Wal-Mart Stores has raised salaries for entry-level managers before a rule change that extends mandatory overtime pay to more than 4 million U.S. workers, in an attempt to shield itself from unpredictable additional costs for salaried employees.
Wal-Mart (WMT) raised salaries from $45,000 to $48,500 annually for employees including store management, spokesman Randy Hargrove said on Tuesday. The retailer did not break out the number of employees who received the raise.
The new Obama administration rule, set to take effect Dec. 1, will require employers to pay overtime to salaried workers earning less than $47,500 a year, double the current threshold of $23,660.
“We think the starting rate of $48,500 a year … would make a lot of business sense for our company,” Hargrove said.
Wal-Mart is the largest private employer in the United States and employs 1.5 million workers, which includes store staff, store management and truck drivers.
The managerial raises went into effect in September when Wal-Mart paid more than $201 million in second-quarter bonuses to hourly store staff as 99% of its stores met targets for cleanliness, faster checkout and better service.
Earlier this year, Wal-Mart increased entry level wages to $10 an hour and in December 2015 said it would invest $2.7 billion in employee compensation and training over two years.
These increases come at a time when the retailer is cutting back-office jobs and announced the elimination of about 7,000 positions, mostly in accounting and invoicing at its U.S. stores.
The new overtime rule is likely to touch nearly every sector of the U.S. economy, with the biggest impact on retail, hospitality and restaurants.
Last month, officials from 21 U.S. states filed a lawsuit claiming the new overtime rule will place a heavy burden on state budgets. The U.S. Chamber of Commerce and other business groups also filed a separate challenge to the rule in the same federal court.
Business groups have said the rule will force employers to demote some salaried management workers to hourly positions and create more part-time jobs that do not offer benefits.
Only 7% of full-time salaried employees are currently eligible for overtime pay down from 62% in 1975, according to the Department of Labor.