In 2008, many employees either lost their jobs or their pay was frozen. And every year since then, employees have been crossing their fingers that this will finally be the year where they will see a significant increase in pay. But it’s not.
Aon Hewitt’s U.S. Salary Increase Survey of 1,074 companies shows base wages and bonuses won’t be increasing in 2017 any more than they did in 2016. This is the 5th year companies have predicted a 3% increase but actually only provided a 2.6 – 2.8% average increase. This is viewed as a sign of the pressure companies are feeling to keep fixed costs low.
The survey also showed:
- 12.8% of payroll is going toward variable pay (bonuses and pay-for-performance)
- 10% of companies have frozen salaries (up from 6% in 2015)
- Stopping annual raises and shifting to performance-based bonuses or perks is a strong consideration for many companies
On December 1st, we expect to see a huge increase in the number of non-exempt employees due to the increased minimum salary for exempt employees. This means the potential for considerably more overtime hitting your payroll and another reason it’s doubtful we’ll see companies offering higher pay increases. You’ll need to see what your new payroll costs are compared to prior years.
Another component is the increase to minimum wage. While you may only be providing tiny raises, the state is providing 10% increases. This, too, affects your bottom line and needs to be weighed in your overall payroll costs.
While bonuses are becoming more popular as a way to reward employees without increasing fixed costs, they also have a downside. Bonus pay may qualify for an overtime premium with non-exempt employees, is often taxed higher, and white-collar positions are often offered more bonus potential than blue-collar positions.
I like bonuses instead of higher pay but you need to think through a company-wide plan. Everyone should have an opportunity to profit based on company, team, and personal performances. You want a written bonus plan that is distributed and communicated in a way that every employee knows exactly what they must do to earn their piece of the bonus.
“I’ve just promoted a great employee, John, so he’s now supervising several other employees who used to be his peers. He seems to be having trouble supervising these employees but I’m not sure how to help him. Any ideas?”
Your HR Survival Tip
Supervising former peers can be difficult because suddenly their buddy is their boss. However, there are things both you and John can do to make this easier.
When first promoting John, you should have made an announcement to the whole company. If it’s only been a month or so since the promotion, you can still do this. Highlight why you selected John for this promotion, what the new position entails, and who will now be reporting to him. This helps set the stage for John and lets the other employees know you trust John to handle this job.
There may be some of John’s former peers who don’t feel he has the right background or experience to be their supervisor. This is one reason you make the announcement… to let them know you believe John was the correct choice for this promotion. If they bring this up to you, you need to stand behind John and your decision.
John should meet individually with each of his direct reports. He needs to nicely take control but to also let them know he basically hasn’t changed. He’s still John. Follow those meetings up with a team meeting to plan how things will move. John has new responsibilities and completing them will very likely require a team effort. Whether he realizes it or not, John already knows what motivates each member of his team and he needs to use that information to help the team function smoothly.
If a team member continues to be resistant to the new leadership change, it’s time for another one-on-one. John needs to let this team member know he can’t and won’t let the situation continue. Although it can be very hard to discipline a former peer the first time, John needs to be prepared to take whatever action is necessary. However, just the intervention of another meeting may provide the desired end result.
Something critical to John’s long-term success is training. Too often an employee is promoted with no supervisory training provided and they either fail or just aren’t very successful at it. There is a wide assortment of supervisory training available and investing in John’s success can result in a great supervisor for you.
“My employee, Jane, is pregnant and asking what happens during her pregnancy and after the delivery. I don’t have a clue what to tell her. Help!”
Your HR Survival Tip
Did you remember to congratulate Jane? Often your concerns about how to operate your business without Jane can make you forget what an exciting time this is for her.
Both expectant mothers and expectant fathers want to know what they can and can’t do at this time so you need to have the answers for them. You also need information about what you, the employer, can and can’t do. One place to start is by giving Jane the Pregnancy Leave and the Paid Family Leave brochures again (these were part of the required new hire paperwork) because it gives you both a few answers. There’s also a pregnancy notice flyer you must give her as soon as you’re aware of the pregnancy.
The biggest misunderstandings are based on the differences between companies that are subject to FMLA (Family/Medical Leave Act, when you have 50+ employees) and companies that are not subject to FMLA (<50 employees). Jane will hear from friends and family about her rights and you’ve probably heard from other business owners how hard it was to manage without the employee. All those stories need to take into account the size of the company because this makes a huge difference for both you and Jane.
You are subject to the Pregnancy Disability Leave if you have 5 or more employees, which means the following probably pertains to your company. These are answers to several of the most common questions we’re asked:
- Jane cannot voluntarily stop working before her doctor is willing to provide the state proof she is medically disabled and unable to work. You, as the employer, want to receive that note from the doctor before Jane stops working or as soon as possible after that. Once you get the doctor’s note that she’s to stop working, do your calculations and give her the precise date she’s expected to return (or earlier). If she doesn’t return on that date and hasn’t made other arrangements with you, it could be considered a resignation.
- You can only put someone temporarily into Jane’s position. The laws protect her job and she should return to the same “or (very) similar” job. Yes, even if you discover Jane wasn’t doing the job as well as you thought!
- You are required to continue her insurance coverage, if any, and Jane is required to send you the co-pays you normally deducted from her checks.
- The length of leave possible has two answers. If you have under 50 employees, Jane is legally allowed only the amount of time her doctor can show she is medically disabled but this is standardized at about 8 weeks unless there are medical issues. If you have over 50 employees, Jane can take the full 12 weeks allowed by FMLA (493 hours under CA’s Pregnancy Disability Leave law). The company may offer additional unpaid leave that isn’t legally required but please consider it as more protected time off, just to be safe.
- Jane may apply and receive supplemental income (~60% of her pay) through CA’s state disability insurance for 6 weeks. She will also be eligible for Paid Family Leave’s supplemental income for up to another 6 weeks… however, this is not a leave, it’s supplemental pay for the mother or father only if they are otherwise eligible for a leave. Whether or not she receives Paid Family Leave pay will likely depend on whether you are subject to FMLA or you have allowed her to be off work longer than her medical disability leave requires.
- Baby bonding time is only legally available if you are subject to FMLA (>50 employees). Fathers have no paternity leave legally available at this time if you have <50 employees. The company may agree to a period of unpaid time off that isn’t legally required.
- Available paid sick leave can be used by Jane or by the father during her maternity leave. You can require Jane to use her sick leave (which I recommend) and you can allow, but not require, her to use any vacation or PTO.
- Time off due to the pregnancy (morning sickness, doctor visits, etc.) before delivery counts against the total FMLA and Pregnancy Disability Leave allowed. Yes, even if they use Paid Sick Leave or PTO.
- Jane must send you a doctor’s note stating she is able to return to work, when she’s ready to return. Jane must return when her doctor releases her (<50 employees) or as soon as her 12 weeks of FMLA / 493 hours of Pregnancy Disability Leave is used up. Her job protection ends at that point.
- If Jane wants to only come back part-time, you are not legally obligated to provide any change to her job. First, let her know her same job is available and that she needs to provide in writing that she doesn’t want it. Now you can discuss her options and preferences but it’s totally up to the company to agree to any changes in her previous position.
Pregnancy is a fact of life. Prepare for the inevitable by making sure some of your employees are cross-trained so absences of any kind are easier to manage. While Jane’s absence might be hard on you temporarily, I’ve never heard of a company going under simply because an employee (at any level) had a baby.
“I’m hiring an Office Manager and have found a really good candidate, Jane. I had planned to pay $15.00 to $17.50 per hour but Jane was only making $11 per hour at her last job so I know she’d be thrilled by $14. Do I have to offer her something within the range, even if she didn’t know the range?”
Your HR Survival Tip
While you might be able to get away with paying below the range you created, there are several reasons why you should stick with your range.
Pay for what you want done and then hold the person accountable for doing the job. You created that range somehow and it should represent the level and quality of work you expect for that pay. Offering a lower amount just lowers those expectations.
In addition, no matter how confidential we like to believe wages to be, employees talk… and those conversations are protected by California law stating you cannot stop them from discussing wages. Even if there are no other employees, it seems confidential information is rarely totally secure within the company. What happens when Jane learns about the original range or that other employees with fewer responsibilities are earning more?
Starting a position too low often means, at some point, you’ll need to provide an “equity increase” to bring Jane up to the level in the marketplace. If you don’t evenutaly pay in the range of other companies, you take the risk of losing her to another company. Even if you’re only focused on the money, keep in mind the cost of replacing Jane will be far greater than paying her a fair wage from the start.
This mindset of paying only a little above what someone was previously earning, instead of what the position is actually worth, has been the reason legislation is currently winging its way toward a new law. The proposed law will prohibit employers from asking about previous wages… just to prevent this type of below-market offer!
I happen to like knowing what candidates previously earned because it helps me determine if we are both wasting our time continuing the interview process. I also like knowing I can hold the employee accountable for the work itself because I’m paying a fair wage. What do you like knowing?
“An employee’s behavior has changed recently. Jane is working slower and she seems to have trouble paying attention. We think drugs might be involved. Can I send her out for drug testing?”
Your HR Survival Tip
Yes, but you want to be cautious in this area. First, have a conversation with Jane and explain what you’ve noticed. Ask if she has an explanation for her changed behavior. Maybe she’s bored with the work or has personal problems distracting her.
You want employees to let you know when they are prescribed drugs that may alter their behavior or create a danger to the employee or others. However, do not ask what is medically wrong with Jane… you only want to know if she’s on a prescription drug that could explain her behavior.
Several prescription drugs can make you sleepy… which could explain Jane’s inattentiveness and will let you know she shouldn’t operate a vehicle or other equipment. Her doctor may be trying different drugs to find the right balance for a health issue and the changes to the prescribed drugs could be causing her behavior changes. If a prescription drug is the cause, you’ll want to know when Jane will be off them and you can expect her performance to return to normal. You could ask for a note from her doctor if the prescription prevents her from doing her usual work.
If Jane tells you she isn’t on any prescription drug and doesn’t offer any other reason for what you’ve noticed. You might now consider a drug test. However, you want to be fairly sure that what you’ve noticed is actually a sign of drug use. Do your research. A few signs include, but are not limited to:
- Bloodshot eyes or her pupils are larger or smaller than usual
- Unusual smells on her breath, body or clothing
- A change in her appetite or sleep patterns (however, it’s unlikely you’d be aware of this)
- Unexplained changes in work performance (beyond normal ups and downs)
- Sudden weight loss or gain
- Deterioration of her physical appearance and personal grooming habits
- Uncoordinated movements, tremors, or slurred speech
Just so you know, having a medical marijuana card does NOT automatically make it okay for Jane to have used marijuana recently or while working. If your company has a drug-free policy, Jane can’t use marijuana or still have it in her system while working. Marijuana is still a Federal illegal drug and your drug-free policy truly means no state or Federal illegal drugs.
If you’ve decided to send Jane for drug testing, be ready to send her immediately and put a time limit on it… “you need to go for a drug test within the next hour.” In fact, call a cab to take her there and bring her back to work. You should already have a contract in place with a testing company and know where the closest lab is located.
California does not allow random drug testing… you need a reason for testing, which is why you want to be careful. Protect your company with a written drug and alcohol policy that includes pre-employment drug and alcohol screening and/or the possibility of “reasonable suspicion” testing… and the consequences of failing the test or refusing to take the test.
“I’m using a computerized timekeeping system for my employees. I love the convenience because it can be set to automatically clock them in and out based on their normal schedule and I don’t have to remind them about a missed punch. Although they take meal breaks at different times, I’ve discovered the system can also be set to automatically punch them out/in for the meal break. Is there a problem with the system using the same start time for everyone’s meal breaks even though they actually vary?”
Your HR Survival Tip
The meal break isn’t the only thing you should be concerned about here. Aside from knowing what to pay your employee, having timekeeping information is critical for your company.
Your company needs proof you have paid the employee properly for time worked, any overtime worked, late or missed or short meal breaks, requested time off, etc. Without proof, California will believe whatever your employee says. Plus, the state can review up to 4 years of ALL your payroll information when conducting an audit.
Here are a few timekeeping basics:
- Only non-exempt (hourly) employees are required to track their time. You can also require exempt (salaried) employees to track time but it’s normally for job costing purposes rather than tracking their total time worked.
- Require employees to clock in only for themselves and no one else. It’s fraud if they clock in or out another employee.
- If you’re using handwritten timecards, require employees to put the actual time rather than the scheduled time (i.e., enter 8:02 instead of 8:00). Timecards showing 8:00 to 5:00 everyday on that sheet won’t hold up in court as proof you’ve properly paid your employees. Timecards like that look fake because no one actually clocks in and out exactly at the same time every workday.
- You should never enter or correct a time for the employee without the employee’s signature authorizing or requesting it. Your entry could be considered invalid without proof and the employee could say you eliminated their overtime.
- Meal breaks must show actual times just like the day’s in and out times. You need to have proof the employee began the meal period within the first 5 hours of work and that it lasted at least 30 minutes. If you don’t have this proof, you’ll owe that employee one extra hour of pay (penalty pay) every day it happens.
- Do not have your timekeeping system automatically deduct 30 minutes for meal breaks. Again, you’ll have no proof the employee actually took their meal break.
- If you are using a computerized or electronic timekeeping system, make sure employees have a personal login and password or some other method to confirm no one else could have entered the information.
Timekeeping seems to be equally hated by all but it is a necessity. Ensure your timekeeping processes will actually keep you out of trouble instead of making you vulnerable to claims.
“Every year on an employee’s anniversary I give them a pay increase of $1.00 per hour. However, now their pay is getting a little too high for the work they are doing. What can I do instead?”
Your HR Survival Tip
There is a difference between rewarding employees for sticking around versus rewarding them for their work. Your method is paying employees for sticking around … and nothing more.
Rewarding employees for taking on more responsibility, helping you reach your goals to grow the business, doing their work faster or better, or learning a new skill makes more sense. When you reward employees this way, your company also does better because your employees are bringing more to their jobs.
When the recession hit in 2008, companies dropped the percentage they were giving for pay increases and some even stopped increases for a time. It’s now several years later and we’re still seeing only 2-3% pay increases each year. Unfortunately, it doesn’t look like that range will increase in the near future.
Most of the time, an increase of 2-3% is barely noticeable to a non-exempt employee … and could even tip them into a higher tax bracket that results in a lower net pay. Let’s be honest; these tiny increases aren’t viewed favorably by employees. Demotivating your employees wasn’t your intent but you also can’t keep paying larger increases without eventually overpaying.
It’s time to consider a bonus program that rewards high performers. You don’t guarantee annual raises. You only provide bonuses to employees who really step up and go beyond their normal job. The bonuses don’t increase the hourly wage; these are extra checks that reward behaviors you want to encourage.
You don’t need to stop all raises but you do need to think more about why you are giving that specific employee that particular raise. A raise should never be about the fact that they’ve managed NOT to be fired. A raise should be a reward for doing something more and doing it on a consistent basis.
“My company and our clients are quite conservative so I want my employees to fit into that conservative image. Can I require my female employees to wear dresses or skirts and men to wear suits?”
Your HR Survival Tip
In some fields, like finance and banking, employees always wore very conservative clothing. Men wore black, dark blue or dark gray suits with a white shirt and a tie that didn’t have people staring at it trying to figure out what it said about their personality. Women wore a dress near their knee or a suit that had a skirt instead of pants.
However, times have changed. I was amazed to discover two things: (1) California passed a law in 1994 giving women the right to wear pants in the workplace and (2) that it took a law. Really?
Today, when a company tries to address the issue of conservative appearance, we’re usually talking about prohibiting visible tattoos or piercings, no cleavage or butt cracks showing, and no see-through clothing. Discrimination rules also have us prohibiting pictures or sayings on T-shirts because they could be viewed as discriminatory by someone. Certain types of jewelry can be a safety issue.
Clothing and appearance in the workplace has become a discrimination issue. You can no longer identify the differences in clothing, jewelry, make-up, or hair based on gender; now you focus on unisex clothing and appearances that may be inappropriate for your company. This avoids not only gender discrimination but also gender identity discrimination.
State your employees must have a conservative appearance and even give examples of what that looks like to you… just leave off the gender language. For example, we feel a conservative appearance includes suits, knee-length dresses, pants that touch your shoes, closed-toe and closed-heel shoes, ties with muted colors and patterns, no visible tattoos, only one small earring in each ear and no other facial jewelry, and no more than two rings. This covered a lot of territory for both genders while never specifying gender.
If your business prospers by providing the appearance your clients want, it’s easiest to hire people who understand this and naturally dress that way. There are a lot of companies out there willing to hire people who don’t fit into a certain look but are great performers at work. You just have to decide how much appearance matters for your company and for the work the employee will be doing.
“I have an employee who wants to bring his miniature horse to work because it’s a support animal for him. What am I supposed to do in this situation?”
Your HR Survival Tip
Call an employment law attorney! While dogs may have been the standard service/assistive animal for years, even a miniature horse can be trained as a service animal. The reason this is a delicate legal issue is because, in addition to the known American Disabilities Act (ADA), there are several agencies and other laws that all have slightly different rules about service animals and those qualifying as assistive animals.
Service animals are specifically trained to provide a service for their owner, such as guide dogs. Assistive and support animals do not need to be trained and are often considered a reasonable accommodation. All a support animal must do is provide emotional, cognitive, or other support to a person with a disability.
While you may have to take your employee’s word his horse is a service animal, you have the ability to ask more questions about assistive animals. You are allowed to ask for documentation from your employee’s health care provider stating the animal is necessary for your employee’s ability to perform the essential functions of the job. You can also request confirmation that the animal:
- will be free from offensive odors and will display habits appropriate to the work environment, including the elimination of urine and feces; and
- will not engage in behavior that endangers the health or safety of the individual with a disability or others in the workplace.
The definition of disabilities has changed over the past few years and resulted in many more people being eligible for accommodations. Don’t assume your employee doesn’t have a disability or that their horse isn’t an assistive or service animal. You need to treat this as seriously as you would treat any other disability accommodation request… regardless of the type of animal.
The ADA authorizes fines of up to $55,000 for a first violation, plus whatever fines are possible from other laws you might violate if you handle this badly. Don’t horse around… get advice from an employment law attorney.
Not everyone is taking California’s Fair Pay Act seriously. Perhaps Qualcomm’s case will help convince you that some women are taking it very seriously.
Qualcomm decided to settle a proposed class action discrimination claim before it reached the lawsuit stage. They are paying more than 3,000 female employees $19,500,000, in addition to agreeing to make policy changes.
The complaints began with their female employees working in the technical fields (technology, science, mathematics, and engineering) who were being paid less than their male equivalents. Added to that, females in senior leadership positions accounted for less than 15% of all senior employees. Women felt they received fewer promotions because men were making those decisions.
There was also a reward system that favored employees who arrived early and stayed late at work. This unwritten policy was felt to be a disadvantage to women with children who had to deal with childcare issues.
As you know, CA’s Fair Pay Act states all employees must be paid equally based on job responsibilities, skills, experience, and other objective data. CA’s law extended the practice to more than just a male or female in the same job… you have to compare other positions that have similar requirements in other departments.
Qualcomm’s issue involved the Fair Pay Act but also included other laws protecting discrimination. Yes, this is viewed as another form of discrimination because it affects a protected class.
The Fair Pay Act has only been in place since January 1st but there are other laws that have been around much longer. While you won’t get hit with a $19.5M claim, can you afford to pay $50,000+ for an attorney plus more to settle claims? It’s past time to review your pay policies.