Changes in 2023 Highlight the Need for Salary Reviews

August 18, 2022

Increases to the Salary Threshold for Exempt Employees

Federal and state law requires that employees be designated as either exempt or non-exempt. Non-exempt employees must be paid at least minimum wage for all hours worked, they are entitled to overtime pay for hours worked in excess of 40 in a week, and are entitled to all protections guaranteed by the state Minimum Wage Act (MWA), including sick leave. Exempt employees, on the other hand, are not entitled to overtime pay, are not required to earn at least minimum wage for all hours worked, and are not guaranteed other protections under the MWA, including paid sick leave. 

In order to be classified as exempt, most employees must satisfy a three-part test. 

  • Salary Basis: The employee must be paid a predetermined and fixed salary.  The employee’s salary may not vary based upon the quality or quantity of the employee’s work.
  • Salary Level: For the executive, administrative, professional, and computer professional exemptions, the amount paid to the employee must generally meet or exceed the current threshold amount regardless of whether the individual is a full-time or part-time employee.
  • Duties: The employee must perform specific duties involving executiveadministrativeprofessionaloutside sales* or computer professional as defined by law.

The salary threshold multiplier used to classify Washington non-computer professionals as exempt for 2023 will remain at 1.75 times the minimum wage for small employers (1-50 employees) and increase to twice the minimum wage for large employers (51+ employees). Exempt computer professionals must continue to earn at least 3.5 times the minimum wage in 2023 and beyond. Even when the multiplier remains consistent from one year to the next, the correlating dollar amount may increase as the minimum wage is adjusted by the Department of Labor & Industries (LNI) each year based upon the Consumer Price Index. Estimated threshold dollar amounts can be found on the New Salary Threshold Implementation Schedule (non-computer professionals) and Hourly Computer Professional Phase-in Schedule (computer professionals). These charts have not been updated for 2023.  The final dollar amounts based upon the multipliers will not be released by LNI until September after the minimum wage is set for 2023. AI will keep members apprised of these revisions once they are released.

What amounts are considered “salary” has not changed and continues to include those set amounts paid on a recurring basis to compensate for work performed. Washington state law does not include board, lodging, housing, bonuses, commission, and benefits as salary.

Changes to Required Information in Job Postings

Washington’s Equal Pay and Opportunities Act has been amended to include additional pay transparency requirements beginning January 1, 2023.  Among other provisions, the Act has historically required that Washington employers provide equal compensation to similarly employed workers and included provisions whereby employees and applicants could request information related to the wage scale and salary range for open positions. RCW 49.58. However, once the new changes take effect, employers with 15 or more employees who post new positions will automatically be required to disclose “ the wage scale or salary range, and a general description of all of the benefits and other compensation to be offered to the hired applicant.”  RCW 49.58.110

draft Administrative Policy explains that a description of all benefits ”includes but is not limited to health care benefits, retirement benefits, any benefits permitting paid days off,… and any other benefits that must be reported for federal tax purposes, such as fringe benefits. Employers are not required to include a dollar figure amount of benefits in a job posting, just a description….” Draft Administrative Policy ES.E.1 (issued 6/30/2022).  In addition to benefits, other compensation including “discretionary bonuses, stock options or other forms of compensation that would be offered to the hired applicant in addition to their established salary range or wage scale” id., must also be disclosed. Id. The draft Administrative Policy has not been finalized but does provide insight into the Department’s current interpretation of the enhanced employer obligations.

Employers should evaluate current wage and salary amounts and upcoming disclosure requirements to plan for 2023 organizational needs and staffing levels. You can purchase our 2022 Compensation Survey here.

*The outside sales exemption varies somewhat from the general requirements for exemptions.  See LNI Administrative Policy ES.A.9.7 for a more detailed explanation.