An Exit is Inevitable

“I’m trying to plan ahead and think about how I can prepare to sell my business one day. Are there things I can do now or should I wait until I’m ready to make a move?”

Your HR Survival TipRadkov

It’s really never too early to start prepping your business for the future. Whether you plan to have someone take it over or sell it, the business will have more value if you keep that future in mind. After all, we’re all going to exit our business in some manner. We may not always be able to choose when but we can certainly make it easier for ourselves and others when that time arrives.

I’ve met a few business brokers and they all agree you need to start preparing your business at least 2-5 years in advance. What does this prep look like? Here are just a few examples:

  • Document your processes — Stop rolling your eyes and realize this is critical. You can do short videos if writing your processes down is too much. However, anyone taking over the business needs to know what you’re doing to make it successful so they can keep repeating the process.
  • Pull yourself out of the picture — If you are holding all the expertise and knowledge that keeps the business going, no one will find value in the business. Can you leave for 2-4 weeks and know the business will continue to operate as well as when you’re there?
  • Hire good people — Instead of worrying that someone knows more than you, celebrate your good luck! Having great people work for you only makes you and your business look better. Make sure you’re taking steps to ensure they stick around. This often means you need to create a career path for them, if possible. You don’t want your employees leaving once someone else is at the helm.
  • Maintain focus — We’ve all followed that shiny object at some time or another… that big distraction from our goals or plan. Figure out what your business is best at and how you can keep that momentum going. Flitting from one idea to another isn’t going to build a solid business.
  • Lock down your customers — Most businesses rely on customers continuing to buy your product or service. What are you doing to ensure your customers will continue to use your business… regardless of who’s running it?

It doesn’t really matter if you want to eventually sell your business to a stranger or turn it over to family, the process is similar. If selling, you’ll have a much better chance of getting the best price if they can see what it will take to run the business. If turning the business over to family, they’ll thank you for providing a solid operation. Let us know if you would like an introduction to a business broker and explore what you can do to build value in your business.

Short Days

“If I have someone come to work one day just for a 30-minute meeting, do I have to pay them for the whole day? Also, what if they come to work but I don’t need them at all that day?”

Your HR Survival Tip

HR Jungle

These are actually two different topics but they both fall under short days so we’ll cover both scenarios.

When you schedule an employee to come to work for less than a normal day, you only have to pay them for the scheduled time. You could schedule an all-hands meeting on Saturday that only lasts 30 minutes and you’d only be required to pay for that 30 minutes. Although, let’s be honest, your employees would probably stage a mutiny if you made them attend a short meeting on one of their days off! Be considerate and try to squeeze those short meetings into the regular workweek.

The other scenario happens much more often. You have 4 employees scheduled to work all day Thursday. However, Thursday morning arrives and you realize there isn’t enough work for all of them so you decide to tell Sam to go back home. You will owe Sam “reporting time pay.”

Reporting time pay means you are paying for one-half of their scheduled hours… but no more than 4 hours and no less than 2 hours. So, if Sam was:

  • Scheduled for 8 hours, you’d pay for 4 hours (one-half of the scheduled amount).
  • Scheduled for 2 hours, you’d pay for 2 hours (the minimum amount of reporting time pay).
  • Scheduled for 6 hours, you’d pay for 3 hours (one-half of the scheduled amount).
  • Scheduled for 10 hours, you’d pay for 4 hours (no more than 4 hours is due with reporting time pay).

Both your employees and your budget would appreciate better scheduling so you don’t have more employees showing up than is needed for the available work. Check your workload and the schedule… call employees (pre-bedtime ideally) to let them know you won’t need them tomorrow. They won’t have to get up early and you won’t have to pay them reporting time pay.

California Calculations

“I’ve heard you mention a calculation that is needed when I’m paying my employees. What is it for?”

Your HR Survival TipHR Jungle

California has several calculations to determine the correct pay for employees. Which calculation is used depends upon the situation. We have:

  • Regular Pay — When regular pay is mentioned, it’s not always the same as an employee’s base wage. This is a calculation of their total wages for the day divided by the total hours. If you paid an employee different hourly wages that day ($12 /hr for one type of work and $14 /hr for other work), then you must do the calculation to determine the correct overtime premium paid if they worked overtime or to know what to pay for sick time.
  • Split Shift Pay — If you have an employee taking more than an hour for the meal period, you might have split shift pay. This happens when you want them to take a longer meal break because you need them to work later. This is a calculation that may or may not cost you more money, depending upon their hourly wage. Basically, you owe them 1 hour of pay at minimum wage for the split shift. However, if they are paid more than minimum wage throughout the rest of the day, you can apply that over-minimum amount to the split shift pay.
  • Overtime Pay — If you provide bonuses to hourly employees, you may need to add that bonus into your overtime calculation. Plus, if the employee is paid based on piece rate, the overtime calculation is different than for non-piece rates.
  • Sick Leave Pay — Look closely at the sick leave law(s) that affect your employees. The law may require you to perform a calculation to know what to pay your employee for sick hours. This is one area where the language does vary by location.

There are other calculations but these are the most common. Make sure you are paying your employees properly. Your employees may not know about these calculations but the Labor Commissioner and attorneys certainly do and this could pop up if any other claim is filed.

Who’s in Control?

GrubHub is a company who provides connections between restaurants and delivery drivers classified as independent contractors. GrubHub had a driver, Lawson, who filed a lawsuit claiming he should have been an employee. You might wonder why the classification is such a big deal.

Your HR Survival TipHR Jungle

If a worker is classified as an independent contractor, there are several wage and hour law perks they didn’t get, such as meal breaks, paid rest breaks, overtime pay, or paid sick leave. If the company was wrong about the classification, the company now has to pay the worker for all those lost benefits over the past 4 years. The company is also responsible for the worker’s payroll taxes, fines, penalties, and attorney fees. Overall, misclassifications can be very expensive.

The GrubHub case was heard in 2017 and GrubHub won. The court provided numerous examples of why that decision was reached. Would the court say the same about your independent contractors? Here are the points made:

  • GrubHub exercised little control over the details of Lawson’s work.
  • Lawson wasn’t required to have any particular training or orientation.
  • GrubHub didn’t conduct performance evaluations.
  • Lawson could decide not to work, right up to the moment the time slot he had signed up for was scheduled to begin.
  • GrubHub didn’t control when or how Lawson delivered the restaurant orders he chose to accept.
  • Lawson decided when and if he wanted to work and for how long (complete control of his schedule).
  • GrubHub didn’t control Lawson’s appearance while he made deliveries.

Previous cases have used a 1989 court case as the litmus test for determining whether or not a worker was misclassified. However, a more recent court case referred to the definition of employees found in your Wage Orders, which makes it much easier for the worker to claim he’s an employee. We are currently waiting to hear the opinion of the California Supreme Court on whether that test can be used. If the answer is yes, we’ll all want to review our independent contractors to determine if they should now be employees.

Nearly every company has or will be challenged with determining whether a worker qualifies as an independent contractor. It’s not a decision to be made lightly or just because it’s expedient. Ideally, you should be able to hand over a client or project and say “here’s the scope of work and the deadline.” Then you back off until it’s time to see if the deadline is met and the scope of work completed. Is your relationship with your independent contractor close to this?

Walk Away, Rene

“One of my employees got mad and pushed another employee. I believe the one who got pushed was deliberately trying to make the other employee mad. What should I do about this?”

Your HR Survival TipHR Jungle

Although there is more conversation about violence in the workplace, it doesn’t seem to be stopping it. In fact, we’ve heard about more employees verbally and physically attacking one another than ever before.

There are a few things you can do to prevent this and ways to handle the situation if prevention doesn’t work. The first is recognizing that you, as the business owner or a manager, absolutely must take action. You need to make sure this type of behavior is not condoned or allowed.

There are a variety of possible disciplinary actions you can and should consider, including unpaid suspension, termination, a write-up, anger management classes, harassment classes, probation, etc. How you handle the situation depends greatly on what exactly happened. Make sure you have witnesses write up what they saw and heard.

Here are a few fictional examples and what we might recommend (depending on the details):

  • Sam and John are yelling at each other in front of others — Write them both up for unprofessional behavior and maybe consider a day’s unpaid suspension for the one who started it. Also find out what caused it and consider how to avoid this in the future.
  • A supervisor gets mad at a direct report and punches him — Termination of the supervisor because, in that position, he now poses too big of risk to the company. Maybe write up the direct report, depending on what happened before the punch.
  • A lead has told a newer employee to work rather than watch others. Later the employee threatens the lead. — Terminate the employee. This wasn’t a heat of the moment response; he waited and then made the threat.
  • Sam is verbally abusing John and eventually makes John mad enough that he takes a punch at Sam. — Terminate John for violence and write up Sam for potentially harassing behavior. Possibly even put Sam on probation if this is a common behavior for him.

The point is that, once emotions start escalating, someone needs to be smart enough to walk away before things get out of hand. Screaming at each other doesn’t solve anything… and rarely even makes them feel better. You just can’t have someone in your workplace that believes a punch is okay.

Once emotions have cooled, then both parties can discuss the problem and find a solution. If the conflict is about work, everyone needs to recognize a solution must be found and work toward that end without hot tempers. If the conflict is due to a personal issue, tell them to resolve it outside of work. Make sure your employees understand what professional behavior looks like and give them ways to calmly resolve any issues. Also make sure they know there will be consequences, and potentially severe consequences, for unprofessional behavior.

Romance is in the Office Air

“There has been so much in the news about sexual harassment that I’m really worried about my employees flirting or having relationships with each other. How can I protect my company from claims?”

Your HR Survival TipHR Jungle

Even before harassment claims were domineering the news, we noticed quite a few business owners refusing to meet alone with an employee… of either gender. Concern over harassment claims has been around for years. The news articles have pushed that concern into real fear.

Ironically, a high percentage of people meet their future spouse while working. Coworkers are the people we see the most and it’s the easiest place to meet someone new, whether it’s a new employee or someone who has business interactions with the company. It can be a challenge to balance those relationships while keeping the company out of trouble.

While most people laugh when it’s mentioned, we have a Consensual Relationship Agreement used by a few clients. It’s one of the suggestions we make to bring an employee-employee relationship out into the open… and take harassment off the table. The agreement is provided via individual meetings with each employee to confirm they are in a consensual relationship. If that’s not the relationship, this gives the employee the opportunity to say so.

We don’t recommend having a policy that prohibits relationships at work. Frankly, they just don’t work. Instead, focus on making sure everyone (male or female) knows a very easy way they can let you know there is a problem. It doesn’t matter if a male or female is making the moves on another employee, it should only take one “no” to stop it. Anything more could be harassment. Ensure everyone knows this.

Overall, just keep your ears and eyes open when walking around the office. Pay attention to the interactions your employees have with each other and with outside people working with your company. Some people are more obvious than others. There’s no harm in asking someone if there’s a relationship building. However, you’ll be better off asking the person with less “power” than the other because the abuse of power is behind many claims.

Your job is to make sure everyone is comfortable while at work and only feels pressure to do their job. The moment an employee feels pressured to do something personal for someone else is when you have a potential problem. If there is any chance an employee wouldn’t feel comfortable telling you or HR of a concern, make sure you also let employees know of an outside resource (such as HR Jungle) who can listen to them and provide advice to them and you.

Safer Terminations

“I am always worried when firing an employee that I’m at risk. What can I do to reduce my risks?”

Your HR Survival TipHR Jungle

The best way to reduce your risk when terminating an employee is to make sure the employee isn’t surprised. They should know you’re not happy with their performance… and you should be able to prove it.

An angry employee is always dangerous and often looks at ways to get back at you. None of those ways bode well for the company. They could talk with an attorney, who is bound to find other things you did wrong unrelated to the termination. They could blast you on any number of social sites that mess with your company reputation… and it’s legally very hard to get them to stop. They could call their coworkers and try to cause problems there. They could file a claim with the DFEH (Department of Fair Employment Housing) that you would spend time and money on even if it’s a bogus claim. California has made any of these very easy for employees.

While there are no guarantees you can completely prevent the above from happening if an employee is really determined, you can work on making the termination easier for everyone involved. When we get a call from a nervous employer about an upcoming termination, we want to hear what you’ve done with this employee thus far:

  • Has the manager talked with the employee about the need for changes in performance, skill set, etc.?  —  You may be surprised to learn that most employees actually want to do a good job. However, they aren’t mind readers and need to be coached and shown the way you want things done. Just telling them they are doing it wrong isn’t showing them how to do it right.
  • Did the manager document any of those conversations? — The document doesn’t need to be a big, official memo. A note to the file outlining what was discussed, when, and who participated is a great start. Otherwise, it’s a he-said, she-said scenario that offers little proof.
  • Has anyone said (or provided in writing) the words “your job is at risk if this doesn’t change?” — A very high percentage of managers appear to be afraid to utter these words. However, it’s the only way you can make sure your message might get through to the employee. And, after all, it’s the truth! While you don’t have to tear down the employee, you do need to make it very clear there are consequences if changes aren’t made. It’s easier to help them get better than to have to start all over again with a new employee.
  • What is in the employee file? — This is often the biggest risk area. More often than not, we end up finding years of “okay” performance reviews. They were given an okay rating because the manager didn’t do their job and write the truth. Now, how do you explain the sudden change in the employee’s behavior that warrants termination? And where are notes or memos about previous conversations… and do you have proof the employee was actually told that.
  • Did the manager email you that disciplinary action or termination may be needed? — Even if the employee hasn’t been told outright that they are in trouble, they do pick up clues and start defensive measures. The most popular is suddenly telling you they are pregnant / have been injured on the job / have a major illness / etc. They know this will prevent you from taking action or at least slow you down. However, that little email about a possible termination put a timestamp on your thoughts and may help you continue with the termination or disciplinary action you had planned.

If it’s not in writing, it didn’t happen. This is a really good mantra if you want to protect your company. Provide manager training so they understand what you need and why… then hold them responsible for doing their job properly. It’s more time-consuming and more costly to fight an employee’s claim than to just set up a process all your managers follow.

Preventing Harassment

“The news has been flooded with harassment complaints for several weeks. How can I make sure my company isn’t also doing something wrong?”

Your HR Survival TipHR Jungle

The sexual harassment complaints you read about often include a celebrity or a really big lawsuit. We don’t see the little day-to-day harassment in the news… but that doesn’t mean it doesn’t happen.

The best prevention methods are training and taking the issue seriously. In California, companies with 50 or more employees are required to provide 2 hours of harassment training every 2 years for all supervisory personnel. It’s important to note that the word “supervisory” is very loose in this law. Any employee who has any power over another employee is considered supervisory and needs this training. That means a lead, the scheduler, and other “titles” that don’t always jump out as supervisory but do have some control over others.

Even if your company isn’t required to provide this training to your supervisory staff, we strongly recommend it because you’re still subject to the harassment laws. While you’re at it, provide a shorter version for the rest of your employees. Everyone needs to know what qualifies as harassment in order to prevent harassment and to prevent invalid claims. The little claims often happen because one party or the other doesn’t understand what harassment means in the day-to-day workplace.

If your supervisory staff hears or knows something but ignores it because it wasn’t in their department, both that supervisor and the company can end up in serious trouble. Supervisory staff can be sued individually for harassment and may even end up paying for their own attorney. The company will take a big hit by not making sure the supervisory staff knows when and how to report even the smallest concern that harassment may be happening.

If you, as the business owner, don’t take the training and your policy seriously, your supervisory staff won’t either. The hint of harassment must be investigated. Yes, it might turn out to be nothing but you won’t know until you check it out. No matter how small the issue is, you need to put details of the investigation and outcome in writing.

Consider who should investigate… there are legal issues here so choose wisely. Only an employee (who knows what they’re doing), a private investigator, or an attorney are allowed to be investigators. You noticed I didn’t add HR Consultant? Yes, consultants must work under the umbrella of a law firm if we’re doing the investigation. Typically, the investigator is merely obtaining the facts. Company management, with an attorney’s advice, makes the final decision about what should be done.

There are many ways to provide training at a very reasonable price. It’s well worth it to ensure everyone in your company has a better understanding of the laws and your policy. We’re happy to share our resources with you; just ask.

Money Doesn’t Talk

“Now that I can’t ask about previous wages to make sure we’re in the same ballpark, how do I know if a candidate will be happy with what I can offer?”

Your HR Survival TipHR Jungle

Since the new law went into effect on 1/1/2018, you can no longer ask what a candidate earned previously. This means you don’t ask what their base wage was, you don’t ask how much they earned in bonuses or commissions, and you don’t even hint they might want to tell you. In fact, don’t even ask what they’d like to make.

You not only can’t ask, you really don’t even want the candidate to volunteer that information because it becomes legally risky for you. In the end, you shouldn’t care what they want or what they’ve made because each position is worth a certain amount of money to you and that’s the number that’s important.

So, how do you dance around this vital part of interviewing? You tell them your range and merely ask if it is acceptable. It’s that simple… and that difficult. Providing your range means you need one. Don’t rely on the free online sites for developing your range. They are rarely correct and you need to really know how to translate the experience and skills they list. Most employees who use these sites inevitably believe they are underpaid and they are usually wrong.

It’s time to start investigating more reliable means for determining the market value of your positions. Most of the time you’ll need professional help with this because, if you want good information that will protect you, you must do your due diligence. Geography, size of company, accurate job descriptions, etc. come into play when obtaining an accurate assessment of what each position is worth at any particular time. When “market value” or “worth” is mentioned, we mean the average wage being paid for this position, in this area, and at this time.

Salary surveys usually require you to participate in a survey but can be a great way to get useful information. Since the information is provided by the participating companies, it’s more accurate than when information is gathered from employees self-reporting. You may also find good information from your industry association. Staffing agencies often have access to reliable information. We expect to see many more options becoming available as this need for good salary information grows.

One more thing, if you think you can get around the money issue by using a recruiter, think again. The law specifically states that anyone you engage to help recruit or hire on your behalf must follow the law and leave money out of the conversation. This means you need to make sure any recruiters and/or staffing agencies you use have properly implemented this law into their recruiting and hiring practices… or you’re the one who will be held responsible.

It’s Bonus Planning Time

“In December I gave my employees a bonus. However, I’d like to have a better plan in the future so we have a focus. What should I be thinking about now?”

Your HR Survival Tip

RadkovWe are so glad you’re thinking about the bonus now and realizing it’s better to have a focus. We believe one of the most wasteful things a business owner can do is throw cash at employees who don’t have a clue why they are getting that money. It doesn’t help your company if they believe they’ll get a bonus next year just for showing up. You need to tie the cash to achievements, both theirs and the company’s.

Now is the time (or past time) to create your bonus plan. Yes, it is a plan and the basics of it should be in writing to avoid claims and to just be a reminder for everyone. There are several things you want in writing, such as whether the person must have been employed for a period of time before they are eligible or whether they must still be employed when the bonuses are paid out.

The first step is often forgotten but is critical. Determine how much revenue, profit, etc. you need to even have a bonus pool available at the end of the bonus period. Keep it simple… a 10% increase in gross revenue over the previous quarter/year, $750K in total revenue for the period, the profit margin increased by 5%, 75 new clients… whatever number you can track, explain in simple terms, and use as your base. If you don’t hit that number, you don’t give out bonuses. Period.

The second step is figuring out how to hit that number. Do you have a plan or are you just hoping? Determine what needs to happen throughout the year to achieve your company goals (or that number discussed above). Who is involved in making those things happen? It can’t all be on your shoulders so break it down and determine what your employees must do to help the company reach those goals.

Don’t provide just an annual goal; provide monthly or quarterly goals. These are the stepping stones for those company goals. It can be hard to think of goals for employees who have a daily routine. However, stretch your imagination. An accounting clerk should be able to process more paper the longer they are in the position because they have learned shortcuts and become more efficient. Maybe their goal is to go from processing 200 invoices per month to 500 per month by the end of the year. Plot that increase over the year. You’ve just saved yourself from having to hire a second clerk this year!

Smaller organizations may need to focus just on short-term goals because too many things can alter the outcome. If you and your employees haven’t been able to hit annual goals due to those unforeseeable changes, change your plan. Consider having just 6-month bonus/goal periods rather than annual. Find the period of time that you know would not require changing the goals. No one said bonus or goal periods have to be one year.

Maybe the goals build on one another or over time so start smaller and increase the “quota” each successive month/quarter. Do the same with the employee’s goals. Maybe some of the goals are for personal growth or classes that will enable employees to do their job better or faster. The more you grow your employees, the more your company grows. Bonuses would then be smaller but more frequent to keep everyone excited and striving to achieve them.

Growing your company is a team effort but you are the leader and need to present the plan. Work with each employee on developing their goals so they have a say in them… you might be surprised by what they come up with for themselves. Make the goals a company event with monthly updates. Contact us for help in creating a written bonus plan or providing more ideas for individual employee goals.