Increases to wage requirements for salaried employees stand to affect businesses and nonprofits profoundly—arguably more so than minimum wage hikes. Regardless of whether the state or federal government acts first, changes should be made slowly and conservatively.

The Washington state Department of Labor & Industries is considering tying wage requirements to minimum wage. As proposed, the wage required to be salaried—and thereby exempt from receiving overtime pay—would be 1.5 times to three times minimum wage, so somewhere between the high $30,000s and the mid $70,000s annually.

The apparent worst-case scenario, if the state went with the higher end of that range, would force employers to make a choice between raising every salaried employees’ annual salary to the mid-$70,000s or convert those employees to hourly pay, and the issues that come with that.

An L&I official has speculated that the new wage requirement will fall somewhere in the middle of that range—not as high as three times minimum wage and not as low as the 1.5 factor. Even at 2 percent of minimum wage, the increase is too aggressive and would stand to cause staffing issues for employers across a number of industries, in an environment in which labor shortages already are an issue in a number of sectors.

In general, L&I should reconsider tying salary wage requirements to minimum wage, regardless of the factor. Already tied for the highest in the U.S., Washington’s minimum wage is due to increase to $12 next year and to $13.50 in 2020. After that, it will be tied to the Consumer Price Index for Urban Wage Earners and Clerical Workers.

Consequently, like minimum wage, the requirement for salaried employees would increase annually and in perpetuity—until the state changes the rule again. Each year, more employers would find themselves in the conundrum of having to increase pay for salaried workers or convert them to hourly pay.

Observers have noted that converting employees to hourly from salary brings with it a host of issues. If an employee who worked long hours is converted to hourly pay and relegated to 40 hours a week, more people might need to be hired to do the same job one person handled before. Also, employees who are converted to hourly might view such a maneuver as a demotion, and such morale issues can affect productivity as well.

Nonprofits stand to be affected profoundly. Paying more to meet a government mandate stands to pull money from missions for organizations that typically are operating on thin budgets already and frequently looking to secure funding sources. 

Many employers statewide stand to suffer if changes come too quickly and are too extreme. We expect L&I has heard a similar message as it talked to communities across Washington state about its proposed changes, and we hope it’s listening.