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HUMAN RESOURCES ROLE IN MERGERS AND ACQUISITIONS

Mergers and acquisitions are extremely challenging and even chaotic events.  Therefore, it is critical that everyone involved has a clear understanding of their role in the process.  Mergers and acquisitions have become the norm in the business world and are often necessary for survival.  Almost every major company in the US today has or will experience a major acquisition.  There is a subtle yet distinct difference between a merger and an acquisition.  A merger is when two separate companies merge into one new entity.  An acquisition is when one company buys the assets of another company.  A merger or acquisition can be desired due to many different strategic reasons including positioning in the market, acquiring another company’s areas of strength or expertise, acquiring capital, diversification and short-term growth.  There are several phases or steps in the acquisition process and human resources will typically be involved in at least 2 to 3 of these phases, including the due diligence and investigation process and the post-merger integration process.

The human resource role in the due diligence and investigation process is to perform a thorough review of all human resource contracts, benefit plans, plan documents, systems, personnel, employment records, all forms of compensation, policies and procedures, especially related to human resource regulations that relate to all human resource disciplines including compensation, benefits, recruiting, employee relations, training and development, and payroll and HRIS.  Human Resources will help to determine the organizational structure and staffing models for the new organization.  Some other important items that fall under the Human Resources umbrella are wage and hour or other compliance claims, employment litigations, collective bargaining agreements, any FMLA, OSHA, Workers Compensation, EEOC and OFCCP compliance issues.

Transition issues need to be discovered and addressed, for example, pay levels between the two organizations may be very different and a cost analysis may be needed to determine the cost of bringing pay levels more in line between the two merging entities.  Other transition issues that often need to be addressed are transitioning pay increase and performance review cycles, differences between benefit levels in health care and retirement plans.  Most items will need to be addressed immediately, and some items can be completed during the first or second year following the merger or acquisition.  For example, if the acquisition occurs in the first quarter and your merit increases are done in January, you may be able to wait until the following January for this transition.  Conversely, it will be highly desirable to transition the acquired entity employees immediately to your health and welfare plans rather than take on the administrative burden and ownership risk of additional plans.

Human Resources is also responsible for layoffs, stay bonuses, culture differences, and synergies and will play a key role in the orientation and welcoming of the new employees.  These are just a few key items on the Human Resources Acquisition Checklist.  And each item has its own list of key points and issues that must be addressed.  While most of the transition work will happen prior to the closing date, the job of transitioning employees into your policies, pay models, practices, procedures, and culture does not end at transition date and typically continues for 2 to 3 years following the transition date and requires continued review at the management level.

Change can be challenging and demanding.  With over 5,000 properties in our lodging compensation database, 150 casinos, and 125 hospitals and clinics, we regularly see properties being acquired, divested, and rebranded. Consolidations are occurring at a rapid pace in the healthcare industry as well with hospitals buying physician groups and primary care practices. There are numerous human resources concerns to address every time a property changes hands. WageWatch consultants can guide you through the process of integrating two or more compensation models, rebalancing grades and ranges, examining internal equities between plan documents, developing a market-based approach to resolving inconsistencies, and helping you along the way with all your transition needs.  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.

WHAT’S NEXT…JOINT EMPLOYMENT REDEFINED?

Joint EmploymentHave you noticed the flip-flop on Joint Employer Standards from the National Labor Relations Board (NLRB)?  Currently, the standards are in flux.  In 2015, the definition of a joint employer was modified and expanded based on the Browning-Ferris Industries case.  This case changed over 30 years of precedent that had required “direct” and “immediate” control over an employee’s working conditions to “indirect” and “potential” control as the new definition of joint employment.

Under the Browning-Ferris standard, even if two entities never exercised joint control over the essential terms and conditions of employment, and any joint control was not direct and immediate, there could still be joint employers based on: (1) the existence of reserved joint control, (2) indirect control, or (3) control that was limited and routine.  Browning-Ferris was considered controversial and criticized by many employers and business groups.

In December 2017, in an attempt to rein in what was perceived as a broad and vague standard, the NLRB re-established the pre-Browning-Ferris standard in the Hy-Brand Industrial Contractors case which returned the former joint employer test requiring “direct” and “immediate” control.

To the dismay of many in the business community, in February 2018, due to an alleged conflict of interest, the NLRB vacated the Hy-Brand case, leaving Browning-Ferris as the law of the land once again.  Prior to Browning-Ferris, the NLRB relied on decades of legal precedent to set the joint employment standard.

In May 2018, the NLRB announced its intention to clarify the joint employer standard by issuing a new rule to reinstate the pre-Browning-Ferris joint employer standard.  On September 14, 2018, the NLRB published a Notice of Proposed Rulemaking (NPRM) in the Federal Register regarding its joint-employment standard (allowing 60 days for public comments).  The proposed rule reflects a return to the previously longstanding standard that an employer may be found to be a joint-employer when the following condition exists:

    • A joint-employer of another employer’s employees exists only if it possesses AND exercises substantial, direct and immediate control over the essential terms and conditions of employment and has done so in a manner that is not limited and routine. 

 The 60-day period for public comments continues through November 13.  After the NLRB reviews the public comments and replies, it will issue a final rule regarding the joint employer standard.  If issued without substantial changes, this rule will provide employers with a more clear and consistent standard and reduce the likelihood of an employer inadvertently becoming a joint employer.

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.

EMPLOYERS MUST START USING NEW “FEDERAL CONSUMER RIGHTS ACT” NOTICE

Effective September 21, 2018, the Fair Credit Reporting Act (FCRA) requires that employers that use a third-party consumer reporting agency, to conduct background checks on employee applicants, use the updated Summary of Your Rights Under the Fair Credit Reporting Act.  The new Summary of Rights Act was issued on September 12, 2018; employers were given very little time to comply with the act.

The FCRA requires that employers follow certain procedures before obtaining a background check by a third party reporting agency.  The employer must follow certain procedures if it decides not to hire the applicant (or take an adverse action against an employee) based upon a third party background check.  One of the procedures is to provide employees with their “Summary of Consumer Rights” under the FCRA along with the name, address, and phone number of the third-party agency that provided the information.  Failure to provide the correct notification can expose employers to legal risk, including class action litigation.

Employers will have to provide the new “Summary of Consumer Rights” form in any pre-adverse action notification that comes as a result of the background check.  They must also provide this notification before obtaining a background check if the report includes information stemming from personal interviews conducted by a consumer reporting agency.

The new rule requires that employers use the new “Summary of Consumer Rights.” This new model “Summary of Consumer Rights” requires that the rejected applicant be advised of their right to request that the third-party reporting agency provide the rejected applicant with a free “national security freeze.”  This freeze would restrict prospective lenders from obtaining the consumer’s credit report, thereby thwarting identify thieves.  The new model form can be found here.

Change can be challenging and demanding.  At WageWatch our compensation consultants can assist with your organization’s compensation needs and help ensure your wages and salaries are supporting your company’s business strategy and objectives.  In addition to our PeerMark Salary Survey for over 100 local lodging markets in the U.S. and Canada, we offer a National Benchmark Salary Survey. With over 9,000 hotels and 200 casinos in our database, WageWatch’s hotel and gaming salary surveys are the most comprehensive surveys available to Human Resource professionals.  For more information on our services, including consulting, salary surveys, benefit surveys, and custom compensation reports, please call WageWatch at 888-330-9243 or contact us online.

Guest Editor:  Pautsch, Spognardi & Baiocchi Legal Group LLP
www.psb-attorneys.com

WHAT SHOULD AN EMPLOYER DO WHEN AN OTHERWISE QUALIFIED APPLICANT FAILS A DRUG TEST WHILE USING MARIJUANA FOR MEDICAL PURPOSES?

First and foremost, CHECK STATE LAW!  This remains a troubling issue for employers in states that have enacted medical marijuana laws and/or laws allowing for recreational marijuana laws.  We have written on this perplexing issue in the past focusing on the Colorado Supreme Court’s decision which held that state’s protection of employees who are engaging in “lawful activities” did not shield an employee using state-law protected medical marijuana from termination.

Last week a Connecticut federal court judge issued a decision for employers concerning Connecticut’s Palliative Use of Marijuana Act (PUMA). The federal judge granted summary judgment in the employee’s favor in connection with her PUMA claim.  The court concluded that the Company violated PUMA by rescinding the job offer based on a positive pre-employment drug test because was a “qualifying patient” under Connecticut law.

In so doing, the court rejected the Company’s argument that its zero-tolerance policy complied with the Drug-Free Workplace Act (DFWA), which requires federal contractors to make a “good faith effort” to maintain a drug-free workplace.  The federal judge concluded that the DFWA does not prohibit federal contractors from employing someone who uses medical marijuana outside of the workplace.  The emphasized that PUMA does nothing to limit an employer’s ability to prohibit the use of intoxicating substances during work hours, but it does protect a “qualifying patient” from an adverse employment action for using marijuana “outside of work hours and in the absence of any influence during work hours.”

PLEASE NOTE: this is an area of the law that is not yet settled.  And that there will be different results in each state as state laws on marijuana use vary greatly—-and judicial interpretations of these laws will also greatly vary.  Before proceeding to enforce your drug-testing policy against individuals purportedly using marijuana for medicinal purposes, you are well-advised to review all applicable state laws.  Of course, feel free to contact PSB if you have any questions on this at www.psb-attorneys.com.

Change can be challenging and demanding.  At WageWatch our compensation consultants can assist with your organization’s compensation needs and help ensure your wages and salaries are supporting your company’s business strategy and objectives.  In addition to our PeerMark Salary Survey for over 100 local lodging markets in the U.S. and Canada, we offer a National Benchmark Salary Survey.  With over 9,000 hotels and 200 casinos in our database, WageWatch’s hotel and gaming salary surveys are the most comprehensive surveys available to Human Resource professionals. For more information on our services, including consulting, salary surveys, benefit surveys, and custom compensation reports, please call WageWatch at 888-330-9243 or contact us online.

SALARY STRUCTURES: WHAT ARE THEY GOOD FOR?

Established salary structures aren’t mandatory.  There is no law that requires them, but they serve many useful purposes.  Having salary ranges in place can ensure that salary decisions, from new hires to promotions, are made with objective and consistent rules and parameters.  They provide at least a first line of defense against salary discrimination, intentional or otherwise, by ensuring that employees performing the same job are granted the same salary opportunity.  And, formal salary ranges provide you with a tool for proactively managing and budgeting your salary dollars.

Salary structures help ensure that pay levels for groups of jobs are competitive externally and equitable internally.  A well-designed salary structure allows management to reward performance and skills development and control overall base salary cost by providing a cap on the range paid.

A salary structure enables employers to pay employees in a given position, consistently, for the work they do.  Salary ranges also offer flexibility enabling a company to pay higher in the range for an employee based on a greater level of education, experience or performance.  In the same way, it can potentially save on labor costs when hiring employees with limited backgrounds.

Having well documented and communicated salary ranges can minimize employees’ pay equity concerns and grievances.

A well-designed salary structure will help organizations:

  • Attract and retain suitable, qualified, and experienced employees
  • Build high morale with internal equity
  • Create more satisfied employees and thus reduce turnover
  • Minimize favoritism and bias
  • Provide a structure for career progression
  • Serve as a sound basis for collective bargaining and employee relations management

If the salary structure gets out of sync with the overall labor market, a company may find itself paying employees too much and needlessly increasing operating costs, or paying employees too little and having difficulty attracting and retaining talent.

A study of the current labor market will provide new information to determine whether the organization’s pay structure, policies and practices, job classifications and job titles are appropriate or needing adjustment.

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.

ALIGNING COMPENSATION WITH COMPANY CULTURE

Many organizations today are focusing on their company’s culture including determining their culture, deciding what it should be, aligning it with strategic goals, and transitioning to the desired culture.  Culture is important because it reinforces the values of the organization, which in turn shapes team members’ behavior.  There are many success stories of companies with cultures that are aligned to their business goals including Google, Zappos, and Patagonia.  These companies have developed a culture that supports their business as well as their culture.

Organizational culture is the collective behavior of the people who are part of the organization and has important effects on the morale and motivation of the organizational members.  It includes the values, norms, systems, beliefs, attitudes, and habits of the organization which impacts the interactions of the employees with each other, and with customers.  Even before you define it, you know it is there and that it has an impact on your business. This is why it is so important to internalize the culture and understanding when company activities are in sync or not in sync with the culture.

Once the company values and desired culture are defined, compensation can support and help drive the values and corporate culture.  It is important that the role of compensation in an organization and the compensation strategy are also defined.  For example, where does the organization want to set pay levels in comparison to the competitive market?  Perhaps the organization’s culture is strong in training and developing its employees, acknowledging their successes and offering advancement opportunities. This, in turn, may allow the organization to set lower pay levels than what is paid in the market.  Of course, when recruiting it is important to align the compensation strategy to support the values of the culture through highlighting performance management, performance appraisals, and the goal-setting process for each team member.

Once values, business objectives, and desired behaviors are determined then compensation plans can be put in place to support the culture.  For example, if the business objective is innovation and the desired behavior is risk-taking, then short-term incentives may be the compensation strategy.  If the goal is for a highly trained workforce and the behavior is learning and upgrading skills, then skill or competency-based pay may be the compensation strategy.

Corporate culture is about people’s behaviors – how goals are accomplished – so as to establish a culture that drives company success, organizations should link a significant component of their compensation systems to behaviors.

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 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.

 

 

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 how slow the market is moving, adjustments normally are needed every two to three years.  During your annual salary range review relative to the market analysis process, make notes and keep a record of any changes or movement that you see with 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 the 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 in which 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 the level, time in the 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 base salary from highest to lowest.
  5. Outlier report:  The average salary of a 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.

 

DOCKING EXEMPT EMPLOYEE PAY

The application and rules for the federal FLSA salary basis test are often misunderstood and not administered accurately or consistently.

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 (i.e., administrative, executive, professional, 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.  In 2018 many states increased the minimum wage and, at the same time increased the minimum weekly salary of ‘exempt’ employees.  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 workweek 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 a 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 two 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.

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 employee’s 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 the 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 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 the company’s goals, mission, and values in an activity-based 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 of the game, 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, schedule follow-up meetings with each new hire to elicit 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 voicemail, 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 its 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.

IT’S TIME TO ADJUST YOUR SALARY STRUCTURE

Maintaining a salary structure that aligns with the organization’s pay philosophy and is competitive in the labor market is imperative for any organization.  Most organizations update their salary structure every one to two years, as budget permits.  However, during the recent recession, some organizations chose not to increase their salary structures for cost containment and/or a lack of competitive pressure to do so.  For 2018, the stronger U.S. economy and increased employer confidence should continue to bolster job gains, and economists expect the previously sluggish wage growth to accelerate.  Whether or not you’ve adjusted your salary structure during the past few years, it is certainly time to do so now.

The review of your salary structure should determine whether it is still aligned with the company’s needs, pay philosophy and the labor market.  Salary structure adjustments maintain the structure’s competitiveness with the external labor market and protect an organization’s ability to compete in the marketplace for talented employees.  If the salary structure gets out of sync with the overall labor market, a company may find itself paying employees too much and needlessly increasing operating costs, or paying employees too little and having difficulty attracting and retaining talent.  Salary-structure issues are less expensive to address early on so it is best to review your salary structure annually for any needed changes.  If you wait two or three years to review and adjust, the labor market can move significantly upward in that period of time and the cost of salary range adjustments and resulting salary increases can be substantial.

Other business changes and events may warrant a review of the salary structure, such as the company’s merger or acquisition, or a competitor opening or closing a facility that impacts the company’s operations.  At times during the year, hiring managers may alert you to possible salary-structure issues and their insight can indicate that specific areas of the salary structure are out of alignment.  But there may be other factors that the manager is not aware of, such as an organization’s strategic decision to set pay levels above or below the market median.

There are two basic methods for updating your salary structure and many companies will alternate the two methods, performing the ‘quick’ adjustment one year and the ‘in-depth’ adjustment the following year.

  1. The Quick Adjustment method is where you collect and consider trend or annual merit increase information, then adjust your ranges by a percentage you view as necessary to remain competitive. Trend and annual merit increase surveys are published every year and most companies rely more on average or median salary increase figures.
  2. The In-Depth Adjustment method is where you select a representative sample of benchmark jobs using currently published compensation surveys for your competitive market. Collect the competitive salary data, and then compare your salary range mid-points to the market medians or the percentile that you chose to compete with for the benchmark jobs.  The results will help you determine the degree to which your ranges should be adjusted and also identify any jobs or job families whose pay is moving at a different pace than the rest of the market and may need re-graded. This methodology requires more data and time to complete.

Alternating annually between these two methods should maintain competitiveness, cost efficiency, and save time from performing the In-Depth Adjustment analysis every year.  Any resulting increases from the structure movement should be minimal and workable within the current budget year.

It is also important to remember that established pay grades, the jobs’ placement within the pay grades and well-maintained job descriptions are the nuts and bolts of the salary structure.  Companies change over time and job functions and duties can also change.  Keeping job descriptions accurate and reflecting the core duties of each position will be essential to appropriate and competitive salary ranges and pay.

Companies should consider the reassessment of their salary administration programs, along with all of their compensation plans, as a vital and ongoing part of the program’s success.  Assessing the program to ensure that it continues to meet your company’s needs is perceived as a credible and functional part of the Human Resources process, and will enhance your company’s ability to remain a competitive force in the marketplace.  When was the last time your organization reviewed its salary structure(s)?

At WageWatch, we offer accurate, up-to-date benefit survey data, market compensation data, salary reports and consulting services 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.  WageWatch, Inc. is the leading compensation survey provider for the lodging and gaming industries with 6,000 properties participating in its PeerMark™ Wage Survey.  WageWatch also conducts compensation surveys for other business and industry segments including healthcare and non-profits.  For more information on our services, including market compensation data, benefits survey data, salary reports, and consulting services, please call WageWatch at 888-330-9243 or contact us online.