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Archive for June, 2013

Total Rewards: What’s Hot and What’s Not

A variety of factors are influencing and changing the landscape of compensation and benefits today. With the uncertain economic outlook, employers continue to be asked to do more with less and continue to look for new ways to contain labor costs.  The millennial generation, are very worried about running out of money in retirement and they are focused on their long term financial security.  Boomers are working beyond the age of 65 and appreciate the benefits that their employers provide – even at a higher cost.  Employees today are less loyal then in the past, impacting employee retention and organizational competitiveness. 

Since the economic crisis began in 2008, salary increases fell to historic lows and still remain low.  Many organizations have reduced overtime and cut staff to levels where any further reductions to payroll expenses are largely exhausted.  Employers are looking more toward employee benefits for future cost cutting.   As for compensation, current base salary increases still hover around 3 percent.   Though the number continues to drop, there are still a few organizations implementing salary freezes.  Overall employers are now trying to finding a balance between cost containment and employee retention.  Many employers are shifting to pay-for-performance to drive compensation decisions.  There is also a stronger focus on employee retention.  Employers are offering additional retirement and benefit choices and restructuring their salary scales adding more differentiation between grades in an effort to motivate employees.  Incentive compensation continues to be important and organizations rate this among the top factors impacting total compensation decisions. 

The face of employee benefits is also changing impacted by the same factors as compensation but also significantly impacted by the Affordable Care Act.  Employers are implementing more wellness benefits in hopes of reducing costs and boosting productivity.  High Deductible Health Plans (HDHPs) are increasing in popularity, driven by the need to manage increasing financial obligations.  Preferred Provider Organization (PPO) plans are still the most common option but HDHPs are now the second most prevalent plan ahead of Health Maintenance Organizations (HMOs).  Other core welfare benefits including dental, life, short and long term disability and vision insurance remain strong.

Defined contribution (DC) plans continue to be the dominant retirement savings program and automatic enrollment continues to gain popularity.  Defined Benefit Pensions are slowly disappearing.  Most employers continue to offer matching contributions in their DC plans.

Recent surveys show the following benefits and perks are significantly down and some have almost disappeared:

  • Company Sports teams
  • Take your kid to work day
  • Temporary relocation benefits
  • Tickets to sporting and other events
  • Floating holidays
  • Long-term care

The following are becoming more popular: 

  • Wellness incentives
  • Onsite fitness classes and/or health and life coaching
  • Coverage for mental health, laser vision, and acupuncture
  • Same Sex Domestic Partner Benefits
  • On site mothers/lactation room
  • Paid time off plans
  • Employee referral bonus plans
  • Retirement and individual investment advice
  • Traditional voluntary benefit plans such as supplemental life
  • Non-traditional voluntary benefits such as group legal plans

Maintaining a competitive advantage and being able to retain key employees is increasingly important.  At WageWatch our compensation consultants can assist with your organization’s compensation needs and help you ensure that your compensation programs are supporting your company’s business strategy and objectives.  WageWatch also offers accurate, up-to-date benefit survey data, market compensation data and salary reports that will allow you to stay current with the times. This information is highly beneficial in creating the best salary and benefits packages that meet or rival the industry standards. For more information on our services, including consulting, salary survey data, benefit survey data and market compensation reports, please call WageWatch at 888-330-9243 or contact us online .

Wage and Hour Potholes

Every company should perform wage and hour audits periodically; minimally once a year, twice if possible.  It is easier to catch and correct errors yourself than to risk discovery from employees or in the event of a DOL audit, and mistakes do happen.   To remain compliant with wage and hour regulations it helps to have the appropriate checks in place, such as up to date written policies and procedures, periodic training for supervisors and managers, effective complaint mechanisms should be in place and a regular audit process should be established.

Wage and hour violations are not only costly from the standpoint of back pay and penalties but can also lead to serious employee relations issues if employees feel they are not being fairly compensated.  Below, we present just a few of the many wage and hour potholes of which you should beware.

Overtime Pay

Many missteps can occur regarding overtime pay, here are a few:

  1. Misclassifying workers as ‘Exempt’ from overtime;
  2. not paying ‘unapproved’ overtime;
  3. failing to count all hours worked including pre and post work activities;
  4. failing to count certain activities as work time including working through a break;
  5. checking emails or performing other duties during time off; and
  6. travel time and meeting and training attendance.

Bonus or commission payments to nonexempt employees may impact overtime pay.   A bonus should be included in the calculation of the regular rate of pay for the weeks which the bonus is earned.  This will increase the overtime rate for these weeks.  The weeks for which the bonus is earned includes all weeks covered by the bonus period.  For example, if it is a quarterly bonus then all weeks in the quarter will apply.

Another consideration for computing overtime pay is when an employee works two or more jobs with different hourly rates at one or more facilities for the same employer in the same workweek. The employer must use the weighted average of the rates to compute the employee’s regular rate of pay for the purpose of calculating overtime pay.

Exemption Status / Salary Basis Test

Do you examine the duties of your salaried employees and not just their titles or how they are paid in determining whether they are exempt?  Your exempt employees must pass one of the FLSA exemption tests in order to be exempt from being paid overtime.  These exemption tests are based on actual worked performed,  and do not test based upon the job title nor what is written in the job description.

For a job to remain exempt it must pass the Salary Basis Test which ensures that improper deductions to exempt employee’s salary are not made.  There are very specific rules to follow when making any deductions to an exempt employee’s salary.  Also a job that is exempt can lose exempt status when the duties and responsibilities change due to things such as staff reductions or organizational changes.  Therefore it is advisable to retest jobs that are impacted by these types of changes.

Meal and rest period compliance

Many state wage and hour laws require employers to provide their employees with meal and/or rest breaks. These laws specify the circumstances under which such breaks must be compensated. In some cases, state laws impose different requirements than does FLSA.

A few more potholes worth mentioning

We have mentioned just a few of the many potholes HR professionals need to be aware when classifying jobs as exempt or nonexempt, overtime pay calculation and rest period compliance. Here are a few more you should keep in mind:

  1. failing to pay employees on day of termination;
  2. failure to follow rules for On-Call pay;
  3. improper use of ‘Comp Time’; and
  4. unlawful deductions from employee paychecks.

Of course, you should always consult your federal and state wage and hour resources and/or your wage and hour counsel to ensure a thorough and correct understanding of wage and hour rules.

Remaining compliant with wage and hour regulations is an important task that Human Resources and Compensation performs for an organization.   Another important task they perform is to ensure fair and competitive pay practices.  For the good of your employees, it is helpful to analyze benefits survey data, compensation surveys and salary reports.  Having this information at hand allows you to plan a budget, including competitive employee salaries and benefits, which will help you to hire and retain a happy, talented team.

At WageWatch, our expert evaluators provide businesses in a large range of industries with accurate and beneficial benefits survey data, compensation surveys and salary reports to ensure that payment and benefits plans are on par with those in the industry. For more information on market compensation data, please call WageWatch at 888-330-9243 or contact us online (https://www.wagewatch.com/Contact/ContactUs.aspx).

Posted in Uncategorized on June 20th, 2013 · Comments Off on Wage and Hour Potholes

Budget Boot Camp

For many HR Directors, drafting the annual HR department budget comes with the understanding that future project costs will be hyper inflated with the expectation that the majority of it will be left on the cutting room floor leaving a shoe-string level of funding for critical projects. If this matches your experience, this week’s blog on budgeting fundamentals and best practices can help. What the C-suite is trying to do is systematically collect financial data from the department heads and then prioritizes the budget dollars based on the degree to which they support organizational objectives. Developing a budget is a process with two common methods.

  1. Incremental budgeting – the current budget as a starting point and a new budget is developed by making adjustments upwards or downwards to each item based upon expectations.
  2. Zero-based budgeting – every item included in the budget must be justified before being included; therefore, the process begins with a blank page.

Regardless of which method your company uses, the critical step in preparing to write the budget is understanding the company’s objectives and how HR will need to respond in support. This means not only talking with the C-suite but also the other department heads. Will the company opening a new warehouse or office?  When is the next new product scheduled to be brought to market? Is a new IT system rolling out? Are there any mergers or acquisitions planned? Entering any new markets?

 Providing market based salary and benefits data for current and new job classes is a key part of the budgeting process. From a human resource perspective, the answers to these objectives impact company labor in several ways:

  1. The number of full and part time employees needed next year;
  2. Number of temporary staff or contractors needed next year;
  3. Benefit cost increases due to changes in headcount, vendor fees, or policy;
  4. Projected turnover rate with associated recruitment and onboarding costs;
  5. New compensation and benefit plans offered; and
  6. Impact of new or changed laws such as minimum wage, worker’s compensation, or insurance.

Most HR budgets cover operating expenses, such as the items listed above. Your HR budget may also contain capital expenditures. The difference between these two types of budgets is that operating expenses are for goods and service that are consumed or used up during the budget period whereas a capital expenditure is for an asset or project with a useful life beyond that period. For example, criminal background checks for new hires are an operating expense and a new HR information system is a capital expense. It is important to identify capital costs because they may require special funding sources such as a bank loan or selling of other assets.

It is also important to determine which projects and services are recurring or non-recurring. A recurring cost would be payroll expense. A non-recurring cost would be employment attorney fees. Knowing which items are recurring will help after the fact in managing expenses and identifying budget variances.

The opening paragraph spoke to inflated budgets and deep cuts. Much of this occurs to areas considered discretionary and contingency spending. Wide budget variances, both positive and negative, often result due to inaccurate forecasting or misunderstanding of company goals. WageWatch salary survey data provides the most current industry market metrics needed to build your compensation and benefits budgets.

At WageWatch, our expert HR team provides businesses in a large range of industries with accurate and timely survey data, Our benefits surveys and salary reports ensure that salary and benefits plans are on par with those in the industry. For more information on market compensation data, please call WageWatch at 888-330-9243 or contact us online at (WageWatch.com).

Selecting the Right Salary Structure for Your Organization

Salary structures are the foundation for base pay administration.  The salary structure you determine for your organization will have an impact on your business operations, especially related to talent management and cost containment, so the selection of a compensation philosophy is an important one.

There are four main types of salary structures; traditional, market-based, broadband and step.  According to recent surveys, market-based salary structures are by far the most prevalent type of structure in use today, followed by traditional and next by broadband.

  • Traditional structures have numerous pay grades with small distance between each range.  It is a hierarchal system conducive to promotions between pay grades.  Typical range spreads 20% – 40%, midpoint progression 5% – 10%
  • Market-based structures are based on what other businesses in your industry and or region are paying for similar jobs.  Typical range spreads  30% – 80%, midpoint progression 10% – 15%
  • Broadband structures group several related jobs, such as the administrative staff. A pay range is assigned, to the job group rather than to a job title.  Typical range spreads 80% – 200% and no defined midpoints
  • Step structures use standard progression rates within a pay range for a job in which employees can progress based on seniority and performance.  Typical range spreads 20% – 40%, midpoint progressions of 5% to 10% with defined points (steps) within the ranges.

Other factors in developing a salary structure are job evaluations, management fit, training and communication.

You can also look into alternative structures that are based more on what the employee can do and less on what the job description is such as skill-based pay, competency pay and variable pay.

Before designing a pay structure, you need to consider competitive salary practices, the organizational culture and the organizations budget tolerance for pay levels.  Designs considerations for pay structure include the number of range levels, width of the ranges from minimum to maximum values (i.e., range spreads), midpoint differentials and the degree of overlap between adjacent ranges.  A strategic plan for employee compensation determines how much you want to pay employees and what type of employees you want to attract.  A total compensation plan includes pay scales, reward programs, benefits packages and company perks. A successful strategic compensation plan allows your business to compete in the market for the best employees in your industry.

As a company, it is important to analyze benefits survey data, compensation surveys and salary reports. Having this information at hand allows you to plan a budget, including competitive employee salaries and benefits, which will help you to hire and retain a happy, talented team. At WageWatch, our expert evaluators provide businesses in a large range of industries with accurate and beneficial benefits survey data, compensation surveys and salary reports to ensure that payment and benefits plans are on par with those in the industry. For more information on market compensation data, please call WageWatch at 888-330-9243 or contact us online at (WageWatch.com).