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Creating Your Compensation Plan

Last time we talked about establishing your pay philosophy. Once you’ve done that and have committed it to paper (to be periodically updated) the next step is to understand the market so you can develop pay rates for each of the positions you identified in your workforce plan.

There are several ways to do this. You can speak to other people within your industry to learn what they are paying, or you can search sites such as Salary.com, Glassdoor, or the Bureau of Labor Statistics for salary information, or you can use a salary survey such as PayScale. As you look at salary information, determine a salary range to use. You could use the median or 50^th percentile, or you could establish a range, for example 25^th to 75^th percentile. This will help you decide on your own pay ranges. And remember, you need to consider your budget as you are making these decisions.

Make sure that your compensation plan fully complies with state and federal laws and regulations. This includes classifications such as exempt and non-exempt, overtime pay, independent contractor regulations, required benefits such as health insurance and Worker’s Compensation, minimum wage laws, etc.

Another component of your compensation plan is “pay for performance.” How and when will you reward employee performance? Will you use rating and rankings to determine salary increases or will they be determined purely on the basis of individual performance? Will performance reviews and salary increases happen in concert or separately? Will you have a discretionary fund for employee incentives and what are the criteria for those awards?

Once you’ve developed your compensation plan, it’s important to communicate it to your employees. Explain that salaries are based on market rates, pay philosophy and employee performance. Discuss total compensation – that is, base salary, incentives and benefits. Employees who have a clear understanding of how they contribute to the success of the organization and who feel recognized for that contribution are more engaged and motivated. Everyone wins.

If you need some help understanding the market for your job positions, or selecting a salary survey to use, please contact me.

Compensation Step One – Developing a Pay Philosophy

For the past couple of blogs, I’ve been talking about various aspects of HR planning and the importance of being proactive vs. reactive around people-related activities. One of the most important activities to plan for is compensation. What have you budgeted for compensation, and how will you allocate it for merit increases and adjustments needed to attract and retain the skills identified in your workforce plan?

Step one is clarifying your pay philosophy. A pay philosophy is a set of guiding principles that identifies compensation priorities, and supports organizational values and goals. It explains why the company makes the decisions it does about employee pay, and creates a framework for consistency across the organization. Although a pay philosophy will differ from company to company, all are aligned in the goal of attracting, retaining and motivating the best talent.

Some factors to consider in creating your pay philosophy are company size, financial position, level of difficulty in finding needed talent, the industry, and market salary data. An example might be that you know you have to pay a starting salary slightly above the market in order to attract the right people. Or, your financial position is such that you have to pay slightly below market, but make up for it with a more generous vacation benefit.

As you define your pay philosophy, be sure to consider total compensation – base salary, incentive pay, and benefits. Examples of incentive pay are bonuses, commissions, and profit sharing. Benefits may include medical, dental, and vision insurance; life insurance; paid vacation; leave policies and 401(k) programs. Some companies choose to match 401(k) contributions up to a certain amount, which is an attractive benefit. Recognition is another factor to consider, especially from the perspective of motivating employees. Recognition can include cash awards, or non-cash awards such as sports event tickets, travel vouchers or other “thank you” gifts.

Once you’ve defined your philosophy, commit it to paper and review it periodically to assess how it’s working and identify any changes needed based on changing company circumstances, the market or the economy in general.

If you need more information or need a sounding board as you create your philosophy, please contact me.

Achieving Growth Through Effective Workforce Planning

In my last blog, I discussed the importance of taking some time – now – to plan for the various HR activities that need to occur throughout the year. A good place to start is with your workforce planning. We all want to grow our businesses. But without a clear understanding of the knowledge and skills that will be required to move the business to the next level, this is a difficult goal to achieve.

Workforce planning helps consider the size, type and quality of the workforce you will need to achieve your company objectives. It helps you strategically recruit, hire and develop employees to ensure that you have the right people in the right place at the right time.

Workforce planning can include operational considerations such as work schedules and hours, distributing talent among divisions and departments, identifying functions no longer needed and reassigning workers, and maintaining employee engagement. The more strategic side of workforce planning looks at identifying skills sets needed as the company grows and changes, transferring company knowledge as employees leave, and defining recruitment strategy for future workforce needs.

An effective workforce plan keeps talent in the pipeline for when you have an immediate need. It improves your bench strength by helping you identify and prepare future leaders. And it ensures that you are ready for future opportunities.

Start by defining job roles: the work that needs to be done, and the skills and competencies required for that work. If you’re starting from scratch, you may want to use an employee who is currently doing the work successfully as a model to identify required skills, experience and behaviors, but remember that a job should be designed around the role requirements, not a particular person.

Once you’ve defined and designed the critical job roles to meet your needs today, spend some time thinking about skills/job roles you may need in the future. This will be helpful in identifying skill gaps, and determining whether it makes more sense to hire for those skills gaps or to develop current employees to fill the gaps.

Next, create formal job descriptions. Job descriptions should be reviewed and updated at least annually, and whenever someone leaves. Job descriptions should be as detailed as possible. This will help you recruit the right person for the job. It will also give you a legally defensible document, or ‘benchmark’ for performance management. Be sure your job descriptions include at least the following:

Job title
Job location
A summary of the job objective/purpose
Scope of responsibility
Reporting relationships
Qualifications required (experience, skills, competencies)
Key functions and duties (including standards)
Physical requirements of the job

Please contact me if you need help creating your workforce strategy.

Now is the Time for Your HR Planning

As the New Year gets underway, this is the perfect time to do some planning for the various HR activities that need to occur throughout the year. If you haven’t already, I highly recommend that you get out your calendar to schedule the following HR activities and begin developing a plan for each of them. It’s very easy to get so caught up in day-to-day operations that these activities sneak up on you, and then are either delayed, not done well, or missed entirely.

Here’s a framework of common activities you can start with. You may have additional ones, based on your business.

Company goals. What are you planning to/need to accomplish this year? This is important in driving your planning and decisions for all HR activities. And also, in driving individual and team goals.

Workforce planning. To accomplish your goals, what are the skills, knowledge and number of employees you’ll need? Where are the gaps in your current workforce? What plans do you have in place for upskilling current employees to meet new demands of the business?

Budgeting for headcount. If you’ll be adding to your workforce this year, what’s your budget?

Job descriptions. Job descriptions should be reviewed at least once a year or and/or whenever a job position’s responsibilities change. As new positions are created job descriptions need to be created. Up-to-date, accurate, and detailed jobs descriptions as essential for effective hiring, employee development and performance management.

Employee Handbook. Your Employee Handbook should be thoroughly reviewed and updated annually, with periodic updates as new laws are implemented. When was the last time you updated your Handbook to reflect new company polices or employment laws?

Open enrollment. Even though this activity typically occurs in the fall, it’s important to plan for it well in advance, especially if you are thinking about changing brokers or adding or changing benefits.

Performance reviews. Waiting until the performance review date to manage performance is a disservice to employees and to the company. Make performance management an ongoing activity and then plan well in advance for the annual or semi-annual performance review.

Salary increases. What is your budget /criteria for salary increases? What surveys will you use to determine current market data?

Employee surveys. Giving employees the opportunity to provide feedback (and then doing something in response) is important in keeping employees engaged and motivated. Questions need to be thoughtfully prepared and relevant. You also need to consider how you will administer the survey (paper, online, focus groups…) and develop a plan for reviewing, communicating and implementing any changes resulting from the survey. Don’t conduct a survey unless you plan to do something with the information!

The most important thing is to be proactive rather than reactive. It’s much better to carve out some time now – as busy as you might be – to plan for these items ahead of time. Leaving it until the last minute or overlooking an activity altogether can be very costly in time, money and employee morale.

“If you fail to plan, you are planning to fail.” – Benjamin Franklin

Remember to Thank Your Employees

The last month of the year can often get so busy with wrapping things up for one year and preparing for the next that we forget a very important activity – saying “Thank You” to employees.

Before you take off for the holidays, be sure you show your appreciation for the work that your employees have done in 2016. Recap the successes, share lessons learned, and tell them your hopes and plans for the New Year. Let them know how important they were in the organization’s accomplishments this year, and how you are relying on them for continued success next year.

Many companies have gone through changes this year – big and small, planned or unexpected. As you thank employees – both in group settings and individually – keep your message positive. Here are some ideas for showing your appreciation.

Say “thank you” in person. Encourage managers to make the time to walk around and thank each person on their team for contributing to the success of the organization. A personal thank you is much more meaningful than an email or a thank you during an “all hands” meeting.

Give a gift or cash award. Include a gift, cash or gift card with the personal thank you. It doesn’t have to be expensive, but it should be meaningful.

Take your team to lunch. Have each manager take their team out to lunch to celebrate the holidays and say “thank you.”

And now I would like to thank you for following my blog, and for providing your comments and feedback!

My best wishes for very Happy Holidays and a Successful 2017!

New Year to Bring New Wage and Leave Requirements

As we head into the home stretch for 2016, it’s important to know about new employment-related requirements that will go into effect next year. Here’s a summary of those requirements. As always, we will keep you updated about any changes or additions.

New overtime rules delayed
The new overtime rules that were to go into effect on December 1 have been temporarily blocked due to a lawsuit filed by 21 states to block enforcement. The new overtime regulations would have increased the salary required for an employee to be considered exempt to $913 per week, or $47,476 annually. Enforcement will be blocked until a final decision is made in the case or an appellate court overturns it.

The current California minimum annual salary for exempt employees is $41,660. This means that, if the new regulations go forward, California employers with employees who are currently classified as exempt and earn between $41,660 and $47,476 would need to decide whether to reclassify these employees as nonexempt, or increase their salaries to at least $47,476.

Electronic Unemployment Insurance reporting
Starting January 1, 2017, employers with 10 or more employees will be required to submit their unemployment insurance reports to the Employment Development Department electronically. Under the new requirements, employers must also remit contributions for unemployment insurance premiums by electronic funds transfer. The requirement will apply to all employers beginning January 1, 2018.

California minimum wage increase
Effective January 1, 2017 California’s minimum wage will increase to $10.50/hour for employers with 26 or more employees. Earlier this year, Governor Brown signed legislation that will increase California’s minimum wage annually, reaching $15/hour by January 1, 2022. For employers with 26 or more employees the minimum wage will increase per the following schedule:

January 1, 2017 – $10.50/hour
January 1, 2018 – $11/hour
January 1, 2019 – $12/hour
January 1, 2020 – $13/hour
January 1, 2021 – $14/hour
January 1, 2022 – $15/hour

Employers with 25 or fewer employees will be on a schedule one year behind the above schedule, reaching $15/hour on January 1, 2023.

San Francisco Paid Parental Leave
Also effective January 1, a new San Francisco ordinance will require employers with employees in San Francisco to supplement California’s Paid Family Leave (PFL) so that employees receive 100% of their gross weekly wages while on a parental leave of absence. PFL currently provides eligible employees with up to 55% of their regular wages, subject to a maximum weekly benefit of $1,129. Employees may receive these benefits for up to six weeks in a 12-month period. San Francisco’s law will require covered employers to provide additional wage replacement benefits of up to 45% of the employee’s wages, subject to the weekly maximum.

This law goes into effect on January 1, 2017 for employers with 50 or more employees; July 1, 2017 for employers with 35 or more employees; and January 1, 2018 for employers with 20 or more employees.

Paid Sick Leave changes
An amended San Francisco paid sick leave law, which goes into effect January 1, 2017, simplifies the sick leave pay calculation to match that of the California state law. For non-exempt employees, this means paying them for sick leave using either their regular rate of pay, or, a rate calculated by dividing total wages (excluding overtime) by total hours worked in the previous 90 days of employment. Exempt employees should be paid for sick leave at the same rate they are for other leaves.

The amended law will also prohibit an employer from requiring employees to take sick leave in increments of more than one hour.

Los Angeles also recently passed a sick leave ordinance. This new law allows employees working in the City of Los Angeles the ability to accrue and use up to 48 hours of sick leave. This is twice the amount provided by California state law. The ordinance went into effect on July 1 for employers with 26 or more employees, and will go into effect on July 1, 2017 for employers with 25 or fewer employees.

San Diego’s paid sick leave law went into effect on July 11 and provides employees with 40 hours of sick leave per year.

Note that San Francisco, Oakland, San Diego, Emeryville, Santa Monica, and Los Angeles all have sick leave laws that vary slightly from the California law. If you have employees working in those cities, be sure to check with your employment counsel to ensure you are complying with the appropriate requirements.

With all these changes on the horizon, and as we head into year end, this is an excellent time to review your Employee Handbook. Need Assistance? Contact me at michelle@connecttohr.com to get started!

Supporting Our Communities

As you gather with friends, family and colleagues this holiday season, please remember those in your community who are less fortunate. This can be an especially difficult time of year for them.

Giving back is not only a socially responsible thing to do, it also has many intrinsic benefits for you, your company and your employees.

You feel better about yourself!
Your company will benefit by demonstrating that it cares about the community, which helps attract customers and employees. And,
Your employees will have the opportunity to bond (and feel better about themselves) when you encourage them to volunteer their time or their money to a team selected cause.

There are many local charitable organizations that rely on donations and the help of volunteers to continue to serve their respective constituents. Here are a few:

Second Harvest Food Bank needs help packing and sorting the food it collects and provides to people in need in the community. This makes a great team event. Your employees may also want to help with food distribution.

The Family Giving Tree offers several opportunities for group volunteering: Off-season product sorting; wish card sorting/collateral prep; and volunteering in the warehouse.

Cityteam needs frozen turkeys and canned nonperishable food items to help to make a difference in the lives of men, women, and children struggling with homelessness, hunger, and poverty. Donations can be dropped off 9am-4pm Tuesdays-Saturdays at Cityteam’s Community Services Program, 1297 North 13th St., San Jose.

You can find more opportunities for giving in this San Jose Mercury News article.

Tomorrow, Tuesday, November 29 is Giving Tuesday. Please consider giving to your favorite charity.

“We make a living by what we get. We make a life by what we give.” – Winston Churchill

Guest Article – Maximum Individual Mandate Payment for 2016

As we reach year end and start to think about the approaching tax season, it’s important to keep up to date on tax-related items in the Affordable Care Act (ACA). To assist you in that, I’m sharing this article from Patrick Whitaker at Whitaker Financial Services. You can find more information on his website.

The Affordable Care Act’s individual mandate provision requires every individual to have minimum essential health coverage for each month, qualify for an exemption, or make a penalty payment when filing his or her federal income tax return. Recently, the Internal Revenue Service (IRS) issued Revenue Procedure 2016-43, which provides the information needed to determine the maximum penalty that may be due for 2016.

Calculating the Payment
For tax year 2016, individuals will generally pay whichever of the following penalty amount is higher:

2.5% of the individual’s yearly household income above his/her applicable filing threshold, OR
$695 per person for the year ($347.50 per child under age 18)

The maximum penalty is capped at the cost of the national average premium for a bronze-level health plan available through a Health Insurance Marketplace in 2016. According to the IRS, the monthly national average premium for qualified health plans that have a bronze level of coverage and are offered through a Health Insurance Marketplace in 2016 is:

$223 per individual; and
$1,115 for a family with five or more members

See the Health Care Reform Updates section on our website for additional articles related to the Affordable Care Act.

About the author, Patrick Whitaker

Whitaker Financial Services has been providing professional financial and insurance services for over 25 years. At WFS, it’s our business to help you plan ahead. The most important point we make with clients is this: strategy is everything. We offer business owners an alternative to the impersonal treatment they receive from the large brokerage agencies. The benefits programs you invest in affect multiple facets of your business, from company morale, to employee retention, to administrative efficiency, to your bottom line.

5 Ways to Attract and Retain Millennials

Millennials (those people born between 1980 and 2000) are now the nation’s largest living generation, surpassing Baby Boomers, according to the U.S. Census Bureau. In fact, it’s projected that by 2025, Millennials will make up 75% of the workforce. This means that finding ways to effectively attract and retain them will become essential in keeping the wheels of your business churning!

Here are some tips for recruiting and keeping employees from this now-dominant generation.

Use social media. To attract Millennials, you need to go where they are. And that’s on social media. A recent article in Inc. Magazine said 66.7% of first time job seekers use social media to look for work. Make sure your recruiting messages present your brand well, and are mobile friendly. Anyone with a family member in this age group knows that their smartphone is a key source of information and communication. Use the latest tools available, such as LinkedIn’s recruiting tools and video interviewing.

Give them insight. Millennials want to work somewhere that provides stability and financial security. A collaborative environment is also important to them. They care about company culture. Be sure your website and your social media presence convey a sense of what it’s like to work at your company. Think about the images and content on those sites – do they accurately tell the story of who you are?

Show you care. According to a Deloitte survey, 60% of Millennials say they chose to join their current employer in part because of the organization’s sense of purpose. Do you give back to your local community? Include that on your website and in your recruiting materials and messages. Also, consider giving employees time off to volunteer or matching their monetary donations.

Develop and grow them. Millennials are motivated by a competitive compensation package, professional development, and opportunities for advancement. Give them a clear vision of their career path and how they can advance. Provide training and mentoring opportunities. They also prefer leaders who empower their employees, and who give them frequent, constructive feedback.

Provide flexibility. Millenials favor work/life balance. They want to work hard and get ahead, but they also want to have enough time to pursue their personal interests. Consider offering flexible work schedules.

Matching your recruitment efforts to the needs of Millennials will help ensure that you keep your candidate pipeline active!

Please contact me if you need more ideas or help in implementing any of these.

Employee Surveys: Don’t Just Ask…Act!

For the first 6 months of this year, only 32.9% of employees were engaged at work, according to Gallup, who regularly measures employee engagement. This means that nearly 70% of employees were not engaged. Lack of employee engagement translates into less productivity and lower morale, and may ultimately impact business results.

There are multiple factors that contribute to employees being engaged and motivated – a sense of purpose, opportunities for growth, a positive culture, learning and development, and effective leadership, to name a few. Often companies, especially small ones with limited resources and time, are hard pressed to know where to focus to move the engagement meter in the right direction. A good way to determine how to improve your employees’ satisfaction, engagement and motivation is to ask them.

Conduct an employee survey.

Perhaps you’ve done one before. But there are surveys and there are surveys. And…it’s not just about asking a bunch of questions. It’s about asking a few good questions that encourage an honest response, and then actually acting on the information you receive. Too often employees are asked to spend 20 minutes or so providing input to a survey and then they never hear anymore about it. This is most likely not the intent when the survey is sent out, but sometimes there are so many ideas and suggestions for improvement that leadership can’t get their arms around them, or they compete with other priorities. Good intentions get lost in the shuffle.

There is a better way.

Start by creating a list of questions that will help you identify some areas that employees want to see improved. Common ones are training and growth opportunities, communication, and understanding how their role fits into the big picture. Pare the list down to 3 or 4 effective questions. Communicate to employees the purpose of the survey and that you will be selecting one or two areas to work on based on the results. An alternate way to gather responses to the questions is through employee focus groups. Once you’ve gathered and analyzed the data, communicate results to employees and involve them in prioritizing the areas to work on. Select one or two areas to focus on in the short term. Be open and honest about what’s achievable. Consider setting up employee work groups to create solutions for the improvement areas selected. Make progress updates a regular part of your employee communication. The important part is to ask and to ACT. When employees see that you are true to your word, they will be more willing to provide you with feedback and ideas and to be part of the solution.

“Research indicates that workers have three prime needs: Interesting work, recognition for doing a good job, and being let in on things that are going on in the company.” –Zig Ziglar