How New FLSA Rules Could Impact Your 2020 Reward Strategy

January 16, 2020 John Baldino

3-minute read

money

Just a few weeks ago we completed the holiday season, with most readers participating in one of the feasts associated with these holidays. Belts had to be set to one notch wider, elastic became a Godsend, and our workout gear is fitting a little more snugly. We long for abdominal compression (or a flatter, thinner stomach in layman’s terms). Taking our health seriously is good, but compression is a gift expressed differently for companies in 2020.

As you may be aware, a recent change in the Federal Labor Standards Act (FLSA) raises one of the three tests focusing on salary thresholds to a minimum of $35,568 for exemption consideration. What does that do for salary bands within our organizations? By increasing a level of staff who need to maintain exemption from overtime (if that’s an organization’s plan), a percentage rise in compensation may not be able to be offered to other levels of staff. The range for compensation comes up at the bottom for some roles, but that does not mean the top end will increase, thereby creating compression in ranges.

And before we get too far away from the compliance component of compensation as it applies to overtime considerations, many states and cities have increased their minimum salary threshold even further than the federal government. States like California, Alaska, and Maine, cities like New York City (and surrounding areas) are active with higher salary thresholds, with another handful of locations poised to increase in 2021 and 2022. The FLSA changes pale in comparison to some of these state and municipality changes.

To deal with some of this compression impact, some employers are working harder to look at how recognition strategies will need to be more than a bump in base salary or a flat bonus amount. Organizations will need to be more thoughtful regarding engagement and reward plans. What will it take to genuinely recognize staff knowing that a percentage increase to salary may exacerbate the compression and benchmarking issues?

In part, it’s going to take thoughtfulness. Strange to say, right? If your recognition strategy is heavily based upon annual reviews and salary increases, then you’ve likely not had to think so strategically lately. You’ve used grids to keep in line with a respectable and responsible compensation increase plan, which has worked in part, but never in full. And now that there is a major shift in our compliance mandate for compensation, we need to think, to plan, and to strategize. Considering retention in bolder ways is a group effort and is best shared with those in positions to impact the larger organization.

If salaries flatten due to these changes and compression is the new normal, then new considerations should be given to bonus structures and recognition opportunities. Will it be enough to offer a flat bonus? If the leveling of salaries is here to stay, then it is possible that compensation-related rewards will not have as much of an impact as hoped. Mixing rewards will bring the recognition diversity necessary to cultivate healthy responsiveness from staff. These employees will understand that thought and consideration regarding what matters to them has been considered. It also allows an employer to instill cultural and value-based initiatives in recognition that speak to why working at your organization is so good.

Appreciation is received differently by your staff. Not everything works as effectively for one as it might for another. With salary compression considerations, it is time to reflect and react to a changing landscape in compensation. What will your organization do to express a thoughtful reward strategy to its teams? This compression doesn’t have to be crushing, but rather, an opportunity to lead the charge for mission-based recognition and meaningful rewards.

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About the Author

John Baldino

John is president at Humareso and an SPHR and SHRM-SCP certified professional with more than 25 years of HR experience.

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