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Archive for April, 2014

WHEN TO EMPLOY SHORT-TERM AND LONG-TERM INCENTIVES

An employee compensation plan should provide a competitive wage and reward employees fairly and equitably for behaviors while accomplishing goals and objectives for the organization.  Compensation is the reward an employee receives in return for his or her contribution to the organization.  Basic components of a compensation package include base salary, incentives, and benefits. 

 Organizations implement incentive plans to help reach overall goals and objectives.  Incentive plans range from variable pay plans to prizes and recognition awards.   Incentive plans can motivate employees to go beyond expectations and produce results that contribute to business success.  They also can attract new talent and encourage company loyalty.  For an incentive plan to be effective, the goals must be obtainable.

 So how do you determine whether a short-term or long-term incentive is appropriate?  Short-term incentives are used to create focus on short-term or immediate goals, and align rewards with individual and business performance.  Long-term incentives are typically designed for executives who make strategic decisions for the company.  They can ensure focus on what’s best for the organization’s future outcomes by placing importance on medium and/or long-term goals and creating a sense of ownership of those goals.  Successful incentive plans can also help organizations align rewards with shareholder interests, and help retain key talent.

 Short term incentives can be for all employee levels from entry level to middle management to the executive level and they can be big or small and can cover a week, month, quarter or year of performance measurements and goals.  Short term incentives can create a better work environment and motivate employees to work to their greatest potential.  Without short term incentives, employees may feel that their work is unappreciated and morale can be low.  Short term incentives align employees work with the overall success of the company and can clearly define an employee’s specific role in contributing to that success.  Short term incentives such as prizes, free airline tickets or hotel stays, tickets to events or a paid day off can have high impact.  Short-term incentives can be individual and/or team based.  Rewarding employees for clearly defined goals can go a long way to creating happy employees who work well alone and together striving for success.

 It is important to use both the short and the long term initiatives to produce desired results. Incentive programs that are carefully and strategically crafted and aligned with company goals and timeframes should lead to more productive, motivated and loyal team members.  Retaining good employees saves organizations the expense of recruiting and training new workers.

 At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to 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 April 23rd, 2014 · Comments Off on WHEN TO EMPLOY SHORT-TERM AND LONG-TERM INCENTIVES

SALARY RANGE DISCLOSURE

The question of whether or not to share salary grades and ranges with employees continues to be debated.  Some companies provide their salary structure to all employees, some provide portions of the structure on a need to know basis, while others hold the information in the strictest of confidence.  Non-disclosure of salary ranges can create confusion and even suspicion and distrust among employees.  Alternatively, companies that share information about pay ranges tend to have more committed employees and higher retention rates.  Salary Ranges are also an effective tool for recruitment.   

 There are many advantages to disclosing pay ranges to your employees.  Full transparency can help cultivate a culture of fairness and provide employees with a greater understanding of how their role impacts company goals.  The salary ranges are a useful tool for managers to align employee expectations with market realities and to manage pay progression within their departments.   They are also helpful to employees when making decisions about their next career move.  

 A well-defined compensation strategy can help you communicate your salary structure, and handle questions and potentially difficult conversations with greater success.  Employees can still disagree, but communicating honestly about pay at least provides a better understanding. 

 For salary range communications to be effective, you need to ensure your structure grew out of current and competitive market data that was carefully matched to your jobs and that a thorough and accurate market analysis produced the resulting salary ranges.  You will need to be able to define and defend your labor markets, survey sources, how pay ranges were determined and how jobs were assigned to grades and corresponding pay ranges.  If you have done the job properly, explaining and defending the salary ranges should be easy.  Be prepared to respond to questions regarding employee’s compa-ratio or position in the salary range and/or market point. 

 Salary ranges can help with communications during the merit increase process, especially if pay increases are based on performance and/or position in range.  Some information does not need to be shared.  For example, executive salaries (typically above the Director level) are normally not disclosed and actual salaries of employees do not need to be disclosed except under a union bargaining agreement.  Be selective and discreet about the information that you share as well as how it is presented.

 Employee complaints about salary usually stem from a few core issues, including perceiving salary decisions as unfair, confusion regarding the compensation system and disputes regarding their performance evaluations.  If jobs have been fairly and objectively evaluated and priced against both internal and external factors and there is nothing to hide, if you can defend and explain your decisions, then why not consider full disclosure of your salary structure?

 At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to 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 April 16th, 2014 · Comments Off on SALARY RANGE DISCLOSURE

Joint Employer Liability

In last week’s blog we looked at when ‘Independent Contractors’ are really ‘Employees’.  Now let’s look at the rules regarding sub-contractors, temporary staffing and leased employees and what constitutes a joint employer relationship with the contractor or leasing agency and the client business. 

 The use of sub-contractors, temporary staffing, leased employees and independent contractors can provide employers with quick temporary staffing and reduce benefits and payroll costs. However, the employer client can be considered a joint employer with the leasing or temporary agency when they share certain key employment terms such as the ability to hire, fire or discipline the workers, affect their compensation and benefits, and direct and supervise their performance.  When businesses use temporary agency, leased, or contract workers, though the employer is the temporary help, leasing, or contracting company, the client business may be regarded as a joint employer under some laws.  

 The Family and Medical Leave Act has specific language regarding joint employer relationships. While the leasing or temporary help agency is the primary employer, the client company may be required to place the worker in the same or comparable position upon his or her return from FMLA leave.  Additionally, leased and temporary workers will count as employees of the client company for the purposes of determining whether a business is subject to the FMLA regulations.

 In the Tax Equity and Fiscal Responsibility Act of 1982, leased and temporary workers are the client’s employees for the purposes of qualifying retirement plans and certain fringe benefits such as life insurance and cafeteria plans (does not apply to health insurance benefits), if the workers have been engaged with the client company on a full-time basis for a minimum of one year and the client company primarily controls or directs their work.

 An employer can face a charge of discrimination under Title VII anti-discrimination legislation brought by an individual who worked for the employer under one of these leasing or sub-contractor relationships.

 It has also come into question with the National Labor Relations Board (NLRB) whether leased and temporary workers must be included in collective bargaining agreements that cover the client’s regular employees.

Some states have passed legislation on joint employer liability as it pertains to workers’ compensation regulation.  New York ruled that the client is the common law employer of leased employees and is therefore primarily responsible for providing workers’ compensation benefits. To date there have been no guidelines for joint employer status under OSHA or other health and safety regulations.

 Employers need to be aware of and have guidelines regarding the degree of control they have over these temporary, leased and contract workers. The greater the degree of control, the greater the likelihood that the employer could be determined to be a joint employer.

 At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to 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 April 10th, 2014 · Comments Off on Joint Employer Liability

Independent Contractor or Employee?

If it walks like a duck and talks like a duck, it’s a duck.  In other words, if you are treating the ‘independent contractor’ like an employee by doing things such as providing work materials and office space, designating working hours, providing training and direction regarding how and when to perform the work, then the ‘independent contractor’ is most likely an employee.  Independent contractor is defined by the Fair Labor Standards Act, IRS regulations, and the decisions of some courts.  Many states also have specific independent contractor regulations.  The IRS and many states have adopted common law principles to define an independent contractor. These rules focus primarily on the level of control an employer has over a service or product. For independent contractors, the company can direct or control only the result of the work done, and not the means and methods in getting to the result.

The rules are not always clear-cut to determine the correct status, but generally characteristics of an Independent Contractor include:

  • The work assignment is temporary and typically for a specific project; and
  • The work assignment is not an integral part of the business and is not something typically done by employees.

The Independent Contractor will:

  • Supply his or her own equipment, materials and tools;
  • Pay for their own expenses;
  • Control the hours worked;
  • Determine how and when to perform the work;
  • Retain a degree of control and independence;
  • Operate under a business name and has his/her own employees; and
  • Advertise his/her business’ services and has more than one client.

 Some courts and federal agencies use an “economic realities test” which looks at the dependence of the worker on the business.  If a large portion of a worker’s salary is from one specific company, this may qualify the as an employee. Other factors considered are level of skill, integral nature of the work, intent of the parties and payment of social security taxes and benefits.

 Misclassification of an individual as an independent contractor may have a number of costly legal consequences such as reimbursement of all wages including overtime, taxes and penalties for federal and state income taxes, social security, Medicare and unemployment, providing employee benefits and workers compensation for any injuries.

 There is no set number of factors that makes the worker an employee or an independent contractor.  Also, factors which are relevant in one situation may not be relevant in another.  The best approach is to look at the entire relationship, consider the degree or extent of the right to direct and control the work, and be sure to document all factors used in your determination process.

 At WageWatch our compensation consultants are focused on your organization’s compensation needs and ready to 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 April 3rd, 2014 · Comments Off on Independent Contractor or Employee?