Federal Salary Law Change

This past spring, the Obama administration and the Department of Labor updated overtime payment laws. This change is one of the most significant compensation law changes in decades: the exemption threshold for overtime pay will be raised from $23,000 to $47, 476 starting December 1st. After this year, this threshold with continue to increase to align with inflation.

As Dan Wykoff, Covenant Chief Financial Officer, explains, this means that all across the US and in every industry full-time salaried employees will either have to be payed $47, 476 or will have to be moved to hourly wage labor, in which they are compensated for overtime work—generally 1.5 times their base wage.

Covenant’s Senior Administration is working with the Human Resources Department to figure out how to adjust to the new law. As Wykoff explains, “Everybody has to figure out what to do with those employees who are currently exempt but are under that threshold.” At the college, around ten percent of the full-time workforce—or, twenty to twenty-five employees—fall into that category.

The hard part is deciding what to do with an employee whose current salary falls, for example, $8,000 below the threshold as opposed to one whose salary only falls $2,000 below. Covenant is concerned with compensation justice, according to Wykoff, so it is carefully working through all the internal equity questions that accompany the new law change. Another consideration is how much the overtime compensation budget will have to grow to respond to the employees who are moved to hourly wage labor and might work extra hours during busy weeks like campus preview weekend and homecoming.

A typical frustration with new federal wage regulations such as this one is that they do not account for regional differences in costs-of-living. Wykoff expresses this to be one of the “inherent issues with sweeping government regulations.” He wishes that the law was accompanied by regional adjustment standards, but voices that costs-of-living considerations might not be logistically realistic for a nation the size of the US.

He reiterates that his main concern with the law is the question of internal equity: “If somebody suddenly got bumped up, maybe they got bumped up to where their supervisor is because maybe their supervisor was just above the threshold.” So, increasing an employee’s annual pay could create a chain-reaction, but it would be unsustainable for Covenant to give every employee a significant pay raise due to this new law.

Salary and wage changes are sensitive topics, says Wykoff, and “the value of a position has to be separated from the value of the work that person is doing and the image-bearing nature of who they are.” Compensation considerations contain many nuances, and the delineation between the value of a person and the market value of their job has to be defined.

Although departments like Maintenance and Operations, Facilities Services, Technology Services, and Events experience the most overtime work at busy times throughout the year, the 10 percent of employees who are impacted by the new law are spread throughout the college.