HR has a significant role to play in helping to ensure a merger is effective. Talent management and cultural issues have the power to support or derail virtually any corporate marriage. Employees are understandably wary when organizations announce a merger; left unchecked, suspicion, misinformation, and layoff fears can delay the anticipated benefits of a merger or acquisition for months and even years.
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According to Deloitte’s recent mergers and acquisitions (M&A) research report, 2019 is expected to provide an optimistic climate for M&A activity. The report found that 76% of surveyed M&A executives at U.S.-headquartered corporations and 87% of M&A leaders at domestic private equity firms expect the number of deals closed by their organizations to increase over the next year.
Executives at both corporations and private equity firms point to effective integration as the single most important factor in a successful merger. Yet roughly 40% of respondents reported that half their deals don’t generate the expected value or return on investment (ROI), with internal factors like “integration gaps” and “not achieving cultural alignment” as major reasons why.
Studies show that following a merger announcement, the number of highly engaged employees typically drops by 50%, while the number of highly disengaged employees jumps significantly. Complicating matters is the fact that managers have their hands full with merger activities and often aren’t able to focus on employee engagement. Such distractions can prevent leaders from addressing the human side of a corporate union, potentially putting the deal in peril.
Digital Platforms at the Center
As organizations contemplate potential M&A activity, it’s important to understand the larger changes impacting the workplace. As a global society, we’re entering a new reality: the era of the social enterprise. Cultural forces—enabled by the rise of social media—are making relationships with employees, customers, communities, and society essential to fulfilling a company’s mission.
While technology is fueling this seismic shift, it can also help manage it. HR leaders have a number of tools at their disposal to positively impact both talent issues and cultural integration, giving any merger a far better chance of success—the key is proper implementation. Here are some essential actions to help ensure a smoother transition:
Create a detailed cultural inventory. Online services and software products can be used to audit each company’s culture before operational changes begin; once the differences are identified and understood, steps can be taken to lessen their impact using strategic communications that meet the workforce where they are.
Listen. Employees want and need the opportunity to offer input and feedback—and again, technology can help. In addition to face-to-face meetings, live town halls conducted via social media workplace tools can provide a platform for employees to participate. These kinds of events create trust and allow voices to be heard. Social media and employee engagement platforms also enable work groups from both the acquiring and the acquired organizations to collaborate and post comments in a controlled setting, enabling management to dialogue with employees.
Additionally, by sensing internal and external data, trends, and leading practices, organizations can develop a holistic view into a merger or acquisition and the combining workforces. By listening, and collecting and analyzing data, leaders can yield insights on the business and their people today to anticipate the needs of tomorrow.
Embrace integration. With the advent of cloud-based computing systems, integration between companies has become easier. This advantage can be leveraged to facilitate mergers of e-mail servers, workflows, and accounting processes. The cloud can also make it easier to disseminate information. Workers can now be indoctrinated and trained through cloud-hosted portals where learning materials are uploaded. Video updates on merger activity from senior leadership can also be posted weekly, or even daily, for improved transparency.
Yes, integration has advanced with technology, but with it comes the need for clear, custom, and consistent communication with the workforce. Building a tailored, innovative, strategic communications plan can make the difference between successful adoption of new processes and culture and a failed merger.
These examples are just some ways to creatively share information with employees because communications in the world of the social enterprise means so much more than just e-mail. However, strategic communications plans are not one size fits all—to be successful, the communications should be tailored for the specific workforce in the ways they want to be communicated with. Communications today are truly strategic and innovative in nature, so think outside of the box when engaging employees, especially during times of change.
Platforms including mobile apps, corporate websites, digital workplace portals (like Deloitte’s ConnectMe), and sites dedicated to merger activity can all be put to work to facilitate integration. Digital tools can tailor and deliver messages to specific employee populations, and analytics can identify people who have read a communication—allowing HR to act with agility to reinforce a message or change delivery mechanisms to increase penetration.
Be Transparent and Employee-Centric
HR should get involved in communicating with employees at an early stage. Involvement can start as soon as the initial agreement has been reached. It’s important to point out that mergers impact employees at the acquiring company, as well as the one being acquired. Workers deserve the chance to not only ask questions but also understand the strategy and advantages of the union. An FAQ should be established that outlines the impact on operations, workflows, and employment benefits.
Employees are one of the biggest assets organizations have. Without strong planning for employee engagement, staff turnover and disengagement can reduce productivity and even jeopardize the M&A transaction itself. Enterprises must internalize the people aspect of a merger by addressing both cultural alignment and talent management—two of the most important success factors.
In the age of the social enterprise, employees want to feel valued. They demand information and the chance to be heard. Technology, in the hands of HR, can not only support requirements like benefit sign-ups and employment agreements but also facilitate bidirectional communication and a better understanding of a new corporate vision. If the merger of two organizations is a journey, enabling people through the use of technology is one of the best-possible ways to smooth out the road ahead.
Research over the last decade has made the case that employee engagement in an organization is highly correlated with success in achieving business goals. Gallup’s State of the American Workplace report found that companies with highly engaged employees experience 17% higher productivity, 20% higher sales, and 21% higher profitability, among many other positive metrics.
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An engaged workplace also helps create a positive work environment. When employees are engaged at work, they:
Feel a connection with the company
Believe that the work they’re doing is important
Want to work harder
The most successful companies know that a strategy of engaging and retaining new employees begins on their first day. First impressions are important, and the first day for a new employee is no exception. This is the first day of an onboarding journey that can take days, weeks, or even months to complete. Every organization should take advantage of the opportunity to make a new employee feel welcome and important.
The first day should be simple and focused on providing a great employee experience. However, despite the simple nature of the agenda, overlooked logistics can wreak havoc on a new hire’s first day. Do you want to make sure you’re starting off on the right foot? Here are some best practices to follow:
Organize and prepare early for the candidate’s first day.
Don’t wait to start preparing for the new hire. In this hiring market, it’s more likely employers will lose candidates between when the offer is accepted and a new employee’s first day. Because of that, companies should make an extra effort to stay in touch during that crucial period.
Make sure IT and office resources are ready for day one.
If a new hire has to wait a day to start working because an access code is not created, a phone doesn’t work, or a desk isn’t ready, the experience can leave a negative impression of the company. If you can, set up the new hire’s desk or work station so it is welcoming or at the very least prepared for work to commence.
Introduce new hires to teammates and key stakeholders.
The new hire is busy. Every teammate and leader is busy, too. Take the time early to introduce the new hire to the people they need to know. Take the new hire out to lunch or schedule a happy hour to get to know their team outside of the office. It can make your organization stand out as a great employer and make the new hire feel special.
Give new hires a tour of the facilities.
Make sure someone is available to provide a tour, not simply of the immediate working area, but of all the places the new hire is likely to go. Even minor logistics such as where to park your car, where to get coffee and store your food, places to eat lunch, etc.
Provide background on the company and business strategy.
Provide a detailed education to help the new hire understand the larger picture and take pride in your team and your business right from the start. Make sure the company literature is up to date and relevant. Help new employees understand how their work aligns with the work of their team members, business area and organization.
Provide clear job expectations from the start.
Take a second look at what you are communicating to the new hire. Are you communicating 30-, 60-, and 90-day goals? Do you give employees enough information and access to allow them to ask questions? Providing regular feedback will ensure that your new hires always know their strengths and areas for improvement. This sets the new hire up for success, which in turn leads to better retention.
Communicate with your new hire consistently and frequently.
Communication and relationship-building define the employee experience. Meet with new hires during their first day, first week and first month to answer any questions and mitigate any concerns. Look to assign your new employee with a mentor.
Especially in this candidate-driven hiring landscape, you want to make sure you’re doing all you can to retain the new hires you’ve worked so hard to recruit. It’s worth taking the time to ensure you have an onboarding strategy that prioritizes the new employee experience and builds engagement.
Eric Pezzo is the Director of Business Development at Aerotek.
For the third year in a row, respondents to the annual Callan Institute “Defined Contribution (DC) Trends Survey” specified reviewing their plan fees as a key area of focus and as the best way to improve their fiduciary position as plan sponsors.
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Asked in the fall of 2018, 106 defined contribution (DC) plan sponsors, both Callan clients and other organizations, said that for 2019, assessing fees was more important than any other activity they undertook in managing their plans.
Plan fees’ top rank for sponsor focus over the next 12 months replaced last year’s highest-rated area, retirement readiness, which fell to the middle of the pack for 2019.
Participant communication and financial wellness (a new category this year) were the next two highest-rated areas of focus for 2019. Prioritizing financial wellness and communications may likely go hand-in-hand in 2019, the Callan survey said. Despite being a newsworthy topic, cybersecurity was reported as a low priority in this year’s survey.
Looking back over the previous year, survey respondents also rated reviewing plan fees as the top action taken within the past 12 months to improve the plan’s fiduciary positioning. Implementing, updating, or reviewing their investment policy statement (IPS) came in second. Conducting a plan audit ranked third, followed by changing the investment menu, conducting formal fiduciary training, and reviewing compliance.
Drilling Down on Fees
Among the plan sponsors surveyed in Callan’s 12th annual review, 77.1% said they had figured and assessed their DC plan fees in the last year, and 57.5% said they looked at indirect revenue when calculating fees.
More than 80% used benchmarking as part of their fee calculation exercise, up from about 77% last year. Most (82.4%) said their plan consultant or adviser conducted the benchmarking, roughly the same proportion as the year before. About 22% also said they benchmarked their own fees in 2018, compared with only 14% in 2017.
Five in 10 plan sponsors are either somewhat or very likely to conduct a fee study in 2019 (52.5%), down from last year’s survey (60%). Other somewhat or very likely actions reported include switching to lower-fee share classes (56.1%) and switching to more institutional vehicles such as collective trusts or separate accounts (42.1%).
Renegotiating recordkeeper and investment manager fees will also be on plan sponsors’ to-do lists, the survey indicated, at 33.8% and 26.7%, respectively.
On the sometimes-controversial topic of revenue sharing, the survey found 19% of respondents used explicit asset-based fees in the latest year, versus 64% that reported using explicit per-participant fees for their plans. The margin between these two methods has widened since 2017.
No plans with revenue sharing reported that all of the funds in their plan included it, a decrease from the prior year. The most common was to have between 10% and 25% of funds paying revenue sharing, consistent with 2017. Still, about 6% of respondents said they are not sure what percentage of the funds in the plan offer revenue sharing.
Other significant trends highlighted in the 2019 Callan survey include:
Eighty-six% of plans in the survey offer a 401(k) plan, and 62.2% were “mega plans” with more than $1 billion in assets in their DC plans.
Fully bundled plans, which use the same recordkeeper and trustee, with all investment funds managed by the recordkeeper, declined to 12.3%, the lowest in the survey’s 12-year history. This reflects a larger unbundling trend over time, Callan said.
Four out of five plan sponsors surveyed say they engage an investment consultant.
Eighty-three% said they took steps to ensure Employee Retirement Income Security Act (ERISA) Section 404(c) compliance in 2018, and more than half personally reviewed that compliance.
A 3(38) discretionary adviser was retained by 16% of the plans.
Twenty-two% of surveyed plans said they made a change to their company match policy in 2018, and 33% of these increased the match.
Those plans providing a retirement income projection fell modestly to 73.1% from the last two years’ level, following a dramatic increase in this offering from 2015 (56.1%).
Fifty-eight% of the Callan survey respondents said they have a policy on asset retention.
A Roth feature is now offered by 85% of the plans.
Respondents to the 2019 Callan survey spanned a wide range of industries, with the largest proportion (21.7%) in financial services, followed in turn by technology, professional services, energy/utilities, and health care.
As the new year progresses, it’s a perfect time to reflect and reassess personally and professionally. Businesses use strategic planning and budgets to reflect that same thinking at an enterprise level. However, all too often those choices are rushed—and even forced—based on constraints and lack of time. More importantly, people tend to be considered last on the list.
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This year, take the time as leaders and HR professionals to reflect on your role and your department’s role when it comes to your organization’s people. Think of it as a talent management resolution (TMR).
Here are seven trends that affect people and should influence your TMR.
Embrace a blended workforce. With low unemployment, we need to find the right skill set for work assignments. Contract employees may have more specialized skills. Women who left the workforce to raise families are looking to come back. Retirees are living longer and many want to work again. Your workforce has an opportunity to be more diverse than ever. Are you up for it?
Keep employees engaged in an effective environment. Technology can cut costs or create efficiencies. The only problem is it can also alienate employees and weaken relationships. Use technology to strengthen relationships, include remote workers, and improve collaboration. Engagement is about relationships and connections, not efficiencies.
Create a more positive experience for candidates from sourcing to onboarding. Employee experience is all the rage—and for good reason. It seems to take on importance, however, after an employee gets settled. We must remember the experience starts before they ever take the job. Modernize your recruitment systems and efforts to come across as relevant. Do what hardly any employers do—offer considerate, genuine feedback along the way. Demonstrate confidence in new hires, and make it a priority to give them a quick win or success when they first begin. Last, truly onboard rather than orient. Paper-pushing orientations do little and are passive and boring. The onboarding process should include an ongoing journey that integrates new hires into the way the company works and how you like to get things done.
Use the appropriate training format. Online learning has its place, and so does face-to-face learning. The trend shouldn’t be to move training online but rather to find the best way to achieve our goal—to create better, more powerful learning experiences for employees that have a real effect on the business. Sometimes real networking is needed and helpful. If you do move to online learning or collaborative online training experiences, make it good.
Refocus your attention on hiring for attitudes and behaviors rather than qualifications. We typically hire for expertise, and then we fire because of attitude, poor cultural fit, and soft skills. Remember to use the hiring process to build your company brand, and make sure the company’s values and ethos are advertised in the public domain. Most important, determine how your organization can screen for cultural fit as well as job skills.
Have a plan to keep your very best. Retention is key again with our current low unemployment rates. Managers need to understand why people stay, why they leave, and the influence they have over those factors. Creating a “stay plan” that determines the risk of potential departure on your team and the ability to address those risks early can have a significant bottom-line impact.
Business has gotten tougher, and we need to as well. Resilience or mental toughness has become a key survival skill in this new and disruptive world. To what degree have we created that skill set in our workforce? The companies that have will surpass those that have not.
In the last 4 years, gamification has grown more prevalent in the assessment industry. Part of this trend’s growth stems from the science, and another portion stems from cultural appeal.
Source: Tashatuvango / shutterstock
Rooms where a group of individuals are placed and given a time frame to “escape” by solving a variety of puzzles have become more popular—you might’ve even participated in one. There were 22 game rooms in the United States in 2014, and now, there are over 1,800. Additionally, the board game industry has seen a veritable explosion of growth, growing into a $9.5 billion industry with over a 29% compound annual growth rate (CAGR) in various markets. Consumers, aka our employees, love games, and HR professionals are taking note.
Is Picking My Favorite Furry Animal on Social Media a Legitimate Assessment?
It’s important to know how fast and expansive the technology behind gamified assessments is growing. The industry has moved beyond simple gaming techniques like progress bars, the gamification technique to encourage you to finish a survey or an assessment by letting you know how close to the goal you are. Now fast forward—the assessment industry is realizing the multitude of data it can absorb by moving to a gamified platform, such as speed of decision-making, mouse movement, and pace of engagement.
The research shows using gamification in assessments can have the following benefits:
Increase inclusivity, as gamification can be much more effective in testing and engaging individuals who have attention deficit hyperactive disorder (ADHD) and its related versions.
Should You Go Out and Jump on the Gamification Bandwagon?
There are some key questions to consider when looking at gamified assessments:
Make the process smooth. Consider how the gamification fits into the overall employee or candidate experience. Does the process seem incongruent?
Don’t skip the science! A gamified assessment still needs to go through the same validity and reliability testing a regular cognitive assessment would need to go through in your environment.
Make sure the results are useful. There are some gamified assessments that are valid instruments but that may only provide you with very basic information (e.g., this person is optimistic). Will you be getting a return on the investment?
Enjoyment is key. Research shows most gamified applications in the consumer space fail, and that is because making a good game is difficult. As a result, have your employees try out the gamified assessment, and make sure they enjoy it.
It is exciting to see gamification come to the assessment space, and a number of providers have made huge strides in moving this particular space forward. I look forward to seeing what the future holds, but regardless, I know it will be fun.
As the Vice President, Solution Provider Programs at Bersin, Deloitte Consulting LLP, Franz Gilbert is responsible for developing the programs for Bersin and Deloitte to interact with the HR Solution Provider community. He oversees analyst coverage approaches, marketing asset products, events, developing new programs to advise HR Solution Provider members on topics such as sales enablement, product engineering approaches on AI, Blockchain, offshore development centers, and strategic advisory on topics such as capitalization strategies. Gilbert is a graduate of Wichita State University, Bluefield College and Penn State University and resides in Jacksonville, Florida.
 https://roomescapeartist.com/2017/07/30/three-years-of-room-escapes-the-growth-of-the-us-market/  https://www.toynews-online.biz/marketing/dice-age-the-unstoppable-momentum-of-the-board-games-industry  Landers, Richard N., et al. “Gamification science, its history and future: Definitions and a research agenda.” Simulation & Gaming (2018): 1046878118774385.  Korn, Oliver, et al. “Defining Recrutainment: A Model and a Survey on the Gamification of Recruiting and Human Resources.” International Conference on Applied Human Factors and Ergonomics. Springer, Cham, 2017.  Narayanan, Darshana, et al. “Gamification of the hiring process.” Workforce Solutions Review 7.5 (2016): 32-34.  Attali, Yigal, and Meirav Arieli-Attali. “Gamification in assessment: Do points affect test performance?” Computers & Education 83 (2015): 57-63.  Attali, Yigal, and Meirav Arieli-Attali. “Gamification in assessment: Do points affect test performance?” Computers & Education 83 (2015): 57-63.
The start of a new year is a great time to hire new legal staff. If you’re like many law firms and corporate legal departments in the United States, that’s good news, as litigation and other specialty areas are driving organizations into hiring mode in the beginning of 2019.
In a recent Robert Half Legal survey of more than 200 lawyers, 47% of respondents said their law office or company plans to grow its legal team in the first half of 2019. But 91% of hiring managers said it is challenging to find the skilled legal professionals they seek.
The Need for Specialized Experience
Hiring is brisk throughout the legal field, but professionals with a background in financial services, health care, real estate, and technology are especially in demand, as are those who have worked in litigation or business/commercial law. Current and anticipated increases in regulations—both in the United States and internationally—are prompting employers to seek staff who specialize in compliance administration and data privacy. And with Baby Boomer retirements reaching a peak, managers are on the lookout for attorneys and legal support staff to handle the heavier workload related to taxes and trusts.
Wanted: Tech-Savvy Support Staff
The legal field is in the midst of a rapid digital transformation, and companies need employees who can keep up with the change. Paralegals and secretaries should have not only solid legal knowledge but also the ability—and desire—to harness the power of the latest technical tools. Top candidates have advanced skills in eDiscovery, document management, process automation, legal databases, and online research. They should also understand the issues and best practices around data security.
When you come across job candidates with strong digital and interpersonal skills, you should act quickly to bring them on board, as they likely have attracted the attention of other local employers. This doesn’t mean cutting corners, though. Rather, shorten the timeline for vetting and interviewing, then make a job offer contingent on a successful reference check.
Hot Practice Areas
In the survey linked above, 32% of respondents say litigation will be the most in-demand practice area for the first half of 2019. Within this practice area, companies seek specialists in commercial litigation, insurance defense, and employment litigation. Because skilled litigators and support staff are in such demand, their compensation is equally high. For example, a litigation support/eDiscovery specialist/analyst with 1 to 2 years of experience has a salary midpoint (or median national salary) of $63,250, while a manager with 7 to 9 years of experience can expect to be paid $111,750.
Other practice areas anticipated to see a rapid rate of hiring include privacy, data security and information law (12%), general business/commercial law (11%), and ethics/corporate governance (11%).
Benefits Get an Upgrade
Competitive salary alone is often not enough to land highly skilled job candidates, who value a well-rounded package of benefits, perks, and incentives. In addition to medical insurance and paid time off, top job candidates want these extras the most:
Retirement savings plans
Flexible work schedules
Uptick for In-House and Flexible Hiring
While companies still outsource some work to third-party providers, our research shows general counsel offices across the nation are bringing projects back home. This “insourcing” has caused an increase in hiring for contract administrators, litigation support personnel, and commercial law specialists to handle the additional workload.
However, in-house doesn’t mean all workers are full-time employees. To handle short-term projects and seasonal demands, law firms and legal departments are taking full advantage of a blended staffing model. Some examples of onetime tasks include compliance training, workplace investigations, and HR projects. Using interim legal professionals is also an optimal way for a company to assess skills and organizational culture fit before inviting them to join the team on a full-time basis.
The Importance of Employee Retention
The best hiring strategies mean little if they aren’t coupled with equally strong retention efforts. With skilled professionals in such high demand, you need to make sure they’re happy at work and satisfied in their role. Such measures include:
A comprehensive onboarding process
Regular check-ins and transparent communication
Acknowledgment for good work, from verbal recognition to cash bonuses
Generous training and professional development programs
In a tough hiring market, you need the latest salary data and employment trends to make informed decisions and competitive offers.
Jamy J. Sullivan is executive director of Robert Half Legal, a premier legal staffing service specializing in the placement of attorneys, paralegals, legal administrators, and other legal professionals with law firms and corporate legal departments. Based in Menlo Park, Calif., Robert Half Legal has offices in major North American and global markets and offers a full suite of legal staffing and consulting solutions.
How many of your employees work from home? A recent study by Amerisleep analyzed 1,001 remote employees across the United States. Among other things, this survey revealed both the sweeter and the more bitter sides of the increasingly popular remote lifestyle.
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The industry that remote employees choose greatly affects the amount of sleep they get.
The Centers for Disease Control and Prevention (CDC) reported that 35% of typical American adults are not getting sufficient sleep each night. For adults who work from home, that number is 39.5%. That said, 75.4% of remote workers in the marketing and advertising industry got the doctor-recommended hours of sleep. Only 50% of remote employees in the transportation industry got the same.
Job dissatisfaction was much more common when remote employees didn’t get the proper amount of sleep.
Without adequate sleep, workers described lowered satisfaction levels on the job. Moreover, those who didn’t get the recommended amount of sleep were 76% more likely to exhibit high levels of stress. Both overall job satisfaction and general stress levels worsened with poorer sleep.
Most people who worked from home enjoyed good sleep quality on typical weeknights.
Nearly 65% of remote workers said they slept well and that it took them an average of 25 minutes to fall asleep on an average weeknight. Remote employees who worked in government and public administration were the most likely to have high sleep quality and experienced 7.1 hours of sleep each night on average. Only 53.6% of transportation and warehouse workers obtained the recommended sleep and enjoyed an average of just 6.5 hours of sleep per night.
The majority of remote employees planned to work from home for the rest of their career.
Seventy-five percent of those who worked from home expressed the desire to continue doing so until retirement. In fact, they were 57% more likely than the average American to be satisfied with their job. Over 80% reported high job satisfaction. Additionally, around 40% of remote employees described their days as “not stressful.”
Remote employees worked longer hours but less efficiently.
On average, people worked from home 47 hours a week but felt unproductive roughly a quarter of the time. The education industry was the most likely to waste time, confessing to wasting 31.4% of their working hours, on average. The telecommunications industry reported wasting the least amount of time of any industry studied.
Cleaning the house was the most popular downtime activity for remote workers.
Nearly 62% of remote workers used their spare time to clean their home. Equally as often, they used the extra time to watch TV. Almost 53% of the time, they ran errands.
More than a quarter of remote employees experienced social isolation.
About 80% of people who worked from home said they felt isolated from others at least a little of the time. Roughly 76% reported feeling left out at least a little of the time, as well.
Best Practices for Working from Home
Know your capacity for productivity at home.
With all of the home-based distractions to possibly pull you away from work, it’s important to set up an area or office space where you can truly concentrate. Children, pets, and even electronics can all serve as productivity barriers, so it’s important to understand your own ability to focus before deciding to work remotely.
Get all the sleep you can.
Remote workers have the advantage of not needing to spend time on morning and evening commutes; however, they’re still not sleeping better. If you choose to work from home, make sure to use some of that extra time to get some rest.
The odds are you’ll love working from home.
The majority of remote employees planned to continue working from home for the rest of their career, and chances are, you would, too. Increased flexibility in scheduling, working locations, and even wardrobe can lead to happier employees. Social isolation, however, can be a major downside, so try to schedule social activities or spend time with loved ones whenever possible. Ultimately, remote work has become possible in almost every industry, so long as the employee has a laptop and Internet connection. It may very well be a path you choose. Simply follow the best practices and maintain your focus to make the most of this relatively newfound way to work.
The U.S. Department of Labor (DOL) continues to devote substantial resources to investigating certain low-wage industries each year. Among those regularly targeted are fast-food establishments and other restaurants, grocery stores, and construction companies. The Wage and Hour Division (WHD) conducted 5,751 investigations of food-service establishments during fiscal year 2018, resulting in more than 41,000 employees being paid almost $43 million in back wages. A large part of the back wages resulted from improper use of tip credit provisions. While this article will address only the requirements of the Fair Labor Standards Act (FLSA), you should be aware that several states don’t allow tip credits. Almost half of the states have their own tip credit regulations that are more stringent than the FLSA.
Who Is a Tipped Employee?
The FLSA defines tipped employees as workers who customarily and regularly receive more than $30 in tips per month. The Act permits an employer to take a tip credit toward its minimum wage obligations to tipped employees equal to the difference between the required cash wage of $2.13 and the minimum wage. Thus, the maximum tip credit an employer can currently claim under the FLSA is $5.12 per hour (the minimum wage of $7.25 minus the minimum required cash wage of $2.13).
The regulations, which became effective in April 2011, state that an employer must provide the following information to a tipped employee before using the tip credit:
The amount of cash wages the employer will pay tipped employees (at least $2.13 per hour);
The additional amount claimed by the employer as a tip credit;
An explanation that the tip credit claimed by the employer cannot exceed the amount of tips actually received by tipped employees;
An explanation that all tips received by tipped employees are to be retained by employees except for a valid tip-pooling arrangement that is limited to employees who customarily and regularly receive tips; and
A statement that the tip credit will not be applied to tipped employees unless they have been informed of the tip credit provisions.
The regulations state the employer may provide oral or written notice to tipped employees to inform them of the tip credit provisions. Further, the regulations state that an employer must be able to show it has provided notice. An employer that fails to provide the required information cannot use the tip credit provisions and must pay tipped employees at least $7.25 per hour and allow them to keep all tips received. To make it easier to prove that the notice has been furnished to employees, written notice should be provided.
Employers electing to use a tip credit must be able to show that tipped employees received at least the minimum wage when direct (or cash) wages and the tip credit amount are combined. If an employee’s tips and the direct wage of at least $2.13 do not equal the minimum hourly wage of $7.25, the employer must make up the difference.
Whose Tip Is It?
The regulations state that tips are the sole property of tipped employees regardless of whether the employer takes a tip credit. The regulations prohibit any arrangement between the employer and tipped employees in which any tips become the employer’s property.
The DOL’s 2011 final rule amending its tip credit regulations specifically sets out the WHD’s interpretation of the FLSA’s limitations on an employer’s use of its employees’ tips when a tip credit is not taken. The rule states in pertinent part:
Tips are the property of the employee whether or not the employer has taken a tip credit. . . . The employer is prohibited from using an employee’s tips, whether or not it has taken a tip credit, for any reason other than that which is statutorily permitted: as a credit against its minimum wage obligations to the employee, or in furtherance of a valid tip pool.
The 2011 regulations allow for tip pooling among employees who customarily and regularly receive tips, such as servers, bellhops, and bartenders. Conversely, a valid tip pool may not include employees who don’t customarily and regularly receive tips, such as dishwashers, cooks, chefs, and janitors. One factor that helps determine who may be included in a tip pool is employee interaction with customers.
One positive change: The 2011 regulations did not impose a maximum contribution amount or percentage on valid mandatory tip pools. The employer, however, must notify tipped employees of a required tip-pool contribution amount and may take a tip credit only for the actual tips each tipped employee ultimately receives.
When an employee is employed in both a tipped job and a nontipped occupation, a tip credit is available only for the hours the employee spends in the tipped occupation. An employer may take a tip credit for the time a tipped employee spends performing duties related to the tipped occupation, even though the duties may not produce tips. For example, a server who spends time cleaning and setting tables, making coffee, and occasionally washing dishes or glasses is engaged in a tipped occupation even though those duties do not produce tips. However, if a tipped employee spends a substantial amount of time (more than 20% in his workweek) performing nontipped duties, a tip credit may not be taken for time spent on those tasks.
The WHD issued an administrator’s opinion letter on November 8, 2018, further delineating when a tip credit may be used for employees that are engaged in dual jobs with both tipped and nontipped duties.
A compulsory charge for service (e.g., a charge placed on a ticket when the number of guests at a table exceeds a specified limit) is not a tip. Service charges cannot be counted as tips, but they may be used to satisfy the employer’s minimum wage and overtime obligations under the FLSA. If an employee receives tips when a compulsory service charge is added, the tips may be considered in determining whether he is a tipped employee and in applying the tip credit.
If tips are charged on a credit card and the employer must pay the card company a fee, the employer may deduct the fee from the employee’s tips. Further, if an employee does not receive enough tips to make up the difference between the direct (or cash) wages (which must be at least $2.13 per hour) and the minimum wage, the employer must make up the difference. If an employee receives only tips and isn’t paid a cash wage, the employer owes the full minimum wage.
Deductions from an employee’s pay for walkouts, breakage, or cash register shortages that reduce her wages below the minimum wage are illegal. If a tipped employee is paid $2.13 per hour in direct wages and the employer claims the maximum tip credit of $5.12 per hour, no deductions can be made without reducing the employee’s pay below the minimum wage (even if the employee receives more than $5.12 per hour in tips).
The regulations state that if a tipped employee is required to contribute to a pool that includes employees who don’t customarily and regularly receive tips, the employee is owed all tips she contributed to the pool and the full $7.25 minimum wage.
Computing Overtime for Tipped Employees
If an employer takes a tip credit, it must calculate overtime based on the full minimum wage, not the lower direct wage. The employer may not take a larger tip credit for overtime hours than for straight-time hours. For example, if an employee works 45 hours during a workweek, he is owed 40 hours at $2.13 in straight-time pay and five hours of overtime at $5.76 per hour ($7.25 x 1.5 ” $5.12 in tip credits).
The National Restaurant Association, along with several other groups, filed suit against the DOL, seeking to overturn the regulations. The U.S. Supreme Court, however, allowed the rules to take effect.
A tour through a typical workplace is likely to show employees fresh out of school working alongside workers their parents’ age or older. Researchers have long taken note of the wave of Millennial workers—and lately the even younger Gen Z workers—finding their way in the world of work long populated by Gen Xers, Baby Boomers, and even those choosing to work well past a common retirement age.
Researchers also have noted differences and tension between the age groups. Tension often takes the form of older workers worried about being pushed aside and younger workers feeling unappreciated despite their education and skills. Although the multigenerational workforce has always existed, it’s getting more noticeable as people in their 70s and beyond choose to stay employed and the Gen Zs, which the Pew Research Center defines as those born after 1997, begin to enter the workforce.
New research published by Dell Technologies takes a look at what employers need to consider as they continue to mix employees of all ages. Some 12,000 high school and college students from around the world were surveyed from August to September 2018 to find out their views on technology and careers. A few of the key findings included in a summary of the research show that Gen Zs:
Want to work with cutting-edge technology and share their knowledge;
Are confident of their tech skills but not sure of their workforce readiness; and
Are eager for human interaction.
Meaning for HR
When workers of different ages are thought of as being significantly different from one another, tension can prevent the different generations from learning from one another. But employers can reap the benefits of an age-diverse workforce if they develop an attitude that goes beyond age stereotypes.
Brad Federman, Chief Operating Officer of HR consultancy F&H Solutions Group, says it’s important to put research such as the Dell report into context.
“Generational differences studies are based on broad groups so the findings are relevant to broad groups, not to small groups and individuals,” Federman says. “What that means is that using the research for a broad-brush approach, such as marketing and building a brand across a large population, makes sense. Applying the research at an individual or small-group level may actually cause damage because at some point we are making assumptions about individuals; we are stereotyping.”
Federman says little research exists demonstrating any real difference in workplace attitudes across generations, and studies often contradict themselves because of differences in research methodologies. He says HR professionals need to focus on building relationships, rather than differences between age groups.
“Generational tension, meaning lacking respect for someone who is of a different generation, typically occurs because we have trained people to size others up based on perceived differences without even getting to know them,” Federman says. “Everyday people from different generations work together without incident.”
Federman says different generations actually have a great deal in common. “They relate to change, teamwork, why they stay or leave an organization, employee engagement, and more in the same or similar manner.”
Look for the Best, Regardless of Age
Federman says organizations need to retain and train the best employees, no matter the age. “Older workers are our historians,” he says. “They have a great deal of knowledge to share. Many older workers are fantastic employees that can mentor others in the organization.” Also, mentoring doesn’t have to go just one way. Often younger employees can help older employees master new innovations and technologies.
Arlene Donovan, an Executive Coach and Workforce Development Professional at Turning Point Coaching, agrees that older and younger employees can bring out the best in each other. While it’s great to have the insights of young workers fresh out of college, an organization also benefits from the experience older workers bring. She cites the example of a 66-year-old account executive she knows who has “a Rolodex that would make the best of the best weep.” He’s active (he runs 12 miles a day), healthy, and eager to keep contributing.
Donovan says employers need to look at the gifts and talents individuals bring to the organization and select the best candidate, regardless of age. And older workers have a lot to offer. For example, they often stick with an employer 5 or even 10 years, and they’re also not always chasing the next title or salary increase.
Donovan stresses that she doesn’t want to stereotype workers based on age, but often, it is the older workers who are “rich with knowledge” but still overlooked because of age.
Tips for Employers
Donovan has suggestions to help employers ensure they are getting the most from their employees, regardless of age:
Make sure job advertisements don’t discourage senior talent by using words and phrases that signal a bias in favor of younger employees.
Have younger employees shadow older workers so that the younger employees can learn strategies and techniques from the more experienced workers.
Cross-train employees. Having each person sit for 2 months in the seat of another worker will result in each worker gaining a greater appreciation for coworkers and make for a stronger team.
Bring in an executive, career, or life coach for employees to help them solve problems they experience in the workplace. Donovan says a neutral coach may help employees work out issues better than the services available in most employee assistance programs.
Make employee training and development go beyond the typical sexual harassment and other employment law sessions. Surveying employees about training that is of interest to them and offering it frequently can help both young and old succeed.
Nearly 3 million on-the-job injuries occur each year. These injuries may often result in significant disruptions and costs to your company, as well as your employees and their families. While not all are considered serious, more than one-third of on-the-job injuries require time off work to facilitate recovery.
Source: Panchenko Vladimir / shutterstock
Workplace injuries happen for a variety of reasons. From changes in process or technology to simply ensuring employees can do their job most effectively, it is important to assess and reassess existing programs and how they serve the needs of your organization. A proactive approach to injury prevention and treatment in the workplace not only benefits the bottom line but also demonstrates that the organization values its most prized asset: its employees.
Automation of work. Technology, computers, and robotics are being integrated into our workplaces, often introducing new and perhaps unexpected hazards.
Greater workforce diversity. People from different backgrounds and cultures are working alongside each other, resulting in the possibility of different languages creating communication barriers. Misunderstandings resulting from communication issues increase the likelihood of accidents.
An aging workforce. The rise of sedentary work and lifestyles means that some workers are at higher risk for work-related musculoskeletal disorders.
No industry is completely safe. There is greater recognition that workers in industries some consider safe (such as health care, lodging, retail, and transportation) face significant hazards.
Increased temporary and contract employment. Traditional relationships between workers and employers are shifting, and changes in safety programs and policies will be required to ensure the safety of all workers.
We know workplace injuries can be costly from a business standpoint. And we know there is a long list of reasons why so many of these injuries occur. But the big question remains: What can you do to prevent injuries at work, and how does it impact your business?
To best answer that question, I thought I’d give you a few firsthand examples of real companies that have used workplace injury prevention programs to not only create a safer work environment but also improve the bottom line:
Challenge: An energy company’s office team experienced an increased number of injuries and illnesses, meaning higher medical and disability costs, plus absenteeism.
How an injury prevention program helped solve it: An ergonomics program helped prevent repetitive motion injuries, resulting in a 74% success rate in its first year (currently at 92%) in addressing early signs and symptoms before escalation to medical.
Challenge: An automotive company was seeing an increase in the number of injuries, resulting in increased OSHA recordables rates, absenteeism, and short- and long-term disability. It needed a broad injury treatment and prevention program for 9,000 employees across multiple facilities.
How an injury prevention program helped solve it: New programs were implemented, including new hire work conditioning, early intervention, self-care, preshift warm-up exercises, first-aid follow-ups, and a 9-week exercise conditioning program. The business results were significant:
90% resolution of musculoskeletal disorders
83% resolution of reported discomfort
$2.5 million in cost avoidance, which is determined by the number of participants multiplied by an average cost of an OSHA recordable from ergonomic injuries
Challenge: A manufacturing company experienced an increase in injuries and illnesses among new hires, resulting in increased OSHA recordable rates, worker compensation costs, and higher turnover.
How an injury prevention program helped solve it: The program this manufacturer implemented assesses work tasks and safety practices before, during, and after the hiring process to ensure new hires meet the requirements of the job and are properly trained. Ultimately, this proactive approach resulted in decreased OSHA recordable rates by 60% in the first year and another 18% the following year. Additionally, fewer OSHA recordables meant a savings of $12,000 to $25,000 per case.
Challenge: Med-tech giant Boston Scientific noticed employees at its Maple Grove, Minn., manufacturing facility were experiencing an increasing number of ergonomic injuries and realized it needed to fix the existing program—and proactively eliminate or reduce the risk of injuries and help employees stay safe and pain-free.
How an injury prevention program helped solve it: Boston Scientific was shown how to create an ergonomic stretching program, with movements tailored to each work station. The key to engagement was making it fun, which meant two things: The first was a musical cue to announce room-wide stretch breaks. And the song of choice was none other than the theme song of the most storied and celebrated villain in movie history: Darth Vader. Cue the “Imperial March!” The second was visible support and participation from the company’s leadership—at every level. Once the musical cue comes on, everyone in the room has to stretch—from executives to engineers to safety managers to production workers. When everyone participates, everyone wins and the business benefits.
Remember, injury treatment and prevention programs protect your most valuable resource—your employees—while allowing them to reach optimal performance and maximize productivity while on the job. Employees who feel supported and safe at work contribute to the well-being of the business in the long run.
Nicole Chaudet is the executive director, product execution, with HealthFitness. She is charged with leading the team that takes new products, services, and product enhancements to market. She has been delivering employee well-being programs and solutions, both on-site and in a consultative role, for more than 20 years.