JANUARY 2011
In This Issue:
Are Your Pay Practices Ready for an Economic Upturn?By Jerry Bumgarner, CCP, Director of Research and Compensation Services Considering the revelations of the 2011 Economic Trends Survey (see article below or SalaryTrends.com), I think it's time employers give serious thought to incentive-based pay plans. You will be better prepared for an economic upturn when you are confident that your pay and benefits are reasonably competitive (not too high and not too low). A compensation package with an incentive or "variable" component allows you to pay employees more competitively when you can afford it. Employees agree - pay must be "enough." So, what is "enough" pay? Well, it's not a package with wages, salaries and benefits priced high above competitive market norms. Packages like this turned out to be an albatross during the economic downturn. Layoffs were the only answer in many cases. A healthy alternative to higher salaries and benefits is an incentive pay plan which enables employers to pay based on performance - organizational performance, that is. When business is good, variable pay plans typically result in additional cash compensation for employees, which compares more closely to the upper quartiles of the market. On the other hand, when performance is below expectations employee cash compensation may be at or below competitive market averages. If the apparent optimistic economic trend translates into reality and Oregon employers begin to increase staff to meet improved sales expectations, you better be sure your pay practices are ready to withstand greater competition for talent. Cascade has a staff of qualified compensation professionals that can help you evaluate your pay practices and structure plans that are market-worthy. Call us. We'd love to help. 2011 Economic Trends Survey Shows Cautious Optimism
|
Top Oregon Cost Cutting Measures for 2011 | |
Measures | Percentage |
Lean / process improvement initiatives | 43% |
Shift larger percentage of healthcare costs to employees | 31% |
Reduce or eliminate bonuses / profit sharing | 11% |
Layoffs (permanent reduction) | 10% |
Hiring freeze | 9% |
Reduce work schedule / required furloughs | 7% |
"Interestingly, 33% of the Oregon respondents have no cost-cutting measures planned for 2011. It's not clear if this is a barometer of employers' optimism or if it is an indicator of how lean companies are operating after past cost-cutting measures," said Bumgarner.
Survey Information
The survey was conducted locally and nationwide by Cascade Employers Association in cooperation with 24 similar employer associations from throughout the U.S. Survey data was collected between mid-November and mid-December of 2010.
To download a free copy of the Economic Trends Report, click here.
By Jenna Reed, JD, MBA, Director, Human Resource Development Services
Cascade Employers Association
jreed@cascadeemployers.com
This spring the U.S. Supreme Court will hear and make a decision over whether the largest employment discrimination case on record can move forward as a class action lawsuit. In the lawsuit against Wal-Mart Stores, the plaintiffs claim the company discriminated against women in pay and promotions. If accepted, the class would be comprised of more than half a million women who worked in 3,400 stores, in 170 different jobs, and in each of the 50 states. If Wal-Mart is found to have discriminated against the class, the award could be in the billions of dollars.
The Supreme Court is not making a decision over whether the plaintiffs were in fact discriminated against, but only if the case can proceed as a class action suit. Wal-Mart claims the class should not be certified because each store operates independently and the women should file complaints against the individual stores. The plaintiffs argue that the company knew it had problems with the pay and promotion of women and that it "manages its operations and employment practices in a highly uniform and centralized manner." The Ninth Circuit Court of Appeals agreed with the plaintiffs and held that the treatment of the women in the class is similar enough that a class action suit is efficient and appropriate. Wal-Mart appealed the Ninth Circuit's decision paving the way to the U.S. Supreme Court for final review.
Because this is a high profile case, savvy employers should take note and take proactive steps regarding potential discrimination (even unintentional) in their own employment practices. Here are a few tips: Develop (and annually maintain) a formal wage and salary program to eliminate arbitrary decisions which can lead to discrimination; annually audit application and hiring practices; annually review internal promotions and processes; have all terminations reviewed prior to the termination; regularly conduct companywide harassment and discrimination awareness training; and regularly conduct an employee engagement survey to build off of your strengths and identify potential problems before they become a crisis.
By Cascade Staff
Question: Do you advise Employers to address bonus programs in writing?
Answer: Yes. A written policy describing the program's intent, the determination of the bonus fund, eligibility requirements and the timing of bonus payments, will help to limit disputes.
In the absence of a policy statement, questions often arise when there is a separation from employment. Is the departing employee entitled to a bonus? When must any payment be made? Statutory penalties, for failing to pay earned compensation when due, make careful answers critical. A policy shapes employees' understanding and expectations. It is not unusual that, when a bonus dispute occurs and there is no bonus policy in place, the Employer will pay the bonus and then develop a policy to prevent future disputes. A policy should address the purpose of the bonus program. Is a bonus intended to reward past performance? Is it also intended to serve as an incentive for performing well in the future?
How is the fund, from which bonuses are paid, determined? Are bonus payments discretionary? If payments are automatic, based upon calculating the fund (10% of the difference between gross sales and departmental labor costs), overtime pay must be adjusted to reflect increased hourly rates for non-exempt employees. No additional overtime is required if distributions are discretionary.
Who is eligible for a bonus? Must an employee work all, or only a part, of the bonus period? If intended to motivate future performance, must an employee be employed on the last day of the bonus period, or, on the date of distribution? Do employees participate during initial or disciplinary probations? Must an employee be in "good standing?" If so, how is "good standing" defined?
Finally when is a bonus considered to be earned? Depending upon the nature of and purposes for the program, options include: the end of the bonus period; when a bonus is "declared" by management; and, upon the date of eligibility and/or distribution. An eligible, departing employee must promptly receive the bonus when it becomes earned.
It is not enough to simply address "how much" in a bonus program. A policy which also answers the questions of who, why and when, will help ensure that the program achieves its purpose and that exposure to unexpected liability is limited.
On average, how many months does it take to become eligible for medical insurance coverage (excluding unions)?
The average non-union organization with 1-500 employees has a 2.41 month waiting period before employees are eligible for medical insurance coverage.
Look here each month for a specific policy or benefit practice and see how your practices compare to other employers just like you.
©2011 Cascade Employers Association. All rights reserved.
SalaryTrends® is a trademark of Cascade Employers Association.
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