UncategorizedOctober 1, 20230

Kristi’s Korner: Show Me the Money

Everywhere I turn lately, there is a new proposed law, thought, philosophy or guideline being published about how we are supposed to pay people. No? Just me? That’s ok, that’s what we are here for. Let’s break down all of the compensation guidelines and laws that you need to know about as a leader in your organization.

Let’s talk COLA (Cost of Living Allowance). Each year, the Social Security Administration puts out their % increase for those individuals that are receiving social security income. Although organizations don’t have too, many base the % increase for their employees off of this amount. Remember cost of living and merit are different, or they should be. Historically, cost of living increases have been nominal, for the many years leading up to the pandemic, it was 3% or lower. However, COLA in 2023 was a whopping 8.7% and 5.9% for 2022. For reference, the last time COLA was above 6% was in 1982.

Predictions for COLA going into 2024 are around 3.2%. This means, if you were to base pay increases off of COLA, employees would receive this percent increase across the board. The Society for Human Resources Management (SHRM) is saying that employers polled are budgeting for 4% increases.

While COLA can be the basis for merit increases, merit and COLA should be different. Merit increases in pay should be based more on individual performance, which may mean not all employees receive the same increase. Creating a merit-based pay system can be tricky and, to avoid risk, should be tied to KPI’s and metrics.

Another huge potential change headed our way is around the salary threshold for exempt workers. Currently, to be qualified as exempt from overtime, an employee has to make a minimum salary of $35,568. The Department of Labor recently published a proposal to take this minimum amount to $55,068. This means, if the rule passes, and you have exempt employees that make less than $55,068, they will be eligible for overtime pay above 40 hours in a workweek (in Oklahoma) and they will have to track their time.

A couple of final tips around pay. Not all of us have large budgets to work with these days and/or have some concerns around the ever-threatening recession. You can still incentive employees without large annual pay increases. Think generous PTO policies, wellness programs, paid volunteer time, and bonuses of all kinds.

And also, make sure employees are aware of your total spend. This is called total compensation and includes the above suggestions and how much that costs you as the employer, and what you pay towards benefits. Employees may only look at their base pay as their compensation but we know there is so much more that goes into paying an employee.

I know this is a lot. Never fear, we are here to interpret and support in the way that works best for you. We hope you reach out with any questions.


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