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What the New Exempt Salary Threshold Could Mean for Your Business

What the New Exempt Salary Threshold Could Mean for Your Business

In December 2016, compliance with the Obama administration and the Department of Labor’s proposed wage minimum required extreme reclassification. (Read our 2016 blog on this proposal here.) The proposal would have raised minimum exemption wage to a jarring $47,476 from the previous $23,660. Push back from businesses combined with a late term lawsuit kept the proposal pending until Trump took office.

This Just In

As of last week, the Department of Labor has proposed an increase straight down the middle of the historic minimum and attempted Obama-era hike. The current proposed salary-level threshold for white-collar exemptions now sits at $35,308. According to the Society of Human Resource Management (SHRM), the proposal, if finalized, could result in the transition of more than one million currently exempt workers to non exempt, as well as many pay increases for employees below the new threshold.

Nonexempt employees (those who do not meet the salary base and do not match FLSA work requirements) must receive a “time and one half” pay rate for any hours worked over forty in a workweek. The FLSA “duties test” defines specific regulations for executive, administrative and professional work that make an employee exempt, in addition to the salary threshold.

Tricky Business

While compliance is mandatory if the proposal is finalized, the specific way of reaching compliance is left to employer decisions.

If exempt employees currently make salaries significantly lower than the threshold, reclassifying employees to non-exempt and overtime eligible might make sense.

But, employers can also avoid salary and overtime pay altogether. Hours for newly non-exempt employees may be reduced, part-time or contract workers may be hired to fill gaps, tasks may be re-assigned to other exempt employees, and perks may be dismissed since the exempt/non-exempt distinction is often used to provide benefits.

Employers must then weigh the cost of morale.

Overall, it makes more sense to reclassify to nonexempt if an employee does not work much beyond forty hours. But for employees who often work over 40, it may be less difficult and less expensive to increase salary to the new threshold, rather than paying consistent overtime.

What Now?

There is still a long way to go before reclassification. Proposals are always small first steps in a lengthy process before finalization.

However, employers do not have to wait for the final rule to review FLSA duty requirements. Jeffrey Ruzal, an attorney with Epstein Becker Green, recommends employers begin auditing their exempt workforces to determine how many might qualify under the criteria of executive, administrative and professional exemptions. Before raging re-classification, it is possible that employees currently or potentially exempt due to salary, may not pass the primary duties tests.

In general, this pending proposal offers valuable time for fixing current errors and planning for the future. We at Servant HR would love to help plan for yours. If you’re our client, we’re already on it. But if you have questions about the specifics of the proposal, or are wondering how a PEO can help manage these crucial details, please don’t hesitate. Contact us today!

Employee vs. Independent Contractor: The latest NLRB approach

Employee vs. Independent Contractor: The latest NLRB approach

A new National Labor Relations Board (NLRB) decision has drawn a blurrier line between employers and independent contractors. Returning to pre-Obama-era policies, the NLRB is now more likely to acknowledge independent contractor relationships.

A wide array of federal, state and local laws govern the relationship between employers and their employees. But often these laws do not apply to those classified as independent contractors.

The distinction between the two is critical, but hazy, as each law has a slightly different way of discerning independent contractors from employees. Courts and agencies add complication as well through differing interpretations of those laws, along with frequently changing standards according to appointed political party.

Back and Forth

Last year the California Supreme Court broadened the definition of “employee” for wage order claims. Obama-era guidance restricted an employer’s ability to classify workers as independent contractors. Now under President Trump, federal agencies are swinging back the other way.

According to Ryan Funk of Faegre Baker Daniels, the new NLRB decision returns to how it viewed independent contractors before Obama-era restrictions. Funk writes, “The main difference between the new test and the Obama-era one is how the agency looks at whether workers have ‘entrepreneurial opportunity.’”

Action vs. Opportunity

The Obama-era decision gave weight only to actual entrepreneurial activity (and even then, only when looking at just one part of a multi-factor test.) This narrow view makes the chance of meeting criteria significantly slim.

The new NLRB decision re-establishes the value of entrepreneurial activity. The principle of “opportunity for entrepreneurial activity” is used to evaluate the overall effect of each of the ten factors in a common-law analysis of an independent contractor relationship.

The decision is employer friendly, as it frees up employers to classify independent contractors and drop the host of governing laws.

Boiling It Down

While employers are freed up through the new decision, the line is still blurry. Those looking for a clear distinction between employee and independent contractor are in for a letdown. According to Funk, “Any legal test with ten factors is bound to boil down to a case-by-case approach.”

Even tests and their factors can vary case-by-case. Over the last thirty years the IRS has used an old revenue ruling twenty-point test, the tax court has used a seven-point test, and the IRS has espoused a three-pronged “control test.” Confusion is certainly understandable.

Therefore, independent contractor relationships should be re-analyzed in light of the new NLRB approach. Based on potential IRS involvement, it’s also important to note that the NLRB is just one voice in a crowd of agencies, so employers should stay up to date as independent contractor tests continue to evolve.

Practicing workplace gratitude + Servant HR updates!

Practicing workplace gratitude + Servant HR updates!

Few things are more contagious than recognition, encouragement and gratitude. Creating an office culture of thankfulness is not seasonal work, but a year-round initiative sparked most often by leaders. The humility demonstrated by employers, managers and HR professionals in acknowledging and appreciating others can spread quickly through an organization. Simple “thank-yous” have the power to transform a workplace.

As we approach thanksgiving, we thought we would practice this gratitude with you, as well as share a few Servant HR updates! We have so much to be thankful for this year.

 

1. Our people

 

In the midst of our office remodel this week, our team still gathered together for our Monday prayer meeting. We shared personal and work-related prayer requests in a circle on the floor of our empty new conference room. We are grateful for our dedicated team members and their flexibility in transition. Each person brings a variety of skills and personality traits and we appreciate their hard work.

 

Our temporary team meeting spot, since no shortage of furniture can keep our team from Monday mornings together.

Our small but mighty team manages payroll, benefits administration and all things HR for clients across the Midwest.

 

 

 

 

 

 

 

 

 

2. Our clients

 

Lately we have been given opportunities to see our clients in action and we are so thankful for the organizations we serve. Edge Mentoring’s EDGE|X conference reinforced our values about servant leadership and provided us with unique networking opportunities. Hosting a booth at Truth at Work’s Transformation conference also introduced us to new people and ideas on leadership and humility. We are proud of the work our clients do and feel blessed to partner with so many different missions and organizations.

 

Our Truth at Work conference booth featured details about Servant HR, information about our upcoming network series and a drawing to win a free drone.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

3. Our space

 

For our friends and clients a few states away, you may wonder where we actually work! While we serve clients in over twenty-five states, our team of eleven works out of an office complex in Fishers, Indiana. Now, after several months of prayer and planning (and a few demo days!) we are operating out of a new office that better fits our growing team

 

Demolition of our old space continues as our team works on the other side of the wall.

The new expansion provides more office space, several conference rooms, a break room and a waiting lounge.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

The new space is an expansion of our old one into a vacant neighboring office and God has been so faithful to provide this smooth transition. We are especially thankful for Avera Commercial LLC and their quick, diligent work through the construction process. Adrian Sodrel and his team have been a huge blessing, working many late nights and early mornings to keep our workplace clean and functional.

 

Adrian and his team hard at work in one our new office spaces.

Avera Commercial workers rip up old carpet with cheerful smiles.

 

 

 

 

 

 

 

 

 

We have been richly blessed and still have much to be thankful for. So, are you infected yet? We hope our gratitude is contagious and inspires you to spend time intentionally thanking your family, your boss, your friends, your managers and coworkers this season.

Wishing you a Happy Thanksgiving from all of us at Servant HR!

Top Ten Tips for Effective Interviewing

Top Ten Tips for Effective Interviewing

Did you know most hiring managers decide whether they are going to hire someone in the first 3 minutes of an interview? And that is not enough time to conduct an effective interview. In fact, ineffective job interviews often lead to bad hires and that is a costly proposition when you factor in training costs, wages, and lost productivity when you have to do it all over again.

In order to improve your odds, you need to be prepared. Conducting a structured interview requires time and forethought. Some studies suggest businesses spend at least one hour preparing for an hour-long interview. It’s well worth the investment.

Here are the Top Ten tips for conducting more effective job interviews – and hiring the right person.

1. Have a current, accurate and enticing job description.
Job descriptions should identify the specific knowledge, skills, and abilities that are critical for the candidate to succeed at the job. What critical need does the company have, and how will the candidate fulfill that need? Make sure to also identify the personality traits required for the specific job. Once you’ve performed the job analysis, develop the interview questions based upon the determined criteria.

2. Create a structured interview process.
Structured interviews help ensure all candidates are treated similarly, and research has indicated they are more effective than unstructured job interviews. To create a structured interview:

  • Ask every candidate the same interview questions, and plan follow-up questions to likely responses.
  • Evaluate candidates using an objective and thorough rating scale.
  • Provide training to all interviewers to enable them to conduct interviews using a consistent method and tangible tools to evaluate candidates so they aren’t relying solely on instinct.

3. Ask behavioral questions.
Asking hypothetical or open-ended questions like “how would you deal with an angry coworker?” or “what are your strengths and weaknesses?” encourages candidates to frame their responses according to what they think the interviewer wants to hear. This is not the best method.

Behavioral interview questions are designed so candidates describe things they actually did in a previous situation and the outcome of their actions. Ask questions like “Tell me about a project you helped initiate. What was your role? What were the results?” and ”Tell me about a time you made an unpopular decision. What were the reactions? How did you respond?”

4. Contact references.
References are a valuable tool for attaining a more complete impression of a candidate. References can verify information, provide feedback on the candidates’ past job performance and accomplishments, and give insight into whether they’ll fit with your company’s culture. They can also verify the accuracy of the examples given in responses to the behavioral questions posed during the interview. When considering a candidate, it’s also prudent to examine their resume to find colleagues who are in your business network and contact them as well.

5. Use the interview to describe the job position.
Interviews are opportunities for managers to give candidates a realistic impression of the job position and the company culture. Some managers are tempted to oversell the company in job interviews, which can ultimately lead to employee dissatisfaction in the long run. Answer questions thoughtfully and candidly and let your natural enthusiasm for the company show, and you’ll help the candidate make an informed decision.

6. Hire for attitude. 
At least one study found that 89% of the time new hires failed, it was for attitudinal reasons, not lack of skill. Hire for characteristics that align with the company’s values as well as technical skills. Be proactive about recruiting people who will be good for your team. High performers are a good source of referrals.

7. Don’t take chances.
Sometimes employees can hire candidates with obvious deficiencies, in hopes they will change. There will always be some compromises made, but if a candidate has a track record of burning bridges, missing deadlines, or quitting multiple jobs within a few weeks – their past behavior is the best indicator of future behavior.

8.Silence Can Be Golden.
Try pausing and counting to 5 after an answer to a question you want to know more about. Let them fill in the silence and reveal more.

9. One more interview. 
If you have doubts, conduct one more interview. A bad hire is too costly to the company to forgo the additional interview. And if you find you’re deciding between a pool of average candidates, continue the process until you find someone who fits.

10. Look on social media.
Is the candidate on social media such as Twitter or Facebook? What do they comment on? What do they do with their free time? Who are they are linked to on LinkedIn? Social media channels can give a good look into whether someone will fit your culture.

By taking the time to sufficiently prepare for an interview and asking the right questions, companies can improve their chances of hiring the candidate who is best for the job. If you need help developing an effective interview process which produces consistently great results, don’t hesitate to reach out to us.

 

New Department of Labor Wage Minimums And Its’ Effect on Overtime (and YOU!)

New Department of Labor Wage Minimums And Its’ Effect on Overtime (and YOU!)

UPDATE 10/01/16: The House approved a six-month delay in overtime rule implementation, trying to defer legislation that would have gone into effect on Dec. 1.  The Republican-backed Regulatory Relief for Small Businesses, Schools and Nonprofits Act, or HR 6094, would postpone the implementation of new Department of Labor rules that would shift the threshold for determining overtime pay until June 1, 2017.

The House approved the bill with a 246 to 177 vote. The bill has moved to the Senate, where it faces an uncertain future. President Obama has reportedly threatened to veto the bill. If you have questions, please contact us.
Original Post:

As many of you have heard from us at Servant HR and other sources for months, the Obama Administration has finally come down with new regulations that establish a new wage minimum for your salaried/exempt employees.  Employers must be in compliance by December 1, 2016 so if you haven’t already analyzed your situation, now is the time.  The odds of this being overturned are virtually non-existent regardless of the 2016 election outcome.

Snapshot of the New Regulations

These regulations update the minimum salary level required for an employee to qualify under any of the common exemptions. Currently, that salary level stands at $23,660 per year ($455 per week). The new regulations raise the minimum salary level to $47,476 ($913 per week).

What This Means to Employers and Employees

As an employer, if you have employees who are classified as exempt under the current FLSA regulations “duties test” but who make less than the new wage base, you will need to make some changes. Employers essentially have three choices to be in compliance with the new regulations:

  1. Keep the employee’s exemption status intact by increasing the employee’s pay to at or above the new minimum threshold
  2. Change the employee’s exemption status to salary/nonexempt, and while still paying a salary, begin paying overtime for all hours worked over 40 hours in a given workweek
  3. Change the employee’s exemption status to hourly/nonexempt, and only pay for hours worked and begin paying overtime for all hours worked over 40 hours in a given workweek

How to Prepare for the Upcoming Changes

These changes require a lot of planning on the part of all affected employers. Here are some ways to get prepared for the coming regulations changes:

  • Confirm employees currently treated as exempt truly meet the “duties test” to establish a list of affected employees
    • Which FLSA Exemption applies?
    • Is there a Department of Labor Fact Sheet that can support your decision?
  • Analyze affected employees.
    • Which employees currently are classified as exempt under the duties test, but have salaries below the new threshold?
    • Gather all relevant data points, such as:
      • How many hours per week do these employees currently work?
      • How much overtime would need to be paid if the employee changed status to nonexempt? How much would that cost?
      • How much would it cost to increase salary levels to meet the new thresholds?
      • Will there be a need to hire additional staff (perhaps in lieu of paying overtime)?
      • Are there systems in place now to accurately calculate hours worked (including all overtime) for all affected employees? If no, what would it cost to put such systems in place?
      • If salaries are increased, what impact will this have on the overall organizational salary structure? Will salary bands need updating? Will upper levels in the organizational hierarchy also need pay increases to stay in alignment with their relative level within the organization?
  • Put together a clear process for decision making.
    • Reach agreement on what changes must be made.
    • Establish consensus on timing of changes.
  • Plan for the transition process
    • Determine exactly what changes will be needed within the payroll system to either change these employees to nonexempt (and pay overtime) or change their salary levels. Create a plan to accomplish either task, depending on which is chosen for a given individual.
    • If any employees will be moving to nonexempt status, create systems for time tracking and create training on how to use those systems and to keep them accurate.
    • Consider whether updates will be needed to your overtime policy and start drafting these now.
    • Start making assessments for individuals and groups to determine the best course of action.
      • Consider to also take this opportunity to do a job analysis and update job descriptions accordingly to reflect the true duties of the job. This will allow a more accurate comparison against the guidelines in the future.
    • Create a systemic process for review of employee exemption status to ensure that employees are always classified correctly going forward, especially since the salary basis will undoubtedly be changing periodically in the future—employee salaries will need to comply to keep the exemption in place.
  • Communicate, communicate, communicate to minimize the disruption these changes may cause.

 

How prepared is your organization for these coming changes?

This article does not constitute legal advice. Always consult legal counsel with specific questions.

 

4 Reasons Why You Need World Class Job Descriptions

I was recently asked to speak to a group of business owners about “World Class Job Descriptions.” Servant HR clients have a love-hate relationship with job descriptions – some love them, some hate them and some just view job descriptions as a necessary evil. While job descriptions are not mandatory for our clients, it is important to understand why job descriptions are necessary and the role they play in keeping you out of trouble.

1. Simplify recruiting communication

First, job descriptions are an easy way to explain job requirements to applicants. You want to attract and hire competent employees, and to do so, they must understand the key requirements of the job.  A well written job description can make the recruitment process flow much more smoothly.

2. Clarify expectations with employees

Second, job descriptions are a great tool for communicating expectations to employees. The job description spells out what is expected of the employee and provides the direction to achieve successful job performance. You can utilize the job description when it comes time for performance reviews and/or determining compensation for a given position. You can also use them as road maps for career planning and training.

3. Ensure compliance with governmental regulations

Third, job descriptions are key to ensuring your legal compliance with the Americans with Disabilities Act and the Fair Labor Standards Act (FLSA). You may be faced with a situation in which an employee requests an accommodation in order to perform his or her job. Your job description is firm documentation of what constitutes the position and the requirements for it. This will be important in determining what are “essential functions” and potential reasonable accommodations. Your job descriptions also assist with FLSA compliance. By spelling out the FLSA status of a position (exempt v. non-exempt) you set the parameters for work hours, pay type and overtime.

4. Position to defent agains faulty unemployment claims

Finally, having job descriptions on file can be the difference between winning or losing (and paying!) unemployment claims. In today’s workplace, it is imperative to have written job descriptions for each position in your organization. In terms of unemployment claims, it is not uncommon to have an employer speak to the requirements of the job and then the employee claims they never knew of those requirements. The State Department of Workforce development tends to be ‘employee friendly’ and is less likely to deny benefits to someone who proves they were never given a job description. By creating them, you are giving yourself more leverage against faulty claims.

There are plenty of tools that help create the foundation of job descriptions without too much difficulty. It is a great starting point where an employer can then make them specific to their workplace and culture.

 

If you don’t have world class job descriptions or have concerns that yours won’t pass the test, we’d be happy to chat with you about your options.

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