Horizon Point Consulting

Category: Human Resources

We know HR. Read our Human Resources blog archives for stories and best practices from our work with real clients and personal experiences in the world of HR.

  • Top Payroll Errors

    Top Payroll Errors

    My theme for the summer seems to be money. It’s been a huge topic of conversation in my house and with clients, from trying to help my oldest navigate scholarships, FAFSA, and how to responsibly manage having a credit card, to teaching my 16-year-old to understand income taxes, to helping clients answer questions about wages and payroll. 

    Over the past few weeks, I’ve talked about misclassifying employees, both as Independent Contractors and as exempt employees. This week I want to shift a little and talk about some of the common payroll errors and how to avoid them. 

    Overtime Pay: 

    • Comp time for hourly employees: Unfortunately, unless you are a government agency, employers cannot opt to provide comp time in lieu of payment of overtime wages. Any employee who works over 40 hours in a workweek must be paid for that time. 
    • Averaging hours across the pay period: The federal law states that anything over 40 hours in a workweek must be paid as overtime. A common error that employers make is averaging that time over a two-week period. “Well, the employee worked 80 hours over two weeks, with 50 hours in one week and 30 in the next, so we don’t owe them overtime.” Unfortunately, this is not the case. If your workweek is Sunday through Saturday and an employee works over 40 hours in that workweek, they must be paid for overtime hours worked, even if you pay biweekly and they work less than 40 hours in the second week. And keep in mind it’s based on the workweek, not calendar week. So, if your workweek is from Wednesday to Tuesday, it’s 40 hours within those days. Keep in mind that a few states, such as California, have overtime laws that are more stringent than the federal law, so be sure to confirm state overtime laws as well. 
    • Overtime wasn’t approved in advance, so we don’t have to pay it: Regardless of whether or not the employee followed proper procedures, you are still required to pay them for all hours worked, even if it’s unapproved overtime. In such cases, you should pay the wages and then follow your disciplinary process to counsel the employee on not getting pre-approval to work the hours. 
    • Miscalculating overtime pay: Many employers believe that overtime pay is based on an employee’s hourly rate, but in fact, there are other wages that may need to be added to that calculation. The FLSA states that “employees must receive overtime pay for hours worked in excess of 40 in a workweek of at least one and one-half times their regular rates of pay.” Note that this does not say hourly rate, but “regular rate of pay.” This is important because an employee’s regular rate of pay could include shift differentials, premium pay, stipends, and nondiscretionary payments (for example quarterly bonuses based on production). 

    Improper Withholdings: 

    • Not withholding correct income taxes: This has become a bigger issue with the increase in remote workers post-Covid. Many employers are not sure how to navigate figuring out how to set up taxes for out-of-state employees. It’s important to know that some states have a reciprocity agreement, meaning that an employee can live in one state and work in another and only be taxed in the state where they live. For example, given the mobility across state lines in the Virginia, Maryland, and DC areas (DMV), employees who live in one of those locations but work in another DMV location do not have to pay taxes to the location in which they work. 
    • Not setting up state tax accounts: In addition to understanding reciprocity agreements, the employer must understand what business accounts they need to set up in each state. This will vary but usually includes a state tax account and a state unemployment insurance account. Failure to set up and pay into the proper state accounts can lead to hefty fines and penalties. 
    • Improper deductions from wages: Federal law allows employers to make certain deductions from an employee’s wages without their written consent. These include tax deductions, garnishments, and meals and lodging. Beyond that, employers must have written consent to deduct from an employee’s wages. For example, if you as the employer require an employee to pay for their own PPE, you must have them sign a payroll deduction consent form. 

    Direct Deposit:

    • Requiring direct deposit: One item that many employers are not aware of is that some states regulate whether or not an employer can require payment of payroll wages via direct deposit. While direct deposit is the easiest method of payment and the preferred method of most employers, it’s not legal to mandate direct deposit in some states. As with many employment laws, the regulations vary by state. 

    What are some of the payroll errors or questions you have faced in your organization? 

  • Unlimited Paid Time Off- The What, How, and Most Importantly, the Why

    Unlimited Paid Time Off- The What, How, and Most Importantly, the Why

     

    If you believe employees need strict rules and enforcement to be productive, hiring and retaining high-performance people will be a challenge for you. You hired these people for their tenacity and talents. Get out of the way and let them be great. Deal with any people who choose not to meet expectations on a case-by-case basis.” 

    Sue Bingham, HBR article

     

    My husband came home one day and told me about a conversation he had with a friend about her company’s recent switch to unlimited paid time off (PTO).

    “Is that really a thing?” he asked me.

    “Yep,” I said. “That’s what we do.” 

    “Your team has unlimited PTO?” he inquired.

    “Yep. It works well,” I said. 

    “Well, she was saying that she feels like she’s less likely to take time off now that it’s ‘unlimited’ than when there was a clear-cut policy on how much she had and if she didn’t use it, she would lose it,” he said.

    “Interesting,” I said.  Culture, I thought, with a little bit of personality probably mixed in as well. 

    Unlimited PTO is, in fact, a growing trend. Whereas only about 2% of companies offer it and 9% of workers have it, the growth of unlimited PTO is a real imperative in recruiting and retaining talent given that the number one priority of job seekers is work-life balance, as cited in a recent study by LinkedIn. 

     

    What is it? 

    In most cases, it is exactly what you think it is.  It is that time off, whether for vacation, illness, or any other reason, that is paid and unlimited.  People aren’t assigned a set number of days off they can take and time off isn’t earned and accrued. 

    This means some good things for organizations:

    • If done right, it should build a culture of trust and productivity between employees and leadership, leading to more positive outcomes- ie- what most organizations claim to be doing it for- improving recruiting and retaining the best talent.
    • You don’t have the administrative burden of keeping up with and regulating it.
    • You don’t have the administrative burden of answering questions about how much people have or don’t have.
    • You don’t have to (if this has been your normal policy) pay it out when people leave.

    This means some good things for employees:

    • They can take off when they need it for whatever reason and don’t have to justify, lie, or explain why they are taking it.
    • They don’t have to track it and keep up with it either.
    • If done right, it should build a culture of trust and productivity between employees and leadership leading to employee engagement and satisfaction.

     

    How you do it

    In order for unlimited PTO to be successful, there are some keys for organizations and employees. 

    For organizations: 

    • Like almost everything, you train leaders of people how to handle it, with the focus on managing and developing performance, not managing time, and instead focusing on trust and autonomy as key drivers of productivity and positive outcomes.  You ensure leaders are ensuring rewards and motivation are based on results, not time. Train leaders to help them understand how to handle underperformance related or unrelated to the unlimited PTO policy on a case-by-case basis. 
    • If you are changing to it, communicate clearly what it means and how it will be implemented and what it will change for people.  Make sure you handle how any accrued time under an old policy will be handled.
    • You ensure your leaders model it by taking time off when they need it; people believe demonstrated behaviors more than they believe policy.

    For employees: 

    • Take time off when you need it.
    • If you perform well, everything will take care of itself.

     

    Why to do it

    Unlimited PTO, like any other policy or lack thereof, should be linked back to your organizational values and should be lived in the day-to-day behaviors of all people that are a part of the organization.  

    Yes, you do it to enhance business outcomes, but that is not the end or why.  This is the outcome of the right why. 

    I don’t know why my husband’s friend felt she would take less time off with an unlimited PTO plan. I don’t know if that feeling was more about the intent of her employer for shifting to one, linking back to their culture and values. Much has been written about this as it relates to the perceived malicious intent of employers switching to it.  It may have simply said more about her personality and her view of work. 

    But what I do know is that it works for our team.  And I trust that it will continue to even as we hopefully grow our business and team. And I hope and pray that is because it says something about our culture and its link to our value of People First. 

    How do you feel about unlimited PTO? 

     

    To read more and to see references to statistics cited in this post, check out these articles: 

    Forbes

    Fortune

    TandemHR

    SHRM

    Why Unlimited PTO is Becoming and Industry Standard

    The Stats Behind Unlimited PTO

    Unlimited PTO is a Deceptive Ploy

     

  • Benefits Benchmarks: North Central Alabama

    Benefits Benchmarks: North Central Alabama

    A few weeks ago, I asked the question “Are Employees Utilizing Those New Perks?” and highlighted benchmarking as a critical activity for evaluating workplace benefits. Now, we have the published results from the 2022 North Central Alabama Wage & Benefit Survey!

    First up, Average Benefit-Cost Per Employee (Annual) increased 25% over 2021. Employers reported an average of $16,608 spent annually per employee in benefits, compared to $12,459 one year ago. Some hot categories for increased benefits spending are Child Care Support, Adoption Support, Pet Insurance, and Elder Care Support. These types of benefits are increasingly attractive, and the Huntsville/Madison County Chamber Foundation is now providing the Best Place for Working Parents® program in recognition of companies that are focusing on family care.  

    Next up, 72% of companies are now offering a PTO (Paid Time Off) structure in place of set hours/days for Sick Leave, Vacation, etc. Last year, only 58% were using a PTO structure. This shift aligns with increases in Flex Time and Remote/Telework benefits as options to give some autonomy back to employees. If you’re thinking about shifting your Leave and/or PTO policies, look for a blog post coming soon from Mary Ila Ward on Flexibility and Unlimited PTO. 

    Paid Family/Parental Leave is more available, with a 17% increase in the number of employers offering any amount of leave designated specifically for family/parental leave. The median leave times in weeks jumped from 2 weeks to 4 weeks.  

    If you are in the North Central Alabama Region, how do your benefit offerings stack up against these benchmarks? 

    If you are outside of this region, where can you find local data? Check with your local Economic Development Agency and/or Chamber of Commerce to find out if local data is available. 

    Benchmark, benchmark, benchmark! 

    This wage survey covers Cullman, Lawrence, Limestone, Madison, and Morgan Counties in Alabama and represents 132 company respondents in 2022. Learn more here. 

     

  • Are You Misclassifying Employees?

    Are You Misclassifying Employees?

    The Supreme Court recently agreed to hear a case that could have a big impact on the Fair Labor Standards Act (FLSA) and the classification of employees as exempt versus non-exempt. The case of Hewitt v. Helix Energy Sols. Grp., Inc. involves a highly compensated oil rig worker who was paid a weekly “salary” and upon his termination sued Helix for unpaid overtime on the basis that he was not paid an annual salary and therefore was not an exempt employee. The outcome of this case could impact employers who pay a daily or weekly “salary” as well as those who pay salaried employees on an hourly basis.

    In the past couple of years, we’ve seen a large number of FLSA cases arise, costing employers millions. Below are just a few recent headlines: 

    Amazon.com Services and its Contractor Fined $6.4 Million (March 2021)

    Court Approves $8.5 Million Settlement for Juicers in Misclassification Case Against Lime (July 2021)

    Holland Acquisition Inc Pays $42.3 Million in Misclassification Case (October 2021)

    DoorDash Agrees to a $100 Million Settlement (November 2021) 

    Last month I talked about misclassifying employees as Independent Contractors. This month I want to talk about misclassifying employees as exempt. 

    I’ve recently been working with a couple of clients on classification projects and in each of those projects I’ve come across employees who were misclassified. In some cases, it was an easy find for me. But in others, classifying employees is not an easy determination to make. So how can employers ensure that they are classifying employees correctly? 

    The FLSA has very detailed guidelines on what qualifies an employee to be classified as exempt for the purposes of overtime pay. The first, and easiest, determination is pay – if any employee makes less than $684 per week ($35,568 annually) they MUST be paid as a non-exempt employee eligible for overtime wages. 

    If they meet the salary requirement, the next step is to determine which FLSA exemption test, or tests, apply to that position. A position can potentially qualify under more than one exemption test. The exemption tests are:

    • Executive
    • Administrative
    • Professional/Creative
    • Computer Professional
    • Outside Sales

    Once you determine which test, or tests, apply to the position, you will need to do an in-depth analysis of that position using the exemption test to determine if a position meets the requirements to be exempt. 

    As I mentioned above, some positions are relatively easy to assess, but others are much harder. A great example of this is Healthcare Case Managers. By evaluating the position of Case Manager against the FLSA exemption tests that apply, many evaluate the position to be exempt. However, the Department of Labor issued an Opinion Letter in 2005 in which it determined that Case Managers did not meet the qualifications to be exempt employees under the FLSA. The DOL has a searchable database on all Administrative and Non-Administrative Opinion Letters regarding FLSA which is a great tool to use if you’re unsure whether a position qualifies as exempt. 

    A great way to ensure that your employees are classified correctly is to ensure that you have updated and accurate job descriptions for each position within your organization and to review the job descriptions at least every 2-3 years. 

  • Crafting a Thoughtful Performance Management System

    Crafting a Thoughtful Performance Management System

    I recently asked a room full of managers representing dozens of organizations if they actually liked their own company’s performance management system. What do you think they said? 

    Some of us may think of Performance Management as a rubber stamp on an annual review. We often don’t think of it as a living, breathing, system. Others of us may think of Performance Management as monitoring what we’re doing wrong. We may not think of it as monitoring and developing what we’re doing right. 

    When an organization thoughtfully designs, implements, and continuously improves a performance management system, it should look like the graphic below, representing a continuous, living cycle. 

     

    OBJECTIVE

    Company objectives should be driven by the organization’s vision, mission, and values, and these objectives should cascade and influence manager and individual contributor objectives. Read more from Mary Ila on 6 Ways to Design Your Performance Management System Around Company Values. 

    How are you writing company, department, and individual objectives? 

    MONITOR

    Progress towards objectives should be monitored regularly, and “regularly” should be a customized cadence that works for your organization. 

    For the context of this post, let’s assume that formal performance reviews are held annually. We recommend formal and informal monitoring in addition to the annual review. This may look like an informal monthly one-on-one and a formal mid-year review with your direct supervisor. 

    How are you effectively and regularly monitoring progress towards objectives? 

    COACH

    If there’s anything you take away from this light reading, I hope it’s that everyone needs coaching. High performers, low performers, and everyone in between. 

    Coaching is critical to successful performance management systems. This is where we catch potential issues and allow time for correction before a formal review period ends. This is also where we acknowledge and reinforce positive behaviors and results in real-time instead of waiting for the formal review. 

    How often are you coaching your direct reports? How often are you receiving coaching from a supervisor? Is the coaching meaningful? 

    EVALUATE

    The formal evaluation is an important element of any performance management system. It often drives rewards (stay tuned), succession planning, and development opportunities. All organizations should have a structured performance evaluation process that gauges the successful completion of objectives (or lack thereof) and sets the foundation for future objectives.

    One of the most critical components of evaluation is that team members be made aware of the evaluation methods and criteria at the start of the evaluation period. In other words, if my performance is evaluated from January to December and my annual review is in December, I need to know by January at the latest what my objectives and expectations are for the upcoming year. I need to know what I’m going to be evaluated on. What chance do I have of performing well if I don’t know what I’m expected to do? 

    When and how are you letting people know what methods and criteria will be used in their formal evaluations? 

    REWARD

    This is where we put our money where our mouths are. In order for a performance review to be effective, the rewards or incentives need to be clear, relevant, and meaningful. Employees want to know: “Why should I work hard to achieve goals? Why does it matter whether I score low or high on a review?” 

    Do your policies clearly outline the rewards structure, including how rewards are determined? Are rewards actually relevant and meaningful to your employees? 

     

    When I asked a room of nearly 50 managers if they truly liked their own organization’s performance management system, only 3 people said yes. What are you doing to help your own managers answer “Yes!” to that question?