The right process to pick depends in large part on what you want to accomplish with performance management and what you’re willing to invest in it. Here are some principles to keep in mind when deciding on your policy and performing assessments:
Performance reviews are often stressful and difficult because the employees don’t know how they’ll be evaluated and they’re worried they’ll be surprised with a bad review. But reviews, however often they’re done, shouldn’t be a surprise. If you give employees regular feedback on their performance and address poor performance when it happens, then the review becomes more of a reminder and summary of what employees are doing well and where they have opportunities to improve.
Setting clear performance expectations and holding employees accountable to them improves efficiency and productivity. It also improves morale. Conversations with an underperforming employee may be challenging, but allowing poor performance to continue unabated can cause widespread frustration and resentment from coworkers whose work is affected by it. Ignoring poor performance only compounds the problem.
Employees are more likely to take ownership over their performance goals if they have a role in defining those goals.
Connecting performance measures to company objectives and values can increase employees’ sense of purpose and engagement by drawing a direct correlation between their individual work and performance and your collective success as a company.
It’s helpful to structure performance evaluation meetings and conversations around the specific expectations set in the job description to ensure that the discussion is directly applicable to that employee’s particular job duties.
Documenting performance evaluations can help you justify pay increases, decreases, or other employment decisions like termination that could be challenged as discriminatory. It’s safest to terminate an employee when you have documentation that justifies the legitimate business reasons for the termination.
For more insights into effective performance management, you can speak with the HR Pros who contributed this piece.
Several states and localities, including those in Illinois, Maryland, Washington, DC, California, Maine, Minnesota and Oregon will raise the minimum wage effective Sunday, July 1, 2018. The updated hourly rates include:
Los Angeles, Malibu, Pasadena and Santa Monica, CA:
$13.25 (more than 25 employees);
$12.00 (25 or fewer employees)
Other California Cities:
El Cerito: $13.60
San Francisco: $15.00
San Leandro: $13.00
Portland, ME: $10.90
Note that additional minimum wage rate rules may apply for tipped employees. If you have specific questions about minimum wage rates in your state or locality, the HR Pros at HR Support Center can help.
Our previous post looked at alternatives to “working interviews” that allow you to try out a potential employee before hiring them full time. When you test applicants however, there are guidelines you should follow in order to avoid potential discrimination claims.
The Uniform Guidelines on Employee Selection Procedures (UGESP)–jointly adopted in 1978 by the Equal Employment Opportunity Commission, the Civil Service Commission, the Department of Labor and the Department of Justice–provides a framework for determining the proper use of tests and other selection procedures. The guidelines were designed to assist employers, among others, with federal requirements prohibiting employment practices that discriminate on the grounds of race, color, religion, sex and national origin. The EEOC recommends the following best practices for testing and selection:
Ensure that employment tests and selection procedures are job-related and appropriate for your purposes. For example, a proofreading test might be appropriate for an editing position or an administrative assistant job, but it would not be a valid test for an automobile mechanic or an electrician. If you use an outside vendor for testing, the vendor’s documentation supporting the validity of a test may be helpful if you find your company in litigation. However, you as the employer are ultimately responsible for ensuring that your tests are non-discriminatory, both in intention and effect.
Assess whether your selection procedures unintentionally screen out a protected group–for example people of a certain race or sex. If so, determine whether there is an equally effective alternative selection procedure that has less adverse impact and, if there is one, adopt the alternative procedure.
Keep your tests and procedures up-to-date relative to the specific positions. Job duties change over time, and as they change, so should your employment tests and selection procedures. There’s no sense testing for skills if a job no longer requires those skills. Tests and selection procedures should be predictive of success in the job.
Make sure whoever develops the tests, purchases them from a vendor, administers the tests, and assesses their results understands the effectiveness, appropriateness and limitations of the test. Tests can a useful management tool, but managers who use them need to know what they’re doing.
If you want to avoid the hassle of pre-employment testing, another way to get an idea of an applicant’s skill level is to ask follow-up questions during the interview process and request that the applicant provide examples. So, if a candidate says in the interview that they have a particular skill, you could ask them to tell you about a time they used that skill or how they might handle various scenarios that require that skill. You could also pose questions that only someone with that skill would know how to answer.
The use of pre-employment testing can be helpful in finding the right candidate to fill a position. Being mindful of non- discriminatory practices helps avoid problems that might otherwise arise. If you have questions about pre-employment testing, the HR Pros at HR Support Center can help.
Few things are more frustrating for employers than finding out that a new hire oversold their knowledge, skills, and abilities. The employee looked great on paper and appeared confident and competent in the interview, but when it came to doing the basic duties of the job, they just didn’t have what it took.
To lessen the likelihood of this unfortunate situation, some employers want to see the candidate in action before formally hiring them. They’ll invite the candidate to spend a day or so at the workplace, shadowing a seasoned employee or doing some of the tasks of the job. This is known as a working interview. It’s legal to conduct working interviews, but there are serious drawbacks and risks to understand and consider. Consequently, our HR Pros generally don’t recommend doing them. However, if you do conduct them, here are some issues to be aware of:
First, working interviews must be compensated at a rate of at least the minimum wage. You’re basically hiring the candidate as an employee for that span of time. At the bare minimum, you would need to have the person complete a Form W-4 and Form I-9 to do the work. You cannot classify them as an independent contractor as they don’t meet the legal criteria for that classification. Legally, they are temporary employees – even though the time is fixed at one day or a couple of hours. Should you decide to go this route, we recommend that you have a check prepared for them to take with them at the end of the day. This way you don’t run afoul of any state laws pertaining to the delivery of final paychecks.
There are several risks to consider if you decide to do a working interview. One is that the candidate could be injured during that time and you would be liable for a workers compensation claim. If the employee wasn’t reported and paid correctly, your workers compensation carrier may not cover the claim. Additionally, candidates completing working interviews could file for unemployment if you do not hire them for additional work after the working interview. Unemployment tax is tied to the prospect’s wages during the preceding year, not to the employer. That said, the shorter the period the person is employed by you, the less they will draw from your unemployment account.
Luckily, there are several alternatives to the working interview.
Alternative 1: Use a Temp Agency
If it is essential that you observe the candidate in your office under regular working conditions, you can contact a temporary agency and inquire if they would hire the candidate for a single day. The person would then be the employee of the temporary agency and no employee-employer relationship would be created between your company and the candidate. If you anticipate a lot of working interviews, this might be a good option to explore. You will, however, pay a premium for this service.
Alternative 2: Skills Testing
Another option is making a skills test part of the interview. The difference between working interviews and skills testing is the environment in which they are done. During a working interview, you ask the candidate to work alongside an employee or complete tasks that are a benefit for your organization. For instance, if you were to ask a candidate for an accounting position to work on your next payroll for four hours with the intention of using their work, you would have to pay them for their time. In contrast, skills testing involves setting up a scenario and asking the candidate to complete certain tasks on their own that will not result in a net gain to your organization. For example, you could provide a candidate with old payroll information, assign them a task with that information, and then assess their work for accuracy. This would be an acceptable unpaid skills test.
You can also ask an applicant to complete a skills test exercise at home. You will generally want to make sure that the amount of time it will take to complete the exercise will be reasonable–around an hour or so, not a full day.
Whatever kind of testing you decide to do, there are some general guidelines you should keep in mind so you don’t unintentionally discriminate against a particular group of people. We will cover those in our next post.
The HR Pros at HR Support Center can help you with best practices regarding employment testing and other recruiting-related questions.
“At-will” employment refers to a common-law rule that the employment relationship may be terminated by the employer or the employee at any time, with or without cause, with or without notice, for any reason (allowed by law) or no reason at all. The intent behind this rule is to allow either the employee or employer to terminate the employment relationship without financial liability to the other. To minimize the risks of wrongful termination claims, however, employers need to understand at least three big exceptions to the employment at-will concept.
Illegal Reasons for Termination
At-will employment only extends to reasons that are permitted by law. The law allows for pretty much any reason at all, so long as it is not based on a person’s inclusion in a protected class. For example, you could legally terminate an employee for coming to work with green hair, but not because the employee revealed that they have social anxiety.
However, you should be careful when terminating employment even for valid reasons. If you were to simply terminate an employee without any disciplinary actions or attempts to remedy the problem, or if you had previously not terminated other employees for the same reason, the employee could claim they were terminated for an illegal reason. Therefore, It’s helpful to give employees a chance to improve (unless their behavior warrants immediate termination) and to follow your discipline and termination policies consistently.
If the employee who showed up to work with green hair on Monday is terminated without the opportunity to correct the hair problem and had no other record of poor performance, she might reasonably contend that she had instead been fired for revealing that she had social anxiety.
At-will employment also doesn’t allow you to terminate employment because an employee exercised their rights under established public policy. Even under at-will employment, it’s illegal to terminate an employee because they requested time off to serve on a jury or participate in a police investigation.
At-will employment is the standard in every state except Montana, but not every employer-employee relationship follows that standard. A contractual relationship, for example, would not be at will; and you don’t necessarily need something in writing for a contract to exist. An implied contract could be created by an employer’s oral statements or by the implied meaning of other written policies. For example, referring to an employee’s first 90 days as a “probationary period” can imply guaranteed continuing employment when the probationary period has ended. Likewise, a statement that the company will employ you as long as you meet the minimum job performance standards is essentially a promise that the company will only discharge an employee for a performance-related issue, therefore eliminating the at-will relationship.
If you want to maintain a policy of at-will employment, it is best to avoid any language that could imply conditions for continuing employment. It’s also helpful to have a statement in your handbook noting that employment is at will and that nothing in the handbook alters that at-will relationship.
The HR Pros at HR Support Center can answer your questions about at-will employment, employee handbooks and a host of other employment issues.
Employee turnover is expensive. According to a recent survey by the Society for Human Resource Management, the average cost-per-hire is $4,129. However, turnover costs can vary depending on the length of time it takes to fill the role, the importance of the position to the employer and the employer’s industry. Some costs are easily calculable, such as those of recruiting, hiring and onboarding. Other costs can be difficult to measure, such as the impact of a termination on employee engagement. Easily measurable or not, all these costs hurt your bottom line.
Fortunately, many of the costs of turnover can be measured and predicted, so you can budget for employee turnover and operate with a reasonable sense of your yearly turnover costs. Here are the main expenses to expect:
Recruiting and hiring. These costs include the expenses for advertising the open position, background checks and pre-employment testing. They also include internal operational costs for the time taken to market the job, screen applicants and interview candidates.
Onboarding. Here we have the costs of orientation and training materials, as well as staff and management time to provide training and additional supervision to the new employee.
Burden on staff. Having an empty seat means other employees have to pick up the slack. Depending on your role, they may also have to cover for you while you spend valuable time looking for a candidate to hire. Even after the new employee is hired, it takes time to train new people. You may also have to plan for overtime so that employees temporarily assigned other job duties can still get their own work done.
Productivity loss. Even with everyone pitching in and working extra time, productivity will drop. After the hire, it will take time for the replacement worker to reach the former employee’s level of productivity. As it can take on average more than 40 days to fill a position, and longer for the new person to master the role, this productivity gap is no small expense.
Mistakes. Errors are likely to increase when employees are covering the duties of their former coworker and when the new hire is learning to do the job. These are, unfortunately, a cost of doing business.
Disengagement. Employee engagement is likely to be low when turnover is high, and if the former employee was well-liked, morale might take a momentary plunge after they leave the company.
The first three costs above are ones you can and should track. They’ll give you a history of your costs-per-hire and enable you to predict future turnover costs. You can estimate annual turnover costs by adding up these costs for each employee and multiplying the total number by your annual turnover rate.
The latter three costs may be, to some extent, inevitable costs of doing business, but you can minimize those costs by working to decrease turnover. Put thought and effort into your recruiting, hiring and onboarding procedures so you hire right people at the right time. Engage your employees and retain them longer by building and maintaining a healthy company culture. There are dozens of resources from the HR Pros in our HR Support Center to help you bring on and retain the best people.
Let’s face it. A number of employers intentionally misclassify workers as independent contractors rather than employees. It is estimated that 10 to 20 percent of employers misclassify at least one worker. Both old- and new-economy sector workers are impacted, in industries like trucking, construction, house cleaning, in-home care and technology, as well as those in the “sharing” economy (think Uber and Airbnb). The employer’s incentive is lower labor costs, but the practice means these companies evade Social Security, Medicare, unemployment and other tax obligations. They also avoid covering their misclassified workers for workers compensation and unemployment insurance.
The reduced labor costs give them an unfair competitive advantage versus the legally compliant business owners. The practice also shorts revenue collection for the federal and state governments–several studies conservatively estimate the shortfall at over $3 billion annually–which shifts the tax burden to law-abiding taxpayers. And the workers find themselves without the legal protections afforded employees for wages and overtime, unemployment insurance if they find themselves out of work, and workers compensation coverage if injured on the job.
We’ve covered the criteria for the Internal Revenue Service (IRS) and the Department of Labor (DOL) to determine the correct worker classification. The net result of being found out, whether through a worker filing a complaint with a state labor agency, or a workers compensation or unemployment claim being filed which alerts those agencies, is that significant fines and penalties can be levied on the company. Plus, the individual(s) responsible may find themselves personally liable for the uncollected taxes.
Employer Fines and Back Payments
Even in cases where misclassification is unintentional, an employer can face fines including:
A $50 fee for each Form W-2 that should have been filed
1.5% of the employee’s wages, plus interest
40% of the employee’s FICA (Social Security and Medicare) taxes that were not withheld from the employee
100% of the employer’s matching FICA contributions
However, if intentional misclassification is suspected, an employer can be charged these fines and penalties:
20% of all employee wages paid
100% of FICA contributions for both employee and employer
Criminal penalties of up to $1000 per misclassified employee
Imprisonment for up to one year
To restate the point: the individuals responsible for the misclassification may be held personally liable.
Employee Benefits Owed
A misclassified employee who files a complaint may be eligible for benefits owed to them, such as:
401(k) or pension plan contributions
Damage to Company Name and Reputation
If the fines and penalties aren’t enough, costly lawsuits can be a financial drag on a company and result in punitive damages. The time, attention and focus of management is diverted from growing the business to salvaging it. Bad publicity stemming from lawsuits and possible media coverage, including viral social media, can do irrevocable harm to the company’s, and the owners’, reputation.
In short, employee misclassification can cost employers a great deal. Compliance with government tax, labor and insurance regulations is a relatively small price to pay for the legal coverage—and peace of mind—it provides.
It’s also the right thing to do.
Are you looking to get it right? Corporate Payroll Services helps thousands of businesses like yours handle payroll taxes, unemployment insurance, workers compensation and other mandated deductions. We’re here to help, so you can focus on running your business.
We’ve all seen it—one of our employees has a bad cold, maybe even the flu, but they come to work anyway. In some cases, the employee has the option of taking time off, and you’d prefer they do so, but still they show up, putting everyone in the workplace at risk. The reasons vary. Sometimes the employee can’t afford the reduced hours. Sometimes they can take the financial hit, but they’re worried about falling behind on their projects, missing an important meeting, or looking bad next to their co-workers who never seem to take a day off.
Some employers encourage sick employees to stay home and rest. To that end, they offer paid sick or personal time so that employees who already feel lousy don’t have to suffer the stress of a smaller paycheck. While paid leave doesn’t work 100% of the time to keep sick employees home, it does help.
In fact, more and more states have passed laws requiring it. In 2011, Connecticut became the first state to pass a paid sick leave law. Now, a total of ten states plus Washington D.C. require at least some employers to provide paid sick leave. These are Arizona, California, Connecticut, Maryland, Massachusetts, New Jersey, Oregon, Rhode Island, Vermont, and Washington. Many cities have their own, typically more generous ordinances, as well.
The paid sick leave laws passed so far share some common elements. Employers are typically required to offer an hour of paid sick leave for a certain number of hours worked per week (usually 30 or 40). Every state-mandated paid sick leave law requires employees to be able to use paid sick leave to care for a family member, and most allow the time to be used in case of domestic or sexual violence. The laws vary most—though still not dramatically—with respect to which employees are eligible and when, and what kind of documentation can be required to prove that employees used the leave for a permissible purpose.
Currently, eighteen states have pending sick leave bills, but we don’t know how many, if any, will soon pass. If a paid sick leave law is enacted in your state, we recommend taking the following steps:
Review all leave policies for compliance. While these laws will generally allow you to keep a current policy as long as it is at least as generous as required by the state law, you will need to comply with the various notice and record keeping requirements as well.
Decide whether lumping vacation, personal, and sick leave together would be better for your organization and, if applicable, for which specific employee groups (you may want a lump sum policy for full-time employees and an hour-by-hour accrual system for part-timers).
Determine which employees work in places with paid sick leave laws and consider whether a one-size-fits-all policy or location-specific policies would be better.
Confirm that usage terms, accrual, coverage, carry-over, and any vesting rules meet minimum requirements.
Review the employee notice; the law may require a poster, written policy, notice on employee paystubs of time accrued, or all of those.
Update your handbook and distribute it to employees
If you have more questions about paid sick leave and how to handle it, talk to the HR Pros in HR Support Center who contributed this post.
Earlier we covered the basics of unemployment insurance at the federal and state level. Here, we will discuss what causes a claim for unemployment benefits to be denied or approved. Then we will take a look at what processes employers can put in place to positively impact their state unemployment tax rate, so they can minimize their unemployment tax paid.
Like the rules about the rates and amount of unemployment benefits, the rules governing eligibility for benefits vary from state to state. However there are many similarities as well.
When is an employee eligible for unemployment benefits?
In general, employees are eligible for unemployment insurance if they are out of work through no fault of their own. For example, if an employee loses her job through a layoff or reduction in force, she is eligible for unemployment benefits. Even if the employer had good reason to fire her, such as for poor performance due to lack the job skills, inability to get along with co-workers or honest errors in judgment, she may still be eligible to receive benefits. Relatively minor, unintentional infractions do not rise to the level of the “misconduct” that would prevent her from receiving benefits.
A worker may also be eligible for unemployment benefits if she quits or resigns from her job for “good cause.” While the definition of “good cause” varies, it includes situations like:
Intolerable working conditions, such as being sexually harassed or facing discrimination
Health or safety concerns unrelated to the job
Large pay reduction, typically over 20%
Loss of ability to get to work, through their own or public transportation
Illness or injury that the employer fails to accommodate
Change in job duties not specified in the employment contract
In order to show “good cause,” an employee must show that she tried to work with her employer to resolve the issue before resorting to quitting the job.
When is an employee ineligible for unemployment benefits?
An employee may be ineligible for benefits for simple reasons like their tenure—most states require employment for a year before benefits accrue—or the fact that they’re a contract or freelance worker. Independent contractors are technically self-employed and therefore ineligible. (You can learn more about the classification of Independent Contractors vs. employees here and here.)
If an employee quits without “good cause,” they are ineligible for benefits. Simple job dissatisfaction is not considered good cause. Going to school, getting married or moving out of the area do not fall under the classification either.
If their own misconduct led to termination, they are ineligible as well. Misconduct includes actions that are illegal or willfully violate company policy such as:
Sexually harassing coworkers
Revealing trade secrets
Coming to work intoxicated
Stealing from a coworker
Destroying company property
Chronic tardiness or unexcused absences
Misconduct is also a matter of interpretation and degree. An off-color comment may be meant as a joke and the employee who made the comment can be counseled and/or reprimanded. Conversely, intentional, ongoing harassment might be considered disqualifying misconduct.
Given the justifiable opportunities for former employees to claim unemployment benefits, and the gray area that defines “misconduct” in denying unemployment claims, employers should be sure to thoroughly document the reasons an employee is terminated. If an employee files an unemployment claim, and the employer wishes to contest it, to help protect their unemployment rate, there are steps to take. We’ll cover that in our next post.
For more information on unemployment claims and processes, see the HR Support Center.