Batten Down the Hatches!
As you have probably heard, the Department of Labor is planning to dramatically raise the minimum salary requirement for employees to qualify as exempt under the “White Collar Exemptions.” It’s possible this new minimum will be as high as $50,440, which could impact nearly five million employees. The threshold could certainly be lower when announced, but for the sake of this article—and for being over-prepared, rather than under—we’ll assume the $50,440 number will hold.

These new rules could be announced as early as this month. It’s also possible that, if the final rule is not announced in the next couple of months, Congress could take action that would table the rule change indefinitely, and all of the concern over this issue will be for naught. But assuming the new rules do take effect this year, we want you to be prepared. Once the changes are published, employers will likely have only 60 days to comply. So what steps should you be taking now?

Step 1: Identify Which Employees Could be Affected
Determine which, if any, employees are currently classified as exempt, but are making less than $50,440 per year. The proposed rules indicate that the salary minimum may increase each year with the cost of living, or some other indicator, so keep in mind that the exemption status of employees currently being paid just over the minimum could be in jeopardy just one year after the rules become effective.

Step 2: Figure Out How Many Hours They Currently Work Each Week
In order to make the best decision about how to deal with the employees who will either need to be reclassified or given a pay increase, you need to know how many hours they are actually putting in. If you simply calculate each employee’s hourly rate assuming they work 40 hours per week, you may get some undesirable results. For example, let’s look at three employees currently classified as exempt, each of whom makes $48,000 a year. If you divide $48,000 by 2080 hours (the number of hours worked in 52 40-hour weeks) you get about $23.08 per hour. If you operate on the assumption that each of those employees is working about 40 hours—because you haven’t checked—you may be in for some surprises.

1. Chandler, a 9 to 5 administrative employee, is currently putting in 40 hours a week. He’ll still make $48,000 – perfect!

2. Joey, a manager, is currently putting in 60 hours a week. If we start paying him for 20 hours a week of overtime, he’ll make $72,000 and get a massive pay increase.

3. Phoebe, an efficient executive who always meets her deadlines, is putting in 30 hours a week. If we pay her by the hour, she’ll make $36,000 and see a significant pay decrease.

As you can see, a one-size-fits-all approach may not be ideal. So, in order to get the kind of information we need, we’ll have to ask our exempt employees to do something new: track their time. How you go about this is entirely up to you. You could ask exempt employees to use the same timekeeping system as non-exempt employees, have them track their time with an app for their computer or phone, or do something as casual as have them track time on sticky notes and let you know each Friday.

You can expect a certain amount of pushback. When asking exempt employees to do this, be sure to communicate 1) that it’s about compliance with new laws rather than about micromanagement and 2) that you won’t be using the information to make any deductions from their paycheck.

Step 3: Do the Math
Now you’re ready to crunch the numbers and do a cost-benefit analysis of the impact on morale. Let’s return to our hypothetical employees from Step 2.

1. Chandler: It would cost an extra $2,440 per year to keep Chandler as exempt. The benefit would be that you don’t have to track his hours and deal with the associated costs, and if the status of being exempt is important to him, he’ll get to maintain it. Also consider how much time will be lost during his day to track his time, as well as the cost to the HR and Payroll departments to carefully track his hours throughout the year. However, if those overhead costs to the company and the cost to his morale are low, it probably makes sense to just pay him $23.08/hr.

2. Joey: Giving Joey the $2,440 raise has the same benefits as it would for Chandler; there wouldn’t be any wasted overhead in tracking hours, and he could maintain any feelings of importance related to being an exempt employee. However—we’ve seen the math—if you wanted to go ahead and pay Joey on an hourly basis, you’d need to pay him less than $23.08/hour unless you want to significantly increase his income. If you wanted to pay him the same amount annually, and for him to continue working the same number of hours, here’s the equation you would use (it’s called a cost-neutral rate):

Total earnings ÷ (2,080 + (annual overtime hours x 1.5)) = hourly rate

$48,000 ÷ (2,080 + ( 1,040 x 1.5)) = $13.19/hour

To pay Joey the same amount on an annual basis, you’d need to make his hourly rate $13.19. This number, being much lower than $23.08, and perhaps a far cry from the market value for the type of manager he is, may make Joey feel devalued. It would also require that he continue at his 60 hour per week pace at all times in order to maintain his previous level of income. This is ultimately a business decision, but morale will probably be a bigger part of your cost-benefit analysis when deciding what to do with Joey.

3. Phoebe: The advantages of giving Phoebe the raise are the same as with Chandler and Joey – easier administration. But if you decide to pay her hourly you’ll want to divide her current salary by her actual number of hours worked per year to get her new hourly rate (easier math here!). As an executive-level employee, her new rate of $30.77 per hour is likely commensurate with her level of responsibility and contribution to the company. However, if you had been under the impression that Phoebe was working closer to a 40-hour week, and that her services are not worth almost $31 per hour, you may be facing a harder conversation.

Step 4: Look at the Big Picture
Once you have your numbers in hand and have considered the feelings of employees affected by this change, take a moment (or a day, or week) to consider the employees who are technically unaffected by the new rules. This may be the hardest issue to tackle. Consider: if Chandler, who works 40 hours a week, receives a $3,000 raise, will his manager who frequently works overtime and makes $54,000 also receive a raise? If you convert Joey to an hourly wage and he compares his $13.19 per hour with a non-manager making $15, does that send the non-manager a message that moving up the hierarchy is a bad idea?

Whatever decisions you make, try to ensure that they are as impartial as possible and that you’re documenting the business-related reasons for each change.

There’s obviously a lot to consider here. Over the next few months, we’ll be providing a number of resources through the HR Support Center to help you through the process. Check out the Training section for a 2-Minute HR on the definition and implications of designating employees as “salaried non-exempt,” and see the guides section for more details related to these changes.

Courtesy of Transcend Technologies Group, Inc.

Be the first to comment

A three-judge panel of the Ninth Circuit Court of Appeals recently released a 2-1 decision that would essentially outlaw tip pooling arrangements in which tips are required to be shared with employees who do not usually receive them. Such employees would generally include dishwashers, cooks, and janitors. The ruling affects employers in Alaska, Arizona, California, Hawaii, Idaho, Montana, Nevada, Oregon, and Washington.

The question at issue was whether the Department of Labor (DOL) has the authority to enforce rules related to tip pooling if the employer does not take a tip credit (it is undisputed that the DOL can regulate if the employer does take a tip credit). The court ruled that the DOL does have that authority. As a result, the Department of Labor can enforce its 2011 regulation that prohibits tip sharing with those who do not customarily or regularly receive tips.

The National Restaurant Association and its co-plaintiffs are considering appealing the ruling to a full 11-judge panel of the Ninth Circuit Court of Appeals. In the meantime, employers in affected states should evaluate their current tip pooling arrangements to ensure they are in compliance with the DOL’s regulations.

Courtesy of Transcend Technologies Group, Inc.

Be the first to comment

Incentivizing your employees to reach a goal – whether it’s total sales, keeping the kitchen clean, or taking the stairs every day – doesn’t have to be hard. In fact, incentives improve employee engagement, and engaged employees improve your bottom line. Organizations with higher employee engagement have higher productivity, profits, sales, customer loyalty, and stock returns!

There is a vast amount of research on incentivizing employees, and among the things we know is that tangible benefits are more valuable to employees than cash. And the more unique or frivolous the better! Think massages, exotic foods or drinks, logoed tennis shoes, front row parking. The reward doesn’t have to be expensive. It will be compelling to employees if it’s something they wouldn’t – or can’t – buy themselves.

Content is courtesy of Transcend Technologies Group, Inc.

Be the first to comment

Question & Answer

February 4, 2016

in Human Resources, Misc.

Q: We’re interested in implementing a performance improvement plan for one of our employees. What does it entail?

A: A performance improvement plan is a tool that employers can use to help underperforming employees succeed in the organization. The plan allows you to specify the company’s expectations with respect to employee performance and behavior and to define what success looks like going forward.

The plan itself can be detailed on a single-page form. For your convenience, we have a sample performance improvement plan document on the HR Support Center. In the document you will want to note the basic performance issue (e.g. efficiency, attendance), list examples of the employee’s performance deficiencies, and then state what actions you expect from the employee, how they should be accomplished, and in what timeframe they need to be completed. It is recommended that the plan also make it clear what the consequences will be for failing to meet and sustain improved performance.

As you do with every step of this process, document the meeting in which the performance improvement plan is implemented. You may also want to note that the performance plan is not intended to be an employment contract or guarantee of continuing employment.

The performance improvement plan also provides for follow-up meetings to discuss the employee’s progress. Upon the conclusion of the performance improvement plan, the company will make a decision as to the employee’s continued employment. We generally recommend that the life of the plan be two to three months. We also recommend either weekly or bi-weekly progress meetings with the employee.

If the employee continues to underperform or fails to sustain improved performance, you may need to move on to termination. In this case, you will have the documentation to demonstrate that you gave them a chance to improve. This record will make it more difficult for the employee to challenge the reason for the termination.

Be the first to comment

When employees become disabled and unable to work, their jobs might be protected, but they’re often left with no replacement income. To help individuals in this situation, five states provide, or require that employers provide, short-term disability insurance to eligible workers. This benefit pays a percentage of an eligible employee’s income in the event that the employee becomes disabled as a result of an off-the-job injury or illness, including disability due to pregnancy. As this temporary disability insurance covers non-work related injuries, illnesses, or disabilities, it is different than workers’ compensation.

In this article, we’ll look at each of these state’s requirements for eligibility, coverage, and filing for benefits.

In order to be eligible for benefits, individuals in California must be employed or actively looking for work at the time they become disabled, and they must be unable to do their regular or customary work for at least eight consecutive days. If employed, they must have lost wages because of the disability and have earned at least $300 from which deductions were withheld during a previous period.

To receive benefits, individuals must complete and submit a claim form within 49 days of the date they became disabled. Filing can be done online or by mail. Medical certification by a physician or accredited practitioner is required.

Those who qualify for benefits will receive weekly compensation of about 55% of their previous weekly earnings in the highest quarter of the base period. They may collect up to 52 weeks of benefits, generally.

The withholding rate for 2016 is 0.9 percent per pay period, and the maximum to withhold for each employee is $960.68 per year. California allows employers to have a private plan in place of the state plan, but either way employers in the state are required to display specific informational posters about the program.

More information on California’s disability insurance program is available on the state website here.

To be eligible in Hawaii, individuals must be currently employed and have worked at least 14 weeks at 20 hours or more during each of those weeks, earning not less than $400 in the 52 weeks preceding the disability. The 14 weeks need not be consecutive or with the same employer.

To file for benefits, employees must immediately notify their employer of the disability and request Form TDI-45. Within 90 days from becoming disabled, the employee must fill out Part A, take the form to their physician or practitioner for medical certification, have the employer fill out Part B, and mail the completed form to the insurance company.

Eligible employees receive a partial wage replacement of up to 58% of their average weekly wages, with a maximum of $570.00 per week. Benefits begin the eighth day of the disability and may be paid for up to 26 weeks.

Employers in Hawaii must purchase the insuring plan from a carrier, adopt a self-insured plan, or have an equally favorable collectively bargained sick leave plan. Employers may pay all of the cost of the plan or share the cost with employees. The cost to employees for the insurance cannot be more than 0.5% of their weekly earnings, with a maximum weekly wage base of $982.36 in 2016; this means the maximum deduction for any employee will be $4.91 per week.

More information on Hawaii’s disability insurance program is available on the state website here.

New Jersey
To be eligible for benefits in New Jersey, employees must have been unable to work for seven days and have 1) worked at least 20 weeks, earning $168 or more in each of those weeks unless there was a declared state of emergency preventing work or 2) earned $8,400 or more in the 52 calendar weeks preceding the week the disability began.

Employees should apply for benefits within 30 days. The application must be completed by the employee, their physician, and their employers from the last six months. Eligible employees can receive benefits for up to 26 weeks with a maximum weekly payment of $615. Employees contribute 0.20% on the first $32,600 they earn, up to a maximum of $65.20 per year.

Eligible employees can receive benefits for up to 26 weeks with a maximum weekly payment of $615. Employees contribute 0.20% on the first $32,600 they earn, up to a maximum of $65.20 per year.

The cost for employers varies from 0.10% to 0.75%. In 2016 employers will contribute between $32.60 and $244.50 on the first $32,600 each employee earns. Employers may use the state plan or a private plan.

More information on New Jersey’s disability insurance program is available on the state website here.

New York
To be eligible in New York, an individual must have worked for a covered employer for at least four weeks and be unable to work due to disability for at least seven days. Benefit rights begin the eighth consecutive day of disability and last for up to 26 weeks during a 52-week period.

The insurance pays up to 50% of an employee’s average weekly wages, but no more than $170 per week. To receive benefits, eligible employees need to apply within 30 days. Certification from a physician or practitioner is required.

Employers can pay for all or some of the plan, or self-insure, but employees can be charged no more than 0.5% of their income each week, up to a maximum of 60 cents per week.

More information on New York’s disability insurance program is available on the state website here.

Rhode Island
Rhode Island was the first state to provide state disability leave—in 1942.

To be eligible for temporary disability benefits in Rhode Island, employees must have earned wages in the state and paid into the insurance fund. They must also have been paid at least $11,520 in one of the year-long base periods the state uses to determine eligibility. Alternatively, workers will be eligible if they earned $1,920 in one of the base period quarters and total base period wages of at least 1.5 times the highest quarter earnings, with total base period earnings of at least $3,840 . Employees must be unemployed for at least seven days due to non-job related illness or injury to qualify for benefits.

The program pays 4.62% of wages paid in the highest quarter of the base period, but not more than $795 total, for a maximum of 30 weeks. Employees can receive disability benefits even if they are still being paid through their employment. However, employees cannot receive disability benefits if they are performing any services for their employer.

The cost to employees is 1.2% of first $66,300 on earnings. Employees should apply online or by mail within 30 days of the start of the disability.

More information on Rhode Island’s disability insurance program is available on the state website here

Content is courtesy of Transcend Technologies Group, Inc.

Be the first to comment