I've seen the gamut with employee handbooks: small companies with really excellent handbooks, medium and even larger companies with no handbook at all or one that is poorly written. Before investing in writing or updating your employee handbook, ask yourself two basic questions:
1. What is our handbook's purpose?
It's first purpose should be to clearly explain to your new and existing employees what is expected of them and what they can expect from the company.
It's second purpose is to reinforce your employment brand. It's difficult to claim that your employees are your greatest asset when your handbook looks like a Frankenstein document - policies pieced together with different fonts and different styles - or sounds vanilla, like it was downloaded from the internet. If your organization is truly a great place to work, your handbook should reinforce that.
It's third purpose is to provide a reasonable line of defense in the case of an employment dispute. The first thing any governmental agency is going to ask for in the case of a claim (from unemployment hearings to claims of harassment, discrimination or retaliation) is a copy of the relevant policies from your handbook. Saying you don't have one is a bad start to that process. Having one that has policies that are clearly out of compliance is equally bad.
2. What pitfalls should I avoid when writing the handbook?
First, don't try to cover every possible scenario in your handbook. I frequently get calls from owners asking me to make an addition to the handbook. After questioning, it turns out that a single employee is doing something the owner doesn't like. The owner feels that he or she can't address the behavior or performance issue if there isn't a policy in the handbook to back them up.
One of my favorite examples of this occurred when an HR colleague of mine had to write a new paragraph for her company's handbook that defined the difference between a sandal (acceptable) and a flip-flop (unacceptable). I understand that the larger the organization, the more careful it must be to ensure everyone is treated the same, but I have no problem with, and expect a manager to simply deal with many situations without the benefit of a written policy. "Jane, those flip flops are unacceptable attire for the office and pose a trip hazard for yourself." If Jane says, "there's no policy against it," the manager can simply say, "we can't have a written policy that covers everything. It's my judgement that your footwear is inappropriate." As a Department of Labor investigator told me once, "managers need to manage."
Second, don't try to write like a lawyer. Sometimes small business owners think they make their handbook sound better by writing in lawyereze: "henceforth, hereinafter, party-of-the-first-part" etc. Your handbook should be written at the level appropriate for your workforce - I typically strive to make my handbooks understandable to a reasonably intelligent 8th grader.
Third, allow a labor attorney or a competent HR professional to write, review or update your handbook for you. There was a great public service announcement series put out by the NCAA a few years ago that reminded viewers that most NCAA athletes go pro in something other than sports. If you are a professional in a field other than labor law or human resources, you might benefit from utilizing the expertise of someone who did go pro in those areas who understands the nuances of a well-written and compliant employee handbook.
Monday, January 9, 2017
Thursday, December 8, 2016
HR Priorities for 2017
Here are some suggestions for your HR priorities for 2017:
1. The Overtime Rule is on hold, but...
I did quite a few projects this year related to the proposed overtime rules that were supposed to take effect December 1. These changes were surprisingly put on hold at the 11th hour by a Federal judge in Texas, and their fate is uncertain due to the election results. But a common misconception I encountered with employers is the belief that as long as an employee meets the salary test, it is fine to treat that employee as exempt. What I found is that many of the jobs I surveyed were misclassified for failing to meet a duties test. The employers thought their risk was with the new higher salary threshold, but they were really at risk all along. So make sure your jobs are properly classified, even if the salary is over $24,000.
2. Switch to the new I-9 form
The USCIS has revised the I-9 form and employers are required to begin using it by January 22. The list of approved documents and the basic process haven't changed, they've just updated the form to make it a little easier to use.
3. Update Job Descriptions
This can seem like a mundane administrative task, but job descriptions are your first line of defense in any employment related conflict. An unemployment hearing? Send us the job description. A workers comp situation? Let's look at the job description. An EEOC charge? Send us the job description. A lawsuit? Your attorney is going to ask for the job description. Job duties change - make sure the job descriptions change with them.
4. Add or review your pre-employment assessments
If you currently use assessments as part of your interview and selection process, review them to make sure they are providing useful information toward making your hiring decisions. If you are not using assessments, that means you are probably depending on interviews alone, which is the least valid method for choosing new hires. Just saying...
5. Make on-boarding a priority
Most companies I speak with plan to add employees in 2017. Choosing the right people is critical, but getting them off to a great start is perhaps even more important. Too many companies hire good people, chunk 'em in the lake and tell 'em to start swimming. Invest in a solid plan for the first day, week, month and quarter, with plenty of feedback and plenty of support. You'll spend a lot less time recruiting if you get the on-boarding part right.
6. Evaluate your use of 1099 workers
There are legitimate and questionable uses of 1099 workers. Both the IRS and the DOL care about this issue, and the penalties for improperly designating workers as contractors when they should be employees are quite punitive (from heavy fines all the way to potential jail time). So if 1099 workers play a key role in your personnel strategy, you best make sure that you have all your ducks in a row in this area.
1. The Overtime Rule is on hold, but...
I did quite a few projects this year related to the proposed overtime rules that were supposed to take effect December 1. These changes were surprisingly put on hold at the 11th hour by a Federal judge in Texas, and their fate is uncertain due to the election results. But a common misconception I encountered with employers is the belief that as long as an employee meets the salary test, it is fine to treat that employee as exempt. What I found is that many of the jobs I surveyed were misclassified for failing to meet a duties test. The employers thought their risk was with the new higher salary threshold, but they were really at risk all along. So make sure your jobs are properly classified, even if the salary is over $24,000.
2. Switch to the new I-9 form
The USCIS has revised the I-9 form and employers are required to begin using it by January 22. The list of approved documents and the basic process haven't changed, they've just updated the form to make it a little easier to use.
3. Update Job Descriptions
This can seem like a mundane administrative task, but job descriptions are your first line of defense in any employment related conflict. An unemployment hearing? Send us the job description. A workers comp situation? Let's look at the job description. An EEOC charge? Send us the job description. A lawsuit? Your attorney is going to ask for the job description. Job duties change - make sure the job descriptions change with them.
4. Add or review your pre-employment assessments
If you currently use assessments as part of your interview and selection process, review them to make sure they are providing useful information toward making your hiring decisions. If you are not using assessments, that means you are probably depending on interviews alone, which is the least valid method for choosing new hires. Just saying...
5. Make on-boarding a priority
Most companies I speak with plan to add employees in 2017. Choosing the right people is critical, but getting them off to a great start is perhaps even more important. Too many companies hire good people, chunk 'em in the lake and tell 'em to start swimming. Invest in a solid plan for the first day, week, month and quarter, with plenty of feedback and plenty of support. You'll spend a lot less time recruiting if you get the on-boarding part right.
6. Evaluate your use of 1099 workers
There are legitimate and questionable uses of 1099 workers. Both the IRS and the DOL care about this issue, and the penalties for improperly designating workers as contractors when they should be employees are quite punitive (from heavy fines all the way to potential jail time). So if 1099 workers play a key role in your personnel strategy, you best make sure that you have all your ducks in a row in this area.
Good Turnover, Bad Turnover
Employee turnover, the number of employees that leave your organization each year, is an underused metric that can tell us a lot about an organization. Many organizations don't even track it. Others simply shrug off the data. They rationalize that all turnover is the ex-employee's fault. However, top performing companies tend to track turnover by various categories (voluntary, involuntary, by department or manager, by age group, by ethnic group, etc.). And they make adjustments in their processes to ensure that what turnover they do experience is good turnover.
What do you mean, "good" turnover? Isn't all turnover bad? Not at all. Some turnover is good. A recent hire's performance starts to slip after about 6 months on the job. Management intervenes and gently tries to get the employee back on the right path, but the employee resists all efforts to rehabilitate and begins to have a negative impact on the team. The employee eventually quits or gets fired. The rest of the team thinks, finally! This is probably good turnover. An organization that holds onto poor performers without attempting to bring their performance up to standard hurts the morale of those who are delivering solid or even excellent performance. Which often leads to bad turnover.
Bad turnover is the turnover that's often dismissed by management. That's when a good worker gives her two week notice because she is frustrated that management is unwilling to address the poor performance of her coworkers. Or the employee who is struggling during his first 90 days, but no one is helping him master the skills or learn the ropes. He could have been a solid contributor if someone had just taken a little time to show him how to be successful. Finally, there's the employee who leaves your organization for a very small pay raise, indicating that his loyalty to your organization was pretty thin. Loyalty that you might have earned with some minor culture adjustments.
Here are some generalizations about turnover:
- Voluntary Turnover occurs when an employee quits on your company. If this number is high, it's generally a bad thing. People join companies but quit bosses. If your voluntary turnover is high, look at the soft skills of your supervisors and managers. That's not to say that all voluntary turnover is bad - some folks resign when they start being held accountable. But if your voluntary turnover rate is stubbornly high, it's likely linked to your management culture.
-Involuntary Turnover occurs when your company quits on an employee. If this number is high it means people are failing at your company at a high rate. Perhaps your organization needs a better training or on-boarding program? It can also mean that your performance standards (expectations) could be too high. Or, it can mean that your selection processes are ineffective and you're hiring people who aren't a good fit for the roles.
The important thing is to track your turnover by voluntary/involuntary at least. Then dissect it further if need be. And don't just blame the exes. Take a look at what the causes could be and try to build a culture where most turnover is good turnover.
What do you mean, "good" turnover? Isn't all turnover bad? Not at all. Some turnover is good. A recent hire's performance starts to slip after about 6 months on the job. Management intervenes and gently tries to get the employee back on the right path, but the employee resists all efforts to rehabilitate and begins to have a negative impact on the team. The employee eventually quits or gets fired. The rest of the team thinks, finally! This is probably good turnover. An organization that holds onto poor performers without attempting to bring their performance up to standard hurts the morale of those who are delivering solid or even excellent performance. Which often leads to bad turnover.
Bad turnover is the turnover that's often dismissed by management. That's when a good worker gives her two week notice because she is frustrated that management is unwilling to address the poor performance of her coworkers. Or the employee who is struggling during his first 90 days, but no one is helping him master the skills or learn the ropes. He could have been a solid contributor if someone had just taken a little time to show him how to be successful. Finally, there's the employee who leaves your organization for a very small pay raise, indicating that his loyalty to your organization was pretty thin. Loyalty that you might have earned with some minor culture adjustments.
Here are some generalizations about turnover:
- Voluntary Turnover occurs when an employee quits on your company. If this number is high, it's generally a bad thing. People join companies but quit bosses. If your voluntary turnover is high, look at the soft skills of your supervisors and managers. That's not to say that all voluntary turnover is bad - some folks resign when they start being held accountable. But if your voluntary turnover rate is stubbornly high, it's likely linked to your management culture.
-Involuntary Turnover occurs when your company quits on an employee. If this number is high it means people are failing at your company at a high rate. Perhaps your organization needs a better training or on-boarding program? It can also mean that your performance standards (expectations) could be too high. Or, it can mean that your selection processes are ineffective and you're hiring people who aren't a good fit for the roles.
The important thing is to track your turnover by voluntary/involuntary at least. Then dissect it further if need be. And don't just blame the exes. Take a look at what the causes could be and try to build a culture where most turnover is good turnover.
Sunday, November 13, 2016
New OSHA Reporting Procedure
If your organization has 10 or more employees and doesn't appear on the list of exempt industries, you are subject to OSHA's reporting rules. This includes maintaining an OSHA 300 log as well as posting an OSHA 300A form in a common area each year from February 1 through April 30.
OSHA has introduced some new rules that go into effect on January 1, 2017. OSHA believes that making injury data public will "nudge" employers to focus on safety and they believe these changes will help them gather more accurate data. Here are some of the highlights:
- employers with 250 employees or more will be required to submit the information on their 2016 OSHA 300A form electronically by July 1, 2017. This will expand to include their 300 and their 301 forms by July 1, 2018. In 2019 the deadline will move up to March 2.
- employers with 20 to 249 employees and fall in the official list of hazardous industries must also submit their 2016 OSHA 300A form electronically by July 1, 2017. They will also submit only their OSHA 300A form electronically in future years - by July 1, 2018 and beginning March 2 in subsequent years.
The website portal through which employers will submit their data is scheduled to go live in February 2017. Employers will reportedly have the option of entering data directly into a web form, uploading data from a csv file, or transferring data through an API interface (for those employers who are already using an automated record keeping platform).
OSHA has introduced some new rules that go into effect on January 1, 2017. OSHA believes that making injury data public will "nudge" employers to focus on safety and they believe these changes will help them gather more accurate data. Here are some of the highlights:
- employers with 250 employees or more will be required to submit the information on their 2016 OSHA 300A form electronically by July 1, 2017. This will expand to include their 300 and their 301 forms by July 1, 2018. In 2019 the deadline will move up to March 2.
- employers with 20 to 249 employees and fall in the official list of hazardous industries must also submit their 2016 OSHA 300A form electronically by July 1, 2017. They will also submit only their OSHA 300A form electronically in future years - by July 1, 2018 and beginning March 2 in subsequent years.
The website portal through which employers will submit their data is scheduled to go live in February 2017. Employers will reportedly have the option of entering data directly into a web form, uploading data from a csv file, or transferring data through an API interface (for those employers who are already using an automated record keeping platform).
Big Mistake with New OT Rules
I've been quite busy helping organizations prepare for the December 1 deadline to be in compliance with the new overtime rules. Most people understand the new salary test - that in order to be exempt from overtime compensation requirements an employee must now earn $913 per week or more. But many people still struggle with the duties tests. And it's not surprising as the Department of Labor's published Fact Sheets for Executive, Professional, Administrative and Computer-Related Occupations exemptions are intentionally (in my opinion) vague.
The biggest mistake I encounter when discussing this with a business owner or high-ranking executive is the misapplication of the Administrative exemption. The confusion lies in this sentence: The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. Business leaders set the bar for what they think qualifies as discretion, independent judgement and matters of significance much lower than the DOL does and this places their business at risk for back pay and fines.
As a good example of what I mean, let's take the DOL investigator who may show up at your door one day. The investigator performs office or non-manual work directly related to the general operations of the business as defined in the Administrative exemption. The investigator has the discretion to recommend corrective action, levy fines and even submit violators for prosecution, based on the level of intent the investigator discerns. Sounds like that job certainly meets the standard for the Administrative exemption, right?
Wrong! DOL investigators are non-exempt. And here's why: investigators use an enforcement manual that guides them on the proper application of the law. And even though they frequently encounter situations that may not be specifically addressed in the manual, and even though they have a reasonable amount of discretion as to how to apply the standards, as evidenced by the sometimes contradictory advice you might get when you call their employer help-line, the DOL sees the investigators as people who apply the law, they don't write the law.
Now compare that with administrative employees in your organization whom you've deemed to be exempt based on this exemption. Does your payroll administrator have more discretion than a DOL investigator regarding matters of significance in your business? Does your accounting assistant have more? Most likely each spends the bulk of their day processing transactions based on policies or best practices already in place. Most likely they need to get the approval of someone who meets the Executive Exemption like their controller, CFO or business owner to make any significant change in the way things are done. Most likely their discretion lies in when to do certain things and to determine priorities within their defined scope of work, not in changing processes or policies in matters of significance.
So he punch line here is, if your administrative employees don't have more discretion than a DOL investigator, then you should classify them as non-exempt.
The biggest mistake I encounter when discussing this with a business owner or high-ranking executive is the misapplication of the Administrative exemption. The confusion lies in this sentence: The employee’s primary duty includes the exercise of discretion and independent judgment with respect to matters of significance. Business leaders set the bar for what they think qualifies as discretion, independent judgement and matters of significance much lower than the DOL does and this places their business at risk for back pay and fines.
As a good example of what I mean, let's take the DOL investigator who may show up at your door one day. The investigator performs office or non-manual work directly related to the general operations of the business as defined in the Administrative exemption. The investigator has the discretion to recommend corrective action, levy fines and even submit violators for prosecution, based on the level of intent the investigator discerns. Sounds like that job certainly meets the standard for the Administrative exemption, right?
Wrong! DOL investigators are non-exempt. And here's why: investigators use an enforcement manual that guides them on the proper application of the law. And even though they frequently encounter situations that may not be specifically addressed in the manual, and even though they have a reasonable amount of discretion as to how to apply the standards, as evidenced by the sometimes contradictory advice you might get when you call their employer help-line, the DOL sees the investigators as people who apply the law, they don't write the law.
Now compare that with administrative employees in your organization whom you've deemed to be exempt based on this exemption. Does your payroll administrator have more discretion than a DOL investigator regarding matters of significance in your business? Does your accounting assistant have more? Most likely each spends the bulk of their day processing transactions based on policies or best practices already in place. Most likely they need to get the approval of someone who meets the Executive Exemption like their controller, CFO or business owner to make any significant change in the way things are done. Most likely their discretion lies in when to do certain things and to determine priorities within their defined scope of work, not in changing processes or policies in matters of significance.
So he punch line here is, if your administrative employees don't have more discretion than a DOL investigator, then you should classify them as non-exempt.
Wednesday, October 12, 2016
How will HR make us better?
I had a prospect recently ask me an important question, and indeed the right question. He asked, if I'd invested in an expensive HR leader a few years' ago, how would my organization be better off today? The reason this is the right question is that if investments in HR don't yield a positive return on investment (ROI), should they be made at all? My MBA training says, no, they shouldn't be.
The research shows that, on average, high performing small and mid-sized companies spend more on HR than their lower-performing competitors (i4cp study). So what is HR doing to make those companies more profitable?
The answer falls into several categories:
1. Opportunity Costs - when one small company waits longer than its competitors to invest in a HR resources, it probably doesn't mean the company has no HR function. It likely means the work that is being done is being done by committee. The committee often consists of the owner or operational leader, the administrative leader and the financial leader. If those leaders could be more effective at their jobs if not constrained by HR related tasks and issues, then the company might be better off. Examples might include a business owner investing many hours creating a performance review platform or a controller researching an HR compliance issue when a trained HR professional could do either much faster.
2. Targeted Expertise - another prospect once told me he didn't need HR help because his controller was a CPA. That's like saying I don't need a dentist because I have a doctor. If my tooth is hurting, my doctor may be able to help, but a dentist has more specialized knowledge - and vice versa for a cold or flu. A trained, experienced HR professional can help reduce the time it takes to arrive at a correct organizational diagnosis and develop an appropriate prescription for organizational aches and pains.
3. Priorities - when key HR initiatives are dependent on individuals in the organization whose primary roles are in other functional areas, HR initiatives often go unfinished. Frequently when I speak with companies who don't have a true HR function, they tell me lots of good ideas they've had but haven't had time to implement. A dedicated HR professional can help push those initiatives to the finish line. If they were worth putting on the list to begin with, they are perceived to have value by the leadership team (improved retention, improved engagement, quicker ramp-up in productivity, avoiding bad hires, etc.)
4. Risk Avoidance - this is the most tenuous argument, but it's not illegitimate - how many work comp claims/EEOC claims/unemployment claims, etc. might you have had if not for the programs initiated and managed by your skilled HR leader? Car insurance only has a positive ROI if you wreck your car. For those who have never wrecked, it's easy to feel that buying that insurance was not a good investment. But those who have wrecked know its value.
At the end of the day, if your organization could benefit from having a stronger, more capable, better trained workforce with a more efficient and user-friendly platform for finding, selecting, on-boarding, retaining, managing, evaluating and inspiring those workers, an HR professional can probably help. But feel free to measure that HR professional's performance against those standards.
The research shows that, on average, high performing small and mid-sized companies spend more on HR than their lower-performing competitors (i4cp study). So what is HR doing to make those companies more profitable?
The answer falls into several categories:
1. Opportunity Costs - when one small company waits longer than its competitors to invest in a HR resources, it probably doesn't mean the company has no HR function. It likely means the work that is being done is being done by committee. The committee often consists of the owner or operational leader, the administrative leader and the financial leader. If those leaders could be more effective at their jobs if not constrained by HR related tasks and issues, then the company might be better off. Examples might include a business owner investing many hours creating a performance review platform or a controller researching an HR compliance issue when a trained HR professional could do either much faster.
2. Targeted Expertise - another prospect once told me he didn't need HR help because his controller was a CPA. That's like saying I don't need a dentist because I have a doctor. If my tooth is hurting, my doctor may be able to help, but a dentist has more specialized knowledge - and vice versa for a cold or flu. A trained, experienced HR professional can help reduce the time it takes to arrive at a correct organizational diagnosis and develop an appropriate prescription for organizational aches and pains.
3. Priorities - when key HR initiatives are dependent on individuals in the organization whose primary roles are in other functional areas, HR initiatives often go unfinished. Frequently when I speak with companies who don't have a true HR function, they tell me lots of good ideas they've had but haven't had time to implement. A dedicated HR professional can help push those initiatives to the finish line. If they were worth putting on the list to begin with, they are perceived to have value by the leadership team (improved retention, improved engagement, quicker ramp-up in productivity, avoiding bad hires, etc.)
4. Risk Avoidance - this is the most tenuous argument, but it's not illegitimate - how many work comp claims/EEOC claims/unemployment claims, etc. might you have had if not for the programs initiated and managed by your skilled HR leader? Car insurance only has a positive ROI if you wreck your car. For those who have never wrecked, it's easy to feel that buying that insurance was not a good investment. But those who have wrecked know its value.
At the end of the day, if your organization could benefit from having a stronger, more capable, better trained workforce with a more efficient and user-friendly platform for finding, selecting, on-boarding, retaining, managing, evaluating and inspiring those workers, an HR professional can probably help. But feel free to measure that HR professional's performance against those standards.
Communicating Overtime Changes
So you have finalized your strategy for being in compliance with the new overtime changes on December 1. You have, haven't you? If not, you better get on with it. While there is some activity in congress that might delay or modify the new rules, it appears the chances of that happening are slim, so you better have a plan.
Assuming you have a plan, how are you going to break the news to those affected? Telling someone they're getting a raise to the new minimum is pretty easy - but it can demotivate those similarly situated who happen to already be over the limit. If Jane has spent 10 years getting to the $48,000 level, she's not going to be thrilled that Ann, 8 years her junior with 8 years less experience, gets automatically bumped from $39,000 to $47,500 in one day. Explaining the change to Ann is easy, but don't forget to have a conversation with Jane.
But how do you tell someone who is currently salaried that they are going back to hourly? Keep in mind that employees may react differently to the news. Some may be thrilled that they are going to be eligible for overtime compensation going forward (assuming that they will be making more money). On a side note: If Bob routinely worked 55 hours a week while he was salaried, calculating a break-even wage rate so that Bob must continue to work 55 hours to retain his total compensation is a sure loser. Before, Bob's 55 hours were discretionary, but now you've made them essentially mandatory. He's likely going to feel differently about those hours now.
However, others may see it as a demotion and a career killer. How do you assure them that neither is true? Here are some tips:
1. Tell them early - your employees watch the news and are likely waiting to hear how they're going to be affected. I understand delaying the conversation a while to see if congress intervenes, but some states require a notice before wages are reduced (7 days in SC, 24 hours in NC, before the hours are worked in VA). So don't let that deadline pass, especially if your plan is a "net zero" plan that accounts for hours-worked as an exempt employee.
2. Be honest - this has nothing to do with their performance and if not for a government mandate you wouldn't be having this conversation. If it's good for them (they're going to earn more), tell them. If you're having to modify (reduce) their hourly rate from a straight salary-to-hourly conversion in order to account for overtime, explain why you're having to do it that way. If they are being reclassified from exempt to non-exempt, they'll need to start keeping a timesheet of some sort. This can also be demotivating, but explain that it's not that the company doesn't trust them, it's required. And also explain how it affects their career ambitions. If their goal is to move up, make sure they understand that this change does not alter their ability to do that (assuming that is true).
3. Don't forget any benefits impacts - some organizations offer different benefits to exempt and non-exempt employees. While the government defines overtime compensation rules, they don't define your vacation policy, so give some thought as to how you're going to handle the things you can control.
4. Train supervisors - if Stan is now non-exempt, he can't work through his lunch anymore or work off the clock (including answering excessive emails or texts after hours). Praise his loyalty, but explain that he's putting the company at risk. Stan may also need training in the company's time-keeping system. Whether it's manual, a time clock, or an electronic system, don't assume he knows how to use it.
5. Tell them who to go to with questions - it may be better to have someone like your HR leader or your finance leader be the pressure valve for these conversations so the workers' supervisors and managers can focus on getting the work done and serving your customers rather than getting mired up in this transition.
Assuming you have a plan, how are you going to break the news to those affected? Telling someone they're getting a raise to the new minimum is pretty easy - but it can demotivate those similarly situated who happen to already be over the limit. If Jane has spent 10 years getting to the $48,000 level, she's not going to be thrilled that Ann, 8 years her junior with 8 years less experience, gets automatically bumped from $39,000 to $47,500 in one day. Explaining the change to Ann is easy, but don't forget to have a conversation with Jane.
But how do you tell someone who is currently salaried that they are going back to hourly? Keep in mind that employees may react differently to the news. Some may be thrilled that they are going to be eligible for overtime compensation going forward (assuming that they will be making more money). On a side note: If Bob routinely worked 55 hours a week while he was salaried, calculating a break-even wage rate so that Bob must continue to work 55 hours to retain his total compensation is a sure loser. Before, Bob's 55 hours were discretionary, but now you've made them essentially mandatory. He's likely going to feel differently about those hours now.
However, others may see it as a demotion and a career killer. How do you assure them that neither is true? Here are some tips:
1. Tell them early - your employees watch the news and are likely waiting to hear how they're going to be affected. I understand delaying the conversation a while to see if congress intervenes, but some states require a notice before wages are reduced (7 days in SC, 24 hours in NC, before the hours are worked in VA). So don't let that deadline pass, especially if your plan is a "net zero" plan that accounts for hours-worked as an exempt employee.
2. Be honest - this has nothing to do with their performance and if not for a government mandate you wouldn't be having this conversation. If it's good for them (they're going to earn more), tell them. If you're having to modify (reduce) their hourly rate from a straight salary-to-hourly conversion in order to account for overtime, explain why you're having to do it that way. If they are being reclassified from exempt to non-exempt, they'll need to start keeping a timesheet of some sort. This can also be demotivating, but explain that it's not that the company doesn't trust them, it's required. And also explain how it affects their career ambitions. If their goal is to move up, make sure they understand that this change does not alter their ability to do that (assuming that is true).
3. Don't forget any benefits impacts - some organizations offer different benefits to exempt and non-exempt employees. While the government defines overtime compensation rules, they don't define your vacation policy, so give some thought as to how you're going to handle the things you can control.
4. Train supervisors - if Stan is now non-exempt, he can't work through his lunch anymore or work off the clock (including answering excessive emails or texts after hours). Praise his loyalty, but explain that he's putting the company at risk. Stan may also need training in the company's time-keeping system. Whether it's manual, a time clock, or an electronic system, don't assume he knows how to use it.
5. Tell them who to go to with questions - it may be better to have someone like your HR leader or your finance leader be the pressure valve for these conversations so the workers' supervisors and managers can focus on getting the work done and serving your customers rather than getting mired up in this transition.
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