The U.S. Department of Labor has promised a renewed emphasis on enforcement and important changes to key policies in 2015. The targeted enforcement areas include: (1) federal and state minimum wage and overtime law violations; (2) the classification of workers as independent contractors; and (3) an overhaul of the Fair Labor Standard Act’s overtime exemption for white collar employees. In 2014, President Obama directed the DOL to modernize the FLSA exemptions and the DOL plans to propose the new rules in early 2015. See WageWatch Blog Regarding Proposed Wage & Hour Legislation Also, in the president’s last address, he urged Congress to send him a paid family leave bill and ensure equal pay for women. He also discussed the importance of overtime pay and challenged members again to raise the minimum wage.
The federal and state governments have strengthened enforcement efforts over the past several years. To ensure their aggressive enforcement agenda for 2015, at the federal level, the Obama administration has expanded the number of Wage and Hour Division investigators from 730 to over 1,000.
The DOL considers the hospitality industry as a “fissured” industry and is expected to step up enforcement against hospitality employers this year. Therefore owners, franchisors, franchisees and management companies should be prepared, particularly in the areas of misclassification of employee exemption status and ensuring tipped employees are receiving minimum wage – See WageWatch Blog Regarding Tip Pay. In general, the leisure and hospitality industries are thought to be the biggest perpetrators, however, a significant share of violations are also found in education, health services and wholesale and retail trade industries.
Employers should make sure that their employees’ exemption classification is correct per the DOL guidelines found on their website – www.dol.gov. Ensure that the employees who you have classified as exempt from overtime pay that you have based the classifications on the employee’s actual job duties and not on the job title. The ultimate burden of proof always rests on the employer.
In light of the DOL’s continued focus on investigations and prosecutions of misclassified independent contractors, employers must carefully examine the company’s relationship with its workers. With continued pressure on businesses to remain competitive, subcontracting can be a way to cut costs. However, in some cases employees are being misclassified as independent contractors. Employers should perform self-audits to ensure that ‘independent contractors’ are correctly classified. The key factors are the degree of control and independence of the worker. The more control the employer has over when, where and how the worker performs, the higher the probability that the worker will be deemed an employee. See WageWatch Blog Regarding Independent Contractor Status
WageWatch 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. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes. Our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. 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.
The primary purpose of an annual incentive or bonus plan is to drive and reward behaviors that have an impact on the operating success of the company. When designing your incentive plan you need to have a clear measurement system for what success is in your company and then make sure the measurements are meaningful to the employees who are doing the work. For any incentive plan to be effective it needs to be meaningful and have clarity relating both to the plan provisions, and to the results needed to earn and maximize an award and the award should be attainable. Employees need to see a link between how their job performance affects results, and the award amount needs to be sufficient enough to motivate.
Generally two to four performance metrics are included in a bonus plan design. The metrics are primarily financial, though quantifiable business objectives can also be used. Corporate or business unit financial metrics are used to fund the incentive pool, and individual performance measures may also be used to determine final individual payouts. Results that are measured can be quantitative and qualitative, such as customer service quality, number of customers served, effectiveness of programs, etc. Often a balanced scorecard approach is used.
Employers should give careful attention not only to the design, but also to the implementation and communication of incentive programs. The most common pitfall when creating a bonus program is inadequate communication. Bonus plan communications should be both clear and timely. Make sure the plan is communicated prior to the beginning of the bonus period and this initial bonus communication should address the structure of the plan, decision making criteria, fairness, measurability and target. Equally important are follow-up communications regarding the progress toward attainment of the goals that should happen at frequent and regular intervals throughout the bonus plan period. You want your employees to have an on-going understanding of where they are and what they need to do to meet and/or exceed their bonus target.
When bonuses are paid or awarded, clear communications again are very important. Managers should have individual meetings with each bonus plan recipient and clearly communicate the outcome for the incentive period. Whatever the amount, be sure to let the recipient know that he/she is valued. Be sure to discuss specific accomplishments and strengths that went into the bonus award. If the employee was expecting more, be sure to emphasize the broader context of the company’s approach to bonuses. Let each person know how the bonus was calculated. No matter what the award is, the conversation regarding the award amount is an opportunity not only for clarity and understanding, but to thank the individual for their hard work and to hopefully improve morale and motivate for future performance.
Employees want to know they are being fairly compensated for their work and their job performance. Bonus plans that are meaningful to your employees and aligned with the bottom line of your company can help build moral and drive behaviors that are critical to the success of the company.
WageWatch 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, incentive and benefits packages that meet or rival the industry standards. The PeerMark™ Wage Survey is the only Web-based custom survey tool that allows individual survey participants to select their competitive set for comparison purposes. Our experienced compensation consultants can assist with your organization’s compensation needs. We can help you ensure internal equity and compliance with regulations as well as help you structure your compensation programs to support your company’s business strategy and objectives. 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.
A primary goal of any compensation program is to motivate employees to perform their best. Most organizations have pay for performance at least in the form of a merit pay system. An accurate, reliable and credible performance-appraisal program that is aligned with company goals, core values and industry best practices is the foundation of a successful merit pay program. Performance measures should be tailored specifically for the organization and it’s jobs with clear outcomes that minimize bias and misinterpretation. Consistency, manager training, effective communications and a periodic review are also essential for success.
The merit pay budget has two aspects to it, determining the size of the budget and allocating the budget to organizational units and it’s employees. Determining the size of the budget will be based on competitive trends, the organization’s financial situation and other factors that may impact pay such as minimum wage and cost of living changes. For the past several years merit budgets have been small and therefore it has been a challenge to adequately rewarding top performers as well as those that are rated ‘Good’ and ‘Average’. Employees with performance ratings of Good and Average can be the largest percentage of employees and therefore the backbone of the workforce. These employees should not be overlooked but raises for these employees often do not keep up with the cost of living. Also the differentials between performance levels may not be large enough to motivate and retain employees. These factors reduce the motivational potential of the merit pay program.
Using a merit increase matrix may help to maintain internal equity but may not properly reward top performers. You want your reviewing managers to be engaged in the merit award process and to give appropriate thought and consideration to their pay decisions. A certain amount of guidance and training is needed but the merit matrix can be too structured and rigid as well as make it too easy for reviewing managers to simply follow the formula rather than spend the time and effort for a thorough review. Greater rewards for top performers and greater deviation of awards between good and average performers can be accomplished by providing zero increases to employees whose performance falls below average. Providing broad increase guidelines in lieu of a matrix to your reviewing managers using factors such as performance rating, time in position, and position in salary range can eliminate the rigidity of the merit matrix and drive a a more thoughtful approach to the merit award process. Once tentative award amounts are determined, reviewing managers should perform an analysis of the awards looking at the whole department and at each individual award using these and other factors as well as any unique or special circumstances.
Annual pay increases not only help keep employees’ pay at market, providing awards that are accurately linked to performance are important in retaining employees – especially your best ones. Compensation frequently emerges as a driver of retention, and when pay increases aren’t provided regularly and fairly, it will negatively impact job satisfaction.
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 and that your pay practices are fair, equitable and non-discriminatory. We can provide your business with compensation surveys and salary reports to help you establish a budget for your merit pay program, including bonuses and incentives. Our innovative company is a leader in the collection of data for surveys and salary reports, which allows us to provide services to a wide range of industries in both the private and public sector. To learn more about our compensation surveys, salary reports and other services, please call 480-237-6130 or contact us online.
As you return to the office in 2015, 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 2015. Taking stock and making a list of the issues and problems from the prior year is a good place to start for your 2015 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 salary 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.