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Archive for July, 2015

HOSPITALITY INDUSTRY: IMPACT OF NEW OVERTIME RULES

The proposed updated and revised regulations, as issued by the Department of Labor on 6 July under the Fair Labor Standards Act, would directly affect an estimated 4.8 million workers who are now exempt under the EAP (or so-called “white collar” exemption), but would fall under the proposed 40th percentile of earnings for full-time salaried workers ($50,440 in 2016 dollars). The rules also would automatically update the salary level in future years based on 40th percentile of earnings in the workplace or on inflationary change. 

 The potential impact of these rule changes greatly exceeds the impact of raising the minimum wage to $10.10 over a two-year period. It was estimated that about 3.3 million workers earn at or below the minimum wage, about 2% of the workforce. In order to increase the minimum wage and tie it to inflation required an act of Congress. What the president has done with a stroke of his pen is to authorize DOL through rulemaking, as stated in the proposed rule, “to update the salary level to ensure that FLSA’s intended overtime protections are fully implemented.” 

Overtime in Hospitality 

To better understand how the overtime rules might be applied in the hospitality sector, I spoke with key people in a number of management companies who would be responsible for the implementation of new overtime rules. 

It was very clear from the discussions that the disruption to operations will be severe as will be the financial impact on the bottom line of the companies. The performance of the hospitality industry has been strong in the last two years with record levels of occupancy as well as 14 straight months of record employment. Hospitality has been a leader in the growth and performance of the United States economy. The overtime rules will definitely affect the industry’s performance. 

The salaried positions that likely will require reclassification to nonexempt or substantial raises to comply with the overtime rules will include:

• assistant general manager;

• night manager;

• director of sales;

• sales manager;

• restaurant manager;

• front office manager;

• executive housekeeping;

• chief engineer; and

• banquet manager 

Of course, this will vary by size and service level of the hotel. In general, it is estimated that about 180,000 to 190,000 employees of the 1.9 million workforce or about 10% will be affected. 

The strategies I mentioned above, reclassification to nonexempt and pay raises, each have their own set of problems. Starting with reclassification to nonexempt, the logic for this is to calculate an hourly rate that takes into consideration the manager’s average weekly hours worked. Many middle managers work around 50 hours a week. For example, a front office manager is making $40,000 a year, which works out to be an hourly rate of about $19.20 an hour based on a 40-hour work week. Adjusting the hourly rate to account for the overtime pay rate of 1.5 and 500 hours of overtime a year, works out to be about $14.20 an hour, a perceived decrease of $5 an hour. 

Now the front desk manager is clocking in and technically is not considered part of management for collective bargaining purposes. They may no longer view themselves as part of management. Furthermore, on an hourly basis, he or she is paid about the same rate as the front desk supervisors, who have not been working overtime. So now, the front desk supervisors may work overtime and the front office manager may have less take-home pay. The term for this would be reverse wage compression or even wage inversion. 

The hotel now could have internal equity problems. The management team has shrunk because the reclassified employees may no longer view themselves as part of management. In essence, this will have overturned one of the key components of the Taft-Hartley Act in the late 1940s where middle managers and supervisors were for the first time since the passage of the Wagner Act in 1935, considered “Soldiers of Management” and were expressly prohibited from participating in union organizing. Along with the NLRB’s continued re-analysis of Supreme Court precedent in Kentucky River and other decisions from that agency and the DOL attacking employer use of independent contractors and temporary agencies, it is evident that there is a union-fueled effort to expand the number of individuals exposed to organizing. And this push works conversely to decrease the number and potency of middle managers as a force to oppose unionization efforts. 

The second strategy of pay raises to keep middle managers above the $50,440 floor would be very costly, adding three to four points to labor expense, reducing profitably and resulting in a loss of equity to shareholders and a lower valuation. 

It also could cause wage compression problems. For example, do the assistant GM and front office manager both receive pay raises to $50,440, or does management give the AGM 10% more in order to avoid wage compression? If the AGM gets an additional bump in pay, then the GM now needs a raise in order to maintain a fair and acceptable differential. 

Other issues

There are many other issues that will be raised by the new overtime rules. For instance, what do you do about off-the-clock time at home or at lunch when an employee calls with an issue that needs your attention? What about telecommuting? 

As you can see, this will not be an easy adjustment for the Leisure and Hospitality supersector of the U.S. economy or for other service sectors, which will be affected by DOL’s new overtime rules.

At WageWatch 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.  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.

Posted in Uncategorized on July 30th, 2015 · Comments Off on HOSPITALITY INDUSTRY: IMPACT OF NEW OVERTIME RULES

DO YOU PAY EQUITABLY AND FAIRLY ENOUGH TO SATISFY EEOC?

You may think you are paying your employees fairly and equitably until the EEOC comes knocking at your door to perform an audit.  It is commonly known that EEOC requires that all employees are treated fairly regardless of national origin, race, religion, color, sex (including pregnancy and sexual orientation), disability or genetic information. And for employers with 20 or more employees, the Age Discrimination in Employment Act requires that you treat workers over 40 the same and younger workers.  To be in complete compliance with EEO regulations, none of these factors can be used when you are hiring, promoting, disciplining and laying off workers.  Additionally private employers with at least 15 employees who work for you for 20 weeks or more a year must also comply with Title VII of the Civil Rights Act and if you have a federal contract or subcontract you may be subject to EEO guidelines.  Less commonly known is that fair treatment must also be extended to employees who marry someone of a different national origin, race, religion or color.  What you don’t know can hurt you and therefore periodic pay equity self-audits are essential.

 All forms of pay are covered by these regulations, for example; base salary, overtime pay, shift differentials, discretionary or non-discretionary bonuses, stock options, profit sharing plans, life insurance, vacation and holiday pay, travel expenses, and benefits.  If an inequality in wages between men and women is found, it cannot be corrected by reducing the wages of either sex.

To properly analyze your pay practices, you need to identify all factors that influence all types of compensation.  Influencing factors may include:

 Company Seniority

  • Length of time in position
  • Service interruptions
  • Skills and experience required for the job
  • Education, certifications, licenses, etc required for the job
  • Performance ratings
  • Pay grade or level
  • Historic pay increases
  • Market Location
  • Employment status such as Full-time/Part-time

 Pay equity analysis should be performed that includes analysis by job group or salary grade;  if no formal salary structure is in place, group by jobs with similar value and worth.  Also analyze by race and by gender.  Ensure all your pay decisions are well documented as well as having good document retention policies in place.  Of utmost importance is that you apply your compensation practices in a consistent manner and in accordance with your policies and procedures.  If audited by the EEOC, you may need to defend your pay decisions and consistency and documentation will be crucial.

 To protect your organization as well as ensure fair and equitable pay to all employees, it is essential to understand and stay up to date with all the regulations, ensure policies and procedures are in place for compliance and to perform periodic compliance audits.  Even if you are in compliance today, that can easily and quickly change as your organization changes and evolves.  Mergers, acquisitions and divestitures can significantly impact pay equity as well as the day to day business operations of hiring, terminating, promoting, transferring, and restructuring within the organization including the realignment of job duties.

 At WageWatch 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.  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 .

 

Posted in Uncategorized on July 23rd, 2015 · Comments Off on DO YOU PAY EQUITABLY AND FAIRLY ENOUGH TO SATISFY EEOC?

EFFECTIVE NEW HIRE ORIENTATION

An employee’s experience during their first few days will affect the rest of their tenure. It is critical to begin with an effective, positive and fun new hire orientation for the future success of your new employees.  Even before the employees hire date, you can make a positive impact with a call to the employee two or three days before their start date, welcoming them, letting them know what time to arrive and what they can expect during their first day and first week on the job.  Studies show that a well-planned orientation can contribute to length of employment, better work attitudes, more effective communication and fewer mistakes.  Your new hire orientation is your chance to set a positive tone for a hopefully long lasting and mutually beneficial relationship. 

A new hire’s early experience is highly influenced by his peers, managers, subordinates, HR team members and the organization’s top management.  Ensure that new hires are welcomed by their team members.  Plan a welcome breakfast meet and greet for their first morning on the job.  The new hire’s immediate supervisor should schedule daily meetings with the new employee at least for the first week, then at least weekly for the first month or two.  Schedule informational meetings with key people in the department and in other departments to provide the new hire with the general knowledge that they will need to perform their job.  Include an office tour in the orientation process that includes introductions.  Be sure to include introductions to top Executives, Human Resource personnel as well as receptionists, administrative assistants and copy/mail room attendants. 

An effective orientation program will put emphasis on the new employee, their individuality and what they have to offer rather than focusing solely on the company’s culture and how the new employee can fit in.  You are probably hiring in part to get new ideas into the organization.  Make sure to capitalize on that.  Make your orientation meetings fun and be sure to provide a meal or at least snacks.  Keep it interesting and not too long. Too much information will be boring and will not be retained.  Orientation should reflect culture through interactive activities.  One way to make it memorable is to present companies goals, mission and values in an activity form rather than simply providing the information.  Allow the new hires to get to know each other on a personal basis, not just professional – go around the room and have them tell one professional and one personal thing about themselves.  You can also turn this into a game by writing one thing about each person on a piece of paper.  At the end, state items one at a time out of order and have people guess who said what.

Promote communication with a team building activity such as learning the employee handbook through a scavenger hunt.  For example, divide the orientation group into teams and see which team can answer the most handbook questions in a set amount of time.  Cover company ethics to let them know what is expected, and also include ‘unwritten rules’.  Don’t end there.  After orientation, provide follow-ups with each new hire to illicit their feedback and answer any follow-up questions they may have. 

Don’t forget the basics.  Provide them with all the office supplies they will need to start their job, include contact information they will need.  And let them know how to get additional office supplies.  Teach them how to use the phone, how to forward calls, set up and change voice mail, and how to do a conference call.

Today, many companies are adding programs such as flex-time, telecommuting as well as accommodating and encouraging alternative work styles in an effort to provide a work environment where employees are happier and thriving.  Therefore don’t neglect or underestimate how impactful beginnings are, and provide your new hires with an orientation program that is effective and unique to your company and it’s culture.

Implementing the above suggestions will help your company to build a culture that encourages retention of employees, which in turn will attract top talent. In addition to providing a great work environment that respects employees and provides opportunities for learning and growth, it is also important that they receive a solid compensation and benefits package.  At WageWatch we offer 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 .

Posted in Uncategorized on July 15th, 2015 · Comments Off on EFFECTIVE NEW HIRE ORIENTATION

MULTI-EMPLOYER PENSION FUNDS CAN BE TROUBLE IN MERGERS AND ACQUISITIONS

Guest Author:  Charles Pautsch

Pautsch, Spognardi & Baiocchi Legal Group LLP

Those familiar with multi-employer pension funds know that they can spell big trouble for participating employers. Those not familiar with them better learn about their man nuances BEFORE ever becoming involved with them through an acquisition, merger or other means. 

A multi employer pension plan is a defined benefit plan established through collective bargaining with a union. They are sometimes called collectively-bargained plans or Taft-Hartley Plans. Collective bargaining itself typically only establishes contribution levels for participating employers, setting these at dollar amounts per hours worked by employees in the collective bargaining unit. Benefit levels, as well as accrual and vesting schedules, are determined by the Plan or Fund itself, usually by a committee of representatives from the Union and the employers’ Association. The most famous of these plans, and perhaps the most troubled, is the Central States Teamsters Fund. Other large Funds include the IBEW Fund, the UNITE Fund and the Carpenters Fund. But there are many others as they cover virtually every unionized industry, are quite prevalent in construction, transportation and the hotel and gaming industries where union’s have long held a foothold. 

These Funds have had a rocky history. Many of them have been plagued with corruption such as seeing Plan loans made to “insiders”. Many have adopted poor investment strategies. Virtually all were racked by the stock market swoons associated with the dot com bust of 2001 and the meltdown of 2008. And virtually all have suffered as a result of unfavorable long-term actuarial trends brought about by industry contraction and the simple reluctance of many companies to refuse to join or bargain their way into a Taft-Hartley Plan. 

Because of this rocky history, Congress has acted to prop up these plans on several critical occasions. The most noteworthy of these, until recently, was the passage of the legendary Multi-Employer Pension Plan Amendments Act (MEPPAA). Some have called it the most pro-Union piece of labor legislation passed since the Wagner Act in 1935. It saved many of these Plans by automatically assessing Withdrawal Liability to each partially or totally withdrawing employer based on their pro-rata share of unfunded vested liability(UVB). And this assessment is made regardless of whether or not the withdrawing employer has made all of its own required contributions. And the liability established is usually set as personal on the business owners and is nearly absolute—-not voidable in bankruptcy. 

And now Congress has acted again. In December 2014, it passed a measure with the mixed blessing of union and employer groups, (some support/some oppose), which allow troubled Funds, including  several big ones spiraling to insolvency, to actually cut back on the vested benefit levels established for certain pensioners and would-be pensioners. Earlier this year the Pension Benefit Guaranty Corporation issued regulations prescribing the process by which these cuts to retirees’ benefits could be made. And just this week the Treasury Secretary appointed Kenneth Feinberg, compensation expert who managed the 9/11 and BP Gulf spill comp funds, to oversee these cuts. 

For employers, these lessons of the past and current developments should serve as a clear warning. If you are contemplating acquiring a facility or business that is participant in these Funds—–DUE DILIGENCE of the highest order is required. And if you are already participating in these funds , carefully thought out funding or withdrawal options should be considered. 

 In the merger or acquisition situation, a savvy buyer can minimize most of the risks associated with these plans through careful analysis and aggressive negotiation of terms upon acquisition. Likewise a shrewd seller can take aim at the prospect of transferring all or some of its withdrawal liability under the plan.  A careful review of current data on the Plan’s historical performance and particularly its trends on the critical measure that determines withdrawal liability—unfunded vested liability (UVB)—– is absolutely essential to evaluating a sale from either perspective—seller or buyer. In a sale of assets involving a concern covered by a Plan, Section 4204 is available to the parties as a means to transfer assets of the concern and the existing UVB to the Buyer without triggering withdrawal liability, so long as the Section’s provisions regarding secondary liability and bonding requirements for the Seller are adhered to. 

Businesses with plans already in place covering employees can minimize the risks of triggering partial or even complete withdrawal by carefully monitoring declining contribution levels and being alert to the types of transactions that trigger complete withdrawal.

WageWatch offers accurate, up-to-date HR metrics, 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 author of this article is Charles Pautsch with Pautsch, Spognardi & Baiocchi Legal Group LLP . His complete biography can be found at www.psb-attorneys.com.  He and other PSB attorneys have considerable experience at guiding employers in unionized industries through the intricacies of MEPPAA and its accompanying regulations. Mr. Pautsch can be reached at 414-810-9944 or cwp@psb-attorneys.com

Posted in Uncategorized on July 8th, 2015 · Comments Off on MULTI-EMPLOYER PENSION FUNDS CAN BE TROUBLE IN MERGERS AND ACQUISITIONS

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 July 2nd, 2015 · Comments Off on WHEN TO EMPLOY SHORT-TERM AND LONG-TERM INCENTIVES