Compensation Archives | orgshakers.com

On April 23^rd, 2024, the US Department of Labor (DOL) announced a finalized rule which will see the minimum compensation levels increasing for the ‘white collar’ exemptions to the federal Fair Labor Standards Act’s (FLSA) overtime premium pay requirements.

The rule will significantly increase the minimum salary threshold for those who work in an executive, professional, or administrative role (the so called ‘white collar’ exemptions). The threshold will increase across two dates; one on July 1^st, 2024, and the other will follow on January 1^st, 2025.

The current threshold for this exemption is $684 per week ($35,568 annually). This threshold will increase as follows:

July 1^st, 2024, the threshold will rise to $844 per week ($43,888 annually).
January 1^st, 2025, the threshold will rise to $1,128 per week ($58,656 annually).

In addition to this, this new rule also increases the minimum annualized salary threshold to qualify for the highly compensated employee (HCE) exemption. As it stands, the current threshold for HCE employees is $107,432 annually, but this will increase as follows:

July 1^st, 2024, the threshold will rise to $132,964 annually.
January 1^st, 2025, the threshold will rise to $151,164 annually.

Employees who meet the new minimum pay requirements must also meet all the other requirements of the FLSA exemptions in order to apply for one. For clarity, here are the criteria that need to be met alongside salary for each ‘white collar’ role:

Executive:

The primary duties of the employee must relate to managing the business, or a department within the business.
The employee must regularly manage at least two full-time employees, or the equivalent in part-time employees.
The employee must have the authority to hire or fire employees, or the employee’s recommendations on hiring, firing, and promotions must carry significant weight.

Professional:

The employee’s primary duties must relate to work that is largely intellectual and involves the regular use of “discretion and independent judgment” (defined by the DOL).
The employee must work in a field of science or learning.
The employee must have acquired his or her knowledge through a prolonged course of specialized intellectual instruction.

Administrative:

The employee’s primary duties must be the performance of office or nonmanual work directly related to the management or general business operations of the company (or the general business operations of the company’s clients).
The employee must regularly exercise discretion and independent judgment on important matters.

It is important for employers to be aware of these changes so to ensure that the employees who they are enrolling for exemption are still applicable against these new monetary criteria. This will either mean raising salaries to meet these new threshold increases, or formally reclassifying currently exempt employees and making them aware of their eligibility for overtime.

If you would like to discuss how we can help assist you with auditing your current payroll in anticipation of this change, as well as overseeing the management of this change, please get in touch with us.

While many jobs still offer hybrid- or remote-working patterns, more bosses are mandating their employees to return to the office on a full-time basis.

But for some of these companies, getting workers fully back on-site comes with a high price tag. This is particularly the case in the US, which has seen the most dramatic shift to flexible working – by January 2024, around 29% of all paid workdays were still worked from home. “Employers who cannot compete on flexibility will have to compete more aggressively on pay,” says Julia Pollak, chief economist at ZipRecruiter, based in California.

The result is that US wages for fully in-office roles are surging. According to ZipRecruiter data, seen by the BBC, companies were offering on average $82,037 (£64,562) for fully in-person roles by March 2024 – an increase of more than 33% versus 2023 ($59,085; £46,499). The trend is cross-sector: compared to hybrid ($59,992; £47,211) and fully remote ($75,327; £64,320) roles, workers appear to be more likely to increase their salaries by returning to pre-pandemic office schedules.

Part of this is compensating for the loss of flexibility that workers have prioritised for the past few years – the greater the push to relinquish that autonomy, the more employers have to offer to compensate. The ZipRecruiter data shows that workers who swapped from fully remote to fully in-office set-ups in the US through 2023 received a 29.2% pay bump – nearly double that of those moving the other way.

Read the full article here: https://www.bbc.com/worklife/article/20240322-us-salaries-higher-in-office-jobs

Did you know that from November 14^th, disabled workers stop getting paid for the work they are doing until the new year?

We were shocked too. A new analysis from the Trades Union Congress discovered that disabled people effectively work for free for the last 47 days of the year due to the sizable pay gap between disabled and non-disabled workers. And what’s even more alarming is that this pay gap has actuallygrown over the last decade from 13.2% to 14.6%.

Disabled people make up 17.8% of England’s population – equivalent to 10.4 million people – and so a sizable percentage of these people are going to be of working age and, with the right reasonable adjustments, very willing and capable of working part- and full-time jobs.

But the problem that is making workplaces unattractive to diverse talent is the pay disparity they experience – and sadly, this isn’t just limited to disabled workers.

Employers who are actively taking steps to bridge this gap are the ones who are going to be the most attractive workplaces for diverse talent. It is already a well-known fact that diverse talent is good for business, so this should be a strategy that all companies are integrating.

Not only will diversifying your hires lead to wider innovative opportunities, but tapping into diverse talent pools such as disabled workers will play a huge part in plugging talent shortages and bridging emerging skills gaps.

A recent survey from the BBC of nearly 5000 companies found that 73% of these companies came across hiring difficulties during the July to September quarter of this year. Aside from the pandemic, this is one of the highest figures it has ever been!

So, what are the best way of overcoming these difficulties? Employers need to be targeting these pools of underused talent and hammering down on the pay disparity that groups like disabled workers continue to face. This will see employers bring in the best of talent from all corners of the market, and help strengthen and sustain their business well into the future.

If you would like to discuss how we can help tailor your hiring strategies and work towards closing the disability pay gap, please get in touch with us!

Equal Pay Day comes around every year to shed light on the fact that pay disparities are still very much present – women working full-time in the US are still only paid 83% of what men earn for the same job.

But for employers to successfully address pay disparity, they first must understand the differences between pay equality and pay equity, and how to utilize them successfully.

Pay equality is the practice that all employees are paid the same amount for doing the same job, regardless of their gender, race, or other protected characteristics. This essentially means that if two employees have the same job role, same responsibilities, and same qualifications, then they should both receive the same pay.

Pay equity, more broadly, is the practice of ensuring that employees are paid fairly for the actual work they do, taking into account factors such as job responsibilities, required skills and experience, and market demand. This means that two people who have the same job title may not be paid the same wage, if one of them has more responsibilities and/or experience than the other and market demand is different based on the location of their work.

When organizations are looking to solve pay disparities, they need to bear in mind that pay alone should not be the sole focus for assessing fairness. Typically, pay disparity issues will be a symptom of wider systemic problems – there may be practices or cultural issues which inadvertently cause (or worsen) these inconsistencies.

That is why the best way of approaching this issue is by using both pay equity and pay equality mindsets. Ensuring that your pay is equitable is vital when attracting and retaining talent, as it means that people are considered based on their value and talent rather than their gender, race or anything else.

But for equitable pay to even truly be achievable, you must first look at the wider context of pay equality on an organizational level. If your processes are not established in a way which allows for employees to be considered on an equal basis from the outset, then you cannot attempt to pay people equitably.

Therefore, to achieve pay equity and pay equality, a company must establish a pay philosophy, which acts as a clear strategy for how the business approaches compensation.

In addition to this, implementing transparent and objective pay practices, regularly reviewing and adjusting pay structures, and eliminating any biases in hiring processes and the company culture, will allow for an employer to successfully be able to pay employees equally and equitably. And this is undoubtedly a smart business move – McKinsey discovered that the least diverse organizations were found to be 27% more likely to underperform on profitability, whereas those companies that were most diverse outperformed their peers by 36%.

However, a company will fail to attract a diverse talent pool if it cannot demonstrate equality and equity in their wages. So, if you need guidance in creating or solidifying your pay philosophy, get in contact with me at alisa.cardenas@orgshakers.com

As we enter the new year, many employers are conducting end of year pay reviews for their employees. This year’s pay trends are likely to differ from previous ones due to a variety of factors which may influence how leaders and workers approach their compensation strategy in the coming twelve months. Considering that a recent study by Willis Towers has revealed that 75% of organizations are struggling to win over new talent, it is critical for companies to actively improve their compensation IQ in order to be a viable talent competitor.

As there is a clear need for employers to improve their compensation IQ in 2023, consider the following trends that are rising in the compensation space as your organization looks into how best to reward talent.

Salary Budgets are Rising – A recent report from Salary.com has found that the long-predominant 3% raise has been replaced by a median raise of 4% across all employee categories, breaking the more than 10-year trend of stagnant projected salary increase budgets. A quarter of employers even plan to offer increases between 5-7% this year, marking 2023 as a ‘banner year’ for compensation. It’s good to keep in mind the careful balance organizations will have to strike so as to meet the talent market demands to competitively compensate the workforce in 2023, all while striving for positive financial performance in a difficult economy.

Data Based Compensation Decisions – Those employers who have limped along without clear salary guidance or practices in past years may find it increasingly difficult to continue down the same path. Now is the time to put in the hard work to build a compensation structure if your organization has been navigating compensation without defined salary ranges. In a data-driven world, employers who leverage competitive salary ranges will find that making data-based compensation decisions for new hire offers, promotions, annual increases and other pay adjustments have an advantage when it comes to attracting and retaining talent while avoiding other pay-related issues such as salary compression and pay equity issues.

Pay Transparency – Across the board, pay transparency is becoming a hot topic, and if there was a single reason to establish salary ranges, as mentioned above, pay transparency is it. Employees want to work for organizations who are transparent about pay. With the UK’s launching of a pay transparency pilot program and pay transparency legislation beginning to be enforced in multiple US states, it is looking as if being open and honest about compensation is going to become more than an expectation but rather the norm. Doing the work now to establish transparent pay practices and guidelines will help you to, if not get ahead, at least not fall behind the curve of the burgeoning pay transparency movement. You will also be demonstrating to the talent market that your organization values pay equity and equality.

Pay Communication – How members of the organization discuss pay can be as important as the pay itself. Communication is everything. Now more than ever, organizations should be devoting time to train leaders about how to have effective compensation discussions. Being able to articulate why someone is receiving an increase and how the amount was determined is something that employees want and deserve to know. This means detailing the rationale behind data-based compensation decisions and knowing the difference themselves between pay adjustments, merit increases, lump sum payments, and so on, and why we allocate one over another depending on the circumstance. Educating your HR team, especially Talent Acquisition, is also critical to ensure the organization is painted favourably with fair offers and a well-articulated total rewards package. To be effective in bringing candidates in the door, recruiters must know how to effectively leverage salary ranges and formulate an offer based on the candidate’s experience and alignment to the open role, as well as understanding the current compensation elements someone may be leaving behind. Investing time in proper training helps to foster trust in new and current employees, and will demonstrate why your organization is an attractive place to work, while reminding those who already work for you why they want to continue doing so.

Geographic Pay Policies – With the rise of remote and hybrid working arrangements, geographic pay differentials are becoming a more prominent topic of discussion, and a highly complex component of compensation. It can be difficult to determine how to approach compensation for people who are performing the same work from different places or if it makes sense to differentiate compensation between remote and on-site workers in areas with different costs of living. Borderwork’s Geographic Pay Policies study found that of the 62% of organizations with existing geo-pay policies, 44% of them are considering modifying or have modified their policies due to the increase in full-time remote work. There is a growing need to develop strategies to navigate this in the coming year as inflation continues to impact the cost of living and the concept of how we work continues to evolve.

Getting Creative – Compensation is both a science and an art. Creative solutions to compensating the workforce are always worth exploring. Effective compensation programs require that you compensate the right people, at the right time, at the right level, in the right way. Creative solutions will be circumstantial but could include some of the following to effectively attract or retain the right talent: establishing new and innovative incentive programs, re-thinking employee recognition, improving leverage of sign-on and retention bonuses, offering sabbaticals, 4-day workweeks or instituting programs to emphasize your company’s commitment to making a positive social and/or environmental impact, just to name a few.

Making the effort to invest in improving your compensation IQ as an employer can be the differentiating factors when it comes to your talent strategy in 2023. Amongst the rising inflation rates, the cost-of-living crisis and changing attitudes towards work, understanding how to leverage compensation as a way of making you stand out will help ensure you are bringing in the right people. To discuss growing your compensation IQ or reviewing your compensation strategy in more detail, get in touch with me at alisa.cardenas@orgshakers.com