This FLSA stuff is getting convoluted. There’s the FLSA, which is confusing in itself; the proposed changes to the overtime rules originally slated for 12/1; the court-issued injunction to the FLSA changes; and the appeal of the injunction by the Department of Labor. Amidst the ambiguity of official FLSA activity, many organizations have already been working to comply with the changes for the better part of 2016. Some implemented FLSA-related pay changes prior to the November 22nd injunction. PayScale’s unique dynamic data has allowed us early visibility into a trend showing just that: it appears that companies are following through with the proposed changes, regardless of whether the revised changes go into effect or not.
Data for jobs around the proposed FLSA salary threshold
PayScale analyzed a set of jobs that have at least 20% of employees earning between the old and new thresholds ($23,660-$47,476). We are seeing a dramatic decrease in the number of employees earning under $47,476 in the third and fourth quarters of this year. The typical job saw a significant increase in the share of employees earning over the new threshold (17.8% to be exact). Prior to the 3rd and 4th quarters of 2016, the number of employees earning between the old and new threshold had been relatively constant since Q4 2014.
In this chart, each line represents the number of employees within a single job title. The chart shows changes to the number of employees earning between the old and new thresholds, relative to Q4/2014. While the bulk of the lines are relatively horizontal from Q4/2014 through Q2/2016, they definitely drop off in Q3 and Q4 of this year, implying that companies moved employee pay above the $47,476 threshold in anticipation of the changes going into effect on December 1st.
Jobs most impacted by the proposed FLSA changes
PayScale looked closer at specific jobs that have already seen pay movement in anticipation of the changes. As we did, we weren’t especially surprised by which jobs saw the most movement. The data show that Operations Supervisors, Warehouse Managers, and Account Executives experienced the most ‘wage adjustment’ in response to the proposed ruling (33.4, 30.9, and 30.0 percentage points respectively). Other jobs with notable increases include Customer Service Managers (27.8 percentage points), Middle School Teachers (25.6 percentage points), and Retail Store Assistant Managers (23.2 percentages points).
In many cases, these were the jobs we already knew fell into the danger zone: jobs that price out in the market very near the proposed new threshold. When the market values jobs near the $47k threshold, individuals in the job are likely paid both above and below the line. Those jobs were especially in danger of either bumping previously exempt employees to non-exempt status and thus eligible for overtime, or requiring an increase in pay at least to the new threshold of $47,476.
Businesses are choosing market over compliance
The proposed changes to the FLSA proved to be a good forcing function for employers to essentially “get their house in order,” examine their jobs and pay practices, and decide to pay wages that reflect the demands of the talent market. Many large employers like TJ Maxx, Marshalls, and Wal-mart have already announced that they do not intend to roll back wages as a result of the injunction.
Others intend to go forward while the official decision remains in limbo because they want to take a decisive path forward for their organizations’ well-being. Blair Boyer, in a recent NPR interview called attention to the need to communicate clearly with their employees. Brooke Birdsong from Associa, a PayScale customer, shared that they would not move forward with planned changes but instead redirect funds to ensure that top performers are being paid right for their talent markets.
It looks like the strengthening economy, tighter talent markets, and uncertainty around the future of the FLSA are all leading organizations to choose market-competitive pay over compliance for now.
How is your organization handling the FLSA ping-pong match? We want to hear from you in the comments section below.
For further reading:
- The Proposed FLSA Change has Already Affected Salaries (with interactive data visualization)
- FLSA Primer