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The SESCO Report – December 2009

SESCO Staff Recommendations and Predictions for 2010

After what has been a very challenging and difficult year for employers including profitability and compliance with new federal and state employment regulations, SESCO unfortunately predicts the challenges to continue into 2010. Please consider the following staff recommendations:

Important Statistics for 2010

No COLA (Cost of Living Adjustment) for 2010. For the first time since 1975 when Social Security benefits became indexed, there will be no increase to benefits in 2010. And, according to Social Security actuaries, benefits are also not likely to rise in 2011. The COLA has actually decreased 2.1% over the past year.

The Consumer Price Index increased 2.4% through the first ten (10) months of 2009, compared to an increase of 3.8% for all of 2008.

Employment outlook unemployment will peak at 11% in early 2010 starting to drop mid-2010.

Corporate profits are predicted to be up 8% in 2010 the first upswing since 2006 (companies have a long way to go to recover lost ground over the past four (4) years).

Energy costs gasoline up $.30 to $.40 per gallon natural gas up 15% — heating oil up $.25 propane down about $.10 per gallon.

Postal, parcel and overnight delivery costs bulk mail up 2.5% — overnight letters and parcels up 5%, first class stamps up $.01.

Healthcare costs up 10%.

Business services and legal fees unchanged or decreased.

Office supplies flat.

Salary adjustments 13% of companies report they will cut salaries in 2010. 87% of companies are planning for salary adjustments from 0% to 1.5%.

IRS Mileage — $.50 per mile.

SESCO Staff Recommendations for 2010

SESCO predicts continuing business and economic challenges in 2010. This will include managing labor cost and employee benefits, increased employment laws and employer restrictions both on a federal and state basis and a continuing challenge of employee productivity to include a willingness to "want to work" and in receiving "a fair day's labor for a fair day's wages."

Even with the layoffs employers have had to implement and unemployment rising well above 10%, one of our clients' biggest concerns is finding individuals who want to work, who are loyal and do a good job. SESCO has one large client who has to provide a Wal-Mart Gift Card incentive on a weekly basis to incentivize employees to work their full 40 hour schedule. With 50% of the American public receiving some sort of federal or state support, employers are concerned that the "younger" generations just do not appreciate their employers. SESCO believes managing the Generations X and Y will continue to be frustrating.

Additionally, SESCO recommends:

1. Employee Handbook If you have not had your employee handbook reviewed in the last year, it is imperative that you do so. SESCO retainer clients receive a free employee handbook review to not only ensure compliance to federal and state employment regulations, but also ensure that the employee handbook is an effective communications tool as well as provides a basis to assist employers defend their employment actions should they be challenged by an unemployment claim, discrimination charge, human rights violation or other legal action. Considerations for employee handbook policies include:

"Red Flag" Rules
Social Media (FaceBook, Twitter, LinkedIn, etc.)
Employee use of PDA's or Smart Phones
Regulating employees' off duty social networking/dating
Healthcare issues including H1N1
Update ADA (Americans with Disabilities Act) policies to comply with new regulations
EEO policies to address new Genetic Non-Discrimination Rule
Dress, tattoos, piercings

2. Conduct a Compliance Review SESCO clients receive a free, annual Human Resource Management Compliance Assessment. This assessment is designed to review the client's compliance to all federal and state employment regulations as well as to ensure systems, practices and employment documentation are effective so as to defend all employment actions.

3. Compensation System Labor costs are an employer's largest, single controllable cost. We can no longer say, "Come to work, do a good job and we will take care of you." Employers must develop an effective compensation system to not only control labor costs, but also bring the employment relationship to "life" through an effective performance management program. Although the recent economy has forced employers to rid themselves of mediocre or poor performing employees, more effective and productive management of the employment relationship will be critical to effectively compete in the years to come. SESCO assists clients in conducting wage surveys, developing labor grades and compensation systems as well as developing and implementing performance management systems and training management.

4. Screening and Hiring If your organization is in a position to screen and hire employees, you should do everything you possibly can to assess candidates to include reference checks (contacting previous supervisors and managers not the references listed by the applicant) and conducting assessments to include skills and personality. See website for numerous skills and assessment tests to verify the candidate's ability to perform the job to your standards, to conduct background checks to include criminal, credit, workers' comp, driver's license and other background checks.

5. Employee Morale Finally, as staffing levels are shrinking in terms of number of employees, maintaining employee morale and high productivity is critical. In simple terms, ensure managers and frontline supervisors understand: MMFI and MMFA all employees wear a medallion around their neck which stated, "Make Me Feel Important" and "Make Me Feel Appreciated." Ensure managers are providing the necessary "psychic" compensation that is necessary in every employment relationship as we all need highly efficient and productive employees.

Employment Regulations for 2010

"Red Flag" Rules After numerous delays over the past 18 months, the FTC has now delayed the enforcement of the "Red Flag" Rule until June 1, 2010. The rules apply to financial institutions and creditors. A "creditor" is defined as any person or business that regularly extends, renews, or continues credit; or any person or business that regularly arranges for the extension, renewal or continuation of credit. Businesses such as financial institutions and credit unions, healthcare facilities, long-term care facilities, auto dealers, retailers, country clubs and other businesses must comply with this regulation. This will include staff training as well as policy development and implementation.

FMLA Expansion FMLA coverage was expanded to include military families. The 2010 Act extends Family and Medical Leave coverage to family members of active duty members of the armed forces. It also expands the potential period during which Family and Medical Leave caregiver leave may be provided. Family and Medical Leave caregiver leave is now available up to five (5) years after the veteran ends active duty. SESCO has updated our Family and Medical Leave forms, compliance guide as well as federal, six-in-one posters.

Employee Free Choice Act Due to the overwhelming response from organizations like Chambers of Commerce, employer associations and individual employers, the Employee Free Choice Act has lost support. Although we will continue to monitor developments as we expect the Act to be resurrected in 2010, politicians have clearly heeded the challenges such a law would impose on employers especially during difficult economic times.

Employment Non-Discrimination Act (ENDA) A bill that would provide employment discrimination protections to individuals based on their sexual orientation and gender identity has been introduced in Congress. ENDA mirrors Title VII's protections and provisions, so it would prohibit employers, employment agencies, labor organizations and joint labor-management committees from firing, refusing to hire, discriminating or retaliating against those employed or seeking employment on the basis of their perceived or actual sexual orientation or gender identity.

Employment Litigation Continues to Explode

Employers are seeing a litigation wave that corporate counsel expect to swell in the coming year. A recent survey, "Litigation Trends Survey Report," states that employment litigation rose 34% in 2009 and will rise 42% in the next 12 months.

The most common issue, because of lucrative earnings for plaintiffs' lawyers as well as employees, continues to be Wage and Hour disputes. Department of Labor and class action lawsuits are up 40%. Wage and Hour issues include overtime, meal periods, rest breaks, bonus earnings, incentives, recordkeeping and others. If you think you understand and know Wage and Hour compliance and believe that you are in compliance, think again. Most employers that SESCO audits to determine compliance with the Fair Labor Standards Act, Wage and Hour regulations, are in fact in non-compliance. Average fines for a small to medium size employer (50 to 250 employees) averages $135,000. Ensure that your organization undergoes a labor and employment compliance assessment conducted by an expert such as SESCO Management Consultants at least on an annual basis. You will find that it will pay dividends and provide peace of mind.

Special Pricing on Federal Posters

Six-in-One (50 or more employees) — $9.95 laminated

Five-in-One (less than 50 employees) — $9.95 laminated

Special Thanks to SESCO Clients!

Federal Pacific/Line Power
Moody Dunbar
Mount Rogers Community Services Board
Cypress Cove Care Center Crystal River
Plymouth Harbor
Prime Choice Foods
Ft. Lauderdale Healthcare
Johnson City Housing Authority

SESCO Client Feedback

"WOW! I didn't expect to have the results so quickly (wage survey) I'm very impressed. Thank you so much. Kim, you did a great job."

~ Amy Porter, Friendship Haven Retirement Community

"This was great news and a great relief to me (SESCO AAP passed DOL desk audit). I am sure I don't have to tell you what a great job Brenda did. I enjoyed working with her and she always took the time to explain things to me that I did not understand. Again, I thank you and your team for going above and beyond."

~ Marie McCoy, Aerial Machine & Tool Corp.

"Joel, thanks again for developing a policy on Social Media. I have to admit, your policy was appreciated greatly and our Corporate office is interested in adopting the SESCO Policy. As a long-time Teledyne employee, Joel, I can think of no better compliment to SESCO than our requesting permission to use your policy. We generally do a thorough job ourselves, however, like yours better."

~ C.V. Fulmer, Teledyne Tekmar

Merry Christmas and Happy Holidays From The SESCO Staff

We at SESCO have enjoyed yet another wonderful year of sharing with you our valued clients! In return, we want to share a word with you this year as part of our traditional holiday message. We all cannot help but wonder with all that has come to pass; what will the future hold? But, we can all rest assured of these universal truths:

A good deed provides its own reward and its positive influence in the world may never be fully known by the person who performed it.

To share love, compassion, and forgiveness with the world will change the world and make it a better place for all of us to live.

We must extend a hand to give; if not, we will never receive or know the real meaning of joy and happiness.

We at SESCO wish you and yours a wonderful holiday season. May the warmth of your heart, the joy of your spirit, and the brightness of your mind enlighten those around you and change the world like the Christ child so many years ago. Happy Holidays!