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Bay Area Human Resources Services

Trends in Work Ecosystem Forcing Employers to Review Compensation Programs

Current trends in historic unemployment and equal pay are requiring employers to rethink their compensation structures and metrics.  In April, the Department of Labor released its hiring and unemployment report, providing a snapshot of today’s economy.  The national unemployment rate is 3.9%, the lowest it has been since 2000.  In many metropolitan areas, the rate is even lower.

In addition, we are seeing increased scrutiny at the federal and state level in pay discrimination.  While the Federal Equal Pay Act has been in existence since 1963, more recently, individual states have enacted similar legislation.  Such states include California, New York, Maryland, Massachusetts, Oregon, New Jersey and Washington.

According to a recent Seyfarth Shaw report, there appears to be a renewed interest among Plaintiffs’ attorneys in the Equal Pay Act and analogous state laws. Employers must now empirically justify pay differentials.

So, what are employers doing with respect to their compensation programs?  Willis Towers Watson (WTW) recently conducted a survey of nearly 2,000 organizations representing a wide range of industries and geographic regions.  This is what they found.

WTW findings examined five elements critical to developing relevant, compliant, high-impact compensation programs:

  • Identify factors that determine base pay
  • Improve differentiation of incentives
  • Make effect use of technology
  • Prioritize fair pay
  • Build a culture of pay transparency

Base Pay Determining Factors

The survey found that organizations may use six or more factors in determining an individual’s base pay. Survey respondents stated that the top three factors they looked at were:

  • Achievement of individual goals
  • Performance review rating
  • Concerns over market competitiveness

Almost half of the respondents indicated that market competitiveness will be a top factor for the next three years.

Improve Incentive Differentiation

Respondents indicated the two most prevalent types of short=terms incentives are organization-wide (62%) and individual (53%).  On average, top performers are paid about 20% more than those achieving target goals.  However, finding showed that when incentive funding is reduced due to overall company performance, this pay differential is compressed such that top performers are not compensated much more than target achievers.  WTW’s finding is that organizations should re-evaluate their incentive plans to ensure this differentiation is meaningful and top performers do not look elsewhere for employment.

Effective Use of Technology

Complex pay decisions can become more difficult due to inadequate technology.  Surprisingly only half of those surveyed use software beyond spreadsheets.  At the same time, those relying solely on spreadsheets are more than twice as likely to indicate that the lack of technology is a challenge to delivering effective compensation plans.

Prioritize Fair Pay

Fair pay is an essential element of an effective compensation program.  In addition, respondents indicated that internal pay equity is a growing concern due to increased employee expectations and legislation.  WTW states that while 70% of the respondents indicated that they have a formal process for starting salaries and base pay increases, US companies have a way to go to reduce the gender gap.  In 2016, women’s median earnings were 82% of men’s.

It is recommended that employers conduct diagnostics on pay data and protected class demographics to determine where they are on compliance.  ABD SharedHR can also provide assistance with point-factor scoring to ensure jobs with equal responsibilities are paid equally.

Building a Pay Transparency Culture

A combination of generational preferences, legislation, and publicly available comparative data is contributing to today’s heightened expectation of pay transparency.  Despite this, the survey showed that only 19% of the participants have taken any action to increase the level of pay transparency in their organization.  20% plan to take action next year and 28% plan to take action in the next three years

Employers should be working hard to be able to articulate not only what factors go into why a particular job pay range is what it is, but why each individual is paid what he or she is paid in that job range.

Effective compensation programs are still one of the most important tools to attract and retain top talent and support a desirable company culture.  With historic lows in unemployment and increased legislation, more and more employers are putting compensation at the top of their priority list.

Malcolm Whyte, SPHR – Vice President HR Services

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

Threatening to Resign May be a Protected Activity

In Wheeler v. Saga Communication of Tuckessee, LLC (6/7/18), a Tennessee federal court ruled that a jury could find that a female radio DJ’s statement to her employer that she was seeking other employment offers was part of her protected activity of demanding equal pay for equal work, and not a legitimate reason for firing her.

The employee worked as an “on air personality” for a radio broadcasting company that operated seven radio stations in Clarksville, Tennessee.  When Wheeler was hired in 2007, she received an annual salary of $22,000, which was the lowest for any on-air personality. She signed a 12-month contract each year, and her 2015 contract provided her a $24,000 annual salary. She was still paid less than her male colleagues.

After she inadvertently saw documentation that a male on-air personality had an annual salary of $36,000, Wheeler began looking for other employment opportunities. When her supervisor presented her with a contract for the 2016 calendar year with a salary of $24,000, she indicated that she was hesitant to sign it since she was being paid less than her male counterparts. Wheeler subsequently asked for more time to decide whether to sign the contract. The company gave her approximately three weeks to decide (December 11, 2016). Shortly after, Wheeler was offered and signed a temporary 30-day contract through January 11, 2017.

On January 11, the manager told the employee that it was not going to pay Wheeler any more money than originally offered. In response, Wheeler stated that she would sign the contract, but would ask to be released if she received a better offer during the year. The employer then made the decision to terminate her employment and Wheeler filed a retaliation claim.

In court, Saga argued that Wheeler could not prove the causation element of her retaliation claims since she was not terminated for complaining about gender discrimination, but because she stated that she would not honor her twelve-month contract if she received a more lucrative offer. Saga asked for a summary judgement.

The court ruled Saga was not entitled to summary judgement since a reasonable jury could find that her statement that she would consider other offers was part of her protected activity of demanding equal pay for equal work. In effect, she only stated she would consider other offers because she was being paid less than men and felt discriminated against. Saga admitted that this was the reason it terminated Wheeler.  Accordingly, the court confirmed that a jury could find that her activity could be protected and was the “but-for” cause of her termination.

Employers will often consider an employee’s loyalty and threats of resignation when considering a termination. This court ruling shows that employers should take into consideration statements made by employees who state dissatisfaction and say they may quit their jobs.

Malcolm Whyte, SPHR – Vice President HR Services

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services

Blog

SharedHR’s blog addresses important HR topics. We cover everything from compliance to workplace advice.

When is it Time to Leave a PEO?

Author: Saul Macias, MBA, PHR – Vice President of HR Services

When you were smaller, partnering with a professional employer organization (PEO) made sense. It shifted some tasks and liabilities off your shoulders and allowed you to afford to offer good health benefits to your employees. Most of all, outsourcing your human resources, benefits, and payroll gave you space to concentrate on growing your business.

Though co-employment had a role in the growth of your organization, many employers arrive at a point where it is appropriate to exit. Here are some key considerations as you decide whether to initiate that transition away from your PEO:

Benefits: Lots has changed in the world of benefits in the past couple of years. Offering benefits in-house would give you the autonomy to design, choose and manage your health and retirement benefits. The desire for greater flexibility in employee benefits can be a key driver to part ways from a PEO. (A lack of knowledge in this area, however, can often delay a PEO exit).

Service: As you grow, your business and your employees’ needs become more complex. In the midst of that complexity, you may find that your PEO lacks the expertise to drive and support your HR, benefits and payroll to meet your unique and evolving needs. Furthermore, a lack of onsite support or expertise to help you cover a multi-state or international expansion can be most challenging under a PEO model.

Cost /Scale: The average employer in a PEO has 15 employees. According to the Society of Human Resources Management (SHRM), the average HR professional supervises approximately 70 employees. Somewhere between 70 and 100 employees the economics may merit managing your benefits, payroll and HR in-house. But what will it take to build a team that can handle this role?

Co-employment: Under a PEO, one key area of managing your employees is done by a different company whose culture and identity could be very different from yours.

Once you have decided to exit, how do you make it happen?

PEO Transition:  Working with an experienced partner like ABD can help you analyze and manage the critical transition away from your PEO. Our team of multi-disciplined experts can help you plan, select the best technology platform, build the required work flows, and transition into your new program while keeping daily operations running smoothly. We can also help you hire an internal team or uncover new options that offer more flexibility than a PEO, but still allow you to outsource some or all of your human resources function. Contact us today to explore the possibilities.

Disclaimer: Some information contained herein has been abridged from numerous sources and may be protected by various copyright laws. Such information should not be construed as consulting or legal advice. Please contact our office for specific advice and/or referrals.

Bay Area Human Resources Services