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Fairness in Pay – Upcoming Reminder for Salary Exempt

We all deserve to get paid well for a hard day’s work, regardless of our job classification or the number of hours we work.  When employees are paid hourly, that fairness is easier to measure, and in fact, federal and state labor laws dictate what the minimum wages are as a starting point to help employers when they are deciding the hourly rate of pay for positions.  The federal minimum wage provisions are contained in the Fair Labor Standards Act (FLSA). The federal minimum wage is currently $7.25 per hour effective July 24, 2009. Many states also have minimum wage laws. Some state laws provide greater employee protection; employers must comply with both.  Overtime pay requirements are also defined for non-exempt employees. The federal overtime provisions are contained in FLSA. “Unless exempt, employees covered by the Act must receive overtime pay for hours worked over 40 in a workweek at a rate not less than time and one-half their regular rates of pay. There is no limit in the Act on the number of hours employees aged 16 and older may work in any workweek. The FLSA does not require overtime pay for work on Saturdays, Sundays, holidays, or regular days of rest, unless overtime is worked on such days.”  States and local laws may have additional requirements.


When an employee is qualified for a salary exempt position, they are not paid by the hour, but instead at a flat rate on a consistent basis.  The Department of Labor regulations require “executive, administrative, and professional (EAP) employees to be paid at least a minimum salary amount to be exempt from the Fair Labor Standards Act’s minimum wage and overtime requirements under section 13(a)(1).”  In April 2024, the Department issued a final rule increasing the standard salary level for exemption, and the total annual compensation requirements for highly compensated employees.  For a standard salary level, the current amount is $684 per week ($35,568 annual salary), increasing July 1, 2024 to $844 per week ($43,888 annual salary), and another increase beginning January 1, 2025 to $1,128 per week ($58,656 annual salary).  Is your organization currently compliant?  Are you prepared for the requirements in increases coming up quickly? 


I find it interesting that there is such focus on “salary exempt” positions when there is the non-exempt hourly position option.  When you do the math, an hourly position’s federal minimum wage is $7.25 per hour x 2080 hours (40 hrs/week x 52 weeks) in a typical year = $15,080 per year without consideration to overtime work and wages.  With that calculation, and correct me if I am mistaken, the current federal minimum annual wage for non-exempt positions is $20,488 less ($35,568 - $15,080) than that for salary exempt positions.  Think about that financial tidbit for a minute.    


Deciding the minimum pay consideration is the easy part, granting that employers follow the laws.  The hard part is to establish a ‘fair’ pay rate for the position and in consideration of the employee’s qualifications.  Employers should do their homework to ensure they are paying their employees not just fair, but also well.   


One resource that is helpful to establish ‘going rates’ or ‘prevailing wages’ is the Bureau of Labor Statistics (BLS).   Through their research, they provide valuable tools including the Occupational Outlook Handbook.  This handbook is sorted by occupation, offers a job summary, includes the entry-level education that is the typical level of education that most workers need to enter this occupation, and includes the current median pay.  This information is compiled from data retrieved from the BLS Occupational Employment Statistics Surveys employers submit.  As an example, the handbook summarizes that Construction Managers plan, coordinate, budget, and supervise construction projects from start to finish. They typically have a Bachelor’s degree for entry-level employees with a median pay of $104,900/year or $50.43/hour.  You can drill down deeper and review other valuable information including:


·         Work experience in a related occupation

·         On-the-job training

·         Number of jobs

·         Job outlook

·         Employment change

·         What they do

·         Work environment

·         How to become one

·         Pay

·         State and area data

·         Similar occupations

·         More information, including links to O*NET


We all know that each position in each organization has unique needs so there is more consideration to make beyond researching what other companies are doing.  Some other items to consider include what the specific job requirements are, and these should be found in the written job descriptions.  These tasks will be even more helpful than the job titles themselves because they are often a truer reflection of what that employee does for their job.  Titles can all be different and some downright creative yet confusing so the consistency isn’t reliable and should only be one part of the consideration.


Finally, offering fairness for employees that bring more knowledge, skills, and abilities (SKA’s) to the company should also be considered.  Best practices can include a reasonably narrow wage scale per position, dependent upon the employee’s SKA’s.  I know, you employers are concerned about your employees talking and finding out how much each other are making.  In fact, if your employees are covered under the National Labor Relations Act (NLRA or the Act), it says that “employees have the right to communicate with their coworkers about their wages, as well as with labor organizations, worker centers, the media, and the public.”  There are also implications to consider for employers that are tempted to discipline their employees for talking about their wages and that includes the perception of retaliation for complaining of discriminatory action under the Equal Employment Opportunity Commission regulations as well as the Equal Pay Act.


The answer is simple; offer transparency through fair, equitable, and non-discriminatory practices. 



     

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