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The SESCO Report – August 2011

Can You Motivate Employees During a Recession/Slow Economy with an Employee Incentive Plan?

Employers are continuing to be forced to do "more with less." This includes staffing as labor costs are en employer's largest, single controllable cost. With the continuing economic pressures on the bottom line, employers continue to seek new and "creative" ways to generate revenue.

To do so, many employers turn to incentives, commissions and "promises" of more earnings in return for increased productivity and higher levels of production.

There are basic elements in developing an incentive plan that works which include:

Define exactly what it is you want employees to accomplish in the incentive opportunity. Define the goal, the production standard, and completely spell it out. It should not be left up to, "Give me more units," or "If we make a profit, we'll share it." Be specific, such as, "For every unit over 100, you will receive "x'."

(Reminder — Penalties for loss of quality should be considered.)

The attainment goal must be measurable. Keep it simple and the closer the employee is to confirming the validity of the measures the better.

Be sure the individual has an effect or impact on what is accomplished. Giving an individual a share of net profit is too remote a measure and beyond the employee's frame of reference. In time, the individual will lose interest since they can't figure it out. (Important Point — Corporate profit and loss is the employer's scorecard — not the employees. You are excited about it, but don't expect them to be. Most employees are satisfied with the knowledge that the company is successful.)

Incentive compensation should be timely — perhaps weekly, but no longer than a monthly period should be considered. Additionally, a brief note of explanation of circumstances is important, supporting the payment, but avoid prolonged meetings offering financial analysis or explanation. Talking numbers is boring anyway, and even the best of speakers can't make it appear any better.

Communications should be developed that incorporate not only bonus payments with regular hourly rates, but also fringe benefits to give the employee an on-going feel for their total financial compensation on a regular and recurring basis. (Total compensation statements are available through SESCO.)

The Reality: Do employee incentive plans work?

Seems like this answer must be obvious — employee incentive plans must work. If they don't, why do so many organizations have incentive plans that they continue to pour money into even during a slow economy?

Unfortunately, most evidence says that employee incentive plans don't work. They don't increase the "quantity" of results except perhaps in the very short term. And, rarely do costly rewards and benefits increase productivity.

Other evidence and research that employee incentive programs don't work can be found informally as well. For example, how many articles have you seen in the management and HR press with titles such as, "Why Everyone Hates Your Employee Incentive Plan" or "Why Your Employee Incentive Plan Doesn't Work?"

Facts About Employee Incentive Plans

1. Employee rewards and benefits rarely do the heavy lifting; your employee incentive plan won't likely cause a positive result to happen — particularly over the long-term.

2. Incentives absolutely don't take the place of managing, thus the old principle: Don't make a management problem into a compensation problem. This is especially crucial during a slow economy. Getting your employees fully energized and committed is a relationship (management) issue, not a compensation issue.

3. Successful employee incentive plans can, however, get employees' attention and make it clear to them what you really care about most. But don't expect anymore.

It is, therefore, up to each of us managers to align people with our organization's critical goals so that they pursue those goals with a passion — a passion that can't be built through an incentive plan that offers employee rewards and benefits.

In summary, manage process, systems and outcomes and avoid grasping at desparate solutions such as incentive programs. In the end, they will not work and will only cost the organization critical resources in terms of compensation.

So, You Are Going to Put an Incentive Program In Anyway

For those organizations who do provide/offer employee incentive programs that reward attendance, safety, production or other performance/employee behavior, please understand that the federal government (Department of Labor, Wage-Hour Division) considers these earnings/payments as compensation and therefore, for any workweek that the incentive covers (even on a pro-rated basis such as a month or quarter), overtime must be computed on these earnings.

For example, if an employee receives an incentive bonus of $100 for the month of July, the employer must pro-rate the payment over the four (4) week period, thus a $25.00 incentive payment. For any workweek an employee works over 40 hours, then overtime for those hours must also be computed on the $25.00 incentive payment.

Please know that most automated payroll systems or outsourced payroll providers do not recognize or comply with this requirement. And this overtime obligation is one of the Department of Labor, Wage-Hour Division's most common violations producing back wage liability.

U.S. Department of Labor Develops App for SmartPhones

Believe it or not, the U.S. Department of Labor announced the launch of its first Application (App) for SmartPhones, a timesheet to help employees independently track the hours they work and determine the wages they are owed. Available in English and Spanish, users conveniently can track regular work hours, break time and any overtime hours for one or more employers. Glossary, contact information and materials about Wage-Hour laws are easily accessible through links to the webpages of the Department of Labor's Wage-Hour Division.

Additionally, through the App users will be able to add comments on any information related to their work hours; view a summary of work hours in a daily, weekly and monthly format; and email the summary of work hours and gross pay as an attachment.

This new technology is significant because, instead of relying on employer's records, employees now can keep their own records. This information could prove extremely critical should an employee bring a Wage-Hour complaint. Can one imagine trying to reconcile an employer's time records with that of an employee's self-maintained time record through an application provided by the U.S. Department of Labor?

Labor Secretary, Hilda Solis, stated, "I'm pleased that my department is able to leverage increasingly popular and available technology to ensure that workers receive the wages to which they are entitled — the App will help empower workers to understand and stand up for their rights when employers have denied their hard-earned pay."

For this reason as well as many others, it is critical that employers require non-exempt employees to maintain an accurate record of time, preferably using an electronic time recordkeeping system. Furthermore, it is crucial that employers provide an opportunity to allow employees to confirm recorded hours through a timesheet and handwritten signature. This practice is not required and is cumbersome given electronic timekeeping practices. However, it is going to be more crucial than ever that we do have company time records officially verified that they are true and accurate by each and every nonexempt employee.

SESCO Staff Recommendations Avoiding HR Legal Traps

Trying to keep up, understand and comply with the myriad of HR-related laws is tricky enough, but certain developments have opened the door to new legal hazards. The following issues pose significant liability:

Trap #1 — Rigidly following policies that limit leaves of absence. Most employers have policies that state once employees have exhausted leave entitlements (FMLA, vacation, sick leave, personal leave, PTO) that employees will lose their job as there is no additional time available to the employee.

However, as the Americans with Disabilities Act has evolved, policies mandating separation once they have been exhausted have been successfully challenged. As a result, policies must be revised to ensure that leave involving an employee who is "disabled" (medical leaves) includes some flexibility; specifically an interactive process and interactive analysis of the employee's circumstances to determine whether or not an employer can reasonably accommodate an employee's continued leave of absence versus blanket separation.

SESCO has revised leaves of absence policies as well as developed new policies to address the Americans with Disabilities Act As Amended. Handbooks should be reviewed to determine compliance and revised where necessary.

Trap #2 — Automatic time deductions for employee meal periods. One of the most common Wage-Hour violations for unpaid wage claims has been for inappropriate deductions as relates to meal periods. Particularly where employers use a timekeeping system that automatically deducts 30 minutes for a scheduled meal period. Please know that for any period of time to be unpaid, the period of time must be 30 minutes uninterrupted. Ensure that time records are edited to determine whether or not inappropriate deductions of less than 30 minutes have been made.

Trap #3 — Over broad restrictions on employees' social media activity. The explosive popularity of social media presents questions that did not exist just a few months ago. And the waters continue to be more muddied. For example, last year, the National Labor Relations Board challenged an employer policy contending that it illegally restricted workers' rights to engage in concerted, protected union activity.

It is critical that employers not only develop specific policy relating to social media and company-owned/issued equipment, but also to formally educate employees about policy as well as their responsibility in complying with such policy.

Trap #4 — Running afoul of a growing list of whisleblower laws. Federal and state laws provide many whistleblower protections. In many cases, the scope of protected activity is extremely broad, making this a particularly difficult area.

One of the best and most effective ways to safeguard against whistleblower claims is to, as always, thoroughly and precisely document the reason(s) for disciplinary actions and terminations, re: job performance related.

Know that employees are protected when they contact OSHA, Department of Labor, EEOC or other federal and state offices. This includes current as well as past employees. Employers need to be very careful about reacting aggressively to employees who may have contacted government agencies — even if complaint procedures or open-door policies are not followed.

National Labor Relations Board Supports Big Labor

When big labor failed to pursuade even a Democratic Congress to pass "card check" legislation, it turned to Plan B: it turned to the National Labor Relations Board (NLRB), which has delivered a plan for "quicky" union elections designed to make organizing easier.

Current law already gives unions an advantage in their ability to work covertly for months, quietly approaching employees to gather signatures for an election until springing the news on employers at the last minute. Once a petition has been filed, currently an employer has an average of 40 days to engage in a campaign on why employees should vote against the union and for the company.

The rules proposed in June, will streamline the election process by denying companies long-standing election rights. The rules set shorter time limits for hearings and filings, robbing employers of preparation time. The regulations will also strip companies of the right to litigate some issues. Many estimate the new rules would allow elections to take place in as little as 10 to 21 days from filing the petition.

The push for "quicky" elections is a sign of labor desparation. The percentage of private workers in unions last year dropped to 6.9%, the lowest rate in a century.

The NLRB was designed to be an independent organization that ensured fair labor practices, but under this administration it has become a hyper politicized and obvious advocate for unions.

The unfortunate results of this NLRB over the past few months has included:

Filing a complaint against Boeing for locating a new plant in a right to work state — South Carolina.

A broad assault on companies that fire/layoff union employees.

Changing persuader laws stating that any lawyer or consultant providing any labor relations advice must disclose all financials — not only for that particular client engagement, but potentially all financials.

Proposing "quicky" elections.

Since 1945, SESCO's belief has always been that unionization is created — it just doesn't happen. Now, more than ever, employers must be sensitive to their employees' on-the-job needs, wants and morale — not only to stay union-free — but also to attract, retain and be able to compete within the global economy. No longer can employers ignore the needs of their employees and wait until a union petition is filed. There may not be enough time to successfully campaign and win the election.

Congratulations SESCO Consultant — Paul Sommerville

Target — 136 UFCW — 85

SESCO Consultant, Paul Sommerville, successfully ran one of the most critical labor campaigns that the "big box" retail industry has ever seen. The UFCW in the State of New York attempted to unionize Target Stores. A petition was filed and as one could imagine, Wal-Mart, Lowe's, Home Depot and many other "big box" stores monitored this case extremely closely as this was the first major attempt by the UFCW in pursuing a "big box" chain. Paul Sommerville was the lead, sole campaigner and overcame significant odds to pull out a very critical win for not only Target, but the for the "big box"/retailers throughout the country.

Congratulations to Paul and for his outstanding efforts in the State of New York on behalf of Target.

Employers in need of professional labor relations services should contact SESCO as SESCO boasts one of the most successful counter-union/union decertification consulting teams in the country.

Special Thanks to New SESCO Clients!

Town of Pulaski
Pulaski, VA

Wisconsin Institute of CPA's
Brookfield, WI

Gentry Family Funeral Home
Yadkinville, NC

U.S. Psychiatric Rehab Association
Linthicum, MD

Iowa Association of Homes and Services for The Aging
West Des Moines, IA

SESCO Client Feedback

Member Compensation and Benefit Survey: "A big thank you to you and your assistant! It's a huge job!" ~ Ann Rohret, Executive Assistant — Iowa Association of Homes and Services for The Aging

SESCO Client Inquiry — Staff Response

Question: What should I do if we receive a charge of discrimination from the EEOC?

Answer: It is an unfortunate fact of business life that at one point or another the vast majority of employers will be the target of an Equal Employment Opportunity Commission (EEOC) charge by an employee or former employee. Many employers, however, don't understand the EEOC procedures or even why and how responding to an EEOC charge is important.

It is crucial that you approach internal investigations and respond to EEOC charges thoroughly and accurately. Your ability to defend against a discrimination charge will depend in large part on the accuracy and completeness of your documentation. Investing time upfront when the EEOC charge is first filed to collect, organize, understand and compile relevant documents will ensure that those facts will be available and coherent.

SESCO boasts a very successful history in representing employers before the EEOC. Our staff specialists are trained in investigating and taking affidavits, preparing position statements, and properly and thoroughly responding to the EEOC as your representative. Should you receive a Notice of Charge of Discrimination from the U.S. Equal Employment Opportunity Commission or a state Human Rights Commission, contact SESCO to ensure a timely, cost effective and professional representation.

Special Insert — Fall Seminar Series 2011

Seminar Agenda

Effective Leader/Manager September 28-29, 2011 (Bristol, VA)
October 5-6, 2011 (Richmond, VA)

Using Your Management Style Effectively
Effective Leadership Skills
Practicing Performance Management
Setting Goals and Motivating Employees
Positive Approach to Discipline
Supervision Basics EEO, ADAAA, FMLA, EFCA, Wage Hour, Safety Compliance

Human Resources The Basic Course October 19-20, 2011 (Bristol, VA)
October 26-27, 2011 (Richmond, VA)

Pre-employment Recruiting, Screening, and Hiring
The Importance of Employee Handbooks and Clear Discipline Policies
Determining Pay Rates and Developing Compensation Systems
Effective Performance Appraisal Systems
EEOC and Wage-Hour Regulations and Practices
ADA, FMLA, COBRA, Workers' Comp Compliance

Human Resources The Advanced Course November 9, 2011 (Bristol, VA)
November 16, 2011 (Richmond, VA)

Union Avoidance/Awareness
Responding to EEOC Charges
OFCCP Compliance
Strategic Planning for the Human Resource Department


$375.00 per person for 2 day classes and includes comprehensive take-home materials ($275.00 for 1 day)

Bristol, Virginia Location:

Courtyard by Marriott
3169 Linden Drive — Bristol, VA 24201

Richmond, Virginia Location:

(SESCO has partnered with one of our valued clients, Brown Distributing, to host our Richmond Seminar Series)

Brown Distributing
7986 Villa Park Drive — Richmond, Virginia 23059

To register contact:

Betty Treadwell, Seminar Registrar
SESCO Management Consultants
P.O. Box 1848
Bristol, TN 37621
Telephone: (423) 764 4127
Fax: (423) 764 5869

For a complete seminar brochure and registration information, click HERE