FreshView
a publication of Cascade Employers Association
SEPTEMBER 2011
Dollars & Sense Poll |
In This Issue:
- Performance Appraisal is Broken …
But Repairable - Overtime and the Fluctuating Work Week
- FreshView on Compliance
- Did You Know?
Performance Appraisal is Broken … But Repairable
By Jerry Bumgarner, CCP, Director of Research & Compensation Services
jbumgarner@cascadeemployers.com
A friend recently asked if I thought it was wise for an employer not to have a formal performance appraisal system as long as they provided frequent performance feedback to employees.
His question was based on an article he had just read about what is “wrong” with performance management – managers and supervisors tend to get so focused on the elaborate, complex performance appraisal systems (forms, rating scales, schedules, etc.) that they miss out on the important ongoing informal communications that make performance management such an valuable business tool.
Research has proven that performance management is an effective employee engagement tool that contributes to high levels of organization productivity, customer satisfaction and profitability … when done correctly. The problem is that many organizations treat it as a once or twice a year event when employee performance is documented and discussed (nothing new about this). If that is all that managers and supervisors do, the so-called performance management system will not work effectively and may result in employee and supervisor resentment. Employees become the victims of the “system”, and supervisors hate to conduct appraisals almost as much as they hate terminating an employee.
In my experience, most organizations say they conduct appraisals (the event) and even provide some ongoing informal performance feedback. But, I have also discovered that they generally leave out performance goals altogether. So, if supervisors aren’t communicating performance goals to employees in these organizations, what are the feedback and appraisal discussions based on? Without goals, performance feedback and appraisals tend to be less effective because they focus mainly on performance behaviors (how the work was done). While I agree that work behavior is important, employers shouldn’t leave out what specifically was accomplished (how well the work was done).
At Cascade, we advocate that performance management must be a reasonably simple, ongoing/day-to-day activity to be effective. Three elements are essential to a successful program: specific goals that are communicated to employees (preferably “real time”); regular/daily informal employee feedback and coaching; and documentation and discussion of performance results (at least annually).
This ongoing process focuses on supporting the success of the employee. Leave out any element – goals, feedback or the appraisal – and the employee may fail. In addition, to assure both employee and organization success, we believe a solid performance management program must provide for employee understanding of the employer’s mission and goals, employee participation in the process, and training for all who are responsible for conducting performance appraisals. While this does suggest a degree of structure and formality, I believe our focus is in the right place. Formality and structure are fine … as long as we don’t let the systems become our primary focus.
I wish all employers would come to recognize the value of effective performance management programs. If the current program is not working, appropriate action needs to be taken to shore it up. One of the most critical actions is supervisor and management training. The ongoing success of every organization depends, to a great extent, on the effectiveness of performance management. As Peter Drucker once said, “The only things that evolve by themselves in an organization are disorder, friction, and malperformance.” Now is the time to act! Cascade is here to help.
Supplemental information – Read Dr. Elaine Pulakos' views on appraisals: Expert suggests new rules for effective performance management – PRACTICE TIP.
Overtime and the Fluctuating Work Week: What is it?
Can we use it? Will it save me money?
By Lynn Morris, PHR, HR and Compensation Consultant
lmorris@cascadeemployers.com
Last month’s article addressed the topic of the Salaried Nonexempt employee classification, and the bottom line was that the Salaried Nonexempt classification is really not that beneficial to Oregon employers.
But what about the Fluctuating Work Week (FWW) method of calculating overtime? Truthfully, it can save employers overtime costs. But don’t be too hasty in implementing this method. Several conditions must be met for it to be legally applied.
Here are the requirements:
This method of calculating overtime can only be used when the nature of the work prevents the employee from working regular hours. It is not something that employers can establish just because they want to do it that way.
The law requires that there be a “clear mutual understanding” between the employer and the employee agreeing the fixed salary is intended as straight-time compensation for all hours worked by the employee regardless of the number of hours.
The employer should have a written consent agreement signed by the employee acknowledging that the employer will be using the “fluctuating workweek” computation for overtime.
The fixed salary must provide compensation (every week) at not less than the minimum wage.
How does the FWW overtime calculation work?
The employer establishes a weekly salary that is intended to be the regular base pay for all hours worked.
The employer determines the employee’s regular base rate by dividing the actual hours worked each week into the set salary.
The base weekly salary is straight time pay for all hours worked. The employer is only required to pay the additional “half time” premium for all time worked over 40 hours.
Let’s look at an example. Assume that Martha has a “clear mutual understanding” to be paid $800 per week. If one week Martha works 50 hours, Martha’s regular rate of pay is $800/50 = $16.00. Her $800 salary covers all straight time so the overtime due is the additional half time premium for all hours worked over 40 ($16.00 × 0.5 = $8 × 10hrs = $80).
The next week Martha works 44 hours. During this week Martha’s regular rate is $800/44 = $18.18. Overtime is halftime on all hours over 40 ($18.18 × 0.5 = $9.09 × 4hrs = $36.36).
During the third week Martha only works 25 hours. How much should she be paid during this week? $800. The mutually agreed upon weekly salary amount. When using the FWW, the salary is intended to cover all hours worked. Since the hours fluctuate and may be unpredictable, it makes it difficult to argue how many hours the salary was intended to cover. Accordingly, under the FWW it covers all hours worked, no matter how few or many. Overtime is still due for all hours over 40 in a workweek.
As you can see from the example there may be some cost savings by using the FWW method. However, use caution before implementing the FWW method as it can be a very risky method of pay. Common mistakes employers make include deductions from salaries for absences like vacation or illness; applying differentials to shift, weekend or holiday work; docking pay for unscheduled absences; and not establishing a “clear mutual understanding”. These errors can result in the employer being required to recalculate and pay back overtime plus additional penalties.
If you have more questions about the FWW method of calculating overtime or any other wage and hour questions, please call to speak to one of Cascade’s HR Consultants.
FreshView on Compliance
By Jenna Reed, Director of Human Resource Development Services
jreed@cascadeemployers.com
Question: Do I have to include unused vacation and sick leave in a final paycheck?
Answer: It depends on your policy.
In Oregon, beyond all wages earned, all earned but unused vacation and sick leave must be paid in accordance with the employer’s policy. Managing this liability can be as simple as adding a statement to your policy which reads, “All earned but unused vacation {is/is not} paid at termination.” An employer’s paid time off policies should also specifically address specifics such as: accrual or granting rates, base years, limitations on use, limitations on carryover, scheduling and approval criteria, and forfeiture.
Did You Know?
Employers (with a headcount between 1 – 100) who have employees that use military leave for annual training obligations give no supplemental pay about 69% of the time. About 25% of the organizations pay their employees on leave the difference between full pay and military pay. The rest of employers reported that they give their employees full pay during annual military leave training.
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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