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Archive for June, 2016

WHEN DOES SALARY MOTIVATE EMPLOYEES?

Studies have shown that salary can just as easily de-motivate employees as motivate them.   In fact, salaries generally operate as negative reinforcement rather than positive.   For example, an employee receiving a lower than expected merit increase or bonus payment can certainly de-motivate.  On the flip side, receiving the status quo merit increase or bonus amount every year can create an entitlement mentality.  However, when it comes to motivating employees, salary is always one of the top factors, and therefore, it has to be part of your total rewards strategy.  Many believe that the amount of money that is needed is at least enough to satisfy basic needs which vary by person.  Obviously, when salary does not, at a minimum, cover essential needs, this serves to de-motivate.

In this article we will focus on monetary rewards. Motivated employees make a difference to the workplace.  They affect the working environment positively as well as improve customer service, sales or production.  So, how can you determine if the salaries you are paying are motivating your workforce?

First, determine where to focus your compensation spending plan.  This can vary depending on factors such as the current economy, the competitive environment, and where the company is in its life-cycle.  For example a growing company with variable sales and income, may be better off focusing on base salaries.  When business is good, it may be prudent to tie more bonus dollars to goals achieved.

Second, do your research, know your competition.  Every organization can benefit from reputable industry salary surveys such as the WageWatch PeerMark™ and Benchmark reports, to determine competitive salaries.  You should utilize salary survey data from the local market, your industry and from organizations of similar size.  Work within your organization’s salary philosophy and the given financial situation to determine where to set salaries.

In addition to looking externally to market competition, look internally to ensure your internal pay structure and salaries are fair and equitable.  Whether you like it or not, employees will discuss pay with one another.  Ensure fair and equitable pay levels between employees in the same jobs, in the same departments, and jobs of comparable worth within your organization. Formal salary ranges within the organization where people with similar responsibilities and authority are grouped into the same salary range help to maintain internal equity.   Set clear goals for what you want to achieve by setting salaries at certain levels.  For example, you may pay an entry level manager less than market if you are hiring inexperience and providing a training and growth opportunity in exchange.  Open and clear communication regarding the company’s salary structure and pay philosophy can aid in employees’ understanding of the methods used in determining their salary level and assist in demonstrating fairness and equity.

Merit pay is one of the most frequently used methods to drive employee performance.  To be effective it needs to be linked to performance in a manner that is consistent with the mission of the organization.  Merit increases can become de-motivating when your performance measurement system is flawed and/or inconsistently applied or when the merit increase amount that is linked to performance is inconsistently administered.  Also with merit increases typically averaging 2 to 3 percent, studies show that increases lower than 7% are unlikely to have any impact on employee performance.  What can help is applying behavioral principles to your pay for performance program such as giving employees a personal stake in the success of the company by showing a clear link between their efforts and results.  Many companies base their compensation plan on time and not results. Of course, time is a factor and needs to be part of the equation. However, if you pay for results, you will get results.

A well planned salary and total rewards package will motivate your employees, help your company maintain a competitive advantage and help retain key employees.  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 June 30th, 2016 · Comments Off on WHEN DOES SALARY MOTIVATE EMPLOYEES?

MINIMUM WAGE UPDATE JULY 2016

Maryland, Minnesota and D.C. have increases scheduled for mid-year 2016. Nevada will announce in July whether or not there will be a cost of living increase to their indexed minimum wage.

State increases that were effective January 2016 included Alaska, Arkansas, California, Connecticut, Hawaii, Massachusetts, Michigan, Nebraska, New York, Rhode Island, South Dakota, Vermont, and West Virginia. New York became the second state to pass a new law that would raise the minimum wage in New York City to $15 per hour by the end of 2018.

California will increase their minimum wage to $15 per hour by Jan. 1, 2022, for employers with 26 or more employees. For employers with 25 or fewer employees the minimum wage will reach $15 per hour by Jan. 1, 2023. Increases may be paused by the governor if certain economic or budgetary conditions exist. Beginning the first Jan. 1 after the minimum wage reaches $15 per hour for smaller employers, the minimum wage is indexed annually for inflation.

Fourteen states began 2016 with higher minimum wages. Of those, 12 states increased their rates through legislation passed in the 2014 or 2015 sessions, while two states automatically increased their rates based on the cost of living.

Of the 11 states that currently tie increases to the cost of living, eight did not increase their minimum wage rates for 2016. Colorado provided for an 8-cent increase and South Dakota granted a 5-cent increase per hour. Increases in Nevada are required to take effect in July.

State and City minimum wage increases continue to make front page news. An unprecedented number of cities and counties have moved to adopt higher local minimum wages. In addition, cities are proposing substantially higher wage levels than in past years.  Cities with minimum wage ordinances include San Francisco, San Jose, Los Angeles, Chicago, Seattle (SEA-TAC), Montgomery County and Prince Georges County MD, Santa Fe, Albuquerque, and others have already approved increases. Many other cities have ordinances that become effective in 2017 and beyond.

Follow this link to the WageWatch MinimumWage Chart with details of federal, state and local minimum wage and pending increases:

https://wagewatch.com/resources/Minimum_Wage_Chart_July_2016.xlsx

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 June 23rd, 2016 · Comments Off on MINIMUM WAGE UPDATE JULY 2016

MARKET PRICING VERSUS JOB EVALUATION

I began my career in Compensation in the early 1990s using a combination of market pricing and job evaluation to establish pay structures.  Market pricing is the ‘external’ method, collecting salary data, usually through a salary survey, for similar jobs from other organizations to establish the ‘market rate’ or ‘price’ for the job.  Job evaluation is the ‘internal’ method, focusing on internal job worth, each job is rated or scored on several different factors and the total score equates to the job’s salary grade in the pay structure.  Over the years, the use of the point factor system fell by the wayside.  Having used both methods together, at first I was uncomfortable with relying only on market pricing and salary surveys.  But over time I saw that I was arriving at the same end result, and ultimately, where I wanted to be which was remaining competitive with the market.  Still I wondered if I wasn’t missing something in my analysis.  I found through my informal research that most of my compensation colleagues were also relying solely on the external market and the use of compensation surveys and the prevalent thinking was that a job is worth only what the market says it is worth.

Job evaluation approaches were prominent when people stayed with the same employer, often their entire career, progressing through the internal hierarchy.  Most hiring was done at the entry level, and recruiting talent from the outside, was not as dominant as it is for today’s organizations.  Therefore, pay relationships between jobs inside the organization were more important than the external job market.  Today the ability to attract and retain necessary talent is critical and in order to do so compensation must remain competitive with the external market.

Still the debate goes on whether it is better to use job evaluation or market pricing and salary surveys to determine employee compensation.   Having an intimate and in-depth understanding of the jobs in your organization is critical to correctly matching your jobs to the external marketplace.  There is no scientific single rate of pay for a job or role, and rates may vary even for the same occupation and in the same location.  Experienced compensation professionals will be able to interpret the data for an organization and its jobs.   Though today compensation in the private sector is largely reliant on external market pricing, in my experience both techniques provide essential data to determine fair and equitable compensation practices. Combining market data with your internal job valuations to drive decision making is ultimately the best practice.

WageWatch Compensation Professionals can provide your business with compensation surveys and salary reports, and can assist you with your market pricing, evaluation of your jobs and organizational needs to establish a salary program that is both externally competitive and internally fair and equitable. 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 WageWatch compensation surveys, salary reports and other services, please call 480-237-6130 or contact us online  www.wagewatch.com.

Posted in Uncategorized on June 16th, 2016 · Comments Off on MARKET PRICING VERSUS JOB EVALUATION

INTERN PROGRAM: RULES AND BEST PRACTICES

Hopefully you have your summer intern program ready to launch but whether you do or not, here is some important information to help make your program a success.  First ensure your program is compliant with Department of Labor regulations regarding internships.  In the last couple years, both the federal and state governments have been cracking down on the use of unpaid interns.  The use of ‘free’ interns has been significantly reduced since 2010 when the Department of Labor issued new criteria for employers using unpaid interns:

In general, the internship should be structured as a training experience, similar to a classroom as opposed to the employer’s actual operations.

  • The training given to the interns must be for the benefit of the intern, and not the employer.  Employers should see no immediate benefit from the intern’s work.
  • The intern cannot displace regular employees but they should work under close supervision.
  • You need to establish in advance that the internship is for a fixed duration of time and the intern is not necessarily entitled to a job at the conclusion of the internship.
  • There is a clear understanding by both the employer and the intern that the intern is not entitled to wages for the time spent in the internship.

If your program includes unpaid interns, consult federal and state wage and hour websites or legal counsel regarding regulatory compliance.  In addition to the regulations, many universities and colleges have specific requirements for the internship program up to and including providing educational credit.  If your intern program does not fit the regulatory criteria for unpaid interns, the same wage and hour guidelines that you follow for your hourly (non-tip) workforce will apply.  Interns are often paid at rates comparable to entry level positions within the department or discipline in which he/she will be working.  Local market or industry salary surveys can assist you in setting competitive pay rates for your interns.

In addition to the compliance component of your intern program, below are some best practices you may want to consider integrating into your program.

Recruit the right candidates by having a clear and thoughtful internship description and get referrals.

  • Designate a program manager and a manager as well as a mentor for each intern
  • Provide structure, even when they aren’t paid.
  • Hold orientation sessions for all involved.
  • Provide interns with a handbook and/or website.
  • Provide interns with real work that is related to their major, that is challenging, that is recognized by the organization as valuable, and that fills the entire work term.
  • Consider offering flex time for the interns
  • Host social events and activities for the interns
  • Encourage team involvement.
  • Conduct exit interviews.

Today’s world moves fast, and as an employer you should constantly be monitoring and adjusting your business operations to meet the ever changing wants and needs of your employees. 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 market compensation data, benefits survey data and salary reports, please call WageWatch at 888-330-9243 or contact us online.

Posted in Uncategorized on June 9th, 2016 · Comments Off on INTERN PROGRAM: RULES AND BEST PRACTICES

DOCKING EXEMPT EMPLOYEE PAY

The application and rules for the federal FLSA salary basis test are often misunderstood and not administered accurately or consistently.  During my human resource career I have seen mistakes made regarding this rule over and over again.

First let’s understand what the term “salary basis” means. An exempt employee that regularly receives a predetermined amount of base salary each workweek is paid on a “salary basis”.  This applies to employees who are determined to be exempt under the federal FLSA exemption tests including both the minimum salary test and qualifying under one of the duties tests (ie., administrative, executive, professional, computer, outside sales, etc.).  The minimum weekly salary that must be paid to ‘exempt’ employees under the federal rules is $455.  Please refer to your federal and state wage and hour for exceptions to the salary requirements.  The salary basis pay requirement for exempt status does not apply to some jobs (for example, doctors, lawyers and schoolteachers are exempt even if the employees are paid hourly).

Now let’s talk about the Salary Basis Test.  An employee’s ‘exempt’ status can be jeopardized if the salary basis test rules are not followed.  The Salary Basis test provides rules regarding what pay deductions can and cannot be made to exempt employees’ weekly base salary.  Generally the predetermined weekly salary cannot be reduced because of variations in the quality or quantity of the employee’s work. Except for a few permissible deductions, an exempt employee must receive the full base salary for any work week in which the employee performs any work, regardless of the number of days or hours worked. This includes any work done remotely such as checking email and voicemail.  An employer cannot make deductions from an employee’s predetermined base salary, because of a business slowdown or lack of available work.

The FLSA salary basis test applies only to reductions in monetary amounts. Requiring an employee to charge absences from work to leave accruals is not a reduction in “pay,” because the monetary amount of the employee’s paycheck remains the same.

Full Day deductions from pay are permissible when an exempt employee:

  • Is absent from work for one or more full days for personal reasons other than sickness or disability;
  • For absences of one or more full days due to sickness or disability if the deduction is made in accordance with a bona fide sick leave or PTO plan, policy or practice of providing compensation for salary lost due to illness;
  • To offset amounts employees receive as jury or witness fees, or for military pay;
  • For partial week worked during the initial or terminal week of employment,
  • For weeks in which an exempt employee takes unpaid leave under the Family and Medical Leave Act,
  • Deductions in pay are also permitted for intermittent FMLA leave when the weekly base salary is reduced to coincide exactly with the reduced workweek,
  • When an exempt performs no work for a full workweek.

For the following 2 permissible deductions, you should have communicated formal policy(s) detailing disciplinary procedures:

  • For penalties imposed in good faith for infractions of safety rules of major significance;
  • For unpaid disciplinary suspensions of one or more full days imposed in good faith for workplace conduct rule infractions.

It is important that as an employer, you have a clearly communicated policy permitting or prohibiting improper deductions from exempt employees’ base salary including a complaint mechanism and reimbursement to employees when improper deductions are made.  You should also have a clearly communicated policy for your exempt employees stating that under no circumstances should work be performed during unpaid time off.  The exempt status of your employees will be safe as long as you have clearly communicated policies in place, make good faith efforts to comply with the salary basis test and can show that willful violations have not been made.  For full details regarding federal FLSA, visit http://www.wagehour.dol.gov and links to your state labor department can be found at http://www.dol.gov/whd/contacts/state_of.htm.

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 June 2nd, 2016 · Comments Off on DOCKING EXEMPT EMPLOYEE PAY