Walmart Raises Entry-Level Manager Salary, Avoiding New Overtime Rule

In response to a proposed change in labor rules, which would extend overtime wage rights to more than 4 million middle-income employees, major retailers have begun increasing salaries. These raises, however, can be minuscule. Walmart, the country’s largest privately-held employer, has raised annual salaries for entry-level managers by just $1,024, a little under $3 a day.

It’s all an effort to avoid paying salaried employees overtime wages.

New Rule Would Raise Overtime Salary Threshold

While many workers are still unaware of this fact, hundreds of thousands of people who make salaries are eligible for overtime pay. Current federal regulations say that any person who makes a salary of $23,660 or less is entitled to overtime wages for any hours worked over 40 in a week.

That number, $23,660, is known as the “salary threshold.” It hasn’t changed since 2004, even though inflation (the lowering value of a dollar) has decreased the value of $23,660 by nearly 17%. As we’ve noted before, President Obama wants to change the equation for millions of American workers – by doubling the salary threshold to $47,476. This change would make an additional 4.2 million workers automatically eligible for overtime pay.

Industry Groups Scramble To Block Overtime Rule

Many business leaders, along with many state officials, aren’t happy. In fact, industry groups like the US Chamber of Commerce (which is not a governmental agency) have already filed lawsuits against the Department of Labor challenging the new rules. Ken Paxton, the Attorney General for Texas, has warned that raising the overtime salary threshold “may lead to disastrous consequences for the economy.” In September, Texas and 20 other states sued the federal government hoping to block the rule’s enforcement, currently slated for December 1, 2016.

Doubling the salary threshold overnight is a radical change, they say, one that most employers will struggle to manage. As the National Retail Federation has argued, companies won’t benefit from a simultaneous windfall in revenues. Instead of doling out overtime wages to newly-eligible workers, the industry lobbying group believes, employers will simply fudge job titles and rework schedules.

Business leaders have thrown out a wide array of options for dealing with the change’s legal requirements, but remaining profitable. One idea is to convert salaried workers to an hourly pay basis, but limit employee hours to avoid paying overtime. Another thought is to reduce salaries drastically, keeping total pay rates relatively stable.

Walmart Raises Entry-Level Manager Salaries

Walmart has taken a different approach.

In September, the nation’s largest private employer decided to raise salaries for entry-level managers, from $47,476 to $48,500. In essence, Walmart has bumped these salaried employees just over the new threshold, avoiding the risk of having to pay them overtime wages. Speaking with CNBC, Walmart spokesperson Randy Hargrove said, “We think the starting rate of $48,500 a year […] would make a lot of business sense for our company.” The company hasn’t announced how many managerial positions are affected by the raise.

Is it a coincidence that Walmart’s entry-level managers used to make $47,476 per year, the same number decided on by the Obama Administration for its new salary threshold? Probably not. The Labor Department says that $47,476 is the 40th percentile of earnings for full-time salaried employees in our nation’s lowest-wage census region, currently the South.

Maybe Walmart was using the same statistics to set its own manager salaries.

Small Bump In Salary Has Big Effect

A big effect on Walmart’s bottom line, that is.

Getting a raise might sound nice, but many current and former Walmart employees say their actually losing out on a huge amount of pay. Working 10 overtime hours in a week would equal out to around $76 extra dollars in overtime pay, taking into account Walmart’s old entry-level salary of $47,476. Work 20 hours of overtime and a manager could expect over $152 in extra compensation. With the company’s new salaries in place, the average entry-level manager will only make an extra $21 per week compared to the old salary.

Walmart has been raising wages for all of its workers this year, including a recent increase in base pay to $10 per hour. In other divisions of the company, though, employees are being laid-off. Walmart just cut around 7,000 jobs, mainly from accounting and invoicing departments.