Your Compensation Package: Keeping It Legal, Fair, and Competitive.
Dawn presented recently with SCORE Jacksonville on fair compensation and pay. Check out an overview below!
Is Your Pay Competitive?
What is competitive varies by industry (for-profit, non-profit, public), needed skills and qualifications, supply in the labor market, and location. Competitive pay varies greatly across the country!
The Department of Labor’s page offers suggestions for competitive compensation across a variety of roles.
Salary.com’s calculator shows you a comparable salary level in different areas of the United States.
Is Your Pay Legal?
You can’t just pull a number out of a hat and decide this is what you’ll pay. Pay needs to be legal at the federal, state, and local levels.
Federal Laws include:
FLSA - Non-exempt employees must receive overtime pay and minimum wages. On the other hand, exempt employees include those in executive, administrative, professional, technical, or computer roles earning over $35,568/year.
Equal Pay Act - Pay for equal roles needs to be equal. The only way you can justify different pay is if the jobs require different seniority levels, tenure, skills, experiences, or responsibilities.
Lilly Ledbetter Fair Pay Act - Each discriminatory paycheck resets the clock for when a lawsuit can be filed. You could accumulate an enormous amount of back pay owed to an employee if you chronically underpay them.
Proper Classification: Your employees who operate under your means and methods of production are classified as W-2 employees, subject to minimum wages and overtime pay. Not sure if your team members are employees or 1099 contractors? Use the Department of Labor’s guidelines. We’ve written about this topic extensively because so many employers think they can choose classification and wiggle out of paying the employer portion of payroll taxes.
State Laws (in Florida) include:
State minimum wage. While the FL minimum wage will reach $15/hour by 2026, it is currently at $12/hour and will bump to $13/hour this September.
Tipped Employees must receive a minimum wage of $8.98/hour, and you cannot extend the tips to employees who don’t directly serve customers.
Pay transparency. It’s not yet required to post salary ranges in Florida; however, other states are mandating this transparency. Consider updating your job postings in anticipation of legal changes in the future.
Use the Society for Human Resource Management’s database here to check state-specific laws.
Is Your Pay Fair?
Different theorists have conceptualized the way humans think about fair pay. A major theory is equity theory, which states that people constantly weigh inputs (labor, skills, experiences) to the outputs (compensation, pay, training, work environment) to determine if the pay is fair (Davlembayeva & Alamanos, 2023).
The theory suggests that people who steal company resources or time are trying to “correct the balance” when they feel their input is greater than the output received.
As you evaluate your compensation practices, remember that pay is just one variable in the system. Offering flexibility, remote options, childcare, mentorship programs, employee appreciation events, etc. all increase the reward of working for you. Requiring employees to take a day off once a month or reducing their caseloads both reduce their input. All strategies you can use to create balance.
References
ADP. (2023, March). Pay Transparency Laws: Your Questions Answered. https://www.adp.com/spark/articles/2023/03/pay-transparency-
laws-your-questions-answered.aspx
ADP. (n.d.). The Difference Between Exempt and Non-Exempt Employees. https://www.adp.com/resources/articles-and-insights/articles/t/the-difference-between-exempt-and-non-exempt-employees.aspx
Bivens, J., & Kandra, J. (2023). CEO pay slightly declined in 2022. Economic Policy Institute. https://www.epi.org/publication/ceo-pay-in-2022/#:~:text=Using%20the%20realized%20compensation%20measure%2C%20the%20CEO%2Dto%2Dworker,%2C%201980s%2C%20or%20early%201990s
CBS News. (n.d.). Wages surged for the lowest-paid Americans during the pandemic. https://www.cbsnews.com/news/wages-surged-lowest-paid-americans-pandemic-covid-19/
Davlembayeva, D. & Alamanos, E. (2023). Equity Theory: A review. TheoryHub Book. https://open.ncl.ac.uk / ISBN: 9781739604400
FairLaw. (n.d.). Tipped Employees. https://fairlawattorney.com/tipped-employees/
Internal Revenue Service. (n.d.). Independent Contractor (Self-Employed) or Employee? https://www.irs.gov/businesses/small-businesses-self-employed/independent-contractor-self-employed-or-employee
JD Supra. (n.d.). Florida Is a Hotspot for Employment Discrimination Claims. https://www.jdsupra.com/legalnews/florida-is-a-hotspot-for-employment-2257395/
U.S. Bureau of Labor Statistics. (2022). 24 percent of establishments increased pay or paid bonuses because of COVID-19 pandemic. https://www.bls.gov/opub/ted/2022/24-percent-of-establishments-increased-pay-or-paid-bonuses-because-of-covid-19-pandemic.htm
Wenzel Fenton Cabassa, P.A. (2022, July 18). Employment Discrimination Statistics: Employees Need to Know.https://www.wenzelfenton.com/blog/2022/07/18/employment-discrimination-statistics-employees-need-to-know/