How Employers Should Approach Changing Pay Requirements, Expectations

Ashley Thomalla, PhD, CCP, GRP, Senior Vice President, HR Consulting for Global Insurance Brokerage and Nichole Burkett, Compensation analyst in the HR Consulting Group, Hub International

The federal minimum wage was last raised in 2009 from $6.55 to $7.25.

By last year, an analysis by the Economic Policy Institute showed the wage was at its lowest value since February 1956. The most recent attempt to raise it to $15 under the 2021 Coronavirus Relief Bill was quashed by legislators, leaving individual states to act “or not “with their own mandates.

In many states, nearly half have stepped up to take the pressure off their citizens who are squeezed by a persistent inflationary economy, deeming the federal minimum wage too low. Twenty-five states have upped their minimum hourly wage. California is among them, with an increase to $15.50, but it’s actually the District of Columbia that has gone the entire state one better with its minimum of $17.00.

And bringing up the bottom? Georgia and Wyoming, each at $5.15.

Employers understand that complying with minimum wage requirements, state and federal, is a given, especially if they are subject to the Fair Labor Standards Act. However,it’s one more complication in the business of balancing reporting and documentation requirements against diverse workforce interests.

Boosting Recruiting, Retention Success

The reality is that the U.S. continues to grapple with a difficult labor market as many sectors struggle to fill job openings. Manufacturing, for example, lost 1.4 million jobs with the pandemic, as reported by the U.S. Chamber of Commerce, but is still struggling. As of March, the industry had 693,000 jobs to fill.

Raising pay to the minimum or better isn’t the only way to bolster recruitment and retention efforts. (Though benefits have an equally important role to play.) But, of course, pay increases are far from a one and done deal. An equitable pay structure needs to be balanced among employee classes, for example. Record-keeping must be meticulous. Rules for statutory compliance can be daunting to follow.

And against these concerns is an increasingly pressing issue: New minimum pay regulations are often accompanied by requirements for more stringent pay transparency. California employers had faced a May 10 deadline to submit core pay record-keeping reports. But many struggled due to their failures to track pay data and provide salary ranges on job postings. 

"Employers understand that complying with minimum wage requirements, state and federal, is a given, especially if they are subject to the Fair Labor Standards Act. However, it’s one more complication in the business of balancing reporting and documentation requirements against diverse workforce interests"

It doesn’t have to be a struggle. In fact, circumstances make this a good time for employers to undertake a strategic reassessment of their pay policies. Here’s how to proceed.

1. Assess today’s pay policies and structure, and adjust when necessary. When wage minimums are established by statute, it’s essential to ensure the ranges in pay are consistent and equitable.

For example, minimum pay offered to non-exempt workers must align with overall pay ranges. It’s also key to look at how adjusting minimum pay will affect exempt employees and delineate who’s considered exempt and non-exempt. When employee pay bumps up against supervisor pay or when supervisor pay bumps up against manager pay, adjustments are needed.

 Adjusting pay scales in response to legislated requirements will not only increase labor costs. Depending on how pay structures are handled and communicated, they can have an impact on employee morale and motivation.

 2. Set philosophical markers on pay practices. Increasingly, there’s more to a good employer and a good job than pay levels. But setting markers for pay says a lot about an organization, its culture, and the extent to which it is people-centered. This means that even in the context of legislative mandates, where the employer stands must be clearly stated. Some may set markers around internal job value. Others may focus more on the value of particular jobs in the broader job market.

 3. Transparency counts. What is pay transparency? It can mean openness about pay practices and how pay is determined. Or openness around salary ranges for every job. Some states, such as California and New York, have mandated salary transparency along with minimum pay requirements. Transparency is increasingly important,“one way to add accountability and fix inequities. And current and prospective employees expect it: more than 90% of employees said salary transparency has a big influence over their trust about pay disparities, “also making a difference in morale, retention, and loyalty.

 4. Communication is the clincher. As the drive for improved transparency regarding pay practices gains momentum, effective communications with employees (and regulators, too) becomes another imperative. This takes a strong team, with HR joining forces with the organization's legal and internal comms experts to craft messaging that shares accurate information about the organization's consistent process for pay policy and compensation levels.

 

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