In yesterday’s Advisor, we featured the first three of Stacey Carroll and Al Lee’s “bad compensation habits.” Today, more bad habits, and an introduction to a unique FLSA audit system that detects problems before the feds do.
Carroll is Director of Professional Services and Education at Payscale, Inc.; Lee is Director of Qualitative Analytics. Their remarks came at a recent webinar hosted by WorldatWork.
Bad Habit #4. Pay Never Goes Down
[Go here for Bad Habits #1, #2, and #3.]
Lots of organizations just continue to move things upward, both ranges and people, no matter what, but that’s a bad habit, says Lee.
Why companies do it:
- It’s easier to administer ranges
- It’s easier than measuring every job
- It’s hard for managers to digest too many variables when making pay decisions. They’re already considering performance and place in range. Try to throw in market data, and that’s too many variables
- We assume that the market doesn’t affect our current employees as much as applicants. Unfortunately, offering more to applicants has an effect on internal equity.
Why it doesn’t work:
- Diluting market changes with range adjustments doesn’t account for jobs outpacing general market trends (as mentioned in yesterday’s Advisor)
- When pay is actually going down, we tend not to move our ranges down. Employers need to make important decisions when this happens.
- The market looks different depending on how you define your market
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Bad Habit #5. Setting Budgets on Predictions
It’s easy to go with the predictions, but they won’t always be right, says Carroll.
Why companies do it:
- It seems like the right thing to do to give the same increases that everyone else is predicting
- It’s easy to go to execs with one report—it’s a simple conversation
- It’s the best available information. That’s hard to argue with, but it doesn’t work, says Lee.
Why it doesn’t it work:
- One company’s budget does not match another company’s needs. For example, says Lee, take two companies, one with an average compa-ratio of .82 and a range penetration of 6%, and another company with an average compa-ratio of 1.24 and a range penetration of 107%. The two companies have very different issues to consider.
- What you intend to do doesn’t always happen (Everyone planned 3% for 2009, but because the economy went south, the actual number was 0%).
- Future projections are best justified with past behavior and current information about the market.
Setting pay budgets and ranges—critical, but for sure not the only compensation issue you have to worry about. For example, how about your wage and hour practices? Could they be under review by the feds or, maybe worse, a class action attorney? Are your “independent contractors” independent? Are your “exempt employees” actually exempt? To ask the question another way, “How many FLSA violations exist at your workplace?”
Bottom Line: Audit Before THEY Do
“They,” in this case, might be the feds, lawyers, or even bankers deciding you don’t get that loan because improperly classified workers represent a huge potential liability.
Experts say that it’s always better to do your own audit, and fix what needs fixing, before authorities do their audit. Most employers agree, but they get bogged down in how to start, and in the end, they do nothing. There are, however, aids to making FLSA self-auditing relatively easy.
What our editors strongly recommend is BLR’s FLSA Wage & Hour Self-Audit Guide. It is both effective and easy to use, and even won an award for those features. Here’s what customers like about it:
—Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated the FLSA’s endless legalese into understandable terms.
—Step-by-step. The book begins with a clear narrative of what the FLSA is all about. That’s followed by a series of checklists that utilize a simple question-and-answer pattern about employee duties to find the appropriate classification.
All you need to avoid exempt/nonexempt classification and overtime errors, now in BLR’s award-winning FLSA Wage & Hour Self-Audit Guide. Plus receive the special report Top 100 FLSA Overtime Q&As for a limited time. Find out more.
—Complete. Many self-audit programs focus on determining exempt/nonexempt status. BLR’s also adds checklists on your policies and procedures and includes questioning such practices as whether your break time and travel time are properly accounted for. Nothing falls through the cracks because the cracks are covered.
—Convenient. Our personal favorite feature: A list of common job titles marked “E” or “NE” for exempt/nonexempt status. It’s a huge work saver.
—Up to Date. If you are using an old self-auditing program, you could be in for trouble. Substantial revisions in the FLSA went into effect in 2004. Anything written before that date is hopelessly—and expensively—obsolete. BLR’s FLSA Wage & Hour Self-Audit Guide includes all the changes.
You can examine BLR’s FLSA Wage & Hour Self-Audit Guide for up to 30 days at no cost or obligation. Go here and we’ll be glad to arrange it.