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Four legal ways to cut pay costs in tough times

Surviving the downturn often means cutting hours and pay to keep the company afloat. That’s understandable and legal, unless you make one of the common cutback mistakes and run afoul of the Fair Labor Standards Act.

The four ways to steer clear of legal trouble:
1. Work cutbacks in full-week increments. It’s a practice common during holidays or other slow or down-season periods. The FLSA permits full-week cuts from exempts’ pay if there is no work available during that whole week. Note: During a full-week shutdown, make sure exempts don’t do “a little work” from home. That would mean they worked part of the week, making them eligible for a full week’s pay.
2. A formal short-week schedule. That is, it’s OK to announce that for the four weeks in January, the company will be closed on Fridays, and pay will be cut commensurately. Make sure to: Announce the revised schedule as far in advance as possible so as not to make it look like you’re haphazardly cutting and have no real salary standards for exempts. Even if you cut days, you can’t increase nonexempts’ workday hours to the point that they exceed 40 hours in a week — unless you want to pay them overtime. And remember you can’t cut exempts’ salary below the magic $455-a-week figure — that would put them in the nonexempt category and make them eligible for overtime pay at a later date.
What to avoid: In a short-term pinch, some companies decide to suddenly clip a day or two off the current workweek, and lower paychecks commensurately. But the FLSA states that if exempt employees are ready and available to work in any scheduled full week in which they’ve already worked, they have to be paid for the full week.
3. Require employees to use vacation time or PTO. The U.S. Department of Labor has ruled it’s OK to mandate that employees use available vacation time or PTO during a shutdown, especially when the shutdown is for “budgetary concerns.”
4. Across-the-board pay cuts, with no reduction in the workweek. Granted, this won’t get you on the “Best Places to Work” list, but it’s a cost-cutting maneuver that’s generally legal. And to pull it off usually requires some heavy lifting in the area of maintaining morale and employee relations. So, for instance, you could announce a 5% pay cut for all employees. Just be sure no one drops below the legal minimum wage or that exempts stay above the $455-a-week mark.

Caution: Some state laws are tougher than federal laws when it comes to allowable cutbacks. Check with your state department of labor to make sure cuts don’t violate state labor laws.

Most Workers Say Their Job's Stagnant

More than half of workers say their jobs are stagnant, and nearly two-thirds of workers say they have no desire to take on a leadership role, according to a survey by Development Dimensions International, a firm that specializes in talent management.
Respondents who said they felt that their job was stagnant were twice as likely to say they had no room to advance (32% of those who said their jobs are stagnant vs. 18% who said they aren't), were less likely to say they are asked to do more (14% vs. 27%), and say they are given fewer exciting challenges (3% vs. 26%).
The survey found that 46% percent of workers who said their jobs are stagnant said they "just do their job and go home," compared with 20% of those who don't feel stagnant.
The survey found that 44 percent of workers said they'll look for another job when the economy improves. Among workers who felt their jobs were stagnant, 77 percent said they'd leave for another company if given the opportunity.
"The economy has forced organizations to focus on generating revenue and delivering bottom-line results, but this data tells us they've forgotten about the importance of also focusing on their people--putting their organizations at risk for high turnover, poor performance and low engagement," said Jim Davis, vice president of workforce development for DDI.

Deloitte rolls out career customisation - Pilot scheme allows staff to ‘dial up or down’

Deloitte has introduced a form of flexible career management that allows staff to “dial up” or “dial down” their professional life to suit their needs, according to Sarah Jepson, talent adviser, human capital consulting, at the firm.
The “mass career customisation” initiative has been piloted in the US by the professional services firm for a year, and will be particularly important for retaining and engaging staff as the economy recovers, said Jepson, speaking at the StepStone Summit in London.
“It’s based on an idea that an individual has times when they can dial up or dial down and take time out depending on their individual priorities. It’s an approach to career management that allows you to have that flexibility,” said Jepson.
Dialling down could take the form of career breaks or adopting more flexible hours, whereas dialling up could mean taking on an additional workload or moving to a different location, explained Jepson. About 10 per cent of eligible employees in the US had chosen to do one or the other, she added.
The pilot has resulted in increased employee satisfaction and has attracted new people into Deloitte, said Jepson. The firm is planning to roll out career customisation to all of its 42,000 US employees by May 2010 and is now starting to pilot the programme in Europe, she said.
Both dialling up and dialling down are monitored against specific criteria, explained Jepson. “These are whether people want to be fixed in a location, whether they want to work part time, and whether they are happy to stay at a certain grade or stretch themselves,” she said.
Jepson added that Deloitte wanted to engage employees through the initiative. “It’s about recognising that people have different values and expectations and alternative talent pools. It’s about attracting mothers and flexible workers. We customise products so why not customise careers and how organisations respond to individuals?” she asked.

What your boss expects HR to know about business

If you don’t know what “free cash flow” means, maybe you should – if you want to get ahead in your organization.
What if someone told you he had a key piece of knowledge that would give you an edge on most of the other managers in your company? You’d probably jump at it, right?
Well, consider that business owners and CEOs routinely expect their managers and supervisors to have an understanding of the basics of business, especially money and finances. A survey by the Harvard Business Review shows that owners’ expectation might be too high.
Asked to take a basic financial-literacy exam, a representative sample of 300 managers — from all company sectors, including HR — scored an average of only 38%. Get this: Over half didn’t know the difference between “profit” and “cash.” Many didn’t know the difference between an income statement and a balance sheet. Nearly two-thirds thought that discounts offered by sales reps had no effect on gross margin.
Does it matter? When delivering the results of the test, Harvard presented scenarios in which that lack of knowledge could cripple a business. For instance, imagine you’re hiring an inventory manager who doesn’t understand the relationship between inventory on hand and cash flow. Worse, imagine you don’t know what the applicant doesn’t know.

Cash for Employee Clunkers?

The Cash for Clunkers program ended a few weeks ago with nearly 700,000 cars taken off the road, replaced by far more efficient vehicles. While the benefits gained verses the $3 Billion spent by the government is still being debated, I couldn’t help but wonder if Cash for Clunkers might not work in the workplace, too.
Imagine how businesses might respond if the government offered a financial incentive to replace under-performing employees with more talented, efficient ones.

Which employees qualify as Clunkers? I’m referring to the employee whom you hired several years ago – the high potential candidate who arrived to work on day one filled with promise, a positive attitude, lots of motivation, even though he was a little wet behind the ears when it came to experience. After a few months, this employee became a keeper, a top performer, a cherished employee. But just like the car clunker, the shine eventually faded and the ride got rough.
The employee’s performance is inconsistent at best and you constantly seem to be fixing this and repairing that. You’ve found yourself avoiding new projects and postponing strategic initiatives because you were afraid this old clunker couldn’t make the journey. Once considered state of the art, his skill sets have become outdated and the cost of retrofitting him with new skills keeps increasing with little improvement.
You’ve tried different working arrangements, shifting team assignments, and changing managers. You’ve offered promotion, demotion, probation, counseling, and warnings. You’ve invested in trainers, coaches, workshops, seminars, and even a psychologist. With each passing day, his reliability becomes more questionable and his attitude is polluting office morale, releasing productivity-killing emissions into the work environment. But for some crazy reason, you keep him employed, just like “good ole Bessie” in the driveway. You have fond memories of good times together and you treat him like a member of your family.

Then finally the government offers an “Employee Cash for Clunkers” program, ponying up the opportunity and money to exchange tired, burned-out, and attitude-killing workers for a new more efficient, more productive, and more positive employee.
The program has a short window and it’s being offered on a first-come, first-serve basis. Inventories are also limited in the talent pool because many of the most talented people are already employed. Only unemployed and new graduates can be hired. Poaching proven employees from competitors is not covered under the Employee Cash for Clunkers program. There are a few great candidates waiting to be hired but they won’t last long. You’ve got little time to act and only one opportunity to make the right choice. And you certainly want to avoid exchanging one clunker for another regardless of the incentive program.

Which employee would you consider to be your “clunker?” Think – what’s his or her name? If any one of your employees handed in his or her resignation today, which one would offer you all relief and little angst?
What type of employee would you replace him with? What expectations would you have? What skills would he need? What new projects or responsibilities could you give him? What could you do differently if you could replace your Clunker Employee with a Cash Cow?
Now I hate to burst your bubble but it’s unlikely there will ever be an Employee Cash for Clunker program. Nonetheless, the long term rewards for upgrading your talent right now far exceed any incentive government could offer. Many high potentials as well as proven performers are just sitting on the proverbial job parking lot waiting to be picked up. Humbled by the Great Recession, many talented people are offering their services at significantly discounted salaries in exchange for an opportunity. The talent inventories are at their highest levels in years and as the economy reboots, the best deals will disappear as quickly as inventories. Like the stock market, if you’re waiting to time the bottom and the top, you’re likely miss both and regret your decision for years to come.
Start your own Employee Clunker Exchange today. Don’t wait. Identify your clunkers right now. Which employees are costing you more than you gain? If you don’t know, find out. While the right metric will be company, industry, and/or company culture specific, one measure that I found helpful in nearly all situations is Profit per Employee. While all employees do not sell, every employee is responsible to contribute to the bottom line. Develop outcomes and metrics for each employee. Don’t go crazy with this. It’s a simple exercise. Just ask this question: by the end of the next 12 months, what do I expect him or her to accomplish? (If you don’t know, you can’t expect the employee to know either. In which case, you might have a classic, not a clunker, right under your nose and you didn’t even know it.) Then hold every employee accountable for expected outcomes.
Identify your requirements for a replacement. Before you go employee-hunting, determine how much experience, education, and skills you need for an employee to succeed. Do a job analysis. Again – don’t go crazy. For most positions, this shouldn’t take more than a few hours, even less sometimes, to identify the goals, responsibilities, and core competencies.

Get the word out. It’s now time to set the recruitment wheels in motion to recruit candidates who fit your requirements. Upload your opportunity to job boards. Announce your opening on social networks like LinkedIn and Facebook. Place an ad in Craigslist. Many of the strategies I just recommended are free or low-cost. If you’re concerned about being overwhelmed with resumes, use an online applicant processing system (APS) to rapidly screen out unqualified candidates. In this market, now is not the time to compromise. Cast as wide as net as possible. There are a few needles in the current haystack but there is also a lot of hay! An APS will automatically handle the “resu-mess” caused by high unemployment and online job boards and allow you to focus your time and attention on only qualified candidates. Spend some time on LinkedIn, posting the job to groups and asking for referrals.
Time is running out. The talent market is as good as it will get for years to come. Talent inventories won’t last forever. Act now. Exchange your clunkers today.

Employers Expected to Face Additional Pressure From Department of Labor

It seems like everywhere you look there is some mention of the U.S. Department of Labor (DOL) cracking down in one way or another on businesses. Statistics indicate that there is much increased activity in DOL audits over the last few years, which should come as no surprise. In the DOL 2011 Strategic Plan Fiscal Years 2006 - 2011 the department listed four major goals, which are:

*A Prepared Workforce

*A Competitive Workforce

*Safe and Secure Workplaces

*Strengthened Economic Protections

According to the Strategic Plan, the third goal, Safe and Secure Workplaces "focuses on ensuring that workplaces are safe, healthful, and fair; providing workers with the wages due to them; providing equal opportunity; and protecting veterans' employee and reemployment rights." It is this area that prompts the majority of DOL audits of employers.
The newly appointed Secretary of Labor, Hilda Solis, issued a statement on March 24, 2009 that the DOL is renewing its efforts to enforce labor laws across the country. With the addition of 250 field investigators provided to the DOL under the American Recovery and Reinvestment Act, businesses can be assured of increased audits.
In is important to understand that the DOL is quite a large organization with far reaching regulatory authority. The DOL has 27 divisions that each has their own function. A few of the divisions that are most familiar to private employees are:
Employment Standards Administration (ESA), which includes: *Wage & Hour Division (WHD) *Employee & Benefits Security Administration (EBSA) *Occupational Safety & Health Administration (OSHA)
In 2008 the WHD recovered more than $185 million in back wages for 228,000 employees. In addition, the agency assessed $9.9 million in civil monetary penalties and concluded 28,242 compliance actions. Including the 2008 figures, the 8 year cumulative total of back wages collected by the agency was $1.4 billion dollars.

Audits are generally triggered either when a current or former employee files a complaint with the DOL or when the DOL targets a specific industry for investigation. It is a common practice of the DOL to target a variety of low-wage industries including day care, agriculture, janitorial services, the garment industry, healthcare, the hotel and motel industries, restaurants, and temporary help. These industries generally have vulnerable and often immigrant workforces, and a history of chronic violations.
Keeping in mind the many arms of the DOL and its numerous divisions, there are many areas that may be audited and some of the main areas of employee complaints (that result in an audit) are listed below:
*Misclassifying employees as exempt (Exempt vs. Non-Exempt status)

*Independent Contractor Status

*Minimum Wage Violations

*Child Labor Violations

*Overtime Issues

*Family & Medical Leave Act (FMLA) Violations

*Improper deduction(s) from wages

*Other Wage Issues such as: Bonus, Incentive, On-Call, Paid Time Off issues

*Timely remittance of retirement plan deferrals withheld through payroll deduction

*Fair Pay Issues

In addition, many states have a state agency equivalent to the DOL. For example, in California there is the Division of Labor Standards Enforcement, which can also audit CA employers for the same items as the DOL. It is imperative to know your specific state's requirements in addition to federal regulations. In California, employers should also ensure they are complying with meal and rest break requirements, properly recording meal breaks and the employees' time worked, properly paying overtime, and reimbursing employees for all business related expenses.
Liability for violation of the wage and hour laws does not require evidence of bad intent or unlawful motive by an employer. The performance of the employee is also rarely an issue, making the employer's exposure fairly straightforward in most cases.

If the DOL audits your company, a representative will visit your facility to conduct interviews, make sure the required posters are hung, and possibly examine the time clocks to determine whether your company is in compliance with the Fair Labor Standards Act. DOL will then review up to 3 years' worth of your wage-and-hour records and investigate your wage-and-hour practices to determine whether you have paid your employees the proper amount of overtime. This will include a review of your pay records, so you must make sure the records are accurate and organized.
Employers need to be proactive about complying with these complex wage and hour laws. If cost is a concern, complete an in-house audit and then have an attorney double check the policies and practices. It will cost a lot more to contact an attorney after the DOL or state agency is in your workplace or the lawsuit has already been filed.