By Bruce and Blair Johanson
PAY MINIMUMS
According to the recent research by the National Conference of State Legislatures on state minimum wages for 2019 and 2020, eighteen states began 2019 with higher minimum wage requirements. Eight of the eighteen have prescribed 2019 minimum wage adjustments based on cost of living calculations and the remaining ten states’ automatic minimum wage levels are based on approved legislation or ballot initiatives. There are 46 states with stated minimum wage requirements, of which 17 have a rate of $7.25 or less. The remaining 29 states have required minimum hourly wages levels between $8.00 and $13.25. The 2019 average required minimum wage for the 46 states is $8.70, and the 2020 average required minimum wage will be $8.95 or a 2.9% increase.
Living wage research and discussions are entering the work place, and they are influencing the pay grade and range minimums for the lower level unskilled and semi-skilled positions. Compensation professionals are completing living wage calculation research on websites inclusive of livingwage.mit.edu. The MIT site offers living wage calculations for one working adult with 0 to 3 children, two adults, one working with 0-3 children and two adults, both working with 0 to 3 children. Employers that endorsed living wage pay calculations are readjusting or increasing their lowest pay grade levels to align with regional living wage figures.
The U.S. House of Representatives passed a “Raise the Wage Act” bill earlier this year on July 18th. This legislation which would increase the federal hourly wage minimum from $7.25 to $15.00 by 2025 was considered dead on arrival with the U.S. Senate in August of this year based on a no consideration decision by Sen. Lamar Alexander (R-TN), who chairs the Senate Committee on Health, Education, Labor, and Pensions.
With the 2020 election year looming, the pressure to raise minimum hourly wages from $10 to $15 will increase at both the state and federal levels.
PAY COMPRESSION
Several factors inclusive of rising state minimum wage requirements, labor supply and demand issues, shortage of skilled employees, and rising pay for unskilled retail workers are increasing the pay compression for employees’ pay and employer pay schedules. Most of the pay compression pressure is located in middle to low-end areas of employers’ pay plans and structures.
Employers are eliminating lower level pay grades and ranges, adjusting pay grade and range plans or schedules to relieve pay compression issues, and re-establishing reasonable positions and pay separation structures to mitigate pay compression being caused by the factors mentioned in the previous paragraph.
Also, employers are conducting time in position, years of service and market pay mean reviews for hourly wage positions to identify areas of pay compression and potential pay equity issues. After completion of a consistent and fair pay compression matrix, employers can evaluate the unique variables and circumstances for each employee to determine the reasoning for pay gaps within same positions whether perceived or real. Identifying and resolving unfounded or unsupported pay inequities is prudent and the right thing to do for your organization and employees.
PAY EQUITY
Pay equity in 2020 will continue to be discussed in human resources departments across the country. With the high profile #Me Too movement and advocacy groups inclusive of the National Committee on Pay Equity, pay equity and related pay issues will stay in the forefront of human resources action steps for 2020 and beyond. The Society of Human Resources Managers (SHRM) and WorldatWork, professional human resources and compensation organizations have initiated pay equity support resources to help address and resolve pay equity issues. SHRM offers a “Managing Pay Equity” tool kit on its website, and WorldatWork held a 2019 Pay Equity Symposium in San Francisco earlier this year. National compensation aggregators Salary.com and PayScale offer pay equity articles, employer and employee resources and guides that can be downloaded from their websites.
A progressive approach by employers is reasonable and timely with the amount of social, economic, regulatory and political awareness given to pay equity in the workplace. Pay equity extends beyond base pay and requires an analysis of total rewards for employees based on gender, race and age.
Employers of choice are ahead of the pay equity curve by identifying and addressing pay equity issues before EEOC and OFCCP investigators come onsite to complete their assessment of systemic compensation discrimination. Effective talent acquisition and retention starts with a pay equity understanding by employer human resources and recruitment specialists and it extends as competent employees are recognized and rewarded for achieving positive results that meet or exceed company goals and objectives.
PAY – NEW FEDERAL OVERTIME PAY
THRESHOLD
$35,568: That is the new annual
overtime pay threshold figure that the U.S. Department of Labor (DOL) released
on September 24, 2019. The DOL issued their ruling, and the new rate will
become effective on January 1, 2020. To be classified as an exempt level
employee, each employee must be paid at least the $35,568, which equates to
$684 per week. The previous weekly figure was $455. In
addition, the position that the employee holds must meet the Fair Labor
Standards Act (FLSA) duties tests. For employees in positions that are
paid under the new figure, employers are obligated to pay 1.5 times their
regular hourly rate for any time over 40 hours worked in a workweek.
Between now and the first of 2020 would be a great time to assess and reclassify any employees / positions that are in the gray or middle area to nonexempt or exempt status based on current pay and the duties tests. Employers may need to increase some employees’ pay to get them at/over the new rate, given that they meet the duties tests.
Employers should be in a better position to comply with the new annual overtime pay threshold figure since they went through the motions for compliance in anticipation of the 2016 Obama Administration DOL proposed overtime pay threshold of $47,476 which failed to be implemented when a federal judge ruled that the DOL exceeded its authority by raising the rate too high.
PAY – ECONOMIC DRIVER OR INFLATION TRIGGER
With increasing employee pay minimums and annual average pay adjustments, will we see increases in economic indicators or will economists sound the alarms for wage push inflation?
A good explanation for wage push inflation is found on the Investopedia website. Investopedia, a member of the Dotdash publishing family strives to empower every person to feel in control of their financial future. Our editors and experts have been simplifying complex financial information and decisions for readers since 1999.
The site explains how wage push inflation is caused by employers maintaining their corporate profits by passing expenses associated with wage increases to consumers for products and services. The push and pull of wage push inflation is equalized when consumers have more money to purchase goods and services. This chicken and egg scenario will show its reality as employee wages increases due to increases in state minimum wage, living wage influenced pay adjustments and the natural supply and demand for skilled and competent employees.
