Tuesday, August 04, 2015

Can We Pay a Living Wage?

Although at the end of 2015 New York State’s minimum wage is scheduled to increase to $9.00 per hour, the recent New York State “fast food” minimum wage has been approved to increase to $9.75 per hour, and eventually reach $15.00 per hour.  If you do not work in the restaurant industry, or in New York State, you may think this recent change doesn’t affect you. However, as of late, many industries are concerned that this change in the restaurant industry may have a quick domino effect on other industries. Astron Solutions discusses the challenges this new change presents other industries and the overall economy today.

A recent New York Times online article expressed that this recent decision to raise the minimum wage for fast food workers to $9.75 per hour “thrust(s) New York State to the forefront of the current experiment.” The article goes on to state that “based on projections from government data, the proposed $15 minimum wage for fast-food workers could represent more than 60% of the wage of a typical New York City worker when it takes effect at the end of 2018...” The New York Times online article highlights the 2003 minimum wage increase of Santé Fe, New Mexico, to compare and predict New York’s possible future. Despite a concentrated analysis with current modern tools, economic analyses of the Santé Fe increase suggest it had little effect on employment.

Astron Solutions’ Michael Maciekowich notes that the impending changes have caused quite a stir. According to Mike, “numerous Astron clients in New York State have called, concerned that the ‘fast food’ minimum wage will in essence become the new state minimum wage, in that these organization compete for entry level staff with the fast food industry. As the ‘fast food’ minimum wage increases to $15.00 over the next four to six years, organizations that compete for staff with this industry will have no choice but to raise their minimum wages to compete.  This will also have a domino effect, in that this increase in the entry wage will create pay compression with coordinators and supervisors in the same work units.  This compression will add unforeseen additional budgetary impact.  For non-profit organizations, this will just add to concerns of how to address increasing pay expenses to already shrinking revenue dollars."

A Forbes online article highlights a portion of New York Governor Andrew Cuomo’s announcement speech about the minimum wage change: “The taxpayers of this nation have been subsidizing the workers at McDonald’s and Burger King at a cost of over $7 billion annually and that’s just wrong.” Forbes expresses how welfare payments are not by and large subsidies to employers.  Through a quote from Arindrajit Dube, a scholar in support of minimum wage hikes, the Forbes article reminds us that for employers to truly have public subsidies, their wages would have to be lower. “Depending on where one is on the EITC (Earned Income Tax Credit) schedule, that policy can increase work incentives.” Analysis from UC Berkeley’s Jesse Rothstein alludes that for every $1 EITC workers use, post-tax income rises by only $0.73. Also of note is that these primarily affected businesses are franchises, not major corporations. The money projected that restaurants such as McDonald’s and Burger King collect annually does not reflect how much a franchisee will actually earn.  According to Forbes, franchises are more similar to a “Mom and Pop store” than a giant corporation.

Concern for this change is coming from all angles. Franchisees are wondering if they can really afford the increases.  Organizations outside of the fast food industry are concerned they may lose some workers to fast food positions that pay more. What can be done?

A Fast Company online article examines the popular fast food chain Chipotle, and how they could address the living wage issue. Chris Arnold, a Chipotle spokesman, mentioned in an e-mail to Fast Company that “we have never taken a position on the minimum wage and believe that a minimum wage or starting wage tells only part of the story; We already pay above minimum wage and over benefits that are more than competitive.” Some of those benefits include paid sick & vacation days and tuition reimbursement. The Fast Company Online article explains that even if the company had the CEOs’ paychecks reduced to $1 per year and divided the compensation among the current employees, it would result in only a $0.55 increase per hour for an employee working 40 hours per week. So what could they do? In San Francisco, this year the minimum wage increased to $12.25, and will increase to $15 by 2018. Coincidently, it has been noted that Chipotle raised its menu prices in the city by 10%. Such a move sends the message that customers have to share in the responsibility of lifting minimum wages. In short, if you can afford an $11 burrito, then you can probably pay for the same burrito with the cost increased by $1. Time will tell if this will work.

Could you adopt this approach if you own a franchise? Could you adopt this approach if your industry becomes affected by the fast food wage changes? Have you prepared other solutions? Write to Astronology. We’d love to hear your input!

Tuesday, July 21, 2015

Decoding the Possible Fair Labor Standards Act Changes

For most of July, many Human Resource professionals have been discussing the recent proposed changes to the Fair Labor Standards Act regulations. Some aren’t aware of the possible impact the new proposals could have on their organizations.  Considering the Department of Labor (DOL) projects that if enacted, this adjustment could impact roughly 4.7 million workers, the proposed changes should be reviewed. In this issue of Astronology we look into these potential changes to the FLSA and what they mean to you.

What is the Purpose of the FLSA?
The Fair Labor Standards Act (FLSA) is the federal government’s primary means to establish minimum wage, overtime pay, recordkeeping, and youth employment standards for the private sector and federal, state, & local government employers. Currently, the standards, in summary format, are as follows:
  • Minimum wage: Federal minimum wage is set at $7.25.
  • Overtime: Employees classified as “non-exempt” through the FLSA exemption test process must receive overtime pay at a rate of not less than 1.5 times their regular rate of pay. Overtime is paid if the non-exempt employee works over 40 hours per workweek.
  • Hours Worked: The hours worked ordinarily, including time spent on the employer’s premises, on duty, or at a prescribed workplace.
  • Recordkeeping: Part of the standards for recordkeeping include displaying an official poster outlining the requirements of the FLSA, as well as keeping records of employee time worked and pay.
  • Child Labor: Designed to provide protection to educational opportunities of minors, and prohibit minors’ employment conditions that could be detrimental to their health and well-being.
The proposed adjustments affect the minimum wage and overtime regulations.

What are the Proposed Changes?
First, the proposal seeks to raise the minimum salary level used to identify exempt white collar employees. Instead of setting a salary amount, the FLSA proposal would set the minimum salary level equal to the 40th percentile of weekly earnings of full-time salaried workers, based on data released from the Bureau of Labor Statistics (BLS). It is projected that in 2016, the year the proposal would be in effect, this level will be $970 per week ($50,440 per year). The salary and compensation levels would be indexed to this BLS data and updated annually, which would eliminate the need to make further adjustments in the future.
The Highly Compensated Employees (HCE) exemption would also be revised. The National Law Review online mentions that currently the exemption applies to employees who earn a total annual compensation of $100,000 or more, and “customarily and regularly” complete the duties of exempt employees or have responsibilities similar to that of an executive, administrative, or professional employee. The DOL seeks to initially raise the current threshold of $100,000 to $122,148 per year.

Am I Affected By These Possible Changes?
If you haven’t done a classification audit recently, perhaps. The National Law Review projects “The DOL’s proposed changes will likely only trigger more activity by private litigants and federal & state agencies.” They suggest to organizations that haven’t conducted a classification audit in some time to consider doing the following:

  1. Evaluate the classification status of workers carefully at the outset of the work relationship, to determine whether a worker is exempt or overtime eligible.
  2. If you inherit a large number of exempt employees, such as following an acquisition or a merger, perform due diligence to determine if there is potential for misclassification liability.
  3. Conduct a privileged audit of your exempt employees and positions to determine what portions of your workforce will be affected by the proposed new rules. For example, assuming that the DOL’s projections are accurate, employers should be prepared to increase the salaries of exempt workers who earn less than $50,400 per year, to reclassify those individuals to overtime eligible, or to take other measures to address the increased costs.
Also, keep in mind we are currently within the 60-day public comment period. The DOL is required to review and respond to all issues raised by comment.  JD Supra Business Advisor online comments:

  • What, if any, changes should be made to the duties tests?
  • Should employees be required to spend a minimum amount of time performing work that is their primary duty in order to qualify for exemption? If so, what should that minimum amount be?
  • Should the Department look to the State of California’s law, requiring that 50 percent of an employee’s time be spent exclusively on work that is the employee’s primary duty, as a model? Is some other threshold that is less than 50 percent of an employee’s time worked a better indicator of the realities of the workplace today?
  • Does the single standard duties test for each exemption category appropriately distinguish between exempt and non-exempt employees? Should the Department reconsider the decision to eliminate the long/short duties tests structure?
  • Is the concurrent duties regulation for executive employees, allowing the performance of both exempt and non-exempt duties concurrently, working appropriately, or does it need to be modified to avoid sweeping non-exempt employees into the exemption? Alternatively, should there be a limitation on the amount of non-exempt work? To what extent are exempt lower-level executive employees performing non-exempt work?
“Most importantly, during this period, in addition to comments on the salary level proposal, the Department of Labor’s Wage & Hour Division (WHD) also seeks comments on the following questions:It is important to note that the Federal Wage and Hour Commission has taken on an activist role when it comes to enforcement of FLSA regulations. According to Littler, “Wage and hour disputes have become the most common source of substantial, employment-related liability facing employers today. The number of class and collective actions has soared due to plaintiff-friendly laws, mounting government enforcement efforts and the increasing amount of information available to employees.”   As such, the Astron Solutions team urges all to remain vigilant with respect to both how jobs are classified and in how regulations are followed.

Astronology readers! Are you considering the possible effects the new proposal could have on your organization? You can voice your concerns to the WHD electronic through the Federal E-rulemaking Portal at http://www.regulations.gov.

Tuesday, July 07, 2015

CEO Pay Controversy

In the last few months, there’s been a lot of conversation on executive pay. CNBC news reported that in 2014, “the average S&P 500 company CEO made 373 times the salary of the average production and non-supervisory worker in 2014.” This is an increase from the 331 times the salary average in 2013. Why the sharp increase? What about the recent news of Unilever CEO Paul Polman’s reaction to his own salary? Astronology takes a brief look into executive pay.
According to the aforementioned CNBC report, a survey by the Hay Group in 2013 found that 37% of CEO pay was in cash, while the percentage paid in stock and stock options was 54%. It was also discovered that a number of companies added the stock option to CEO packages after the 2008 financial crisis. The thought behind this move was that since stocks were low, “giving execs equity was likely to make them richer in the longer term.” Considering that CEO pay is typically not tied as much to performance but more so the size of the company, it’s easier to see that the combination of these factors may be part of why CEO pay has gotten so high.
Paul Polman, the current CEO of Unilever, revealed recently to the Washington Post that he was “ashamed about the amount of money” he earns. In general, Polman is considered “a global business leader with a conscience.” The CEO of Gravity Payments took this concept a step further.  He announced in April of this year that he would be raising the company’s minimum wage to $70,000. This is a $22,000 per year increase for its 120 workers. How does he plan to make this work? By reducing his $1 million annual salary to the company’s new minimum wage of $70,000. Forbes.com mentioned that the company will also have to allocate roughly 75 to 80% of its annual $2.3 million profits to further the minimum wage change.
Currently, there has been robust debate on whether implementing some form of pay for performance in executive pay could help with at least justifying executive pay levels. One particular aspect is the SEC’s proposed mandated “compensation actually paid” (CAP). This mandate would require more disclosure of executive pay, including more transparency to the company. However, some feel like this mandate will only give a “hazy” link to pay for performance. This means the search is still on to find a way to understand and regulate executive pay.

Has your organization been faced with dealing with repercussions from high executive pay? Are you searching to find a way to link executive pay to performance? Write to Astronology, and tell us what your attempts have been, or if your organization has found some sort of solution.  We look forward to hearing from you!

Tuesday, June 23, 2015

Harnessing the Power of Flare®

In a previous Astronology, we explored the basics of a Human Resource Information System, or HRIS. As we mentioned in that article, such technology can be beneficial in assisting with HR administration. It is also an effective tool for boosting efficiency & productivity, and removing physical paperwork off one’s desk.  In this Astronology article, we give you a closer look at Astron Solutions’ Flare® and many of its different modules.

What is Flare®?

In short, Flare® is a cloud-based framework that allows you to track your employees from their first days of work to their last days with your organization. You can customize your Flare® suite to fit your organization’s needs. All data stored in the system is password protected and housed on secure servers with 99.9% uptime. You have the ability to upload employee information & reporting relations, and store an unlimited number of users and employees.  Some of Flare®’s most attractive features are the customizable modules and the individual, reasonable pricing per module. 

But what’s included in Flare®?  Let’s dig deeper into some of the more popular modules.

Performance Appraisal Module

According to a 2011 SHRM poll, 98% of organizations reported that they have a formal employee performance evaluation process. Although you may have one in place, are your performance reviews completed on paper?  Why not cut time and resources with an online performance review system? With Flare®’s performance appraisal module you can eliminate the hard copy and streamline everyone’s work by having employees’ appraisals pre-populated with their job description and other desired demographics.  In addition, this module is designed with features to ensure all sections are completed prior to submission, to perform mathematical calculations for accurate scoring, and to check for potential legal issues.  Other user favorites include these features:

  • Self-Reviews,
  • HR approvals,
  • Summary reports, and
  • Electronic or traditional paper signatures.

Pay for Performance / Merit Increase Module

“While there are pros and cons to using a merit increase approach, in today’s world a majority of organizations attempt to link pay increases to employee performance,” explains National Director Jennifer Loftus.  “With limited merit increase budgets typically around three percent of pay, it’s essential that organizations make clear distinctions in pay increases between the high performers and low performers.”

If the thought of working with multiple spreadsheets and checking formulas makes you dizzy, however, consider Flare®’s pay for performance module.  In three easy steps you will be able to assign all employees with proper merit increases, meeting your merit increase budget and having the necessary reports for senior management. This module is able to calculate increases as a percent of base pay, lump sum, or a combination of both. Factors such as position in range and performance appraisal score can also be taken into consideration.

Job Description Module

According to Jennifer, “the Department of Labor continues its robust investigations of wage and hour complaints.  One of your best defenses in an FLSA audit is up to date and accurate job descriptions.  And with the new FLSA regulations around the corner, now is the time to create or update your organization’s job descriptions.”

Need an accessible place to keep record of your job descriptions?  Need reminders to update your organization’s descriptions more frequently than every five to ten years?  Flare®’s job description module is for you.  This module allows you to design a job description template so all job descriptions are consistent in content type. Authorized staff can prepare draft updates to job description content to be approved by HR.  The Flare® job description module also contains tests for FLSA compliance and a point factor job evaluation system to streamline your work and reporting systems.

Staff Advancement Monitor™

About 52% of respondents from the 2013 Global Assessment Trends report listed developing leaders as a top priority for their organization. Is leadership development a priority for yours?  If so, Flare®’s Staff Advancement Monitor™ module assists you in developing custom primary & secondary competencies and developmental activities for future leaders.  The results tracked in this module can be used for employee promotion recommendations.  Additional features include a listing of all participating employees, their mentors, and targeted goal positions.

Finders Keepers™

The 2013 Global Assessment Trends report also mentioned that 55% of respondents cite engagement of the workforce as a priority this year. Do you want to know if your valued employees are engaged with their work… or with your organization? Would you like to get opinions on where managers can make improvements? With the Finders Keepers™ module, you can! This module allows authorized users to create much needed customized surveys to gather employee opinions, new hire perspectives, and even exit interview data.  On-line, real-time reporting makes data analysis a breeze!

Total Rewards Statements

77% of organizations feel as though they communicate employee benefits effectively. If you want to ensure that your employees are aware of your organization’s reward program, consider Flare®’s Total Rewards Statement module!  With this module, you will be able to securely inform your employees of the value of their total compensation packages in real-time.  Information captured and reported by Flare® in both narrative and graphic formats include and are not limited to salary, variable compensation, and benefit cost & value information.
According to an October 2013 Gallup study, one in eight, or 13% of employees, are engaged with their work.  However, the bulk of the employees in the study, 63%, are “not engaged.”  Employee engagement is important for organizational success. So how does an organization keep its employees engaged in their work and engaged with their organization? Astronology explores some areas to consider when creating an engaging workplace.

1. Start by engaging with potential candidates at the recruitment stage.

A strong, reliable, and smooth recruitment process is important for ongoing talent management. The UK mobile network “3” decided to move its recruitment measures to an online platform nearly 10 years ago with the hopes that employees would have a positive and consistent experience with the company starting at initial contact. Prompt contact with candidates gave 3 an edge in its highly competitive market. Part of their online recruitment process gave candidates the ability to track their application status at every stage of the process. Their online system also allowed 3 to record, keep on file, and identify potential candidates who may not match the jobs initially applied for, but could be potential matches for other positions that may become available at a later date.  The system opened communication between candidates and the organization...creating an engaging environment before the hiring process.

2. Provide regular and consistent performance management.

The annual performance review with the employee should not be viewed as an “administrative burden.” The employee should feel as though he / she is valued for his / her contributions to the organization. The performance review is a way for employers to demonstrate to employees that they are valued and recognized for their hard work. It also allows the employees to see that there is a communication channel they can use to share their concerns and ideas.

3. Get to know what your employees are thinking.

The use of employee opinion surveys is one way to get to know what the employees think of their current work environment.  Companies such as Recreational Equipment (REI) have become creative, designing an online social media platform called “company campfire” where employees can voice their concerns and opinions.  As our world becomes more technical, being inventive in opening communication channels may set in motion the motivation for employees to want to communicate and become more engaged.

4. Managers must be effective in engaging their employees.
How are managers to be effective in engaging their employees? Investors In People (IIP), a UK government owned company designed to assist British businesses, lists the following:

  • It is imperative that managers are clear with individuals on what is expected of them:
    “Clarity is vitally important for employees, ensuring that they know their place within the organization, and what is expected of them in their role.  This will further incorporate development of team members, a key attribute in keeping them engaged and aligned with an organization’s objectives.”
  • They must treat individuals as individuals, showing respect and fairness for all.
    “Every individual within a company expects to be treated fairly, so managers must ensure that their behavior towards them is consistent.  This must be consistent not only within the context of other team members, but also within that of other managers and the wider organization.”
  • Managers must be able to build work relationships with team members, both on a one-on -one level and on a group level.
“Breaking down barriers and working in a close capacity is one of the simplest methods for managers to build trust within their team.  In this sense, flattening the hierarchy, pitching in, and sitting with the team are all efficient ways of building up those relationships.  Furthermore, managers must also be willing and prepared to feedback on a team’s direction.  This can be done quite simply when a particular team member or team is performing well, but it is equally important to feedback when the reverse is true.  Research shows that employees particularly value feedback after completion of a successful, but complicated or difficult task.”
Do you see areas you can improve on to make your organization more employee-engaged? Has your organization made adjustments not mentioned in this article that has made a difference? Please share your thoughts with Astronology – we’d love to hear from you!