NOTES & CENTS I BY AMANDA RUETER Employee Pay Structures 101
I n April of this year, the Department of Labor announced changes to the salary threshold for exempt employees. As of July 1, the minimum base salary paid to any administrative, professional or management-level employee to be exempt from federal overtime pay requirements increased nearly 25% from the previous level with additional future increases planned. This adjustment presents a crucial opportunity for businesses to review and revamp their compensation plans, ensuring they’re effective, fair and compliant with legal guidelines. When in doubt, always consult with a labor attorney familiar with both federal and local laws.
single point of contact — your- self, an HR director or someone in upper management — to ensure consistent information and avoid misunderstandings. ENACT CLEAR PERFORMANCE METRICS If you have positions in which the metrics for your employee aren’t clearly defined or tied to their pay, now is the perfect time to make this change. Use any change in compensation as an opportunity to better define job roles and plan for future improvements. Define key metrics — ensure every employee knows the met- rics by which their performance is judged. Also, align pay with performance. Performance expec- tations and compensation should go hand-in-hand. MONITOR & ADJUST The goal is to roll out a compensa- tion plan that gets it right the first time, but build in some safeguards to catch and correct issues early. Put in place continuous monitor- ing, and be sure to task someone in your organization with monitoring the impact of these compensation changes on both the company and the employees. Review and adjust your plan regularly. Review expenses against forecasts and expecta- tions, and be prepared to make adjustments based on feedback and changing business needs. A well-designed compensation plan should be a win-win for all. Having a plan in place before mak- ing any changes will help to ensure a smoother transition. MI Amanda Rueter is the vice president of finance and operations at Ernie Williamson Music, a six-location dealer headquartered in Springfield, Missouri.
Making changes to an employee’s pay can be a highly sensitive process, and your compensation plan is a crucial factor in how employees perceive your company. Whether you need to update your plans to stay compliant with regulations or change it because your current plan is ineffective, it’s essential to get it right. Here are my top tips for revising an existing pay structure. ENSURE CLEAR COMMUNICATION A changing pay structure is often met with trepida- tion. Even the most loyal employee is likely to view a change with some skepticism or downright suspicion. Get ahead of these fears by ensuring that employees have all the information they need up front. Compen- sation plans are an agreement between the company
and the employee, so it’s imperative employees understand changes before they take place. Ensure early notification and communicate any changes in the compensation structure well in advance of the change date. Also, be sure to promote transparency. Be clear about the rea- sons behind the change and the benefits and challenges it may pose for both employees and the company. Then, provide documentation. Put a detailed plan in writing and, if necessary, provide training and support to help employees understand the changes.
“Compensation plans are an agreement between the company and the employee, so it’s imperative employees understand changes before they take place.”
PLAN FOR EMPLOYEE FEEDBACK Along the same vein of ensuring clear communication, keep in mind that this communication should go both ways. The best way to ensure that a change in compensation structure will be received well will be to make sure that employees feel that their concerns have been addressed ahead of time. Seek input and allow for employee input prior to finalizing any changes, if possible. Be open to hearing and addressing their ques- tions and concerns, and, ensure consistent information. Appoint a
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