$35,568

That is the new annual overtime pay threshold figure that the U.S. Department of Labor (DOL) released on September 24, 2019.  The DOL issued their final rule, and the new rate will become effective on January 1, 2020.  To be classified as an exempt level employee, each employee must be paid at least the $35,568, which equates to $684 per week.  The previous weekly figure was $455.   In addition, the position that the employee holds must meet the Fair Labor Standards Act (FLSA) duties tests.  For employees in positions that are paid under the new figure, employers are obligated to pay 1.5 times their regular hourly rate for any time over 40 hours worked in a workweek.

Between now and the first of 2020 would be a great time to assess and reclassify any employees / positions that are in the gray or middle area to nonexempt or exempt status based on current pay and the duties tests.  Employers may need to increase some employees’ pay to get them at/over the new rate, given that they meet the duties tests.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Exodus of Baby Boomers Helping to Fund Higher Employee Pay Adjustments

In a Forbes article titled, Baby Boomers Retiring Rapidly: Are Successors Prepared written by Maureen Metcalf, Forbes Council Member and CEO of Metcalf & Associates, she refers to research by Bonnie Hagemann and co-authors in their book “Leading with Vision” that baby boomers are leaving the workforce at a rapid rate of 10,000 per day or approximately 1 baby boomer every 9 seconds.

In our compensation consulting work, we’re seeing this phenomenon unfolding with our private and public sector clients.  We have a public government client that experienced an average $3.75 hourly pay difference between leaving employees’ average pay and their new hires’ average pay in 2018, and they are on-track for a $2.44 difference in 2019.  This may not seem like much money but it equates to $640,000 annual wage savings in 2018 and approximately $724,000 savings in 2019 based on a 15% turnover rate.

Some clients are redistributing these baby boomer exodus wage savings to help fund higher annual employee pay adjustments.  The 2019 annual WorldatWork Compensation study is projecting a national average of 3.3% for employee pay adjustments in 2020. The represents a new historical high after years of 3.0% or less average annual employee pay adjustments to base pay.

Human Resource and Compensation professionals need to help their management teams with strategic redistribution of baby boomer wage savings and succession planning during the next ten years.  The 3rd and 4th quartile wages will be out the door during the next decade and its recipients will be on the beach, traveling in an RV or parachuting out of a plane like past president George H.W. Bush did to celebrate his 90th birthday on June 12, 2014.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Salary Budget for 2020 and Other Important Compensation Facts

According to a recent article in Workspan Daily written by Brett Christie, staff writer at WorldatWork, the projected 2020 salary budget increase will be 3.3%.  Given that this comes to fruition, it will be the third year in a row that we have seen an increase: 2017 – 3.0%, 2018 – 3.1%, 2019 – 3.2% and 2020 – 3.3%.Some other interesting compensation-related facts from the WorldatWork’s 46th “Salary Budget Survey” that Brett mentioned in his article include the following:Merit Budgets: 2019 average was 2.9% with a projected 3.0% for 2020Promotional Increases: Average grew to 8.9%Salary Structure Adjustments: 2019 average was 2.2%, up from 2018 of 2.0% and a projected 2.1% for 2020We are moving into the late summer and many of our clients are already starting their compensation reviews and formulating their budget plan for 2020.   The above information can be useful data as we all prepare for 2020.Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Finding Balance between Vacation, PTO and Unlimited Time off Policies

We read a recent article that mentioned Millennials now represent half of the current workforce.  This group is continually pushing the HR group to reshape the organization’s benefits policies to match their work-life balance.  One of the benefits at the top of the list on most employee surveys is more time off from work. A lot of the tech and start-up companies have adopted the Unlimited Time Off (UTO) policy as an answer to their employees’ request.  Many of the companies that have implemented the UTO are realizing that a majority of their employees are taking fewer days off than when they have a traditional vacation or PTO policy with a set number of days.  There is enough antidotal evidence to indicate that a UTO policy is not necessary to meet the Millennials needs for time off.  Several organizations are adopting a liberal PTO policy with the understanding that most of the days allocated for that year must be used to ensure an adequate amount of time off to avoid burn-out and maximum flexibility on how the PTO days are taken.   The number of carry-over days to the next year should be limited to five or fewer days or the option for more carry-over days to go into a catastrophic account for the employee.

A traditional vacation policy of two weeks to four weeks based on years of employment with an organization is too limiting for the Millennials.  Since they tend to change organizations more often, then they aren’t typically going to get to the three to four weeks level.  A PTO policy tends to be the right balance between a vacation policy and UTO policy.  The number of PTO days in our part of the country is within a range of 15 to 30 per year.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

It is not a matter of “IF ” but “WHEN”

The EEO is under significant pressure by Judge Tanya Chutkan of the U.S. District Court for the District of Columbia to finalize plans for employers to complete the EEO-1 Component 2 “Pay” and “Hours Worked” by gender and race form during calendar year 2019.  During a recent court hearing, Judge Chutkan was seeking input from EEO Chief Data Officer and Director of Office of Research, Information and Planning, Dr. Samuel Haffer on the agency’s plans to receive employer EEO-1 reporting and EEO-1 Component 2 data submissions.

Dr. Samuel Haffer stated that the EEO was not prepared to receive and analyze the EEO-1 Component 2 submissions and that the EEO-1 Component 2 entire reporting process will be outsourced to the University of Chicago: National Opinion Research Center (“NORC”).

Though the EEO-1 Component 2 data submission is still in legal limbo from our perspective, it is not a matter of “IF” but “WHEN” employers will be required to submit “Pay” and “Hours Worked” by gender and race.  The current proposed use of 12 Pay Bands may prove to be cumbersome and not useful for its intended outcome of identifying pay discrimination for gender and race protected groups.

To provide a magnitude of data inflation of the EEO-1 vs the EEO-1 Component 2 reporting form, the EEO-1 Component 2 form has 3,360 potential data points per establishment as compared to the EEO-1 form with 180 potential data points. A significant amount of data systems and corresponding algorithms will be required to mitigate the mixing of apples and oranges and produce reliable and valid data for the EEO-1 Component 2 report submission.

Since we believe that “WHEN” will win against “IF”, the time for employer anticipated action to test and design information systems that will gather, report and analyze EEO-1 Component 2 data is now. A list of data elements for completion of the EEO-1 Component 2 reporting should include the following:

Employee Name
Job Title
EEO-1 Category
Race
Gender
Location
Date of Hire
Date of Termination
Number of Weeks Worked
Exempt or Non-Exempt
Full-time or Part-time
W2 Box 1 Wages
Number of Hours during W2 Period

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

It’s Time for Overtime

You are probably aware by now the new proposed overtime rule has been released by the Department of Labor.  Though the new provisions don’t go into effect until January, 2020, the overtime threshold will be raised to $35,308 ($679 a week) from $23,660 ($455 a week) per year.

What this means for the employer is that any current salary exempted employee not making at least $35,308 will be reclassified as non-exempt.  The employee will not have the opportunity for overtime pay above 40 hours in a workweek.

Employers will need to determine if it makes sense to increase an employee’s salary to the threshold versus paying the employee at their current wage and hope that the employee doesn’t need to work beyond 40 hours as a reclassified non-exempt employee and end up paying higher than the $35,308 threshold.

Other potential issues when reclassifying an exempt employee to non-exempt include tracking hours and calculating overtime wages, the employee seeing the change as a demotion, and more awareness on the employees’ part of wondering what positions are exempt and non-exempt.

At this time, the proposed overtime rule is just proposed.  Most employers already went through the process of determining position classifications when the original proposed changes came out in 2016, so it shouldn’t take a significant amount of time and effort to meet the new changes set for January, 2020.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Addressing Employee Pay Compression Issues

Several states have passed new minimum wage legislation for 2019 and beyond.  Arkansas passed new minimum hourly rates of $9.25, $10.00 and $11.00 for years 2019, 2020 and 2021 respectfully.  To compound the impact of higher minimum wage laws, the employment market is becoming more competitive in certain business sectors and organizations are increasing new hire pay to attract and retain competent employees.  Also, the U.S. Department of Labor is considering releasing a new annual salary threshold for exempt positions later this year.

The above factors and several economic factors are pressuring organizations to address employee pay compression issues.  We have experienced an increase in the number of client organizations that have asked for our expertise to address systemic and episodal pay compression situations.

Employees with three to five years of employment do not appreciate seeing or hearing of new employees receiving comparable or equal pay.  Employees believe that their time with an employer and performance/results should drive compensation above salaries offered to new hires in comparable positions.

Addressing pay compression issues and situations includes research on organizational positions, current pay structure, employees’ time in positions, historical pay adjustments for performance, past increases to pay structures for COLA or market adjustments and other pay related decisions unique to each organization.

Addressing pay compression issues can be like working on a picture puzzle and as each piece is placed, the picture begins to form and eventually, the whole picture is realized and appreciated.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Are You Ready?

It’s here.  Make no mistake about it.  I can give you a couple of examples to prove it to you.  First, I know of a young professional that recently was able to move from the corporate headquarters back to where he and his wife grew up so that they could raise their one son and one on the way surrounded by their immediate families.  The young professional’s boss and company leadership team were open to allow him to continue to work for the company remotely with the understanding that they would commit for at least one year with full salary and benefits.  In return, the young professional would continue to complete projects with the same level of success and dedication that he has done for the last ten years.

Second, a creative young professional has been hitting home runs at her work, but her boss has been killing her creativity by micro-managing and wanting to cut off this spirit of creativity.  The boss also has been managing by wanting to see, please excuse the expression, “butts in seats.”  This is the only way that the boss has known how to manage and act for the past 30 years.  When the organization’s leadership sought to work through this issue, the micro-management boss is coming to grips that her style of management after all these years is ineffective and she must be willing to change or leave the company.

Have you figured out what is going on?  The younger generations have moved into the workforce and their expectations and desires are different than previous generations.  If an organization can manage based on results, then as leaders, we should be able to allow flexibility as to where our young professionals do their work and how they do their work.  A dedicated young professional will give the organization more than the traditional 40 – 50 hours, but it will be at times that meet their professional and personal needs.  I know many young men and women that work after their children go to sleep or other available pockets of time throughout the week and weekend to accomplish their work.  The progressive organization is not concerned with employees in seats throughout the day, but by managing through end results that are driving the organization forward.  Also, creativity is nurtured, not stifled.

The work environment is changing quickly to meet the needs of the younger generations.   We are seeing  this regularly with our DBSquared/Johanson Group clients. Are you ready?

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-2/.

Human Resources Focus for 2019 and Beyond

  • Enhancing Employees’ Experience

With direction and support of the human resources team, the company culture will focus on tangible and intangible employee experience offerings that enhance the attraction and retention of top performing employees.  Meaningful company purpose, work focus, societal partnership, team and individual recognition, work-life balance, digital friendly technology and competitive and fair total rewards packages will encourage retention of millennials, the largest demographic in the current U.S. workforce.

  • Continuous Employee Development

With low unemployment and a shortage of skilled and competent applicants, human resources will need to focus more on recruiting from within their organizations for needed talent.  A greater emphasis on creating a culture of continuous employee development and retention will help to mitigate the lack of externally qualified candidates. On-going semi-annual employee development assessments and performance feedback sessions will replace stale employee annual performance appraisals.

  • Internal Talent Agents and Career Ladder Experts

Human resources professionals will become internal talent agents working with company talent mentors and brokers to fill every-changing talent voids and projected needs.  Human resources will work closely with company leaders to forecast and deliver internal human capital resources to meet organizational needs based on growth and change.  Human resources will prepare and provide career ladder scenarios and pathways for employees and offer various internal talent pool plans to meet company forecasted needs.

  • Customizable Compensation and Benefits Packages

Compensation, benefits and perks (total rewards) will become more customizable to meet individual needs of a more diverse workforce.  Total rewards packages to attract, motivate, engage and retain employees will have great flexibility and variability. Total rewards software platforms and applications will help human resources and employees manage their respective compensation and benefit plans.

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-ty/.

2019: Pay Me (Too) Now!

Over the past few years, there has been a lot of good pressure regarding pay equity in the workplace. Though the recent #MeToo main emphasis has been the increased exposure of sexual harassment in the work sites around the county, it has also reenergized the pay gap between men and women. This pay gap will be addressed later in this article, but there is finally a recognizable increase in wages around the U.S. and 2019 average increase in wage budgets is projected to be around 3.2%. Wage increases tend to lag the economy and we have had a couple of solid performing years, thus organizations have been using some of their cash reserves to invest in their infrastructure including capital and human improvements. The economy recovery started in the mid-2009 (however slow going until 2016) and the average annual wage increase for private employees for the last eight years has averaged 2.8% as mentioned in an Economic Policy Institute October, 2018 report. However, the 3.2% is a notable event as wages have been fairly stagnant for several years. There are some other recent developments that have occurred which will create additional pressure by companies to increase their starting wages. These include:

1. Walmart increased their starting wage in their stores to $11.00
back in January, 2018. Target has committed to increase their
starting wage to $15.00 by 2020.

2. Big financial and insurance companies like Wells Fargo,
J.P. Morgan and Aetna increased their starting wage to
$16.00/$16.50 back in 2015/2016.

3. Amazon increased their starting wage to $15.00 this past month.

4. There are more organizations researching the living wage structure
for the minimum pay level jobs. This website provides living wage
structure in 13 different living units categories from one adult to
two adults and three children by state and then by county. The
organization mentioned that the average living wage jumped
between 4 to 6% in 2017. http://livingwage.mit.edu/

5. Many states are passing minimum wage laws that will drive up
starting wages. For example, Arkansas’ new minimum will be
$9.25 per hour starting January 1, 2019, then $10.00 per hour
in January 1, 2020 and $11.00 per hour in January 1, 2021. For
Missouri, their current minimum of $7.85 per hour will be raised
to $8.60 per hour January 1, 2019, then increase by $0.85 per
hour each following January until 2023 when it will be $12.00
per hour.

Gender Gap
Based on a variety of articles, there is still about a 20% gender gap between male and female pay levels. Annie Nova wrote an article titled “Make the #MeToo moment your chance for a raise” in February, 2018. She mentioned, “As the conversation about sexual harassment gets louder, women are also bringing up the pay gap to their bosses, according to experts.” The rest of Annie’s article provides advice on how a female can navigate her way to a salary increase in the #MeToo Moment. Her two main steps are “Push for your value to be seen” and “Prepare to ask.”

Given our work with numerous clients from all types of industries over the past 30 plus years, there is a genuine desire and commitment to eliminate any justified pay equity issues and there is also an effort to ensure employees are paid a competitive salary or higher based on performance and time in the position. The Department of Labor (DOL) and the Equal Employment Opportunity Commission (EEOC) are making every effort to find organizations that are intentionally discriminating regarding pay from a gender, ethnic background, age, disability, etc. basis and the back pay, penalties, and fines are significant.

Since 1985, our firm has offered its own copyrighted 15-factor job valuing/rating system. This system evaluates a job against various factors including general experience, management experience, education, machine operations, revenue and/or expense savings generation, etc. and ends up with a point value for a position. An overall point total is established for each position and the base salary for all the employees in each position to calculate an internal pay line or regression line. This allows an organization to use an objective and defensible approach to determine if it has any internal pay equity issues as well as being able to classify positions in similar or dissimilar situated groupings of position titles. We have been able to assist our clients to identify and set in motion steps to correct any pay equity problems.

Millennials and forward Generations Pay/Benefits
Randy Barrett published a thought-provoking article for Employee Benefit News last year titled, “Why the most innovated employers are rethinking total compensation.” Randy said that the millennials are the drivers for this change and the employers are responding. Beyond a competitive base salary, Randy mentioned that the millennials want work/life balance and a socially conscious corporate culture. Below are two key paragraphs from his article.

“Leading innovators, including Akamai, Rackspace, Southwest Airlines and Vivint, are focusing on “quality of life” perks and other benefits that our grandfathers wouldn’t have dreamed of — or thought possible. They include daycare assistance, adoption and fertility funding, onsite medical scans, ID-theft services and enhanced options for working remotely.”

“Benefits, or what we refer to as WorkPerks at Southwest, are a big driver when it comes to attracting, retaining and engaging [employees],” says Julie Weber, VP of people at Southwest Airlines. She adds that the company “doesn’t just focus on traditional benefits like wellness, healthcare and retirement.” “For the airline, that means a positive work culture, career development and generous travel privileges.“

Millennials and later generations are likely to jump ship if they don’t see the above perks as well as career advancement opportunities, challenging work, an open and genuine relationship with supervisor/manager, learning new skills opportunities and performance-based retention compensation.

One of the best retention compensation tools for millennials that we have seen is having a performance-based year-end non-contributory retirement supplement amount (roughly 10% to 15% of base salary) that has a vesting requirement of at least five years that causes high performers to stick around and get past the itch to move tendency.

Another trend we are seeing for millennials is some employers are paying for additional college degrees and/or professional licenses/certifications including MBAs, Project Management Professional (PMP) certification, CPA license, etc.

Baby Boomer Pay/Benefits
With life expectancy being into the mid to late 80’s, many of the baby boomers (BBs) are still working past 65 and this trend will continue for at least the next decade. BBs are looking for ways that they can continue to work to around age 70 to maximize their social security dollars, hold onto good health benefits through their employers until they retire, and take more time off with less pay to be in a semi-retired status so they can spend time with the grandchildren.

BBs can be great mentors to the Gen Xers, Gen Yers (Millennials) and the Gen Zers, the newest workforce members. Most of the BBs are well educated, trained and started working in the mid-60s. They tend to have a balanced outlook on life, worked hard for many years with a few employers and can assist with filling in any non-technical skills gaps that the younger generations haven’t mastered or been exposed to up to now.

Given the pay gap between seasoned BBs and new employees entering the workforce, employers are being creative with easing out the BBs and avoiding any age discrimination issues as well as being able to transfer any intellectual knowledge to new employees. Having a well thought-out succession plan creates a win-win for both the employer and the BBs.

Fixed Pay vs. Variable Pay
The younger generations are open for variable pay as long as the base salary is reasonable and the performance factors tied to the variable or incentive pay are challenging, but achievable. We have worked with several clients over the past few years implementing incentive compensation plans for salaried and hourly positions using a threshold to target maximum pay out with three to six performance-based targets and bonuses starting at 5% of base salary for hourly positions to as high as 50% of base salary for C-Suite positions. New or revised targets are established at the beginning of each calendar or fiscal year and bonuses can be paid in cash or stocks. Variable pay allows an organization to use more at-risk dollars and lowers the amount of fixed pay dollars from a cash flow standpoint.

Key Employee Retention
As more of the BBs are retiring, there is a need to retain key employees that will be the new leaders to take the organization forward over the next 10 to 20 years. To ensure key employees will stay, many companies are offering deferred compensation plans, split dollar insurance and/or restrictive stock grants to lock in the future leaders. These forms of long-term compensation place funds in accounts that would leave a significant amount of dollars that would be forfeited if a key employee leaves for another position.

 

Learn more by visiting www.johansongroup.net or www.dbsquared.com or request a free consultation by visiting https://www.dbsquared.com/consultation-request-ty/.