U.S. consumers who are shopping carefully as they work to overcome the cumulative impact of multiple years of price inflation and are holding out for the best possible deal.

Now Walmart, on the other hand, hiked its full-year forecast. It said it's gaining upper-income shoppers and seeing better trends for sales of merchandise outside of the grocery department, even as consumers look for value. 

What do we make of all of this as we're heading into the holiday season? It's kind of tough to tell. Walmart and Target are among the two biggest retailers in the U.S. Amazon is also up there. Macy's, there's a few that are, you know, that also need to chime in on what their forecasts are, but we will soon learn in the next couple of weeks as Small Business Saturday happens and the Christmas season gets underway as to how shopping sales are going. That will impact so many small businesses, from merchants on Main Street to even people that are producing goods, either way, will the consumer step up again this holiday season? We will find out. 

The next news comes from Texas, and it has to do with the Department of Labor's Overtime Rule. This was reported on fastcompany.com, and they report that overtime pay for millions of workers has been blocked by a Texas judge. This is important, so, let me read it to you.

A federal judge in Texas has blocked a new rule from the Biden administration that would have expanded access to overtime pay to millions of salary workers across the U.S. The previous Friday, U.S. District Judge Sean Jordan sided with the state of Texas in a group of business organizations that argued that the Labor Department exceeded its authority when it finalized a rule earlier this year to expand overtime pay for salaried workers, ruling that the department could not yet prioritize employee wages over job duties when determining eligibility.

Under the federal law, all hourly workers in the U.S. are entitled to the overtime pay if they earn more than 40 hours a week. The Labor Department's new, now scuttled rule would have marked the biggest increase to the cap in decades. Employers were required to pay overtime to salaried workers who make less than $43,888 a year, as of July 1. That was going up to $58,656 a year.

So, the bottom line is that this new overtime rule that was passed by the Biden administration, it has been scuttled right now by this Texas court. And as the Trump administration comes in in January, there is a high probability that they are not going to pursue this lawsuit at all because the Trump administration did that during their first administration, which means that this overtime rule and the changes to these, to the overtime pay is pretty much going to be the same as it was prior to when this new rule came out.

So, pay attention to that. Talk to your labor attorney, talk to your payroll experts at Paychex, and make sure that you are in compliance. But it's a bit of a breather of regulations for a lot of businesses. 

Finally, this report comes from Yahoo! Finance. They are re-reporting something that appeared in Fortune magazine about the use of company credit cards. More employers are cracking down on company credit cards by blocking late-night spending and banning expensive lunch spots. Staffers who had flouted their employers’ company card rules or expensive policies are in for a rude awakening. 

This is the report from Yahoo! Finance and Fortune. Not only are there movements being tracked more carefully, but their jobs could also be on the line if they're found to be in breach. This is according to a director at a company called Pay Hawk, which monitors and blocks the spending on company cards, that bosses are asking for increased levels of scrutiny. 

So, Meta, for example, they reportedly fired a handful of staff earlier this year for flouting the rules applied to their meal stipends. The company gave stipends of $25 allowance for food when working from their desk. However, a number of staff there were reportedly using the money to order items like toothpaste and tea. Other employees reportedly were giving a Grubhub stipend to members of their staff. 

Another example, EY – the Big Four accounting firm: EY reportedly dismissed a number of U.S. staffers after they were discovered to have attended two training sessions at the same time last month. The employees were taking part in online classes in the spring, and therefore they were violating some of those rules and the expenses involved. 

So, the trend now is towards more companies cracking down on employees who misuse some of these policies and also misuse the company credit cards that they were issued to. Companies like Pay Hawk – they are paid to actually stop payments on some of these expenses – so might be something that you want to consider or not, but it is definitely a trend in the corporate world.

My name is Gene Marks and you've been watching the weekly edition of the Paychex THRIVE Week in a Review. If you need any help or tips or advice in running your business, sign up for our Paychex THRIVE newsletter. Go to paychex.com/thrive. 

Hope you enjoyed this episode. Hope you're having a great holiday week and hopefully you have a great holiday season, as well. But we will see you again next week with some more news that impacts your business. Take care.

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