Finishing Strong!

The baby boomer generation is in the middle of retirement age and several in this generation have already retired.  The most common age birth range for the baby boomers is 1946 to 1964.  As we start off 2020, those that were born in 1946 are 74 this year and the last year of the group will be 56.  The baby boomers born in the middle of the range will be 65 this year.  The youngest of the baby boomers have about eleven years left before reaching their normal Social Security retirement age of 67.   

My reason for writing this blog is to help organizations know how to best to assist their baby boomer employees with finishing strong as well as transitioning the next generations into various leadership roles.  We have at least two banking clients where the President/CEOs are in their early 70’s.  They both have succession plans in place and should be retiring in the next few years.  The average number of baby boomers retiring each day is around 10,000.  We do believe that the pace is going to pick up as we will be in the second half of the baby boomer years starting in 2021. 

Below are some valuable tips to allow baby boomers to finish strong, and at the same time, bring on the next generation of leaders to manage your organizations for effectiveness, efficiency and profitability.

  1. Ensure that the company and leadership knowledge that your baby boomer employees possess is being passed on to the next generations’ leaders.
  2. Allow your baby boomers to take more time off or work part-time to ease them into retirement and take some of the savings to pay competitive salaries and bonuses to existing/incoming new generation leaders.
  3. For the key baby boomers that are still in their mid to late 50s, consider some form of tax-deferred retirement plan to keep them from leaving and allow them some retirement cushion beyond the basic 401(k). This will allow this group to transfer their expertise and not worry about having sufficient funds at retirement.
  4. If you haven’t already, start now to identify key Generation Xs, Ys and new to the workforce Z’s and pay them a competitive base salary as well as provide them with performance-based year-end cash bonuses/stock where most of these funds are required to be placed in a five to ten year vesting account.  The key here is to create a balance quickly that the employee can’t access until at least five years out.  This gets the younger generation employee past the years where they tend to hop from one company to the next.

Proven high performance companies are good at allowing their employees to finish their careers and start their careers in a strong and meaningful manner.  Commit yourself to be in this league of companies.

 

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/.

From Our Organizations to Your Organization

It’s December and we just finished Thanksgiving and we’re now on to Christmas! As we approach the end of another successful year in business, our two companies would like to say thank you for the many years that we have been serving you, our clients. 

Johanson Group was formed in 1973 by Dr. Richard C. Johanson (Dad) and Shirley Kathleen Johnson Johanson (Mom).  The two of them consulted to mostly Arkansas-based clients and a handful of organizations in other states from 1973 to 1989.  They both continued to provide wisdom and guidance from 1986 to 2010 when Dad passed away and Mom passed away this past month.  Their twins, Bruce and Blair Johanson joined the family business in 1986 and 1999 respectively and have enjoyed working with a vast number of public, private, government and non-profit organizations in a variety of sectors over the past 33 years.

DB Squared was formed in 2005, and we have been able to offer our two exclusive HR software products, DBCompensation and DBDescriptions to hundreds of clients over the past almost 15 years. 

Between the two companies, we have worked with clients in two-thirds of the 50 states.  We are excited about 2020 and look forward to supporting our existing clients and being blessed with new clients in the coming year(s).

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/.

CDLs ARE HOT

Our public organizational clients are experiencing supply and demand issues associated with jobs that require a commercial driver’s license. The counties and cities that require CDL’s for trucking and other road operated equipment are experiencing shortages in applicants that have CDL’s.  We have seen increased efforts by these public organizations to attract and retain employees with CDL’s.  Higher starting wages, increased pay grade ranges and additional pay for existing CDL employees are some of the actions being taken by employers that are competing in the marketplace for CDL-related jobs.  Annual salaries for local non-OTR CDL jobs are ranging from $35,000 to $50,000. The national annual median salary average for truck drivers is $45,570 (Heavy and Tractor-Trailer Truck Drivers) based on DOL – Bureau of Labor Statistics 5/2018 data.  Salary data found on the Truck Drivers Salary website notes that OTR CDL truck drivers will receive an average salary of $59,158 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/.

$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/.