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Archive for January, 2014

Compensation: What’s Trending in 2014

Most economic predictions for 2014 are for overall growth, though still at a slow pace.  The cautious optimism has employers continuing to walk a fine line between fixed base salary budgets and remaining competitive in the labor market. Continued moderation in base salary increases creates pressure on companies to build more effective variable pay and non-financial reward programs.

To keep valued employees from searching for greener pastures, firms must address their employee engagement challenges and focus on reward programs that have the most impact on retention. Typically, these include incentive programs and key nonfinancial rewards, such as career development opportunities, meaningful job designs, work climate and recognition programs.

Due in large to the great recession of the past few years, organizations are struggling to keep up with compensation trends and changes.  The practice of awarding equivalent increases to all organization members has become a dinosaur. These across the board salary increases, send the wrong message to underperformers and leave organizations with too small of a budget to adequately reward top performers.  Though this salary increase criteria is still used by many companies, forward thinking organizations are changing the way they look at salary and compensation.

The use of variable pay plans has been steadily on the rise.  These plans are more economically sound.  The costs associated with a variable pay plan can be aligned with revenues and performance and therefore vary with company performance.  The motivational potential of variable pay is stronger than other forms of compensation. Variable pay plans can result in income that is lower than last year’s and they can provide rewards that are consistent with the individual’s contribution. Variable pay plans can be customized to fit different business units, providing customization to each unit’s ability to pay and creating a focus on its specific objectives. These plans can also be an effective tool for attracting and retaining critical skills, as well as high performers

Of course there are potential disadvantages associated with variable pay.  Budgeting is difficult and it is vital that all performance criteria, measures and standards are made very clear and defensible to all parties. As more employees operate in a service capacity, with no physical product that can be exactly measured, getting agreement from everyone regarding productivity and outcomes during a performance period can be challenging.

Talent retention continues to be a top priority for companies and human resources with hiring and new job creation still at a low.  Compensation can be one of your most important communication tools used to send a message about your organization’s expectations and goal achievement rewards.  Your compensation philosophy should be aligned with the organization’s mission and vision.  A well written compensation philosophy drives organizational success by aligning compensation plans with business strategy.  It provides the foundation for plan design and administration and anchors current and future plans to the company’s culture and values.  It provides the “why” when employees question compensation practices, serving as a helpful communication tool for reward determination.

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 surveys, salary surveys and pay practices data 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 .

Posted in Uncategorized on January 29th, 2014 · Comments Off on Compensation: What’s Trending in 2014

The Data Tells a Story

Determining the appropriate salary level is never as simple as we would like. The reason is that despite all the diligent work that goes into salary surveys, the resulting pay data for a given job is always a broad range.  So deciding what precisely to pay an individual takes good judgment that comes with experience.

 The challenge in the interpretation of salary survey data is that it requires a combination of good analytics and common sense. The reality is that often a lot of work is required in order to analyze market pay and determine your pay point and pay range. This often involves analyzing several surveys and/or survey reports and considering other factors such as company strategy, payroll budget, and internal equity before landing on an appropriate salary.  As Compensation and HR professionals we have to be able to say, here is the data, here is how it is analyzed, and here are the judgments we made as experienced professionals.

 The WageWatch PeerMark ™ report allows our survey participants to build their own competitive sets, select from a list of 300+ job titles, and quickly generate a market variance report for the participant’s local market.  For the more demanding and complex data needs, a WageWatch Consultant can build your custom reports for you that will meet your specific needs. We will work with you to define your report specifications, target market areas, competitive set and any other specifications.

 WageWatch compensation consultants are your data partners on whom you can rely on to get the most comparable data from your market, with the expertise to know how and what data to extract from each market or sub-market in order to provide you with survey report(s) containing the best competitive results.  Custom reports solve many compensation problems.  For example you may run into a market area that is heavy with one or two competitors not allowing you to report any data or perhaps the survey market does not contain enough competitors of a similar size and scope that fits your organizational needs.  This is where our compensation consultants can assist having the experience needed to work around some of these challenges and capture your specific needs such as peer groups, industry focus or geographic cut.  This additional data analysis can enhance the overall story that you will have to present back to your executive team.   We can build multi-market competitive sets across multiple locations. These many be niche markets in highly competitive hyper segments or broad multi-city or state benchmarks for management companies entering new markets. Custom reports can also be powerful resources for developing union defense strategies, management and executive job pricing, pricing jobs in rural markets with few competitors, segmenting markets into micro markets, and blending markets into macro markets.

 WageWatch compensation consultants can also help you with your analysis of the market data compared to your current salary ranges and incumbent salaries to update your current structure or in creating a whole new structure.  Perhaps you are looking at moving more toward performance based pay.  We are prepared and experienced to be able to help you with a variety of compensation needs, for example,  analyzing the compensation impact of organizational changes with an internal equity and external competitiveness analysis. Our analysis is full service.  In addition to the compensation review, our consultants can help with FLSA classifications, hybrid jobs, writing job descriptions, mapping new organization charts, and crafting employee communications.

 As the economy continues to improve, we expect to see more pressure put on salary budgets and merit increases in order to meet rising demand for talent. Our consultants can work with you to get the balance right on budgeted wage increases and their relationship with structure adjustments.  When wage increases and adjustments are made, often other potential concerns are uncovered such as wage compression and paying out of range. WageWatch consultants are here to offer comprehensive guidance on your structure maintenance and adjustment requirements.

 WageWatch salary surveys provide data tools and report statistics for analysts of all experience levels. Please contact WageWatch if you need assistance with interpretation the statistics reported, help building custom reports, or have a need for our wide range of consulting services. For more information on our services and surveys please call WageWatch at 888-330-9243 or contact us online.

Posted in Uncategorized on January 22nd, 2014 · Comments Off on The Data Tells a Story

Tip Minimum Wage Update

The tip minimum wage has made headlines this past year.  The WAGES Act, introduced in Congress by Maryland Congresswoman Donna Edwards if passed would raise the federal tip minimum from $2.13 an hour for the first time since 1991.  The federal tip minimum wage was originated in 1966 and at that time was 50% of the federal minimum wage.  Today it is 29.4% of the federal minimum wage.  Over half the states and the District of Columbia have tip minimums that are higher than the federal. These range from $2.33 an hour in Wisconsin to $7 in Hawaii.  Washington is one of seven states with no tip credit law, so employers pay the state’s full minimum wage, currently at $9.32 an hour, the highest in the nation.  The other states that prohibit the tip credit are: Alaska, California, Minnesota, Montana, Nevada, and Oregon. Servers who work in these states receive the same minimum wage as all other workers.  Also in the news this past year are restaurants that follow the tip-free European style of service with a ‘no tipping’ policy and the employees are paid the full regular minimum wage or higher.  These restaurants are in the minority and tend to be the “higher end” restaurants in some major US cities such as Los Angeles and New York City.  There is a little talk on whether this practice should become the norm in the US, but at least for the foreseeable future this is not likely to happen.

  By definition, a tipped employee customarily and regularly receives more than $30 per month in tips.  Under federal law and in most states, employers may pay tipped employees less than the minimum wage as long as it does not fall below the tip minimum wage and employees must receive enough in tips so that their hourly rate plus tips received equals at least the regular minimum wage.  The difference between the regular minimum wage and the hourly rate in which the employer pays is called a “tip credit”, which is essentially a credit for the employer towards the regular minimum wage rate.  If a tipped employee does not earn enough in tips to bring his/her total compensation up to at least the applicable minimum wage, the employer has to pay the difference.  Additionally, overtime must be calculated and paid on the full minimum wage for tip employees and not on the tip minimum wage or direct cash wage payment.  Employers are required to provide a tip credit notice to their tip employees in advance of their pay and any pay changes.  The notice informs each tipped employee about the tip credit allowance before the tip employee’s first paycheck and before any paycheck in which there is a pay change. The notice must include the amount of wage the employer will pay, the amount the employer will credit against tips as well as specific tip credit rules.

Many states allow employers to require tip pooling.   For example, waiters may be required to pool their tips with bartenders and bussers for equal disbursement at the end of a shift. All employees subject to the pool have to chip in a portion of their tips, which are then divided among a group of employees. An employee can’t be required to pay more into the pool than is customary and reasonable, and the employee must be able to keep at least the full minimum wage.  Only employees who regularly receive tips can be part of the pool. Employees can’t be required to share their tips with employees who don’t usually receive their own tips, like dishwashers or cooks nor can tips from a tip pool go to employers.  In some states, managers or supervisors are also prohibited from receiving tips from a tip pool.  There is no maximum amount or percentage of tips for a valid mandatory tip pool, according to the federal rules. But employers must notify tipped employees of any tip pool contribution requirements and are prohibited from retaining tips for any other purpose.

According to the FLSA, mandatory service charges (ie., mandatory 15% charge paid out to wait staff) are not considered tips and cannot be counted for use as a tip credit. The service charge may be counted as part of the employee’s minimum wage and overtime requirements. However, employees who receive tips in addition to a mandatory service charge are considered tipped employees by the FLSA. A well planned salary and total rewards package will motivate your employees, help your company maintain a competitive advantage and help retain key employees.  Please refer to your federal and state wage and hour resources for full details regarding all tip wage regulations.

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 surveys, salary surveys and pay practices data 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 .

Posted in Uncategorized on January 15th, 2014 · Comments Off on Tip Minimum Wage Update

Your 2014 Compensation Calendar

As you return to the office in 2014, before you dive right in, take the opportunity to step back from the day to day duties, reflect on the year that just passed and start the new year with a new perspective.  Taking some time to plan your compensation calendar in the year ahead can help you stay organized, stay on task and focus on what is critical. Hopefully you have kept notes on compensation issues that occurred in the prior year, such as salary range or hiring issues for certain jobs, maybe a department has restructured and jobs have changed that could require new job descriptions, exempt status review and may call for a complete department salary structure review.  These are things you will need to attend to as you review your salary structure for 2014.   Taking stock and making a list of the issues and problems from the prior year is a good place to start for your 2014 compensation calendar

 Review and develop a timeline for your annual processes such as the merit increases, performance reviews, minimum wage increases, bonus payments, annual surveys you participate in, and wage or salary structure reviews.  To do this, begin with last year’s timeline and a review of the process to ensure that you don’t miss any important steps or improvements or changes that are needed for this year’s process.  Communicate the timeline and proposed changes to process partners such as Payroll or Accounting to ensure everyone agrees to the dates and has an opportunity to provide their input regarding the process.

 Include data audits on your calendar or task list.  Keeping your compensation house in order is important.  Items to include are: ensure all jobs have the correct exempt status, ensure exempt jobs are paid at or above the exempt minimum wage, review wages by state to ensure all are at or above the minimum wage, include tip minimums.  Ensure overtime is being calculated correctly for tip positions, for employees who work more than one job and when non-discretionary bonuses are paid.  Perform some quick equity analysis, look for salary outliers and ensure you can defend if audited.  You may find simple mis-codings or more serious problems.  Look for new hires with hire salaries above or below the starting rate or any other exceptions that may need to be addressed.  You may find positions that during the past year have consistently been hired at the higher end of the salary range.  This is a strong indication that a salary range adjustment will be needed and this can be added to your list of salary structure issues that will need reviewed.   If you were audited during the prior year and any issues were found, include those in your internal audit.  Also it’s a good idea to have a procedure in place in the event of an audit during the coming year. 

 Review your compensation policies to ensure they are up to date with current regulations and with any changes that may have been made to your salary structure, procedures or systems.  Ensure that you have not missed any new regulations that may require updates and changes to your existing policies or procedures. 

 Set aside time on your compensation calendar to review salary survey data when it is published later this year and perform a thorough analysis of your salary structure to market.  A thorough review should be done at least every other year and each year you should minimally be looking at any problem areas or issues that occurred during the prior year and address possible salary structure movements and/or equity issues.

 As the economy continues to improve, we expect to see more pressure put on salary budgets and merit increases in order to meet rising demand for talent. Our consultants can work with you to get the balance right on budgeted wage increases and their relationship with structure adjustments.  When wage increases and adjustments are made, often other potential concerns are uncovered such as wage compression and paying out of range. WageWatch consultants are here to offer comprehensive guidance on your structure maintenance and adjustment requirements.   WageWatch salary surveys provide data tools and report statistics for analysts of all experience levels. Please contact WageWatch if you need assistance with interpretation the statistics reported, help building custom reports, or have a need for our wide range of consulting services. For more information on our services and surveys please call WageWatch at 888-330-9243 or contact us online.

Posted in Uncategorized on January 8th, 2014 · Comments Off on Your 2014 Compensation Calendar