Tammy Binford
Imagine a workplace where employees are eager, engaged, motivated, and loyal. Now think of what an employer can do to create such employees. Part of the formula will focus on rewards, recognition, and even a little fun.
When considering what perks to offer employees, the sky seems to be the limit. Paid time off and plenty of it, onsite child care, free or discounted gym membership, flexible schedules, telecommuting, tuition reimbursement, and bonuses immediately come to mind.
But allow your mind to wander and oh, the possibilities. An Internet search turned up little extras such as on-premises cupcake trucks, maid service in employees’ homes, employee use of company planes, a company-provided mechanic, even onsite Botox treatments.
Why offer perks?
Why are employers going to great lengths to offer innovative benefits? A survey from outplacement and executive coaching firm Challenger, Gray & Christmas, Inc. offers one explanation. The survey, released in August 2012, showed that the majority of the employers polled are concentrating on worker retention and are giving great attention to employee engagement.
Although the study found that employers most often cited communication as the best way to ensure engagement, awards and other forms of recognition—perks—were the top choice of a significant group of the employers surveyed.
A 2011 Challenger, Gray & Christmas survey of human resources executives showed that employers were beginning to bring back some of the perks that were cut during the recession, and others were introducing new incentives as a way to attract and retain their best workers.
Money topped the list of incentives deemed most effective in the 2011 survey. It found that the best perk for retaining top performers was the performance-based bonus. Other important perks included 401(k) plans with employer contributions, vacation/personal time, wellness-related benefits, flexible schedules, and tuition reimbursement.
Legal concerns
Regardless of how creative a coveted incentive may be, employers need to keep the Fair Labor Standards Act (FLSA) and other laws in mind. Boyd Byers, a partner in the law firm Foulston Siefkin LLP in Wichita, Kansas, reminds employers to be careful.
“Employers who give out perks with monetary value need to be careful not to inadvertently create overtime rate problems with respect to nonexempt employees,” Byers says. “The FLSA, with some exceptions, requires bonus payments to be included as part of an employee’s regular rate of pay in computing overtime.”
Byers says to ensure that monetary perks are properly excluded from the regular pay rate, employers shouldn’t promise them ahead of time. “Surprise is more fun anyway,” he says. Also, employers wanting to exclude monetary perks from an employee’s pay rate shouldn’t tie them to corporate profitability, efficiency, production, or the like.
Whether a monetary perk is a bonus awarded for performance or an actual gift makes a difference. “A ‘gift’ implies it is truly gratuitous, but a ‘reward’ implies that it is in recognition for work performed,” Byers says.
Byers says the U.S. Department of Labor considers bonuses provided as a direct or indirect incentive for employees to work harder or more efficiently must be included in an employee’s regular rate. “But if the perk is meant to be a gift, and its value is not measured by or directly dependent on the hours, production, or efficiency of an employee or group of employees, it shouldn’t need to be included in the regular rate,” he says.
Wage and hour issues aren’t all that employers need to consider. “Though less likely to be an issue, employers also need to be mindful that managers do not dole out perks in a discriminatory fashion, e.g., a male manager who takes all the male employees out to play golf and leaves the female employees behind, or a female manager who takes all the female employees out to the spa and leaves the male employees behind,” Byers says.
One perk that seems to be gaining popularity is the take-what-you-need-when-you-need-it time off policy. Companies such as Netflix and IBM have touted such policies, but Byers reminds employers there are some risks. He says employers need consider productivity and legal issues such as:
How to handle employees whose productivity falls because of time off.
- How and when vacation requests will be considered since employers will need to make sure too many people aren’t taking the same week off.
- What the maximum limit of time off will be, consecutive as well as total. Even unlimited policies must have some outer limit.
- State wage payment laws and how accrued but unused paid time off under the old system might need to be paid when the employer converts to an unlimited system.
- Whether employees fired for abusing the policy will get unemployment compensation under state law.
Creative thinking
Regardless of legal concerns, some employers are using their imagination and hoping for a payoff. An April 2012 article on Time magazine’s Time Business website mentions S.C. Johnson, which offers employees popular nontraditional perks including a concierge service that takes care of errands such as picking up dry cleaning and returning library books.
A Huffington Post article in March 2012 highlighted other innovative perks such as an in-house rock climbing wall at natural foods company Clif Bar; a music studio for employee use, free meals, and “whiskey Fridays” at data-storage company Dropbox; free scuba diving certifications at Chesapeake Energy; paid leave to volunteer with a green nonprofit offered by outdoor gear company Patagonia; and housecleaning services from staffing agency Akraya.
Boyd Byers is a partner with Foulston Siefkin LLP, representing clients in matters relating to all aspects of employment relations. He is the editor of and frequent contributor to Kansas Employment Law Letter. You may contact him at bbyers@foulston.com.