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The Future of Work

These Three Workplace Trends Could Impact Your Paycheck Next Year

From new overtime laws to salary transparency, a handful of recent initiatives could wind up impacting your take-home pay in 2017.

These Three Workplace Trends Could Impact Your Paycheck Next Year

[Photo: Olichel via Pixabay]

Starting a new job can come with a lot of unknowns, like how long it will take to adjust to a new team, or whether this year you’ll finally understand your benefits package.

Regardless of your title or position, however, you can probably expect that a few things will stay the same: You’ll be encouraged to stay hush-hush about your salary, will probably be up for a raise at your yearly review, and, odds are good, you will not be eligible for overtime.

Until now, that is.

"The way we work is changing, and businesses have to take a fresh approach to motivate and retain employees," says Kris Duggan, CEO and cofounder of BetterWorks, a creator of company goal-setting and management software. These days, many companies are evolving toward pay transparency, more frequent evaluations, and other changes in how employees are compensated.

Here are three prominent trends that are switching things up in offices across the country—and could affect how much you take home.

1. A Push Toward Pay Transparency

Public conversations about salaries historically have been discouraged, even though it’s a worker’s right to discuss the terms and conditions of their employment under the National Labor Relations Act of 1935. While your boss can’t outright forbid you from chatting about how much you make, chances are you probably don’t share that info around the water cooler. But new laws are helping to usher in an age of transparency.

In May, the governor of Maryland signed a law that will bridge the gap between salaries for men and women and make it illegal for businesses to restrict employees from discussing their salaries. Also on team transparency, the Obama Administration’s proposed equal-pay rules would require companies and federal contractors with 100 employees or more to report salary and hours-worked data broken down by race, gender, and ethnicity. (This is in addition to workforce profile data already collected from employers.) That way, beginning with the 2017 reporting year, the government will know which companies are not compensating their employees equally and can investigate accordingly.

Many people believe that a push for transparency is a big step toward equal pay for women and people of color, two groups that tend to be paid less than white men for the same work. According to the Labor Department’s weekly earnings report for the second quarter of 2016, women’s median earnings amounted to 81¢ for every dollar paid to a man. The gap widens for women of color, with black women being paid 69¢ and Hispanic women paid 62¢ for every dollar paid to a white man. Taking the gender wage gap out of the equation, black men were paid 75¢ and Hispanic men paid 69¢ for every dollar paid to a white man. Armed with information about what colleagues take home, employees will have the information and support they need to push for equal pay.

"If there’s true transparency, it would help to give people a little more level playing field or ammunition to negotiate a better salary," says Jody Friend, president and CEO of JLM HR Consulting. Some employers may even take matters into their own hands, as Salesforce did in 2015. After analyzing the salaries of more than 17,000 of its employees, the San Francisco-based tech company realized about 6% of its employees (both men and women) weren’t being paid fairly and spent $3 million to close that gap.

Potential downsides. There is a valid concern among employers and employees alike that knowing how much your cube mate makes could be depressing, enraging, or both—even if the company feels that everyone is being compensated fairly. "I think that could lead to lower morale in the workplace," says Friend.

2. The End Of The Annual Raise

The annual evaluation process is one employees dread, except for the fact that a raise or cost-of-living adjustment often comes out of it. About 90% of companies handle performance and salary evaluations this way, with a fixed date when nearly everyone in the company receives a raise, according to Mercer’s 2015/2016 U.S. Compensation Planning Survey.

One company moving away from that process is General Electric. The Connecticut-based company recently announced it’s exploring the option of doing away with yearly raises in favor of rewarding deserving employees on a more frequent evaluation basis.

"When companies give out an annual raise, it’s like spreading a layer of peanut butter super thinly across the whole company, not factoring in who is achieving the most," Duggan says. "It’s more effective to reward and compensate high performers and invest in opportunities for learning and development across the board." Recurring conversations with managers about pay and performance can help employees learn what they’re doing right, where they could improve, and how they can grow in their position.

There’s another upside to more frequent check-ins: Employees receiving real-time feedback may be more motivated to stick around, which is important since it’s not uncommon for young people to leave a company before their one-year anniversary. "When we overhaul the performance compensation structure to reward fairly and develop all employees to become high achievers, we can retain workers who would otherwise find reason to leave," Duggan says. "If your highest achiever isn’t rewarded or recognized for her performance, what’s keeping her at your company?"

At the end of the day, these changes can be a pro for both employers and employees, Duggan says. "If done correctly, managers can expect more from employees, and employees can feel more motivated and satisfied in reaching bigger goals," he says.

Potential downsides. A performance-review overhaul could see managers and employees shuffling to redefine their goals and benchmarks, leaving some money issues on the back burner as a result. "Any time a company chooses to put a new HR policy in place, change management can be a challenge," Duggan says.

Not to mention, some companies may be tempted to replace compensation rewards with perks, say more vacation time or the ability to work remotely, which may not be as motivating as a salary bump. "Employees must be able to understand the long-term benefits under a new performance-related pay structure, or it could feel like they’re being asked to do more for less," Duggan adds.

3. Changes To Overtime Laws

Starting December 1, salaried workers earning up to $47,476 a year will be eligible to receive overtime, which is time-and-a-half pay, after clocking 40 hours a week. This is a big deal since the new threshold is nearly double the current one of $23,660. The Department of Labor estimates the new rules could affect 4.2 million people. You can read the Department of Labor’s fact sheet to check your exemption status, as well as "Will I Be Eligible for Overtime? What the New Department of Labor Rules Could Mean for You."

Of course, there are many ways employers can approach these updates. The overtime changes could force some employers to take a close look at how much time workers are spending on the job. If overtime-eligible employees are consistently putting in more than 40 hours a week, employers may need to reevaluate how tasks are divvied up among employees, streamline workloads, hire additional hands, or completely overhaul their business goals to better adhere to a 40-hour workweek.

Or they could figure out how to work around the rules. Some companies may choose to raise employee salaries to over the $47,476 threshold so they’re no longer eligible to receive overtime. Nearly 40% of HR professionals surveyed by RiseSmart, a career transition services company, said they plan to take this route. Rebecca Davies, a labor and employment attorney at Detroit law firm Butzel Long, predicts workers making between $40,000 and $47,476, or generally those in low-level management, will be bumped up to meet the threshold. Other companies might reduce hours or base pay so workers end up making the same amount after overtime is accounted for, Davies says.

Potential downsides. Many businesses may choose to simply spread their salary budget in a different way. That could mean people who were on track to receive a raise may not get one because that money is now being paid to another employee for overtime. And of course some prices—such as restaurant bills—may go up so the businesses can pay their employees overtime.

Not sure if these three workplace changes will affect you and your take-home pay? Set up a meeting with your HR representative to discuss how they could apply to your individual situation in detail. And add these trends to the growing list of reasons—along with work-from-home capabilities and pet-friendly offices—that the workplace is decidedly different than it was 10 years ago.

This article originally appeared on LearnVest and is reprinted with permission.

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