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Given the thin margins under which her company is already operating, Napier said the changes could prove an existential threat to her business. That Napier has two young daughters working junior positions at ad agencies in Manhattan makes this issue particularly sensitive for her. Yet as a mom, "I want my kids to stay in this industry, but I would like to not have to pay for their rent. But in practice, the issue is far more complex. An across-the-board raise still leaves the "rising tide" issue to deal with. And so on up the line.
Agencies are scrambling to find less painful options. One could be to simply keep salaries where they are and pay the necessary overtime. The result would be resentment among mid-level staff and a disincentive to move incrementally up the ladder.
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The head of one holding company agency plans to raise just enough salaries to compliance levels to ease the burden of the new rules. Napier, to her chagrin, sees no option but to lower salaries. There are other solutions beyond salary adjustments.
Mallya repeats offer of 100% payback for Indian banks
For creative agencies, shifting some of the full-time work to freelancers may be enticing. As it is, agencies have long relied on flex staff to swell their workforce during busy periods or to service project accounts.
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But freelancers are not a realistic long-term solution when trying to build a company, says Napier. Another option is pushing responsibility to more senior staff, to "begin to give the work to account directors or account supervisors," said Jay Haines, founder of Grace Blue, an executive search firm and parent company of Liberty Blue.
Agencies charge clients for the staff hours dedicated to their account, and clients pay the bill.
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In theory, the new overtime rules should be nothing but good news for agencies. With the law on their side, agencies could tell clients they have to pay more for staff assigned to their account, and there would be no room for debate. In the current system, agency bosses complain, the lack of a white-collar minimum wage enables clients to apply endless downward pressure on agencies to pay their people less or simply work them harder. Keeping salaries where they are but paying for overtime could serve as proof of that. Rather than bury sleepless nights under a flat salary, the itemized costs for overtime hours could serve as a ledger.
She, and others, fear clients will take a "not my problem" attitude — after all, they too will have to comply with the rules — and continue to insist agencies provide more value for ever less cost, to say nothing of continuing to provide spec work and to pitch for even the smallest pieces of business, despite the narrowed margins. In a sign of just how delicate the issue is, seemingly no agency has yet approached its clients about how they plan to deal with it. Support from industry organizations and an effort toward agency solidarity would go a long way, said agency heads.
A spokeman for the Association of National Advertisers said the group had no comment at this time. After that, the specifics of the law become public, including the exact amount of the new overtime threshold and the amount of time businesses have before they need to be in compliance, typically between 60 and 90 days. That means agencies need to be planning for increased wages in August or September, barring quick action from Congress.
And that scenario is unlikely. Joint congressional action on any issue is nearly impossible in the current political climate, and the president would need to sign off on any roadblock. The short timeline also makes it difficult for opponents to delay implementation until after the election, when an administration with a different outlook might be in power. But the panic induced by the proposal suggests the ad industry has some soul searching to do. Instead, the industry has spent decades carefully making an uncomfortable bed, only to curse the sun when night inevitably falls.