Benefits and Compensation

The Top 10 Mistakes in Compensation—Don’t Get Caught in 2015’s Perfect Storm!

In yesterday’s Advisor, experts Cassandra Faurote and Karl Ahlrichs presented some popular base pay options and how they work; today, they share the top 10 mistakes employers are making when it comes to compensation.

Faurote, who is president of Total Reward Solutions, and Ahlrichs, a consultant and business developer for Gregory and Appel, shared their expertise on base pay programs in a recent webinar presented by BLR® and HR Hero®.

Top 10 Compensation Mistakes

10. Employers let employees scare them with data from the Internet. There’s a lot of free data on compensation out there, says Faurote, but that doesn’t mean it’s reliable—don’t let it be used against you. With free data you get what you pay for, adds Ahlrichs.

9. Employers don’t think pay makes a difference. High performers may care a lot about meaningful work and good culture, but equitable pay is what gets them in the door in the first place, says Ahlrichs.

8. Employers don’t tell employees how their pay compares to market. Faurote notes, if you don’t show them the facts, how do they know they’re not underpaid?

7. Employers use the “peanut butter” approach. Faurote clarifies this as meaning pay increases are spread evenly all across the business. For instance, everybody’s getting a three percent raise—let’s hope they are all happy with it.

Are class action lawyers peering at your comp practices? It’s likely, but you can keep them at bay by finding and eliminating any wage and hour violations yourself. Our editors recommend BLR’s easy-to-use FLSA Wage & Hour Self-Audit Guide. Click here for details.

6. Employers don’t do a good job identifying top performers or top talent. A lot of research shows top performers expect an increase that is one and a half times an average performer, says Faurote.

5. Employers don’t use reward and recognition, and they think small increases are enough. If you think just a two or three percent regular increase will keep good talent around, it’ll bite you later, warns Ahlrichs.

4. Employers see compensation as an expense and not an investment. Employees are an investment, says Faurote—treat them that way!

3. Employers try to solve all management problems with compensation. Even if compensation is right, there can be other issues to deal with, Faurote points out.

2. Employers think people are not going anywhere. That’s been the case for several years, says Faurote … but that’s about to change.

1. Employers don’t do anything! Don’t expect compensation to take care of itself.

A Perfect Storm

Ahlrichs stresses the importance of avoiding these mistakes. There’s a perfect storm coming, he says, where your high performers are free to move and your managers have perhaps been spending too much time and attention on the low performers (Faurote adds, they also don’t need to depend on you for health insurance anymore). You have to get your pay basics in order so your high performers will feel like they’re a part of a high-performing culture.

From choosing the right base pay program to developing policies on leave to paying employees correctly, comp management never sleeps. And violations, especially in wage and hour, are all too easy to incur. In fact, the numbers suggest that it’s likely that there are wage and hour violations in your workplace. Are some of your employees working off the clock or not getting the overtime to which they are entitled? There’s only one way to find out—audit before “they” do.

“They” might be the feds, your employees’ lawyers, or even bankers deciding you don’t get that loan because improperly classified workers represent a huge potential liability.

Yes, there’s only one way to find out what sort of wage and hour shenanigans are going on—regular audits.

To accomplish a successful audit, BLR’s editors recommend a unique checklist-based program called the Wage & Hour Self-Audit Guide®. Why are checklists so great? It is because they’re completely impersonal, and they force you to jump through all the necessary hoops, one by one. They also ensure consistency in how operations are conducted. And that’s vital in compensation, where it’s all too easy to land in court if you discriminate in how you treat one employee over another.

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 Fair Labor Standards Act (FLSA) self-auditing relatively easy.

What our editors strongly recommend is BLR’s Wage & Hour Self-Audit Guide. It is both effective and easy to use, and it even won an award for those features. Here are some reasons our customers like it:

  • Plain English. Drawing on 30 years of experience in creating plain-English compliance guides, our editors have translated 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. 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 Wage & Hour Self-Audit Guide includes all the changes.

Learn More about BLR’s Wage & Hour Self-Audit Guide.