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DRAMATIC CHANGES FOR PERFORMANCE MANAGEMENT

Organizations are exploring some new and innovative performance management systems in an effort to truly inspire and motivate their teams with some encouraging results. Traditional performance management systems typically set goals related to the business plan, utilize performance appraisals that are too lengthy, redundant, hastily completed to meet deadlines and often don’t allow employees any real input.  Many HR leaders believe that performance reviews yield inaccurate results due to biased approaches and misleading inputs.  Performance Appraisals are essentially a forced ranking system that can actually be very demotivating.

The traditional systems are beginning to shift to a more effective coaching system that focuses on employee achievement of measurable goals and objectives rather than formalized annual appraisal systems that primarily communicate one-way. There are many examples of progressive companies that have replaced their traditional performance management systems with a culture of coaching, feedback, development, and high performance. Critical to success is that everyone in a leadership role is trained on how to coach and provide constant performance feedback, which in turn, engages employees and creates a desire to continuously improve.

The goal of managing performance is being replaced with a goal of obtaining the best possible sustainable performance under the current circumstances.   Key elements under this new paradigm include:

  • Simplify the Process:  Train managers on how to coach, give feedback and regularly check in with employees.  Focus on developing employees rather than evaluating and giving them a ‘rating’.  Ask questions that help target what the employee needs, such as, “What skills would you most like to improve on?” or “What can I do to help you?” Review employee progress more frequently making the process less intimidating and more timely.
  • Streamline, shorten or completely replace Performance Review forms: Replace the forms with on-going coaching and feedback.  Feedback must be timely to be meaningful.
  • More agile, relevant, frequent and transparent goal management:  Include employees in the discussion of key performance objectives, ensuring they understand the reasons for the goals and can see how they are linked to organizational goals.  Utilize more short term goals that are easier for employees to derive meaning from what they do every day.  Create achievable goals and regularly monitor employee progress.
  • Address career goals and future training needs:  Include a system that supports follow-up and delivery of the training and career opportunities.  Create a culture where managers can delegate without feeling threatened, knowing they also have opportunity and training for the next career advancement.
  • Eliminate direct correlation between performance rating and compensation:  Make pay adjustments based on a combination of elements such as performance, customer and business impact, skill scarcity and the competitive nature of employees’ positions.

Employees want to perform at their best.  They want to understand the goals and to be motivated. They want to contribute, be supported, to learn and to have fun. Management and leaders need to create the conditions needed for great performance to take place and for business to flourish.  The ideal process for managing performance is one that successfully motivates and supports staff to contribute to the achievement of the goals and objectives of the organization. A culture that encourages on-going communication and coaching between managers and their employees has many benefits and advantages over traditional Performance Management.

Change can be challenging and demanding. 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 surveys 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 May 26th, 2016 · Comments Off on DRAMATIC CHANGES FOR PERFORMANCE MANAGEMENT

ADVANCED COMPENSATION ANALYSIS

In order to stay in line with industry trends and economic ups and downs, salary ranges should be compared to market each year. Adjustments to salary ranges may not be needed every year.  Depending upon how fast or slow the market is moving, adjustments normally are needed every 2 – 3 years.  During your annual salary range to market analysis process, make notes and keep record of any changes or movement that you see with any jobs and departments from year to year.  It is prudent to avoid making changes to your salary ranges for temporary fluctuations or anomalies.  Look for trends that are long-lasting.

In addition to an external compensation analysis to market, an analysis should be performed to identify internal pay inequities that could potentially become the focus of an OFCCP audit.  Pay inequities should include women statistically paid less than men and/or minorities statistically paid less than non-minorities. Records should consistently be kept regarding all pay decisions to determine whether there are legitimate business reasons to support the pay patterns that exist in those areas. The results of this analysis will not necessarily be used to adjust individual employee compensation.  Rather, the analysis results should be used to target areas where suspicious statistical pay patterns exist.

Since the purpose of the analysis is to anticipate areas potentially of concern to OFCCP, start the analysis with the salary grades or levels as these are most often used as the units of analysis by the OFCCP.   You will need to determine which unit or units of analysis most appropriately reflect how compensation is administered.  The objective is to find potential problem areas by targeting employees who would reasonably be expected to be paid on the same basis due to factors such as job grade, market location, and business unit.

Though the OFCCP will typically use median to perform analysis and determine pay inequities within pay grades or other units.  A thorough compensation analysis should include:

  1. Median and mean analyses (to identify areas of OFCCP concern):  In each pay grade compare the median and mean of women and men and of minorities and non-minorities
  2. t-Test analysis:   This test will determine whether the observed differences in pay within the grade levels are statistically significant.  Results of the t-statistic (t-Stat) in the t-Test are considered to be statistically significant if they are 2.00 or greater representing differences of two or more standard deviations.
  3. Regression analysis:  Any unit where the differences in pay are statistically significant a regression analysis should be performed. Factors that influence grade levels such as time in service, time in level, time in job, department, education, and performance can be incorporated into the regression.
  4. Cohort analysis:  Perform this analysis where it has been determined that the differentials are statistically significant, and where the regression analysis has not accounted for the differentials.  A primary cohort analysis would normally be completed on job titles within grades, across department designations and within departmental designations. Each of the various job titles within the database would be sorted by grade, job title, and then base salary from highest to lowest.
  5. Outlier report:  The average salary of protected class of employees is compared to the average salary of the non-protected group within a salary grade and/or job title.  When a protected employees’ average salary falls below a set percentage of the non-protected, this should be flagged for further review.  This analysis identifies protected employees who are at the lower extremes of the salary range.

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 May 19th, 2016 · Comments Off on ADVANCED COMPENSATION ANALYSIS

THE COMPENSATION MODEL

The compensation discipline seeks to maximize competitive advantage by attracting and retaining the most qualified workers to an employer.  Best practice in today’s workplace considers total compensation to include base salary, bonus or incentive plans, benefits, and non-cash compensation. A pay philosophy is a company’s commitment to how it values employees.

A consistent pay philosophy gives the company and the employee a frame of reference when discussing salary in a negotiation.  This usually requires a competitive well-rounded pay philosophy, including benefits and work life balance.  Compensation philosophies reap little reward without the knowledge and alignment to the organization’s overall business strategy.  Armed with the right information, compensation professionals can create a philosophy that will stimulate a more engaged workforce and lead to a higher-performing organization

A compensation system will price positions to market by using local, national and industry specific survey data, will include survey data for more specialized positions and will address significant market differences due to geographical location.  The system will evaluate external equity to the competitive market and internal equity which is the relative worth of each job when comparing the required level of job competencies, formal training, experience, responsibility, and accountability of one job to another.  The system must be flexible enough to ensure that the company is able to recruit and retain a highly qualified workforce, while providing the structure necessary to effectively manage the overall compensation program.

Organizations should establish and communicate clear pay policies. At a minimum, organizations need to ensure that their compensation policy adheres to employment legislation including:

Minimum wage

Overtime pay

Pay equity

Vacation pay

Holiday pay

Incentive pay

Tips and Gratuities

Pay method and pay frequency

Pay deductions

Payroll records tracking and reporting

Many organizations adopt transparency in compensation practices.  Transparency involves compensation plans that are simple to understand, easy to implement and published internally to all employees.  Many companies provide an annual Total Rewards Statement to each employee that outlines and explains all compensation elements included in their compensation package including cash and non-cash.

Bonus and incentive pay are tied to specific performance results against pre-set goals and objectives at the individual and organizational level. Results that are measured can be quantitative and qualitative. When establishing bonus schemes, organizations often apply a balanced scorecard approach: looking at financial, human resources and customer results.

A compensation model that encourages innovation should strike a balance between the risks and rewards associated with the work. Rewards programs can recognize innovation within all elements of a company and at all or the majority of employees.   When only the top 10% of high performers are eligible for recognition and associated rewards, approximately 70% of employees who fall in the middle of the performance bell curve and who are consistent performers day after day, can become discouraged and disengaged. The goal should be to properly calibrate your awards approach to reach far more employees with recognition rewards, thereby creating a culture of innovation.

Compensation is a part of the complex HR processes, policies and procedures. Top management have to decide, the primary role of compensation in the organization, whether it will be a supplementary role or a dominant role.  The compensation philosophy is the foundation for all compensation decisions an organization makes.

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 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 May 12th, 2016 · Comments Off on THE COMPENSATION MODEL

HOW TO AVOID PERMANENT ACA HEADACHES WHEN WORKING WITH TEMPORARY EMPLOYEES

Guest Author, Alan Hahn, Davis & Gilbert LLP

Just about every employer has them in their workforce—employees who are not quite “regular” employees.  They can be called one of several names, including the following:

  • freelancers;
  • project-based employees;
  • on-call employees;
  • interns;
  • consultants;
  • seasonal; and (perhaps most common of all)
  • “temporary.”

Historically, employers used these labels to identify employees who were not eligible for benefits and other employment perks. This was oftentimes an acceptable practice as long as benefit plan documents were amended appropriately and certain other steps were taken. Now, however, with the advent of the Affordable Care Act (ACA), additional concerns may apply in respect of temporary employees, specifically where temporary employees may occasionally (or not so occasionally) work a full time schedule.  This article provides a quick run-down on why your temporary employees may give you a permanent ACA headache in 2016.*

The ACA employer mandate

As is well known by now, the Affordable Care Act (ACA) requires “large” employers to offer affordable health care coverage to full-time employees or be taxed. A large employer is generally one that has 50 or more full time employees (including full time equivalents). Employers between 50 and 99 full-time employees (including full time equivalents) generally have an extra year to comply with the ACA, although they must comply with the IRS “information reporting” requirements (new IRS Forms 1094 and 1095).

Under the ACA, affected employers will need to identify any employees who are full-time under the ACA (including temps) and report them to the Internal Revenue Service (IRS). Moreover, employees identified as full-time can trigger an ACA tax on the employer if medical benefits are not offered at the right time.

Who is a full-time employee?

Full-time generally means someone who is working at least 30 hours per week (130 hours of service in a month is generally treated as the monthly equivalent of at least 30 hours of service per week). The ACA does not have a “temporary employee” classification. Instead, the treatment of temps depends on how the employer complies with the ACA in respect of the rest of its workforce under one of the following two methods.

There are generally two methods for complying with the ACA:

  1. Monthly Measurement Method: Under the monthly measurement method, an employer looks at its workforce each month and determines who it must offer benefits to and for whom it must pay an ACA tax for not offering benefits.  It’s a clunky method for any employer that has temporary employees that might work full-time in some months but not others, since temporary workers tend to have hours that fluctuate or vary from month to month.  Thus, an employer may have an obligation to offer benefits or pay a tax in any month in which a temporary employee works full-time (or offer benefits all the time, after 90 days of employment, if the employer is concerned the temp may be full-time in any month). This method can be useful to some employers, but many employers seem to be using some form of a look-back method, at least so far.
  2. Look-back Method:  This method allows an employer to test its ongoing workforce in a prior period (e.g., 2015) to determine who is eligible for benefits in a subsequent period (e.g., 2016).  For new employees who are classified as full-time, benefits must be offered following hire (generally, a three month waiting period can be accommodated).  For new employees who can be classified as “variable hour” or “seasonal,” an employer can wait some period of time (generally, up to a year) and then see if the employee worked full-time hours during this “initial measurement period.”  Thus, under this method, it is possible that a temporary employee can be classified as variable or seasonal.  If they can be so classified, the temp would need to actually work full time over an initial measurement period to then become eligible for benefits thereafter.

Which employees are “variable”?

This question is where the rubber meets the road for many employers and their temps, as the determination is not so straight-forward in many instances.  The regulations define variable as, “[b]ased on the facts and circumstances at the employee’s start date, the employer cannot determine whether the employee is reasonably expected to be employed, on average, at least 30 hours of service per week during the initial measurement period because the employee’s hours are variable or otherwise uncertain.” This sounds like many temps, although this is not always the case.

Somewhat helpfully, the regulations provide factors to consider including:

  • Is the employee replacing a full-time employee?
  • Are employees in the same or comparable positions full-time?
  • Was the job advertised, or otherwise communicated to the new hire, or otherwise documented (for example, through a contract or job description), as requiring 30 (or more) hours of service per week?

In addition to dealing with the issue of temps paid on an employer’s payroll, many employers are grappling with their ACA obligations in respect of temps sourced and paid through third party staffing agencies. In that case, it may be unclear as to who is responsible for ACA compliance—the staffing agency or the client/employer. The answer under the regulations is that the entity that is the “common law” employer is responsible for ACA compliance with respect to that worker, even if someone else is paying them.  However, it is not always clear who that common-law employer is.

Checklist: evaluating ACA exposure when it comes to temps:

  • Identify your non-regular staff, including any staffing firms that pay your temporary workers
  • Consider if you should use the ACA monthly measurement method or look-back method
  • Examine your use of “variable” and “seasonal” labels
  • Consider amendments to employee offer letters to bolster your ACA approach
  • Evaluate client service agreements with staffing agencies (get a strong indemnity)
  • Review the new information reporting requirements (IRS Forms 1094 and 1095)
  • Respond to notices from the Exchange that may be coming in 2016
  • Work with legal counsel on an evaluation of your compliance approach in 2016
  • Amend plan documents, as appropriate

*The article is necessarily brief; therefore, important information on ACA compliance may be omitted or stated in summary fashion

Alan Hahn is a partner in the Benefits & Compensation Practice Group of Davis & Gilbert.  His practice is devoted to advising clients in the design and implementation of creative, unique and tax-effective employee benefit plans and programs.  For more information, Mr. Hahn may be reached at 212.468.4832 or ahahn@dglaw.com.

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.

Posted in Uncategorized on May 5th, 2016 · Comments Off on HOW TO AVOID PERMANENT ACA HEADACHES WHEN WORKING WITH TEMPORARY EMPLOYEES