Reflecting on 2017 Federal Policy Changes

The time certainly has flown by as we close the first year of the current political administration. In June, Astronology® reflected on the first six months on Capitol Hill in 2017. In this issue of Astronology®, we review current and potential future policy changes in four areas that affect Human Resources: the Fair Labor Standards Act exemption rules, NLRB seat changes, OSHA regulation rollbacks, and the Affordable Care Act.

Fair Labor Standards Act (FLSA) Exemption Rules Update
Around this time last year, many were preparing for possible changes to the FLSA to determine exempt and non-exempt roles moving forward. However, by the end of November 2016, an injunction was made on the Final Rule, halting its December 1st start date.

On August 31, 2017, U.S. District Court Judge Amos Mazzant granted summary judgement against the Overtime Final Rule. The US Department of Labor’s (DOL) website explains that “The court held that the Final Rule’s salary level exceeded the Department’s authority, and concluded that the Final Rule is invalid.”

What happens next? On October 31, 2017, on behalf of the DOL, the Department of Justice filed a notice to appeal the decision. The notice does not indicate what the US DOL’s motivations are or what practical arguments will be used. It is suggested that the DOL will

• Not defend the Obama selected $913 a week figure, and
• Argue that a salary test is legally permissible under the white-collar exemptions.

It’s likely we won’t hear much else until sometime in 2018. Stay tuned for future updates!

National Labor Relations Board (NLRB)
Many have kept their eyes peeled regarding nominations for and appointments to the National Labor Relations Board, which had a few seats left vacant in 2017. In January, the Trump administration appointed Philip Miscimarra as Chairman. In August, former GOP House staffer Marvin Kaplan was approved by the Senate to an open seat on the Board. The following month, William Emanuel was confirmed to the NLRB with a 49-47 Senate vote. Emanuel’s confirmation currently gives the Republicans a majority on the five member Board.

It is anticipated that with the newly adjusted Board there may be some reverse rulings in the future, namely the Joint-Employer ruling that gave franchisors responsibility for labor law violations committed by their franchisees. Other possible rollback rulings could include 2014 rulings that sped up union elections.

Phillip Miscimarra’s term expires on December 17, at which time he will not seek a second term. We look forward to learn what becomes of the vacated seat and position in 2018.

Occupational Safety & Health Administration (OSHA)
On July 20th the Department of Labor released an updated agenda indicating many OSHA regulatory actions would be cut. 469 proposed federal regulations are being removed. Another 391 regulations have been reclassified as “long-term” or “inactive” for further review. Some of the regulations being removed include efforts to regulate worker exposure to construction, noise, and combustible dust. Two regulations that are listed in the “long-term” category are regulations regarding emergency response & preparedness, and regulations regarding infectious diseases in the health care industry. There are also a few regulations in the “pre-rule” stage:

• Communication Tower Safety,
• Mechanical Power Presses Updated,
• Powered Industrial Trucks,
• Lock-Out/Tag-Out Update, and
• Blood Lead Level for Medical Removal.

We look forward to seeing what will happen with these proposed regulations.

Affordable Care Act (ACA)
In our June 27th Astronology® we described the then newly presented Better Care Reconciliation Act (BCRA). It was the Senate’s amendment to the House of Representatives’ American Health Care Act of 2017 (AHCA). The BCRA did not gain the needed votes to pass. In July, a third attempt, the “Skinny Repeal,” also failed to pass the Senate. Late September another attempt was dismissed. Republicans decided to not bring the Graham-Cassidy Plan to vote, as they believed they would not secure the needed votes.

What does this mean for us now? We should follow the currently mandated Affordable Care Act in order to avoid penalties. Nothing else has changed.

We eagerly wait for what 2018 brings the Human Resources sector! In addition, are there other federal or local regulations that have made an impact on you and your Human Resources role? Please let us know in the comment section below.

Remote Work: A Dying Trend?

After a long, 20 quarter revenue loss, IBM, a company known to be a proponent of remote work, dismantled its remote work option this past May.  This end to the flexible work arrangement sent shockwaves through not only the tech industry but also many involved in business operations. Much has been said about flexible work – particularly remote work and how it could be used as a recruitment and retention tool. Much also has been questioned in regards to remote work’s ability to promote (or lower) productivity, efficiency, and confidence in an organization. In this Astronology® we explore remote work – is it a dying trend?

Many were startled by the change in direction from IBM, largely due to its history. In 1983 the company had 2,000 remote workers.  By 2009, roughly 386,000 people, 40% of its employees in 173 countries, were remote workers. The decision to eliminate the program comes as a surprise because another company, Yahoo, attempted a similar recall of remote work for similar reasons back in 2013. Three years later, in 2016, Verizon acquired Yahoo for $4.4 billion, far less than the $100 billion Yahoo was worth in its prime.  In addition, both Aetna and Best Buy have ended their remote work options in recent years.  Does research indicate if remote work hinders or helps an organization?

A 2017 Gallup poll reported that in 2016, 43% of American employees worked remotely at least sometimes. Considering that in 2012 this level was 39%, clearly there is growth in the use of remote employees.  A Harvard Business Review article noted that the Chinese travel website Ctrip tested half of its call center employees with remote work for nine months.  During the nine month period, the company saved $1,900 per employee on furniture and space.  It also was noted that the at-home workers were not only happier, but also more productive.  13.5% more calls were completed from the at-home staff than the in-office staff. The article also notes that employees perhaps worked more because the at-home workers started earlier, and worked until the end of the day. The advantage of a lack of commute also could have played a factor in the at-home staff’s productivity.

However, there are concerns with remote work.  Since employees are not in a common area, work assignments that require teamwork are difficult to complete.  An online The Atlantic article explains that work that depends on “collaborative efficiency,” the speed at which a group successfully solves a problem, requires communication. Even with the advancement in telecommunications, such as instant messaging and videoconferencing, the speed at which a team can both identify a challenge and then solve it, at its quickest, is when the team members are in person. The power of presence cannot be fully measured or explained, but its effects are seen by the results. In many cases, there is a fear that employees won’t work as hard without the presence of an office setting or management close by. There also are concerns on how to measure and mentor employee growth.

As remote work becomes an increasingly enticing feature for many potential employees, organizations will have to examine how this desire could be met, to both the employee’s and the employer’s satisfaction. In a Chicago Tribune online article, Kate Lister, president of Global Workplace Analytics explains, “The office is becoming a place for collaboration, while home is a place for concentration.” Perhaps remote-work can be a seasonal option for employees that would prefer to be home during the holidays.  Another option is to offer remote work for part of the week, while requiring in office days for the rest of the week.

For example, National Equity Fund has 91 of its 176 employees nationwide working from home two or three days a week. The schedule is spread out in such a way that 22 people are out of the office at a time.  On the work from home days, employees tend to start work early and end later, but take longer breaks throughout the day to take care of personal business.  CEO Joe Hagan remarks, “You’re always concerned people will not work as hard if they’re outside the office, which has proven here, at least, to be a fallacy.” The flexibility hasn’t hurt productivity.  Rather, productivity has increased by 50%.

Does your organization offer a remote work program or option? What are the program requirements? Has remote work helped or hindered overall growth in your organization?  Please share your thoughts in our comments section below!

Keys to Successful Employee Recruitment and Retention

Employee recruitment and retention are hot topics in the world of Human Resources.  In executing their duties, HR professionals every day address a number of recruitment and retention myths. These myths include the following:

1. People most often leave for more pay. While research shows that most people do not leave a job for more money, very low-income workers will leave for more money in order to make ends meet. Others use pay to express a perception of unfairness in how the organization values their contributions.
2. Productivity-based incentive programs produce long-term impacts and improved morale. Studies show that carrot-and-stick motivation programs do not pay off with long-term employee retention. Employees want a chance to learn and grow in the job, perform meaningful work, collaborate with good supervisors, and receive appreciation for a job well done.
3. Employees do not want more responsibility. Employees are not looking for more work, but are looking for opportunities to grow and develop their skills. Employees want to try new things, to feel skillful, and to experience personal satisfaction that comes from higher levels of achievement.
4. Loyalty is dead. Employees want greater work-life balance as well as the opportunity to make higher contributions to the success of the organization. Employees express loyalty when given the opportunity to better serve customers and when given more learning opportunities.
5. Improving employee satisfaction is expensive. Research tells us that employees cannot be bought. Employees want a manager that listens & responds to employees’ ideas, supervisors who support people’s growth & initiative, more training in how to do their jobs better, and effective, positive co-worker relationships.  Meeting these needs does not have to be an expensive undertaking.
6. Employee satisfaction is fluff. Studies show that lower turnover and greater satisfaction levels have a positive impact on customer satisfaction & organizational financial success.
7. Supervisors are the problem. Supervisors today on average have more staff reporting to them than in the past, yet the amount of training provided to supervisors is minimal.  The root issue of underperforming supervisors may rest more with the organization that the supervisors themselves.
8. My organization’s employees are different. Employee issues & needs are universal and are not dependent upon industry.

According to research conducted by Dr. Jim Harris and reported in his book Getting Employees to Fall in Love With Your Company, there are five principles embraced by the best-run companies in America, including Walt Disney, ServiceMaster, Southwest Airlines, Marriott, Ben & Jerry’s, North American Tool & Die, Lincoln Electric, Jacksonville Foods, and Cunningham Communication. These principles are as follows:

1. Capture the Heart. The highest achievable level of service comes from the heart. The organization that reaches its people’s hearts will provide the very best service. Organizations that help employees balance work & life demands, inject fun into the workplace, and create compelling visions of how they contribute to the organization’s success capture the hearts of their employees.
2. Open Communication. Employees are more loyal when they feel connected to the organization. Successful organizations encourage their employees to ask questions of their supervisors regarding the business and to have them involved in critical business decisions.
3. Create Partnerships. Many of these organizations create partnerships by sharing financial numbers with employees, both in good times & bad, and by linking incentive compensation programs to both individual & team success and failure.
4. Drive Learning. These organizations require employees to develop their skills to perfection and ask their employees to learn something new every day. A number of these organizations make available industry-specific reading material and provide in-house seminars, allowing employees work time to develop their skills.
5. Employee Action. These organizations understand that to increase employee loyalty and retention, they must go beyond traditional empowerment programs. Rather, they give employees the freedom to succeed. A rule at many of these organizations is to use your good judgment at all times.

Based on these five principles, the most successful organizations today employ the following strategy in the recruitment and retention of key employees.

1. Pay attention to top employees to make sure they are being developed, rewarded, and recognized for their contributions. Develop a reputation for this in the industry to attract future talent.
2. Build and maintain relationships with top employees, so that departure from the organization will be a personal & very difficult decision for the employee. Top employees also will share this sense of belonging with potential new employees.
3. Increase confidence and hope among employees through a participative vision & strategy. Engage your employees. Develop a reputation as an open organization that really listens to employees and their ideas.
4. Build loyalty, commitment, and trust, so that employees offer these back to the organization. We only have to look at Enron, Wells Fargo, and WorldCom to see what happens when trust is lost.
5. Create clear communication pathways so employees always learn important information first hand.

Recruitment and retention are major issues as employers struggle to keep the best & brightest employees and attract the same from the outside. Employees increasingly are demanding a balance of work & family life, and are not willing to sacrifice everything for their careers and employers. Lifelong employment with one organization is no longer a desired option for many employees. Employees are continually searching for the best pay, benefits, and culture & work environment. With turnover costs conservatively estimated at up to 50% of an employee’s annual pay, retention of employees and recruitment of future staff are critical.

In order to attract and retain top employees, organizations must have an effective, comprehensive strategy addressing four key components:

1.     Effective internal management,
2.     Career development opportunities,
3.     Work-life balance programs, and
4.     Strong compensation & recognition programs.

Organizations that pay attention to these components have a better chance of attracting and retaining the talent required to remain competitive in the marketplace.

The Controversy of Executive Compensation

Executive pay continues to be a topic of conversation. A July 2017 Economy Policy Institute (EPI) survey reported that CEOs at the largest firms in America made an average of $15.6 million in compensation during 2016, or “271 times more than the annual average pay of the typical worker.” CEO pay continues to be exceedingly high and growing quicker than the pay of a typical worker…meaning less of an organization’s effort is being shared with the ordinary workers. What does the increasing appearance of economic inequality mean for organizations? Astronology® takes a brief look into the controversy surrounding executive pay.

An online Fortune article points out that in 1978, CEOs earned just 30 times the amount the average worker made.  CEO pay was set on scale with everyone else in the organization.  This was considered “internal equity.”  By the 1980s, “external equity” became the influence for CEO pay. This external equity meant that CEOs were paid on a scale with other CEOs. Considering that not all organizations are on the same market, this pay scale becomes problematic very quickly.

Fast forward to 2013, where a survey by the Hay Group found that 37% of CEO pay was in cash, while the percentage paid in stock and stock options was 54%. It also was discovered that a number of companies added stock options 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 typically is not tied as much to performance but more so to the size of the company, we can see how easily the combination of these factors may be why CEO pay has gotten so high.

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 Securities and Exchange Commission’s (SEC) proposed mandated “compensation actually paid” (CAP). This mandate would require greater disclosure of executive pay, including more transparency to the company. However, some feel like this mandate will give only a “hazy” link to pay for performance.

The February 2017 Harvard Business Review article “Why We Need to Stop Obsessing over CEO Pay Ratios” gives an additional perspective to consider. Pay ratio is not comparable across different industries. For instance, investment banking will have a different pay ratio than the supermarket industry. Also, the effect of a CEO’s actions carries a bit more weight than most employees’ actions. The article explains that if the CEO improves corporate culture, that change can be rolled out organization-wide, thus having a larger effect in a larger firm. “One percent is $20 million in a $2 billion firm, but $200 million in a $20 billion firm. In contrast, most employees’ actions are less scalable. An engineer who has the capacity to service 10 machines creates, say, $50,000 of value regardless of whether the firm has 100 or 1,000 machines. In short, CEOs and employees compete in very different markets, one that scales with firm size and one that scales less.”

The author, Alex Edmans, also highlights some possible dangers to disclosing pay ratios.  “A CEO wishing to improve the ratio may outsource low-paid jobs, hire more part-time than full-time workers, or invest in automation rather than labor.” The article also notes that a CEO could raise workers’ salaries, but cut other benefits in order to compensate for the raises. More importantly, an organization provides more than just salary. The article reminds us that “… after salary reaches a (relatively low) level, workers value nonpecuniary factors more highly, such as on-the-job training, flexible working conditions, and opportunities for advancement…a snapshot measure of a worker’s current pay is a poor substitute for their career pay within the firm.” Clearly, 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? Share with us what your attempts have been, or if your organization has found some sort of solution. We look forward to hearing from you!

A Laughing Matter - Does Humor Belong in the Workplace?

Did you know that the average six-year-old child laughs 300 times a day?  It’s a stark contrast to the average adult who laughs an average of only 15 times daily.  To some, even 15 laughs may seem high.

Research shows that laughter has many physical and psychological benefits, such as stimulating the immune system, decreasing “stress” hormones, and increasing endorphins.  These benefits also translate to the workplace.  It’s been shown that a little humor & fun can increase productivity, enhance team building, and improve morale.  In a time where employees are consistently being required to work harder & faster, the ability to de-stress and laugh is even more important.

It’s important to remember that not all humor is created equally. Individuals who make exclusive or offensive jokes may not realize that their attempts at humor may affect employees negatively, causing them to feel uncomfortable, angry, or upset.

“Humor should be inclusive to be well-received. But sexist, racist, ageist jokes, and crude remarks label certain individuals, or groups of people, as inferior in some way and create exclusions. Not only is this inappropriate, but offensive displays of humor, even when not directed at a specific person, can lead to sanctions, terminations, and lawsuits,” explains Lahle Wolfe in the article “Learn About Humor in the Workplace and the Law” on thebalance.com.

So how do you incorporate well-intentioned laughter and smiles at work? In order to create a happy & healthy work environment, the article suggests setting boundaries and prohibiting innuendos & comments in jest about:

• Sexual orientation or acts
• Religious or political practices or beliefs
• Race or ethnicity
• Social status, gender, or age-related stereotypes
• Physical appearance and attributes
• Weight-related issues
• Disabled persons, or persons with any form of diminished capacity
• Any other topic that targets an individual or group as being inferior.

Remember, you don’t have to be a stand-up comedian to incorporate humor into your workplace.  Sometimes just having the ability to laugh at yourself, and share that laugh with your employees, is enough to make everyone relax and smile.

2018 Compensation Budgeting Forecast Part 3: Trends in Non-Profit Compensation

The world of non-profit compensation continues to see radical changes from the past. Previously, it was assumed that non-profits, due to the limitations placed on their abilities to generate revenue, were in the position of compensating their employees much below the market.  In the past, it was assumed that time off packages and benefits would make up for low wages. But this mindset has changed in the past few years, and will continue to change into 2018. The following are key trends in non-profit compensation design Astronology® readers need to know.

Trend #1: Strategic Planning. The first trend is the increased use of the strategic planning process by non-profits.  What was once considered a normal part of for-profit planning is being adopted by non-profits. According to the National Council on Nonprofits:

A strategic planning process identifies strategies so that a nonprofit will achieve its mission. Ideally, as staff and board engage in the process, they become committed to measurable goals, approve priorities for implementation, and also commit to revisiting the organization’s strategies on an ongoing basis as the organization’s internal and external environments change. Many nonprofits start the process by identifying the nonprofit’s strengths, weaknesses, opportunities, and threats, in what is commonly called a “SWOT” analysis. Looking at external as well as internal factors (such as your own nonprofit’s staff capacity to accomplish its goals) is important.

This is an important change, as having a formal strategic planning process allows for the creation of a formal “compensation strategy” necessary to focus employee efforts in support of the strategic plan.

Trend #2: Compensation Philosophy Statements.  The second trend is the increase in formal compensation philosophy statements at non-profit organizations. With the advent of strategic planning, we are now finding more non-profits establishing a formal “compensation philosophy” that acts as a blueprint in compensation design and administration activities.  According to Payscale,

A compensation philosophy explains the role of compensation in your organization and tells your employees how you believe people should be paid, while your compensation strategy explains how you will achieve this philosophy. There are three things to look for when it comes to creating a strong compensation strategy in the nonprofit sector. Who do you compete with for talent? Nonprofits aren’t only competing with other nonprofits, so consider all of your competitors for talent in your compensation strategy. Think about specific departments and how they might differ. For example, are you drawing talent for your Finance department from the for-profit sector or specific industries? What about your Development team? How competitive do you want to be in your market? Do you want to pay at the median of the market and target the 50th percentile? Or do you want to be an organization leading the market and targeting higher? Consider targeting higher in your market for key departments and areas that are critical to your organization.  Do your compensation philosophy and strategy support your organization’s mission? If your organization’s mission is focused on social justice, yet employees are struggling financially due to low pay, there might be a disconnect between your mission and compensation philosophy. Be sure your pay practices are aligned with your vision & values to attract and retain the best talent.

Astron Solutions finds that the majority of our non-profit clients now have formal compensation philosophies and strategies to ensure compensation programs are aligned with organizational strategic initiatives.

Trend #3: Creative Compensation. The third trend is the increase in creativity in pay-for-performance and incentive compensation strategies. Many non-profit boards have concerns regarding providing incentives to employees and leadership, in that these programs may be taking funds away from the services provided by the non-profit to its constituents. The IRS provides clear guidelines regarding the use of incentives in non-profit organizations:

A 501(c) tax-exempt organization may award a bonus to an employee if the employee’s total compensation package:

• Is established by an independent board of directors or by an independent compensation committee;

• Is reasonable in terms of the employee’s specialty and geographic locale

• The result of arms’ length bargaining

• Includes a ceiling or reasonable maximum

• Does not have the potential to reduce the charitable services or benefits the organization would otherwise provide

• Takes into account measures of the employee’s performance

• Keeps the organization within budget without charging more for services

• Does not transform the principal activity of the organization into a joint venture between it and the employee

• Is not merely a device to distribute all or a portion of the organization’s surplus to persons who are in control of the organization

• Serves a real and discernable business purpose of the exempt organization

• Does not result in abuse or unwarranted benefits

• Rewards the employee based on services the employee actually performs 

In establishing an incentive plan in a non-profit organization, Astron Solutions recommends that

1. The program be self-funded, with the maximum potential incentive payout part of the compensation budget for the entire fiscal year.
2. The program incorporate a “balanced scorecard approach,” in which key elements of the strategic plan be assigned a value weight and the portion of the incentive payout.
3. Each strategic objective be measured based on a threshold measure (50% payout), target measure (75% payout), and optimum measure (100% payout).

Trend #4: Sophistication Surrounding Executive Compensation.  The fourth trend is the sophistication of Boards and Compensation Committees as related to executive compensation. For years, non-profit boards ignored IRS regulations regarding executive compensation.  However, the IRS tells us that

A key to intermediate sanctions compliance is to create a “rebuttable presumption of reasonableness.” In short, if the organization creates this presumption, then the burden of proving that compensation is unreasonable falls back to the IRS and includes the following: Generally, all compensation transactions for disqualified persons must be approved by an authorized body of the organization (or an entity it controls) which is composed of individuals who do not have a conflict of interest concerning the transaction. Prior to making its determination, the authorized body obtained and relied upon appropriate data as to comparability, and adequately documents the basis for its determination concurrently with making that determination. The authorized body, or its representative, then needs to sufficiently document, including a listing of persons present during deliberations and signatures of those authorized to approve the decision.

Astron Solutions’ Perspective
Astron Solutions will continue to monitor these four trends in non-profit compensation throughout 2018. As non-profits find themselves in a battle for talent with the for-profit market, there will be increased pressures to find ways to be creative with the compensation programs needed to compete for essential talent, and to maintain compliance with financial & regulatory restrictions.

2018 Compensation Budgeting Forecast Part 2: Trends in Incentive Compensation

Astron Solutions has been tracking the increase in organizations instituting short- and long-term incentive plans among our client organizations over the past year. This trend is in direct response to the frustration with and the failure of traditional merit pay programs to impact employee behavior. In addition, organizations are discovering that traditional merit pay programs have little or no impact on retaining and motivating their new millennial workforce.

Employee Engagement and its Impact on Total Rewards
Of most importance to organizations today is the need to have better reward systems to enhance employee engagement. The following is from a 2017 study conducted by Deloitte on the concern of employee engagement:

• Organizational culture, engagement, and employee brand proposition remain top priorities in 2017; employee experience ranks as a major trend again this year.
• Nearly 80 percent of executives rated employee experience very important (42%) or important (38%), but only 22% reported that their organizations were excellent at building a differentiated employee experience.
• Fifty-nine percent of survey respondents reported they were not ready or only somewhat ready to address the employee experience challenge.

A key total rewards strategy is to develop short- and / or long-term incentives that focus on employee behaviors exemplifying the organization’s values.

Current Use of Bonus / Incentives
According to BLR’s recently published 2017–2018 Pay Budget and Variable Pay Survey, incentive / bonus practices in 2017 and projected for 2018 appear as follows:

For 2017:

• On average, 50.4% of organizations paid bonuses to their exempt employees in 2017, down from 54.3% last year.  18.4%, up from 15.7% last year, offered amounts of 5% or less.  31.2% awarded amounts greater than 5%.
• On average, 31.5% of those surveyed awarded bonuses to their hourly workers, down from 37.9% last year.  21.6% offered 5% or less.  9.9% awarded amounts above 5%.
• On average, 30.8% gave their senior management team members bonuses above 10% of base pay, down from 37.2% of organizations last year.  21.2% awarded the remainder of their management team members at that level, down from 24.5% of organizations last year.  8.6% rewarded their non-management exempt employees with bonuses at the same level, down from 10.6% of organizations last year.
• Only 3.4% awarded their hourly office employees bonuses above 10%.  2.4% of survey participants who answered the question awarded their hourly nonoffice employees bonuses above 10% of their base pay.
• 40.4% paid bonuses in addition to salary increases, up from 38.9% of organizations last year.  In 2017, 21.0%, down from 24.5% last year, awarded some of both, depending on employee pay type.
• Though the majority (56.9%) isn’t providing them in 2017, lump sum payments are an option for some employers.  13.1% offer up to 5% of base pay.  Another 3% offer from 5.01% to 10% on average across all employee groups.

Projected for 2018:

• A little over one-third (34%) of survey participants provided information regarding their plans for bonuses in 2018. Of those who did, on average across all employee types, 8% plan to offer bonuses of up to 2.5% of base pay.  Another 9.8% plan to offer 2.51% to 5%.  Another 6.9% plan bonus amounts in 2018 of 5.01% to 10%.  Bonus amounts of 10.01% to 25% are planned for an average of 10.1% of the survey participants who answered this question.
• Senior management will receive bonuses of 10.01% to 30% of base pay at 19.5% of organizations.  9.2% will receive bonuses of 30% or more.
• Though 5.5% plan to award bonuses in lieu of pay increases, 36% will award bonuses in addition to salary increases.  23.5% plan some of both, depending on employee type.
• Although 81% have no plans to offer them in 2018, lump sum payments are on tap for some employers.  12.3% plan to offer up to 5% of base pay.  1.9% plan to offer from 5.01% to 10% on average across all employee groups.

Incentive / Bonus Budgeting for 2018

Regardless of how an organization decides to design its incentive / bonus program, there remains the question of how to budget and account for this variable salary expense.  For not-for-profits, the issue is clearer in that in order to retain nonprofit status in the eyes of the IRS these organizations are required to pre-budget the maximum potential payout.

However, there is still the issue of accounting for this expense. From Accounting Tools, we find the following general recommendations:

• Historical-basis bonus. If a bonus is essentially a roll-forward of the organization’s performance from the preceding period into the budget period, the recipient of the bonus plan presumably only has to copy existing performance to achieve the bonus. In this case, the payment is probable, so you should budget for the bonus expense.
• Attainable bonus. If the bonus is based on an improvement in the organization’s present performance, you should base the decision to record the bonus on a qualitative estimate of how difficult it will be to attain the bonus. If it is more likely than not that the recipient of the bonus plan will be paid the bonus expense.
• Theoretically attainable bonus. If the bonus is only paid if one or more extremely difficult targets are met, then do not budget for the bonus expense. In these cases, the bonus is based on the achievement of targets that may only be theoretically possible, such as running a production facility at 100% of its capacity. Given the low probability of success, there is no reason to budget for the bonus expense.

Astron Solutions’ Perspective
Astron Solutions finds that our client organizations are focusing more on how to enhance employee engagement through their total rewards programs, rather than specific compensation plan elements. Most clients now find that traditional “merit” and / or “pay for performance” programs are inadequate in reinforcing the behaviors expected of employees, in terms of both employee engagement and meeting strategic objectives. Client organizations now look to variable compensation programs as a more effective answer.

2018 Compensation Budgeting Forecast Part 1: Base Pay Adjustments

As we move towards Labor Day, Astron Solutions is getting more and more requests for information regarding 2018 compensation budgeting. This is part one of a three part review of 2018 compensation planning projections.  Part 1 focuses on base pay, and includes a review of the impact of 2018 minimum wage changes.

2018 U.S. Economy
It is always important to put into perspective compensation adjustment projections given general economic predictions for the same time period.  According to the Economic Research Institute (http://www.erieri.com/), the following are projections on key economic indicators for 2018:

• Gross domestic product in the U.S. is expected to increase by 2.5 percent next year, up from 2.3 percent in 2017 and 1.6 percent in 2016 — an improvement, but below the Trump administration’s goal of 3 percent growth for the economy.
• Inflation is forecast to slow to 2.4 percent, down from 2.7 percent this year but higher than the 1.3 percent reported for 2016.
• The unemployment rate is predicted to fall slightly to 4.6 percent, down from 4.7 percent this year and 4.9 percent in 2016.

2018 Minimum Wage Changes
Will your organization’s operating location(s) experience a minimum wage change in 2018?  Following is a summary of anticipated changes in the coming year (www.thebalance.com/2017-federal-state-minimum-wage-rates-2061043).  Note that states, cities, or territories following the Federal minimum wage of $7.25 are not listed in this summary.

• Alaska: $9.80 (Annual indexing has begun)
• Arizona: $10.00 (Raised to $12.00 through Indexed Annual Increases between 1/1/2018 to 1/1/2020)
• Arkansas: $8.50
• California: $10.50  ($11.00 to $15.00 in $1.00 Indexed Annual Increases between 1/1/2018 to 1/1/2022)
• Colorado: $9.30* ($9.30 to $12.00 in $0.90 Indexed Annual Increases between 1/1/2018 and 1/1/2020)
• Connecticut: $10.10
• Delaware: $8.25
• District of Columbia: $12.50 (Increases to $15 with Indexed Annual Increases between 7/1/2018 and 7/1/2020)  Florida: $8.10*
• Georgia: $5.15 if not covered by Federal Regulations otherwise $7.25 (Federal Minimum Wage)
• Guam: $8.25
• Hawaii: $9.25, $10.10 by 1/1/2018
• Illinois: $8.25
• Chicago $11.00 July 2017, $12.00 July 2018, $13.00 July 2019
• Maine: $9.00 ($10.00 to $12.00 in $1.00 annual Increases between 1/1/2018 to 1/1/2020) (Indexed annual increases will begin on 1/1/2021)
• Maryland: $9.25,  Increases to $10.10 7/1/2018
• Massachusetts: $11.00  ($3.75 for tipped employees), $16.50 per hour for working on a Sunday
• Michigan: $8.90, $9.25 by 1/12018 (Indexed annual increases will begin on 4/1/2019)
• Minnesota: Large employers are required to pay workers $9.50/hour and small employers (less than 500k in annual sales) $7.75 (Indexed Annual increases will begin on 1/1/2018)
• Missouri: $7.70
• Montana: $8.15 ($4.00 for businesses with gross annual sales of $110,000 or less) (Annual indexing has begun)
• Nebraska: $9.00
• Nevada: $8.25 Nevada’s minimum wage is set at $1.00 above the federal minimum wage for firms not providing health insurance. The minimum may be increased more than $1.00 above the federal minimum wage if cumulative inflation, as measured by the CPI-U, is larger than the percentage change in the federal minimum wage since December 31, 2004.
• New Jersey: $8.44 (Annual indexing has begun)
• New Mexico: $7.50
• New York: $9.70 ($10.40 by 12/31/2017 with $0.70 Indexed Annual Increases from 12/31/2017 to $12.50 by 12/31/2020. Starting 1/1/2021, the rate will be adjusted annually for inflation until it reaches $15 an hour)
• More information on New York minimum wage increases.
• Ohio: $8.15* ($7:25 for employers with gross sales of $283,000 or less) (Annual indexing has begun)
• Oregon: $10.25  (From $10.75 to $13.50 from 7/1/2018 to 7/1/2022)
• Rhode Island: $9.60
• South Dakota: $8.65  (Annual indexing has begun)
• Vermont: $10, $10.50 by 1/1/2018, Annual indexing begins 1/1/2019
• Virgin Islands: $9.50($4.30 for employers grossing $150,000 or less), $10.50, 6/1/18
• Washington: $11.00 (From $11.50 to $13.50 from 1/1/2018- 1/1/2020)
• West Virginia: $8.75

Remember to follow and account for current minimum wage legislation changes in your location(s), as the cost of minimum wage adjustments often are not included in compensation budgeting projections.  These changes may very well have a domino effect throughout an organization’s formal pay structure.

Summary of 2018 Projections
The following is a summary of compensation budgeting projections from the Economic Research Institute (www.erieri.com) and WorldatWork (www.worldatwork.org).

Economic Research Institute:

WorldatWork:

Total U.S. Salary Budget Increases by Employee Category

Employee Category	Actual 2017 Mean	Actual 2017 Median	Projected 2018 Mean	Projected 2018 Median
Nonexempt Hourly Non-Union	3.0%	3.0%	3.1%	3.0%
Nonexempt Salaried	3.0%	3.0%	3.1%	3.0%
Exempt Salaried	3.0%	3.0%	3.2%	3.0%
Officers/Executives	3.0%	3.0%	3.2%	3.0%
All	3.0%	3.0%	3.1%	3.0%

Astron Solutions’ General Conclusions

1. It appears that we are continuing with an approximate 3% compensation budgeting factor moving into 2018.
2. All organizations need to be cognizant of their state and / or local minimum wage changes, and build into their budgets the direct & indirect impact of these legislative changes.
3. Astron Solutions has noticed a marked increase in career path development to meet the retention needs surrounding millennials in the workforce. These career-based promotions also need to be incorporated into base pay compensation adjustments. Astron recommends moving these positions out of the mainstream salary structure, in order to better track the impact(s) of career-based adjustments.
4. Organizations also need to be aware of potential federal and approved state minimum pay for overtime exemptions, and the potential budgetary impact of making additional adjustments in exempt / non-exempt classification.
5. Organizations also need to be sensitive to the impact of recruiting and retaining “mission critical” positions, and isolate these positions in order for appropriate compensation levels to be accounted for in the 2018 budget.

Please stay tuned for more!  Our next issue of Astronology® explores trends in incentive compensation in 2018.

Low Cost Techniques for Employees Recognition

Everyone wants to be recognized for their hard work. Many believe that recognition gives employees incentive to stay loyal to their organizations, and promotes the employees’ continued hard work. Despite this common thought, however, a 2016 Gallup report highlighted that in the United States, only “one in three workers strongly agree that they received recognition or praise for doing good work in the past seven days.” In this issue of Astronology®, we explore low-cost ways of engaging and rewarding employees with the goal of demonstrating that their dedication & hard work are appreciated.

Two Ways to Communicate Recognition
Informal recognition can be of a spontaneous nature, such as noticing a desired behavior and commending the employee for it. Sending a positive e-mail when tasks are taken care of well beyond expectations is another example of spontaneous recognition.

Another type of employee recognition is formal recognition. Formal recognition is helpful for those managers and supervisors who experience difficulty in making employee recognition a priority. It’s easy to get caught up with day to day activities, and before you know it, a whole year can go by without formal acknowledgement of employee appreciation. Setting aside a certain month out of the year to celebrate employees or instituting an employee of the month program are examples of formal employee recognition programs that do not involve major time commitments. An additional tool you most likely already have available to help in this regard is an efficient performance management system. Such a system can keep track of employee progress & goals, and aid in rewarding employees when it is appropriate.

Low Cost Ways of Saying Thanks!
Keeping in mind your own organization’s culture, perhaps some of the following suggestions could be a start in incorporating regular employee recognition:

• Provide a “Behind the Scenes” award for actions not normally highlighted 
• Give an “Above and Beyond the Call of Duty” (or ABCD) Award for employees who convey this attitude
• Create a “Kudos” column in the department newsletter 
• Hold a department break in the employee’s honor. Don’t forget to include light snacks! 
• Keep a supply of appropriately clever “thank you” notes for immediate rewards
• Award tickets to a sports game 
• Share gift certificates / cards, such as
• To a popular store or restaurant in the area 
• American Express, Visa, and MasterCard gift cards that allow the employee to choose where to spend the allotted amount given 
• Movie theater gift cards
• I-tunes gift cards for those iPod or iPad users 
• Distribute unique coupons to demonstrate thanks, such as a 
• Longer Lunch Coupon
• Shorter Work Day Coupon
• Work from Home Day Coupon
• Swap a Task for a Day Coupon

The point of employee recognition is to make the employee feel valued by the organization where he / she spends most of the day’s waking hours! When employers take time to acknowledge their employees’ hard work and attentiveness, they give employees esteem motivation to continue their good work. Consider employee recognition as part of creating a cohesive, happy organization. Such an organization will have greater success in achieving its objectives. No matter your organization’s budget or culture, spend some time giving employee recognition to those who deserve it.

How to Deal: Performance Reviews

From both sides of the conference table, performance reviews often are considered one of the least liked and feared parts of working within an organization. The employer or manager may not have kept accurate records of an employee’s progress, is unable to highlight performance highs & lows, and is not sure how to encourage the employee to set new goals based on the performance review. Employees may feel they did not receive the performance review they truly deserve, perhaps viewing their managers as overly critical. How does an organization get past these issues and make performance reviews enjoyable? Astronology® investigates the concerns associated with traditional performance reviews.

The Performance Reviewer
One of the key issues an employer or manager must consider when creating a cohesive and thorough performance review is making sure the system’s objectives are clearly stated at the start of, and are met upon completion of, the review. For example, is the performance review primarily for the good of the organization, or for the individual? Susan Heathfield, a human resource expert suggests, “If the true goal of the performance appraisal is employee development and organizational improvement, consider moving to a performance management system.”

Astron Solutions’ Flare® provides an easy to use performance management system. The system is fully configurable to meet any organization’s needs, no matter their size, in automating performance reviews.

Susan also provides these helpful tips to ensure effective performance discussions:

• Make sure that the Job Description is accurate.
• Help create performance goals that are measurable.
• Provide feedback on the employee’s performance throughout the year.
• Maintain records or small notes on contributions and problems.
• Develop coaching or mentoring techniques to apply to the employee.

Applying these helpful tips, or transitioning to a performance management system, can help make the performance review process more efficient and pleasant for both the reviewer & the employee.

Time for Your Report Card
Performance reviews usually bring anxiety and nervousness to employees. Will this be a good review or a bad one? Did I do everything I could to contribute to the organization? Will the reviewer be critical of every error I have made? Did I make too many errors?

Just like the reviewer has to prepare for the performance review, the employee also needs to make preparations. For starters, if the employer or manager hasn’t put an employee on schedule for a performance review, he / she shouldn’t be afraid to ask and schedule one. The review allows employees to see what areas of improvement the employer desires. In addition, employees should not think that they are supposed to be silent during the performance review meeting. Employees need to know that they should come prepared to the meeting, with qualitative & quantitative references of work achievements, such as sales numbers, responses from satisfied clients, and any successful projects spearheaded or contributed to.  By asking the manager to help establish performance review goals for the next year, employees may impress upon their managers eagerness to stay up-to-date with the organization and help the organization to grow.

Monster.com provides these additional tips for the employee going into a performance review:

• Know your career path.
• Ask your supervisor the measurements of a performance review.
• Agree and stick to the performance plan for next year.
• Do not take anything that is said as personal.

The Total Rewards Component
Organizations need to consider the additional benefits of offering a performance management process to their employees. According to National Director Jennifer Loftus, “performance management and recognition is one of the five elements of total rewards. In today’s challenging business environment, proactive organizations are motivating & retaining employees by using all elements of total rewards, particularly the non-cash components.” Total rewards – everything an organization offers its employees – encompasses cash compensation, benefits, work / life balance, career advancement & development, and performance management & recognition. The performance appraisal process should be an on-going opportunity to celebrate successes, and remind employees that we appreciate their efforts. Well-timed praise or minor course corrections are more effective than later addressing the costs of turnover impacting an organization’s bottom line.

A Growing Change in Format
Concerns such as time commitment, technical complications, and confidence in accuracy have led to a growing trend of ditching traditional performance reviews. For more details and examples on this new topic of discussion, please read our Astronology® article “Forgoing Annual Performance Reviews: What Are the Alternatives?”.

Performance reviews do not have to be the bane of an organization’s existence. With proper evaluation, thorough communication, and a basic conceptual foundation on why the performance review takes place, the process can become a “look forward to” event for both managers & employees.

Reflections from the 2017 Annual SHRM Conference and Exposition

The annual SHRM Conference and Exposition is always an excellent time, and this year’s event in New Orleans did not disappoint! Mike, John, Brendan, and I had a fantastic time meeting prospects, visiting with clients & Astron friends, getting caught up on SHRM Learning System developments, and enjoying New Orleans hospitality & good food! Fresh beignets, muffulettas, and po’ boys – yum yum yum!

It was so much fun to reconnect in person with Cathy, Tim, Clara, Linda, Karen, Jake, Ruth, Brian, Corey, Jamie, Terri, Hugo, Carlos, Dan, Sandra, Elizabeth, Sharmila, Lucia, Amy, Dorothy, Juan Carlos, Tracy, Angela, and Rachel. Thank you for stopping by our booth! (I’m sure that I am forgetting to mention by name some clients and friends who visited us in booth #1143 – my apologies for that!)

The Tuesday evening show with Harry Connick, Jr. was amazing! I didn’t know he is such a versatile musical talent. The evening’s 90 minute performance flew by!

The only downside to the conference was the unexpected arrival of Tropical Storm Cindy on Tuesday! John’s umbrella fell victim to the high winds, and we got a bit wetter than we might have liked, but thankfully everyone’s flight home on Wednesday went smoothly. I hope that this is the last tropical storm / hurricane event to hit the Gulf Coast in 2017.

Mike, John, Brendan, and I look forward to seeing you in Chicago, June 17 – 20th, 2018. We’ll be in booth #1829! Mark your calendars and get ready to make your hotel reservations soon!

Additional Pictures:

French Quarter & Bourbon Street

World War II Museum

Balcony view of the Fisher Phillips party