Tuesday, April 18, 2017

To Ask or Not to Ask: The Salary History Question in Today’s Hiring Process

With increasing interest in the issue of gender-based pay gaps, legislation continues to make small movements to meet the challenge of eliminating pay inequity. One such movement has been recent legislation in a number of jurisdictions that bans asking job applicants / new hires about their salary histories. In this issue of Astronology®, we explore this new trend and what it means for employers.

It is heavily thought that asking an applicant his / her salary history continues the spiral of the gender-based pay gap and pay discrimination. For starters, if you begin your career with low pay at an early job, that pay rate could naturally affect the salary earned at the next job if hiring managers base their salary offers off your previous salary. In addition, historically, women tend to be offered lower salaries than men, even if the women negotiate with their employers.

This past summer, Massachusetts unanimously became the first state to enact a law that bans employers from requiring job candidates to reveal salary information, information that would be considered the basis for future pay. The law becomes effective on July 1, 2018. Jim Rooney, President and Chief Executive of the Boston Chamber of Commerce, mentions that the law does allow for candidates to be asked about salary expectations, thus providing hiring managers with an opening point for negotiations.

Another jurisdiction following Massachusetts’ lead is New York City. On April 5th, the New York City Council approved a similar law that prohibits employers from inquiring about, relying on, and verifying a job applicant’s salary history. According to a SHRM newsletter article, the new law, to be effective in six months’ time, will not apply to:
  •  New York City employers acting pursuant to any federal, state or local law authorizing the disclosure or verification of salary history or requiring knowledge of salary history for employment purposes.
  •  Current employees applying for an internal promotion or transfer.
  • Public employee positions for which salary, benefits or other compensation are determined pursuant to procedures established in collective bargaining.
A Business Insider online article mentions that this new law amends the New York City Human Rights Law. This means that there will be two ways in which individuals can bring action against employers who violate the rule. After filing a complaint, if the City or court rules in favor of the plaintiff, damages could be awarded to the plaintiff. In addition, the City could choose to issue civil penalties to the employer. These penalties and fines can reach up to $250,000. The article also notes that since New York City houses not only national but also international organizations, there is speculation that this law could have a far reaching impact on many well beyond the five boroughs.

While we expect other cities and states to adopt similar laws, there also are cases where similar legislation is being disputed. Recently, the Chamber of Commerce for Greater Philadelphia filed a federal lawsuit to block the City’s signed wage equity law, a month before its May 23rd effective date. The lawsuit hinges on the argument that the law violates businesses’ freedom of speech and that the new law won’t do much to close gender pay gap issues. The lawsuit also suggests that the new law would deprive employers of information they could use to make effective decisions in the hiring process. We will have to keep a close watch on what happens in the “city of brotherly love” to see how this impending lawsuit affects other cities and states considering their own salary question ban laws. In the meantime, what can you do?

Organizations not subject to such a law can prepare now. Besides keeping a close eye on jurisdictions that have already passed such a law, pay attention to organizational reaction and changes that employers make in response. Proactively, review your organization’s job application to see if such a question is listed. Consider other options to the question that are in compliance with legal trends. Organizations also should consider training HR staff, line managers, and anyone involved in the hiring process on how to handle interviews after the implementation of new laws.

An additional step proactive employers should take is to ensure that their base pay compensation systems are market sensitive, up to date, and free from discrimination. As National Director Jennifer Loftus explains, “organizations should focus new hire salary offers on the value of the position, not the person’s last salary. While of course there will be natural variations in salary due to years of experience, education, or other factors deemed acceptable under the Equal Pay Act, using the job as the basis for salaries addresses the gender-based pay gap in an equitable fashion.”

Tuesday, April 04, 2017

Essential Success Tips for and Possible Disadvantages of Gainsharing Plans

         In our previous Astronology®, we discussed how to increase organizational success by combining gainsharing and the “Balanced Scorecard” strategic performance method. At the end of the article, two questions remained for exploration:

  • “What are some critical tips in developing a strategically aligned gainshare program?” and
  • “Are there any negative impacts to using such a program?”

        In this Astronology® we answer these questions, and open the floor for your insights on gainsharing plans!

The following four tips are essential for developing a strategically aligned gainshare program linked to a balanced scorecard performance document.
  1. The program should be organization-wide in terms of funding and accomplishing key balanced scorecard objectives. The funding can be an increase in net income, or a decrease in operating expenses or some other quantifiable savings. A single organization-wide objective focusing on a quality, customer, or growth objective should be set as a circuit breaker. Failure to meet these objectives results in total forfeiture of any monies gained.
  2. The program should be an annual one based on the realities of today's complex financial reporting systems and the need for employees to work towards objectives over a realistic period of time. While this may add some pressure in terms of Fair Labor Standards Act (FLSA) overtime calculations for non-exempt employees, this approach tends to be more successful in allowing employees time to correct early failures.
  3. Place no less than a 25% share of the gain in the employee pool. Less than 25% sends a message that the employees' efforts were not considered valuable by organization management.
  4. Have a direct linkage to the performance process. Since this process focuses primarily on contributions to strategic objectives and essential functions, base employee payout shares on this contribution. At the end of the gainshare calculation cycle, managers recommend to senior management three levels of share for employees:
    • a full share for high contributors,
    • a three-quarter share for contributors, and
    • a quarter share for those in need of improvement.
Senior management then can make the final assessment for reward distribution.

Gainshare plans aren’t without their potential downsides, however.  Disadvantages to using gainshare plans aligned with performance processes can include the following:

  • Leadership Challenges: in many cases, in order to maintain a successful gainsharing plan, leaders may need to have prior experience on how to lead a gainsharing plan.
  • Time: It is suggested that it could take a company with over 100 employees close to a year to implement a gainshare plan.  Successful plans aren’t developed and implemented overnight.
  • Confidential Information Sharing Concerns: For gainsharing plans to work successfully, communication is key. As employees have an even more vested interest in the success of the organization, information such as expenses, profits, projections, and employee bonuses have to be disclosed to people in senior level positions who may not have had access to this information under other circumstances.
  • Employees Can Begin to Focus on the Wrong Details: A sense of entitlement, instead of motivation, can develop with the exposure to information mentioned above. Compound this with regular payments of profit sharing money in favorable times, and employees can begin to feel self-important and negatively impact the organization’s culture, ruining motivation for others.

Since the ultimate goal of using a gainshare plan in performance assessment is to increase motivation, it is prudent for leaders to review the organization’s culture prior to investing in implementing such a plan. A review will allow for proper planning, to avoid some of the potential program downsides, and to address any underlying issues the organization may already be facing.

Has your organization considered or implemented a gainsharing performance assessment program? We would love to hear your experiences! You can share your thoughts by commenting in our comments section at the end of our article, or by emailing us at: astronInfo@astronsolutions.com.

Tuesday, March 21, 2017

Linking Gainshare Plans to Strategic Performance Assessment

Strategically aligned performance assessment processes have given attention to increased creativity in reward programs. A suggested rewards program can include gainsharing. While gainsharing has existed for many years, most equate it with profit sharing or a way to legitimize previously scheduled bonus payments. In this two-part Astronology®, we will discuss how to increase organizational success by combining gainsharing and the “Balanced Scorecard” strategic performance method.

Curiously, with combining the use of a simplified two-page performance assessment outline, focusing primarily on "Balanced Scorecard" strategic objectives and each employee's contribution to the organization through his / her essential functions, a strategic performance assessment plan can be created to give an organization enhanced success. How so? If designed properly, gainsharing can focus on the behaviors of individual employees and employee teams, resulting in a more motivated, successful organizational culture.

The U.S. Office of Personnel Management (OPM) website describes gainsharing as: “a reward program that allows employees to share in an award based upon productivity gains or savings in excess of a predetermined baseline of performance. If an organization's goals include improving productivity, reducing waste, reducing costs, and/or creating a savings in production costs, a gainsharing program focuses employees on those goals.”

Organizations should keep in mind when considering any form of gainsharing that

1. An organization cannot expect its employees to continuously improve organization performance when:
  • Their jobs limit their latitude & ability to change work processes, and
  • When they are given little information about the business and / or management systems' focus on control.
2. Gainsharing’s primary goal is to support a philosophy of participative management. When commitment to change is lacking, the involvement process will be ineffective. Gainsharing then will fall short of expectations.

There are six basic components of and processes to build a successful gainshare program.
  1. Define the group to be included. Many organizations attempt to make these programs all-inclusive. However, one must address the "line of sight" issue. All-inclusive programs sometimes lose their effectiveness since employees may not understand how they personally impact results.
  2. Define the formula for measuring success and funding the share. According to the OPM website, “a gainsharing program is self-funding. Therefore, it requires reliable financial measures to calculate the ‘gains’ (i.e., profits or savings) that the organization and employees will share.” This is where the strategic balanced scorecard comes into play. Most organizations focus only on the financial aspects of the scorecard. While this financial emphasis ensures the funds for rewards will be available, this approach jeopardizes the other scorecard components. On the other hand, having four or five objectives can complicate the formula to the point that all are confused and have little trust in the outcomes.
  3. Set the baselines and targets. The baseline for measurement should focus on historic information from the past fiscal year or quarter. Three levels of targets work best for all types of reward and recognition programs: threshold, target, and optimum. However, most gainshare programs focus on one specific level at which the actual share begins.
  4. Determine the share between the organization and the employee. While organization culture often defines this, the most common ratio is 25% to employees and 75% to the organization. Some organizations first determine what percentage they want to reserve as retained earnings and then calculate the share. This ensures the ability to invest in future organizational improvements and, in public companies, to provide for stockholder equity.
  5. Determine payout frequency. Many manufacturing organizations focus on an annual gainshare payout. There is an increasing trend towards quarterly shares to quickly reinforce the behaviors exhibited by employees. However, there may be financial reporting barriers that prevent this from happening. Those on a quarterly program commit to a payout within thirty days of the end of the quarter.
  6. Develop the method to distribute shares to employees. Many advocate an equal share to all involved so as to reinforce the team aspect of the program. Some creative methods include distributing equal shares based on the total hours actually worked during the measurement period. Another determines the share based on the pay grade in which the job is classified. Care must be taken when distributing funds to non-exempt employees. Overtime payment is required on gainshare distributions.
Naturally, the next questions are “what are some critical tips in developing a strategically aligned gainshare program?” and “are there any negative impacts to using such a program?” In our next Astronology® article we will discuss these topics in more depth.

Tuesday, March 07, 2017

Creative Benefit Offerings

               Following up to a previous Astronology® on wellness benefits, this Astronology® article will explore four additional creative benefits programs organizations can consider including in their total rewards packages.

Unlimited Vacation Time
              Unlimited vacation time started in the 1990s, especially in high tech fields. Today, unlimited vacation is becoming an increasingly popular benefit for many organizations, regardless of the field. Although sometimes advertised as liberating in contrast to “old-fashioned constraints such as assigned time off,” there are dangers associated with such programs. For an organization, there will be concerns of benefit abuse. In addition, employers must be aware that employees could collectively take the same days off, and in larger groups than under a traditional vacation time plan. For an employee, a challenge may be keeping a proper work / life balance, as open-ended vacations also can mean open-ended workdays. For instance, a spokesman from Netflix mentions that “we work weekends and around the clock; people work many hours, often from home or elsewhere via laptops/smartphones.” As a result, flexible work scheduling typically goes hand in hand with unlimited vacation time.

Flexible Work Schedules
              Flexible work scheduling is another popular benefit employees tend to enjoy. Whether it’s working from home a few days a week, or scheduling work time an hour before or an hour after the bulk of the staff has left the office, employees are able to find their own working pace and environment. This ensures the organization gets the production it wants from its employees. Some concerns include abuse of privilege and the expectation that employees will always be accessible, even for inaccurately perceived “emergencies.” Creating a policy that keeps both the employer’s and the employee’s needs in mind should curtail these concerns.

Family Focus
              Benefits that help the employee balance home and work life can be very eye-catching. Some of these benefits can include educational assistance for an employee’s dependent, in the form of a scholarship. An Entrepreneur online article notes that in a SHRM 2014 Employee Benefits Report, only 13% of those surveyed said their organizations offered an educational scholarships. Only 2% offered educational loans. These figures remained unchanged in the SHRM 2016 Employee Benefits Survey. Although these financial benefits are not widely popular, the article suggests that employers can set themselves apart by “offering educational scholarships, loans or pre-tax spending accounts.” Additional family oriented benefits include paid parental leave, on-site child care, and flexible scheduling in connection with children’s school breaks.

Paid Workouts
                Employers such as Clif Bar & Company (a nutrition business) offer not only access to an on-site gym, but workout time of 30 minutes every day, to 2.5 hours each week, while on the clock. The incentive of being paid to exercise can be appealing for an employee who needs an extra push to get healthy. Clearly this benefit helps, as Clif Bar in 2011 reported a 96% employee retention rate.

               Unique benefits programs can be an effective means of retaining employees. However, employers must be cautious to not offer a program simply because others are doing it. “Employers must consider the cost of the benefit, employees’ interest levels in such a benefit, and how the program fits with the existing total rewards program, before offering it to all employees,” explains National Director Jennifer Loftus. When it doubt? Try a pilot program first, to see if there’s sufficient momentum and interest to expand the benefit offering to all employees.

             Are you aware of other popular, creative employee benefits not mentioned in this article? Does your organization offer something unique to retain or motivate employees? We’d love to hear your thoughts!