The HR Cafe

Compensation: The legal perils of stonewalling a raise request

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Dear HR Executive:

It's not great employee relations to stonewall someone's request for a raise. And now it appears it can also raise legal warning flags.

A federal appeals court recently ruled that as far as pay discrimination law is concerned, ignoring an employee’s request for a raise is the same as denying it.

The court was deciding a Pennsylvania case in which a female employee complained she was paid less than comparable men. The court said the employer’s failure to respond to her raise request amounted to a “compensation decision.” And compensation decisions are covered by Title VII, the federal law outlawing sex discrimination.

Long-term consequences

Under the Lily Ledbetter Fair Pay Act of 2007, each allegedly discriminatory paycheck arising from a compensation decision is a separate violation of Title VII.

In practice, this means employees can bring legal action based on an initial pay decision going back years, as long as they file an EEOC charge within 300 days of their last allegedly discriminatory paycheck.

Giving an answer

In light of this decision, HR may want to:

• Review your compensation communication policy with line managers so they know what to say when approached for a raise, and
• Make sure you have documented, non-discriminatory support for the level of each employee’s pay.

Dave Clemens

Editor-in-Chief

HR Rapid Learning Center

Merit increases on the way back

Dear HR Professional:

Given the times, you probably want to be cautious about ramping up on salaries even as business improves. But there’s one area where your organization might want to look at going a little more quickly: merit raises.  

Rebound seen in 2010
According to Watson Wyatt’s 2009-10 Strategic Rewards Report, budgets for merit raises are likely to rebound in 2010 after being squeezed in 2009.  Average merit increase budgets, as a percentage of salary, shrank from 3.5% in 2008 to a projected 2.0% in 2009.  But in 2010, the 235 employers surveyed by Watson Wyatt expect to give an average of 3.0% of salary to merit raises.

Dave Clemens
Editor-in-Chief
HR Cafe Newsletter

How to handle garnishments properly

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Dear HR Executive:

Whether you do payroll in-house or outsource it, you want to be sure garnishments are handled properly. Failure to do so can incur legal liability for your organization.

Even if garnishments involving your employees crop up only once in a blue moon, it’s best to have a set procedure for processing them. Here’s a checklist you can use:

• Is the garnishment on the proper form for the jurisdiction or entity claiming the money? 
  
• Is the garnishment from a proper source? For example, a garnishment from an attorney that hasn’t been through the courts may or may not be binding, depending on local law.
  
• Is the garnishment completed correctly? Was it delivered in the legally mandated way – i.e., official service, messenger, U.S. Postal Service, etc.? 
  
• Is the garnishment permitted under the law of the relevant jurisdiction? Certain states don’t allow the garnishment of wages for consumer debt, for example.
  
• Have you responded to the source of the garnishment, even if you feel it’s not properly supported?
  
• Once the garnishment is in proper form, have you communicated to the employee what money is to be withheld? You may want to create a form letter making clear that your only responsibility for the garnishment is to make sure it complies with federal and state limits under the Consumer Credit Protection Act. (The CCPA permits a creditor to garnish up to 25% of an employee’s net earnings.)

For more details, check out this source: www.vickimlambert.com

Dave Clemens
Editor
HR Café Newsletter
 

Free training program -- How to talk to employees about money

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Dear HR Executive:

Business 21 has a new product line we'd like our HR Cafe blog readers to take a look at. It's a training and information resource called the "HR Cafe Training Center" and I guarantee you you've never seen anything like it. We'd love to know what you think of it.

The HR Cafe Training Center combines two services that HR executives will find useful:

1. A fast-read HR newsletter -- nothing too unusual here. Subscribers get a print and online version that keeps you current on employment law, benefits, comp, etc.
2. Fast-paced online training modules -- now these ARE unusual, and the feedback we're getting from early users (see below) suggests they're helping HR executives increase their perceived value in their organizations. Imagine a library of remarkably affordable training modules, all a very watchable five to 10 minutes long, that you can deploy with a click of a mouse when a need arises. You email them to employees; they click on a link and program launches right on their screen.

OPTION 1: See for yourself. Learn more about the product and sign up for a no-risk 60-day trial to test drive the HR Cafe Training Center.

OPTION 2: Click here to view a quick-launching online training module for supervisors who struggle when talking to subordinates about money (that group includes just about ALL supervisors, by the way). It's called: "Don't You Love Me Anymore? How to Drain the Drama and Emotion from Annual Salary Reviews."

We'd love your feedback on both the Quick Take and the HR Cafe Training Center platform. Please feel free to post a "comment."

Stephen Meyer
B21 Publisher

P.S. Here's what HR executives are saying about the Quick Take training modules in the HR Cafe Training Center:

How to Conduct Effective Exit Interviews - 6 mins 32 secs
"This is the first time I have heard your approach to exit interviews, but I intend to use it. The Quick Take format is great for those of us with really busy schedules and limited free time. I can learn something new in only a few minutes. Karen Morton, Town of Ledyard, CT

How to Conduct An Excruciatingly Difficult Conversation With An Employee - 8 mins 43 sec
"Provides a lesson that any level supervisor can understand and use. Very clear and specific. Even helpful for 'HR specialists.' " Marcie Johnson, Virginia Department of Transportation

Making do with what you've got

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Dear HR Executive,

As I sit here writing this, the stock market has been plunging (did I just see it go below 8,000?). What better time to do an HR Cafe post about how companies can make do with less in the months to come?

Something tells me that, for example, we're not going to be able to give big salary increases anytime soon. In fact, some companies may not be able to give ANY salary increases. Which could lead to retention problems.

The other day when talking to a subscriber to Human Resources 21, the newsletter I write, he told me what he'll be doing to reward and retain his skilled staff of about 300 people.

Extra time off
This HR pro works for a heavy industrial company headquartered in Michigan. Because his company is struggling in a declining market, he has two problems: 1) people are tempted to "jump ship," as he put it, and 2) he doesn't have a lot of money to toss around to try to make them stay.

But my contact decided he'd try to do something else for people -- give them extra paid time off. His plan is to add five paid days to the vacation and sick days that exempt employees get, something that will give the average employee about a month off annually.

"The idea is to say, 'We can't give you a raise, but here's some time off, use it with your family,' " my contact told me." It'll be one time only for a year to start, while we see what the financial picture and the prospect for raises will look like in the future."

"It's a generous amount of time, but we haven't had raises in two years," he said. "We've got to do something."

What could YOU do?
If you're concerned about retaining key employees, but are constrained in the money and benefits you can offer, you might want to do like my Michigan friend: look around and inventory the resources you do have at your disposal.

Maybe you can carve out extra time off for people, or maybe you can make the conditions under which they work more agreeable through telecommuting, flex time, or other "work-life" arrangements.

It's worth a try!

Dave Clemens
Editor-in-Chief
Human Resources 21

Exclusive B21 Survey: Gasoline prices

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Dear HR Executive:
Two days ago when driving to an all-day meeting I spotted a gas station a block from my destination that was selling regular at the shockingly low price of $3.99 a gallon. I was late and couldn't stop, but I made a mental note to return after the meeting.

I did, and the price had jumped to $4.06. Sound familiar?

As companies, should we care about the impact of gas prices on our employees? Fact is, the doubling of  gasoline prices in the past two years means we've all taken a pay cut. But for some employees, particularly those who have lower salaries AND a long commute, high gas prices are causing tremendous pain.

We surveyed HR executives to find out what, if anything, companies are doing to help employees deal with rising gas prices. Here are the results:

Do you feel companies should help employees cope with rising gas prices? (n=180)

• Yes, we've taken measures already -- 18.5%
• Yes, and we intend to do something soon -- 28.9%
• No, gas prices aren't the company's problem -- 52.6%

I was a little surprised that a thin majority of HR executives don't feel it's in a company's interest to help out. At my company two people who have onerous commutes -- one is paying about $35 a day for gas -- came to me and requested the right to work at home a couple days a week. Both emphasized the benefits of being productive during those "dead" hours formerly spent on the road, but clearly the price of gas was the motivator for raising the issue now. I said yes in both cases, which I guess puts me in the 18.5% of companies who have "taken measures" (albeit in a reactive way). My guess is that if I were to run this survey three months from now, 50% of companies will have done at least something to ease employees' pain over gas prices.

By the way, I didn't act out of altruism. Both employees are self-motivated and I trust that they'll be productive working at home. I thought it was in the best interest of the company to say yes. If I hadn't seen a win/win, I'd have said no.

Here are some of the measures HR execs mentioned in our survey:

• Switching to four 10-hour workdays to reduce driving (lots of people said they're doing this)
  
• Increasing car allowances
• Paying for bus/train transportation
• Encouraging car-pooling, even creating a car-pooling blog
• Increasing the mileage reimbursement to $.50 a mile
• Increasing telecommuting/flexible work week
• Giving all employees a $100 check
  

Here's the most impassioned comment we got in the survey:

"I don't feel comfortable taking the position that 'gas prices aren't the company's problem.' I think as a responsible employer, we need to make certain our rates of pay continue to be in line with the market and that's an indirect way of addressing the increased cost of gas. We're all very concerned as to how our lower-paid employees will handle address this significant expense to them and their family."

Below is an article from B21's newsletter "Human Resources 21" that discusses another new survey about the employer response to rising gas prices from Robert Half International. Read on.

Stephen Meyer
B21 Publisher

PS: As always, please share your thoughts on this topic by clicking on the "comments" link below. Perhaps mention whatever measures you've taken at your company. 

ARTICLE FROM HUMAN RESOURCES 21

Rising Prices are Driving New Commuting Initiatives

Pain at the gas pump is a burden most employees share these days. Employers are implementing a variety of programs to help ease the cost of escalating gas prices for their employees.

The most common benefit offered is an increase in the company’s mileage reimbursement for travel, according to new research from Robert Half International, which surveyed more than 500 workers employed full- or part-time.

Some employers are also implementing ride-sharing or van-pooling programs and subsidized transportation to offset gas prices. A small number of employees said their employers offered bike-to-work programs or more flexible work schedules .

Nothing Specific
However, nearly 60% of respondents said they weren’t afforded any specific initiatives to help alleviate higher gas costs.

Ignoring this pressing employee concern could be a mistake. The Robert Half survey found 44% of employees interviewed changed their work arrangements because of gas prices. Of those, 46 % reported an increased participation in carpooling or ride-sharing, and 33% said they worked from home more frequently.

Significantly, three out of 10 employees said they were looking for a new job closer to home.

Missed opportunity?
“Employers may be missing an opportunity to improve morale and reduce turnover by helping their staff cope with the burden of rising gas prices,” said Max Messmer, chairman and CEO of Robert Half International. “Often, it can be as simple as communicating to employees what programs are already in place,” said Messmer.

Source: Robert Half International.

Are you giving more than a paycheck?

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Dear HR Executive:

A big paycheck is a big paycheck. It's the price of admission for top employees. And if you're not compensating your best performers, they'll walk. But what happens when Plan A (i.e. throwing lots of money at an employee) isn't enough?

According to "Strategic Rewards: The New Employment Deals," a Watson Wyatt survey of 551 employers and more than 500 hand-picked high-performing employees, workers today are motivated by far more than just money. In fact, money is becoming a source of dissatisfaction for some organizations. Only 15 percent of employees in the study cite expectation of financial reward as a very significant motivation for performance.

This is not to say that financial reward isn't important to employees, but earning respect or being recognized for contributions has a notable impact. In the research, 81 percent of top-performing employees (as identified by their employers) say that maintaining a good personal reputation motivates them to achieve peak performance.

"Top-performing workers are, by definition, already motivated," says Watson Wyatt senior consultant Rick Beal. "So if compensation becomes an issue, an employer has lost the battle. It's more about not de-motivating employees or letting them lose focus on their projects. That will have them considering options elsewhere."

Compensation does remain a key part of recruiting and retention efforts, but with one of the most turbulent labor markets facing employers in recent memory, retaining high-performing employees has become much more complex. Many employers are measuring turnover rates and tying managerial bonuses to retention results.

According to the research, 32 percent of top-performing employees cited dissatisfaction with benefits as being a significant factor in leaving an organization. Even offering stock options, which the technology sector made fashionable in the 1990's, isn't the simple antidote it once was.

"Younger workers view their working life as series of experiences rather than a career. They want each of their experiences to provide opportunities for growth and development," says Watson Wyatt senior consultant Steve Patchel.

According to Patchel, "Employers are better served by making sure they work all the attraction and retention levers - including cool technology, fun experiences and smart coworkers - before blowing their entire compensation pool on employees who won't fully appreciate it and who place a higher value on knowledge and recognition."

In short, the new rules for keeping top talent means employees plan for the future by reinvesting in themselves. This research indicates that employers should recognize that, and move beyond compensation.

"Employers should concentrate on those tools that allow workers to grow," says Beal. "That means embracing a broader understanding of people motivators - a total rewards perspective."

Exclusive B21 survey: Independent contractors

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Dear HR Executive:

B21 editors are reporting in our newsletters that the General Accounting Office thinks the Department of Labor has been soft on enforcement of independent contractor regulations.

That means the DOL is going to start cracking down. B21 conducted an exclusive survey to see whether HR execs feel they're compliant with DOL regs. Here are the results:

How confident are you that if the DOL arrived at your door tomorrow you'd be found compliant with regs on the use of Independent Contractors?

• No problem. We're definitely compliant -- 54%
• I think we're compliant, but I'm not absolutely sure -- 41%
• It wouldn't surprise me if we got fined -- 5%

My read of this poll is that nearly half of HR execs surveyed aren't very confident they're in compliance, and they're vulnerable to penalties and lawsuits. Might be a good time to examine all your contractor relationships to make sure you're clean. Here's a helpful article from B21's newsletter Human Resources 21. And at the bottom of this post you'll find the DOL's trusty "20-Point Test" to determine independent contractor status. Read on.

Stephen Meyer
B21 Publisher

Watch out: Feds get tougher on independent contractors

Crackdown coming on companies that misclassify workers

From now on, you need to make doubly sure the independent contractors you give 1099s are truly independent and not employees subject to withholding and W-2s.

If you misclassify employees as contractors in the future, it's likely the company will get socked with greater tax liabilities and penalties than ever.

It's up to the DOL to make sure employees covered by minimum wage and overtime regs are not fraudulently or mistakenly classified. And DOL is under pressure to do a better job of it, as a result of an ongoing GAO probe into lax DOL procedures.

To be safe, payroll experts recommend using two tests the federal courts apply:

1. Economic realities. If the worker depends heavily on your company for a livelihood, doesn't have other customers or have a significant investment, chances are they'll be considered an employee.
2. Control test. This test looks at how much the employer controls the way the worker does the job, the working hours on site, and whether or not the company supplies tools or equipment. The greater the control, the more likely the person is an employee.

Note: To help preserve contractor status, have contractors submit invoices and pay them just like other vendors.
Info: www.irs.gov; www.taxprophet.comInfo: www.dol.gov

An additional resource: At the bottom of this post we provide the DOL's "20 Point Test" for determining independent contractor status. See below.

The 20-Point Test for Independent Contractors
Every HR person should be aware of the government's "20-Point Test" to determine if an employee is independent or not. Here are the 20 points:

1. Continuing Relationship - Independent contractors do not have a continuous working relationship with a single employer.

2. Working for More then One Contractor - Independent contractors perform services for more than one entity at the same time.

3. Availability to the General Public - Independent contractors offer their services to the general public on a regular basis.

4. Instruction - Independent contractors do not receive instructions on how to perform and accomplish a job.

5. Training - Independent contractors do not receive training on how to complete a job.

6. Personally Rendered Services - Independent contractors have the right to hire employees or contract with other entities to perform actual jobs.

7. Payment - Independent contractors are paid by the job.

8. Business Expenses - Independent contractors are responsible for their own expenses.

9. Tools and Materials - Independent contractors provide their own tools, materials and equipment to perform the job.

10. Work Location - Independent contractors are free to choose where the work will be performed.

11. Controls Over Assistance - Independent contractors are free to decide to hire assistance to accomplish a job and to control their work activities. 

12. Work Hours and Schedule - Independent contractors control their own hours and schedule for accomplishing results.

13. Full Time Work Requirement - Independent contractors are free to work when and for whom they choose.

14. Required Work Order or Sequence - Independent contractors determine the order in which they will perform the work.

15. Required Reports - A degree of control is suggested if a worker is required to submit regular oral or written reports.

16. Investments in Facilities - Independent contractors have a significant investment in facilities in the course of performing their job.

17. Profit or Loss - Independent contractors realize a profit or sustain a loss, based on the success in performing their work or service.

18. Business Succession or Continuation - operations or ability to be successful should not depend on the service of independent contractors.

19. Discharge Rights - Contracts with independent contractors cannot be terminated as long as they perform services in accordance with their contract.

20. No Compensation Liability - Independent contractors may be liable for a breach of contract if they leave without completing their work.

Final word on Circuit City layoffs

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Dear HR Executive:

We've done two posts on the Circuit City layoffs recently (Post 1, Post 2). Most of the HR Cafe readers who commented on them felt that Circuit City is somewhere between amoral and downright stupid for laying off 3,400 aging salesclerks who were making, on average, 51 cents too much per hour.

Those who feel that way will be delighted to learn that Circuit City's stock fell 4% the day after it announced the layoffs. In a recent article by James Surowiecki of the New Yorker, the author points out that although Wall Street still sends CEOs the message that layoffs boost stock prices, in reality they don't. He writes that, "...investors seem to understand that fewer people doesn't always mean more profits. Downsizing may make companies temporarily more productive, but the gains quickly erode, in part because of the predictably negative effect on morale."

Surowiecky says that numerous studies, including one by the University of Colorado, revealed that 300+ firms that downsized in the 1980s saw no improvement in profits after three years.

More evidence: Perhaps you saw that Citigroup recently laid off 17,000 workers. Its stock price didn't budge.

My guess is we'll continue seeing big layoffs, despite the message the market seems to be sending -- i.e., that demographic changes are creating tight labor conditions and, long term, companies that make huge cuts may not be able to replace the workers they need to fuel future growth. That's a turnoff for investors who, we'd all like to believe, will increasingly see human capital as the key driver of long-term profits.

Stephen Meyer
B21 Publisher

Exclusive B21 Survey: Salary negotiations

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Dear HR Executive:

If it hasn't already happened to you, it will. In a pay negotiation an employee will hand you a printout from an online salary survey and say, "According to this source, you're paying me 15% below the median salary for the job I do. Pay me a market rate or I'm outta here."

B21 conducted a survey and found that nearly a third of HR executives have had it happen already. Here are the results:

More employees are getting job-specific salary data from websites and using it to argue for higher pay. Which of the following best describes your experience with this new employee negotiating tactic? (n=128)

• We've had employees use it and we've developed a response strategy - 30%
• No employee has used it, but we're already developing a response strategy - 12 %
• No employee has used it and although we're aware of it we're not concerned - 38%
• We're unaware of this trend - 18%

You can hardly blame employees for using the tactic. In the past, salary surveys were so expensive that few employees could access reliable data. Today, the playing field has been leveled. The data is abundant, but is it reliable? And, more important, even if it is reliable, do employees know how to interpret it?

Here's an article from B21's newsletter Human Resources 21 to help you cope with misuse of salary surveys by employees. Read on.

Stephen Meyer
B21 Publisher

What’s your best response to Web-empowered pay demands? 
Challenge, preempt, and sometimes accept their downloaded data

What do you do if a job applicant or promotion candidate comes to the interview armed to the teeth with what she considers serious comparative salary data?

This couldn’t happen until recently, when a number of websites started making salary data for different job categories in different geographic areas available for free, or for a small fee.

The phenomenon certainly can complicate life for HR people tasked with keeping the company’s salary structure in line. But it doesn’t have to give you fits.

Four Questions
Here’s what you need to bear in mind when confronted with this tactic:

1. Is the data relevant to the job and region? If the employee seeking a raise is working for you in Albuquerque, it doesn’t prove anything when she brings in data about salaries in Los Angeles.
2. Is the data complete? Don’t let yourself be dragged into an apples-and-oranges debate. If you’re talking about the value of the job with benefits included, and the applicant isn’t, the conversation is doomed to flounder.
3. Have you made an effort to verify the data with the site(s)? There’s nothing to stop you from going on the most popular salary sites – salary.com, payscale.com and payscroll.com are three – in a kind of preemptive strike. If you familiarize yourself with the data that people are likely to bring you beforehand, you’ll be likely to spot any phony arguments or misrepresentations.
4. Is your own salary data up-to-date? Occasionally an employee or applicant may do you a favor by bringing in data that you ought to have, but don’t. Example: Your last salary survey dates back six months. An employee comes in with information from two headhunters who have called them about jobs in the immediate area that pay 15-20% more than you do. This is information you should have and use.

No upsets
Although this trend may require you to make some adjustments, it shouldn’t upset your applecart if you’re using appropriate market-based methods to set salaries, points out compensation expert Gary Markle. If that’s the case, you have nothing to hide, and you can show the data-laden employee your data in return.

Markle notes that if you pay under the market average, the word will eventually get out, anyway. To be sure, some will join you and some will stay for reasons like length of commute or physical quality of the office facilities.

But will you get and keep the best? Unlikely.