FreshView
a publication of Cascade Employers Association
AUGUST 2011
Dollars & Sense Poll |
In This Issue:
- Linking Pay to the Wrong Performance:
A Nightmare - Survey Spotlight
- Overtime Payments, Salaried Nonexempt Employees and Fluctuating Workweeks
- FreshView on Compliance
- Did You Know?
Linking Pay to the Wrong Performance: A Nightmare
By Jerry Bumgarner, CCP, Director of Research & Compensation Services
jbumgarner@cascadeemployers.com
As the Compensation Director for a large national insurance company, I once received a call from our Claims Manager in Georgia who said that they were losing Claims Processors to competitors because of low pay. After reviewing the office's pay practices compared to the local market, I concluded he was correct. To solve the problem, we worked together to get approval to increase the pay for Claims Processors to more competitive levels. Problem solved? No! About one year later the manager contacted me with the same concern. Claims Processors were again leaving for more pay.
We were perplexed. Our salary ranges were aligned with the local market, starting rates were competitive, we had the traditional three levels of Claims Processor (Entry, Intermediate and Senior), and employees were receiving performance and salary reviews on a timely basis. So how could our actual salaries be below market given the experience of the employees? Our salary structure and guidelines seemed to be right. So, I concluded that the problem had to be related to salary administration. Employee turnover due to low pay was just one of the symptoms.
In my discussions with the Claims Manager regarding the administration of employee pay, it became evident that the performance standards for the Entry, Intermediate and Senior Claims Processors were exactly the same. In other words, until new Claims Processors could meet the tough standards (complexity of claims, quantity of claims, quality of work) established for our most experienced Senior Claims Processors, they were dead in their tracks.
Because we had a performance based pay system most were not getting much in the way of salary increases and they were not getting promotions to the more experienced job levels. The net effect was that we were making our people feel like losers and incurring the cost of training Claims Processors to work for our competitors. Problem solved? Yes! After fixing the performance standards to reflect the different job levels, office turnover returned to normal levels.
Job-specific goals help to align employees with department and company goals. With clear statements of company and department goals in place, individual goals can be set to provide clarity about how each employee can contribute. However, to avoid problems such as that described in the above story, care must be taken to be sure that performance standards are reasonable and achievable given the background, qualifications and experience of the job incumbents.
As employees become more experienced, moving the bar to expect achievement of higher standards is a good practice…as long as the new standards remain reasonably achievable. When employees succeed and feel successful, they are more likely to contribute to the success of their organization.
Survey Spotlight
By Tina Hamel, Survey Coordinator
thamel@cascadeemployers.com
SalaryTrends surveys from Cascade Employers Association cover the pay practices of diverse organizations from various markets (Oregon, SW Washington, Northwest Regional, and National), and include multiple relevant data summaries. These valuable tools enable users to evaluate their competitiveness within specific talent markets.
Now Open for participation:
- Salary Budget Survey (closes September 2nd)
- Oregon Regional Pay Survey (always open)
Soon Open for participation:
- Sales Compensation Survey
- Economic Trends Survey
Contact us with questions at surveys@salarytrends.com.
Overtime Payments, Salaried Nonexempt Employees
and Fluctuating Workweeks
By Lynn Morris, PHR, HR and Compensation Consultant
lmorris@cascadeemployers.com
Every employer in Oregon knows (at least we hope they know!) that nonexempt employees must be paid overtime (time and a half) for work exceeding 40 hours in a single workweek. In manufacturing establishments, daily overtime is required for nonexempt employees working over 10 hours in a single workday. Simple, right? Well, sometimes it’s not so simple.
One of the more complicated aspects of calculating and managing overtime is when nonexempt employees are paid a salary. This structure is typically used by employers for more administrative/office employees who work a fairly consistent work schedule every week. The advantage is that there is usually less recordkeeping for the employee and employer if the employee’s pay is a straight salary. For the employee there is also the advantage of having a little more flexibility. The problem is that employers can put themselves at risk for a wage and hour challenge by failing to correctly pay for all time worked and appropriate overtime.
Let’s first look at overtime and determining the regular and overtime rate of pay for a salaried nonexempt employee. The regular rate is calculated by dividing the employee’s weekly salary by the number of hours that salary is intended to compensate. The overtime rate is 1.5 times the regular rate of pay. For example, an employee with a salary of $525 per week which is intended to compensate for a 35 hour workweek, earns a regular rate of $15 per hour ($525/35 = $15). This employee’s overtime rate is $22.50 ($15 * 1.5 = $22.50).
Now let’s look at paying appropriately for all time worked. In the scenario above what if the employee worked 38 hours one week? What is the employer required to pay the employee? Many employers would say $525 because that is the agreed upon salary and the employee has worked no overtime hours. Right? Not so fast. Oregon law requires that all nonexempt employees be paid for all hours worked. In this scenario the employee must be paid the salary of $525 plus three more hours at the employee’s regular rate of pay ($15 * 3 = $45).
On the flip side, what if the employee only worked 32 hours one week? Is the employer required to pay the agreed upon weekly salary of $525? Generally, not. In this case, the employer can reduce the nonexempt employee’s salary by $45 ($15 * 3 hours).
You may be wondering, if an employer must pay a nonexempt salaried employee for any and all time work, and if they must track every bit of time worked over 40 hours in a workweek and pay that time at the appropriate overtime rate, what is the advantage of the salaried nonexempt classification? In Oregon, there seems to be very little advantage to this classification unless the employer meets the requirements to pay overtime by the Fluctuating Workweek method.
What is that? Stay tuned for our follow-up article and reisgter for our upcoming webinar - How To: Manage Pay For Salaried Nonexempt Employees.
FreshView on Compliance
By Jenna Reed, Director of Human Resource Development Services
jreed@cascadeemployers.com
Question: What are some things to watch out for in the I-9 process?
Answer: Employers may not knowingly recruit, hire, or continue to employ individuals not authorized to work in the United States. Accordingly, when an employer hires an employee, an I-9 form must be completed within three days of hire in order to verify the employee’s identity and eligibility to work. Here are a few things to keep in mind about the verification process:
Employers may not request specific forms of documentation such as the employee’s social security card or driver’s license. It is the employee’s choice to provide any qualifying document(s) listed on the I-9 form.
A person may also present a receipt showing application for a replacement of an original document. This may happen if the employee’s original documentation has been lost or destroyed. Be careful though, an application for initial work authorization or an extension of expiring work authorization is not acceptable. After 90 days, the person must present the actual document.
It is highly recommended that employers photocopy the verification documents for all employees and staple the photocopy to the I-9. If you choose to photocopy the documents, you must do so for all employees.
When the form is completed, it should be kept in a separate file with other current employees’ I-9 forms, not in the personnel file. Additionally, employers may benefit from keeping separate files for “current” and “terminated” employees. I-9s which include work authorization documents that have an expiration date should be flagged to update the information in a timely manner.
Retain I-9 forms for a minimum of three years, or one year after the worker’s employment ends, whichever date is later.
For additional information, download a copy of the 2011 I-9 Employer’s Handbook. If you have any questions, we are always here to help.
Did You Know?
When an employee quits, but is then rehired, do employers usually count previous service towards seniority? From the 2011/2012 National Benefits Survey, the answer depends quite a bit on how long it has been since the employee left. If rehired within a year, 45.3% of non-union companies say that the employee’s previous service would count. Only 22% of union companies extend the same benefit to employees who meet this criterion.
Look here each month for a specific policy or benefit practice and see how your practices compare to other employers just like you.
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