Where Are Salary Budgets Headed?

By hrlineup | 13.02.2020

Working in Human Resource? Then make sure you stay abreast of all the news. In the year 2020, the labor department will enforce a rule that will enable more than 1.3 million employees eligible for overtime pay. This change is the first one in more than a decade and will require planning and proper allocation of resources.

One may be wondering, who are these 1.3 million employees? In previous years, employees who were salaried and had job responsibilities that were identified as executive, administrative or professional were able to receive overtime rates. This was if their earnings came up to less than $23,660 each year. When the new rule comes in, this benchmark has been set to those earning a salary of up to $35,568 per year being eligible. This is where the 1.3 million additional employees come in.

So, what are the implications of this change? On an annual basis, it is expected that there will be a marginal rise in pay for employees within the organisation. These changes will affect exempt and non-exempt employees in different ways.

The Effect on Private Sector Salary Increases

The average pay rise 2020 is projected to be around 0.1% above the increase of the year 2019. The total U.S. salary budget is expected to rise at an average 3.3% within 2020. In 2019. It rose to 3.2% while in 2018, it was at 3.1%. This shows a clear trend on the average salary increase that is experienced from one year to the next. This data is based on survey results from the WorldatWork’s Salary Budget Survey. These numbers are valid for Exempt salaried and non-exempt hourly employees. Officers and executives are predicted to have no average salary increase, maintaining the same mean in 2020 as there was in 2019.

As an employer, there are options that can be explored that will better manage overtime. Rather than focusing on increasing the wages, one can elevate the commissions and bonuses that the employees receive. Doing this will bring up their earnings so that they are above the rate of those entitled to overtime. As long as communication is clear with the employee, this can lead to a great saving.

Considerations on How to Budget Salary

One option that may affect salary budgets is the merit-based increase in budgets. This is at the discretion of the employer and will be based on a full evaluation of the employee’s working experience. Taking a percentage of the payroll can help with allocation of resources for merit-based salary raises.

Salary Budgets in 2020

In this year, the salary budgets appear to be modest as they increase.  However, this does not mean that compensation is low. There are other ways that people and companies can increase their earnings. That is through allowances, reward benefits, and bonuses. Whereas rises in pay are appreciated, employees also find incredible value in other forms of compensation. Over this year, salary budgets will predictably follow the trends in place from the last two years.