The SESCO Report – April 2017
Compensation Administration – 5 Simple Steps to Developing an Affordable and Competitive Pay Program
Employers have a difficult time in balancing compensation practices within their organization because: 1) compensation, regardless of size of employer, industry or geographic location, is the employer’s largest controllable expense. Compensation alone represents on average anywhere from $.30 to $.50 out of every revenue $1.00 on basic wages. This cost does not include executive compensation, bonuses, perks or benefits, which are normally another 30% to 40% of your compensation costs; and 2) being competitive in the marketplace and thus attracting and retaining a high quality workforce. Here at SESCO, we are experts in developing effective compensation systems that recognize the employer’s affordability as well as the need to be competitive. The last thing SESCO recommends, which many consulting firms do, is that you simply take a look at the market and match it or even be higher than the market itself. Frankly, this advice is not practical for most small to medium size businesses.
SESCO provides the following basic steps when developing your compensation practices and philosophy:
1. Check the market – You should continually assess the market every one (1) to two (2) years. The key here is identifying what the “market” actually is. What the market is not is a general wage and salary survey, normally produced by a local HR association, consisting of varying sizes of employers and industries in the immediate area. Be very careful about utilizing this type of market data. Your market survey should include specific employers that you compete for talent, preferably within your specific industry and region. You may even have to go outside of the region for senior level positions within your industry. SESCO conducts these surveys and recommends that between the client and SESCO, we select specific organizations to be included in a select compensation and benefits survey. We want to know what the wage and benefit practices are of specific employers and not the general market. Further, a word of caution regarding published surveys. The integrity and accuracy of published surveys can be in question. This is why the surveys provide such a wide range of results. Employers complete these surveys providing generic and sometimes inaccurate data. They simply don’t want to take the time and effort and many times receive a free survey for doing so. It is important that you engage in a customized process, allowing a firm such as SESCO to receive and scrub the data to ensure that it is true and accurate. Additionally, one of SESCO’s survey tenets is to receive actual averages of current wages and not general ranges. This actual average will provide specific realities of compensation levels in your market.
2. Benchmark your positions – In addition to the wage survey, your internal equity must also be sound. Internal equity between jobs and employees is far more important than external equity. For example, even if you are the highest payer in town, if employees perceive pay inequity, morale will suffer. Ensure that your positions are slotted by a thorough evaluation of their value to the organization. Additionally, you will also be able to benchmark your current pay practices to the market and any market sensitive positions should stick out and become apparent. Benchmarking also allows you to defend to employees why your pay grades and subsequent pay ranges are what they are. Finally, for compliance purposes such as an EEOC charge or if you are an affirmative action employer, benchmarking greatly defends alleged wrong doing – pay discrimination.
3. Develop a basic plan – A compensation plan should not be overly complicated or “tricked up.” Employees do not trust compensation opportunities that they don’t fully understand or are in full control. The comp plan should be a very basic program based on three (3) tenets including employer’s ability to pay (affordability), market realities and organizational and employee performance. Additionally, a compensation plan will protect an employer from itself as if there is no formal compensation plan, normally an employer is in a reactive/defensive situation and is negotiating on a case by case basis or throw money at employees who threaten to leave. Normally, not having an effective compensation plan results in spending more on compensation than you should.
4. Identify internal pay inequities – Once the plan has been developed, you will identify any internal and external pay inequities. Most of the time, these pay inequities can be difficult to address given the cost of the inequities. As such, a plan needs to be developed over 12 to 24 months, and sometimes even longer, to address those significant inequities. SESCO can provide policies and administrative rules to address these pay inequities.
5. Communications – Employers should always be on the offensive when it comes to compensation. Be proud of your offerings, be able to defend those offerings and be able to tell your story to your employees as well as applicants. When you publish a compensation plan you are able to stand behind it. You are not in a defensive or reactive mode as noted above and if employees believe and have trust in your leadership, they will believe that their compensation offerings and opportunities are the best that you can provide. When there is a lack of communications (any communications), that void is filled with negativity, rumors, backbiting and subsequent poor morale. If the employer is unable to communicate compensation opportunities and realities, employees will assume that they are being taken advantage of, that the owners or managers are padding their pocket and that there are pay inequities including favoritism.
Most employers are concerned about developing a compensation system because they are afraid it will bind or commit them to certain levels of pay. However, if carefully designed and implemented and if the proper mechanisms and policies are in place, the compensation plan will be a win-win – will communicate to the employees that you have a fair and equitable compensation plan and a plan that will protect the organization’s budget – which, again, is your largest, controllable expense.
Please contact SESCO to discuss compensation strategy and to review your current program.
Is the Department of Labor's Overtime Rule Dead?
In 2016, then President Obama issued an Executive Order to overhaul the Department of Labor’s rules specifically to include increasing the guaranteed salary threshold from $23,660 to $47,476. This increase caused a significant ripple through all employers throughout the country in that all employers are subject to the Department of Labor’s rules to include exempt and nonexempt definitions and subsequent eligibility for overtime in excess of 40 hours per week. Late in 2016, a judge in Texas put a halt on the Executive Order stating that the president could not overhaul the Department of Labor’s rules and regulations via Executive Order.
We at SESCO are continually monitoring the developments under the Trump administration to include Trump’s DOL nominee, Alexander Acosta’s feelings toward the Obama Executive Order and proposed changes. As with other developments in Washington, the Trump administration is receiving significant pushback regarding the overhaul of the Department of Labor’s rules. The nation’s largest union federation, the AFL-CIO, just reminded the Trump administration that it plans to fight any attempt to overhaul the changes (reverse the changes) the Obama administration put in place. Specifically, the AFL-CIO plans to sue the DOL if it “dilutes” the final overtime rule that was slated to take effect in December 2016. AFL-CIO president, Richard Trumka, stated that any changes by the Trump administration to attempt to lower the salary threshold under the Obama-era rule will lead to legal action by the federation. Trumka believes taking the overtime expansion away from even one (1) applicable worker could have devastating effects and said, “Anything that dilutes it (the DOL’s new overtime regulations) is bad.”
Additionally, we must consider Alexander Acosta’s feelings toward the DOL rules and regulations including the Obama Executive Order. During his confirmation hearing, despite attempts to dodge queries about whether the Trump administration would defend the overtime rule in court, Acosta did infer that he feels there are problems with the FLSA’s salary threshold under the old overtime rules. He said it is unfortunate that the threshold hasn’t been updated since 2004, but that also he is very sensitive to the fact that a significant revision would have a negative impact on the economy, on non-profit organizations and on specific geographic areas. There are some legal experts that surmise that Acosta’s comment will result in increasing the salary threshold but not nearly as great as in the Obama Executive Order. Of course, SESCO will monitor all developments from an employment law standpoint coming from Washington and inform our clients as well as assist you in not only understanding new rules but also how to effectively implement and comply. As a footnote, SESCO does not predict any DOL action on the salary threshold and overtime laws in 2017 or 2018.
Essential Skills of Leadership
SESCO has partnered with Vital Learning, an award-winning provider of management and leadership training programs used to develop leaders and achieve results. Their original curriculum was built by the training division of McGraw-Hill Publishing Company in the 1980’s. Vital Learning purchased this division of McGraw-Hill in the late 1980’s.
In January 2016, Vital Learning launched an overhauled Leadership Essential Series online and classroom courses which have received five (5) awards (including a prestigious “Stevie” award) during the year. These new courses became among the first soft skills training to utilize responsive design, micro-learning modules, high-definition video scenarios, and a reinforcement application.
SESCO invites you to explore these opportunities by visiting our SESCO Store at sescomgt.com, click on Employee Training, then click on Vital Learning.
Training options include:
- Online Training — $49.00 per module — covers 12 essential topics and the participant can take the course (normally 1 to 1½ hours long) over a 30-day period of time. All online modules contain pre and post-tests.
- Classroom Training - Delivered by one of your trainers or by one of SESCO’s certified trainers.
- Most commonly utilized — Blended Training. Both online and classroom are utilized for self-study as well as team/classroom development.
SESCO is very proud of our training and development offerings to include Vital Learning and we hope that you take advantage of these very cost effective training and development solutions.
For further information, visit our website or contact SESCO at sesco@sescomgt.com or by phone at 423-764-4127.
Congratulations to SESCO'S Labor Relations Team
In March of this year, labor relations team, D. Paul Sommerville and Jim Allen orchestrated a tremendous win for SESCO’s valued client — DSI Underground, Louisville, Kentucky. This location of DSI Underground is now union-free as the SESCO team managed a significant decertification — 19 votes for the company and 1 vote for the union.
SESCO’s roots in labor relations began in the late 1940’s. SESCO has a very proud and very successful history in assisting employers in not only remaining union free (99% win rate), but also in matters of decertification and contract negotiations.
There are few attorneys or consultants that have the practical, hands-on experience as SESCO’s labor relations team. Please contact SESCO should you have any questions or concerns about your labor relations, especially if considering decertification or contract labor negotiations.
Special Client Report Workplace Substance Abuse and Drug and Alcohol Testing: An Issue Employers Cannot Ignore
Considering the following facts, employers cannot ignore developing policy on workplace substance abuse and drug and alcohol testing:
- 73% of drug users are employed
- 1 in 10 employees are addicted
- Nearly 1 in 4 (25%) of Americans have illegally used drugs or alcohol on the job
To assist our valued clients, we have developed a special report on this very important topic. You can receive a free copy of this report by calling 423-764-4127 or emailing sesco@sescomgt.com.
All employers should consider implementing an effective policy to address this unfortunate reality in the workplace. Those who have policy developed, should have their policy reviewed by SESCO to ensure that it is not only legally attentive to federal and state regulations, but also effective.
Special Thanks to New SESCO Clients!
American Supply Association
Itasca, IL
Five Star Jewelers
Miami, FL
American Commercial Tire Network
Charlerio, PA
Friendship Enterprises
Bristol, TN
Weeks’ Funeral Homes
Buckley, WA
FACE Amusement Group
Gray, TN
Pediatric Choice
Lenoir City, TN
Missouri Coalition Against Domestic & Sexual Violence
Jefferson City, MO
SESCO Client Feedback
“The topic of HR is always a challenge for librarians. The presentation from a 30,000 ft. level down to a one-on-one was excellent. We could not have asked for a better experience all the way around. The demeanor of SESCO representatives was timely, personal and professional.” ~ Campbell County Public Library System
“We are working on becoming an Employer of Choice. It was important to feel good about our salary ranges and ensure they are fair and competitive. SESCO was knowledgeable, friendly and they listened.” ~ Tracy Moore – Lutheran Community of Telford
“Jamie was very helpful in making personnel decisions. She was very accessible, by phone and email.” ~ Jennifer Gundy – On My Own Home Care
SESCO Client Corner
SESCO is proud of our clients and as such, we are creating SESCO’s “Client Corner.” This “Client Corner” section in our newsletter will be designed to communicate interesting facts and history, successes and achievements of our valued clients.
Please feel free to submit to Kim Tester at kim@sescomgt.com or by calling 423-764-4127 information you wish for SESCO to publish about your company. We will do our best to publish as many responses as we possibly can.
Our first “Client Corner” congratulates our long-time, valued client, Wood Brothers Racing Team.
The Wood Family started in racing 67 years ago. The Wood Family is considered the first family of NASCAR. Edsel Ford, great-grandson of Henry Ford, proudly stated, “We consider Wood Brothers Racing a part of our family, the Ford Family.”
With Ryan Blaney behind the wheel, the Wood Brothers have had great success in 2017:
- 2nd at Daytona 500
- 3 top 10 finishes in 6 races
SESCO is proud to call Wood Brothers a client and we wish the Wood Family and racing team continued success in 2017.
SESCO'S Spring Seminar Series 2017
Bristol, VA
Courtyard by Marriott
May 10-11, 2017
Human Resources for the Advanced Professional
Richmond, VA
Virginia Community Healthcare Association
May 23-24, 2017
Human Resources for the Advanced Professional
(SESCO has partnered with one of our valued clients, Virginia Community Healthcare Association, to host our Richmond Seminar Series.)
State and National Business and Trade Associations, Chambers of Commerce and Human Resource Associations are welcome to contact SESCO to book a professional speaker for annual conventions and seminars. Contact Bill Ford at 423-764-4127 or by email bill@sescomgt.com.
