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When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay

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When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay

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When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay by Michael Maciekowich and HRsoft.

When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay by Michael Maciekowich and HRsoft.

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When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay

  1. 1. When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay Guest Presenter: Michael F. Maciekowich National Director Astron Solutions TalentTakeaways webinar & podcast series
  2. 2. AGENDAThe Series TalentTakeaways webinar & podcast series Talent Takeaways Series
  3. 3. AGENDAAGENDA ✓ Resource Library ✓ Product Information ✓ Product Tour & Demo The Sponsor Talent Takeaways Series Talent Management Made for Managers
  4. 4. AGENDAWebinar Info Talent Takeaways Series ✓ We are informal (and fun) ✓ Ask Questions! ✓ Q&A Session at end ✓ HRCI & SHRM Credits ✓ Slides will be available after
  5. 5. AGENDAAbout the Presenter Talent Takeaways Series Michael F. Maciekowich is a National Director for Astron Solutions. His areas of expertise include the development, design, and implementation of executive, physician, & employee base pay systems; short- and long-term incentive programs; sales incentive programs; and performance management systems in all industries. Michael has 39 years of compensation experience. Michael is an active member of WorldatWork and the Society for Human Resource Management. Michael received a lifetime achievement award from WorldatWork. Michael received bachelor’s degrees in political science and philosophy, and a master’s degree in industrial relations, from the Loyola University of Chicago.
  6. 6. Learning Objectives • Understanding the Wants and Needs of Long Term Service Employees • The Dilemma of "Maximums" in Salary Structures • Alternative Reward Design Process • Review of Sample Programs
  7. 7. Total Rewards “Tools” External Position Equity Internal Position Equity Employee Pay and Recognition Equity Total “Non-Cash” Compensation – Benefits/ Retirement Ability to Fund all Aspects of the Program • Competitiveness in terms of Geography. • Competitiveness in terms of industry. • Level of competitiveness by organization and position. •Recruitment and Retention Trends. • Determine organizational value of positions regardless of market value. •Determine value of positions not matched to the market. •Determine the differences among “families” of jobs. • Determine internal pay levels of employees based on seniority, performance, or other methods. • Determine appropriate methods to recognize employee performance and contributions. • Understanding the impact of “Generations” in compensation decisions. • Addressing the rising cost of insurance in plan design. • The need to have more employee cost sharing. •Understanding pressures from organized labor. •The need for flexibility in addressing “generational” differences in both benefit and pension design. •Impact of fluctuating stock market on pension design strategies. •Funding all aspects of the program understanding the impact of current industry trends. •Determining the “ROI” of all programs to demonstrate the impact on effective recruitment and retention of staff required for the organization to succeed. •Proactively developing strategies that reduce cost impacts while remaining effective.
  8. 8. Decentralization of Total Rewards • By Generation • By Profession • By Market • By Strategic Contribution • Implications for the HR Professional and Employee Morale
  9. 9. Focus of Discussion • VETERANS (born between 1909 and 1945) ▪ Sense of accomplishment ▪ Strong sense of self ▪ Motivated by pride in knowing what they can accomplish ▪ Act to take charge, make decisions, & delegate responsibility ▪ Operate in a command-and-control decision-making system • Translates as “having all the answers” • BOOMERS (born between 1945 and 1965) ▪ Involved because it is the right thing to do • One should give back to their community ▪ Strong sense of hope ▪ Value tradition, teamwork, and loyalty ▪ Have volunteer time, as many stayed home to raise families
  10. 10. We Are All Getting Old………………….
  11. 11. Understanding the Wants and Needs of Long Term Service Employees
  12. 12. What is Our Understanding • How important are these employees to our organization? • What do these employees want?
  13. 13. SHRM – HR Attitudes Towards Older Workers • Advantages: – More willing to work different schedules (72%) – Serve as mentors (72%) – Invaluable experience (72%) – Stronger work ethic (69%) – More reliable (68%) – Add diversity of thought (61%) – More loyal (58%) – Take work more seriously (58%) – Have established networks (51%) • Disadvantages: – Don’t keep up with technology (53%) – Cause expenses to rise (36%) – Less flexible (28%)
  14. 14. Astron Solutions’ Focus Group Research Findings: Most Desired Elements Time Wellness Benefit Cost Longevity Recognition Options
  15. 15. • Pension plan changes • Use of pay range maximums / caps • Lack of information sharing about the organization and its finances • Lack of senior team visibility • Lack of HR visibility • Pay compression with new staff • Health insurance co-pay adjustment • Lack of strong supervision – not responsive to employees • Unfriendly senior management team • Stress from turnover and staffing issues • No pay recognition of performance and effort • Strong messages that long term employees are not valued • No career advancement opportunity • Pressure not to apply for other jobs if you are needed in the unit • No staff involvement in changes that impact them. Left in the dark about changes until the last minute. Astron Solutions’ Focus Group Research Findings: Most Common Weaknesses
  16. 16. The Dilemma of “Maximums” in Salary Structures
  17. 17. What is Our Understanding Group Discussion: • Do we utilize formal pay ranges with a range maximum? • If so, how do we deal with employees who are at or above the maximum of the pay range?
  18. 18. Typical Compensation Policy Employees whose salaries reach the maximum of their salary ranges and whose performance is satisfactory or better may be eligible to receive range maximum lump sum payments in lieu of increases to their base salaries. These payments are not part of the employee's base salary. However, employee and employer retirement contributions are calculated on both the employee’s salary and range maximum payments; this is the only employee benefit impacted by range maximum payments. Lump sum payments are not to be compounded from year to year. The first payment is processed on or around the employee's review date and the second payment is processed 6 months later. An example of how to calculate a range maximum lump sum payment is shown below: Example: Employee's Pay Rate: $10.25 per hour Maximum of Range: $10.50 per hour Salary Increase %: 4.0% $10.25 (employee's current pay rate) x 1.04 (salary increase percentage) = $10.66 $10.66 - $10.50 (range maximum) = $ .16 $ .16 x 2080 hours (for a full-time employee) = $332.80 $332.80 / 2 = $116.40 (amount of each lump sum payment to be processed) In the example above, the employee's pay rate should be brought to the range maximum of $10.50 and the employee should receive a payment in the amount of $116.40. Six months later, the employee should receive the second $116.40 lump sum payment.
  19. 19. 3 Key Issues Legal considerations (FLSA) Maximum job value real? Cost savings?
  20. 20. Poll Question #1 Does your company “cap” or “freeze” base pay at the maximum of the pay range?
  21. 21. Overview of Federal Legislation Impacting Compensation Key Federal Legislation FLSA Equal Pay Act Equal Pay Between Sexes for Equal Work Title VII Civil Rights Act Apply Equal Pay Provisions Among Protected Classes Race, Religion National Origin Age Act Apply Equal Pay Provisions To Over 40 – 70 Years Old Americans With Disabilities Act APPLY Provisions of Equal Pay Act to Disabled Americans Lilly Ledbetter Pay Equity Act
  22. 22. FLSA and the Regular Rate of Pay Section 7(e) of the Act requires the inclusion in the regular rate of all remuneration for employment except seven specified types of payments. Among these excludable payments are: discretionary bonuses, gifts and payments in the nature of gifts on special occasions, contributions by the employer to certain welfare plans and payments made by the employer pursuant to certain profit-sharing, thrift and savings plans. Bonuses which do not qualify for exclusion from the regular rate as one of these types must be totaled in with other earnings to determine the regular rate on which overtime pay must be based. Bonus payments are payments made in addition to the regular earnings of an employee.
  23. 23. Alternative Reward Design Process
  24. 24. What is Our Understanding • How do we currently recognize long term service in our organization? • Are special pay / benefit / time off programs in place? • If so, how successful have they been?
  25. 25. Step by Step Alternative Rewards Design Process • Audit Current Recognition Programs & Meet with Senior Management • Review Potential Alternatives Available to Current Systems • Form a Recognition Program Development Committee • Identify a Program Purpose • Define Award Themes & Selection Criteria • Determine Award Eligibility & Award Frequency • Select Types of Awards & Publicity • Establishing and Monitoring the Program
  26. 26. Poll Question #2 Has your company established “alternative reward programs” for employees with long tenure?
  27. 27. Review of Sample Programs
  28. 28. Sample Programs
  29. 29. Flexible Work Arrangements Flexible work arrangements may appeal to older adults who no longer wish to work traditional full-time schedules, either because of additional personal obligations (such as the need to care for aging parents or spouses or to help with grandchildren), worsening health, declining physical energy or stamina, or a preference to sacrifice some income for more control over their time without giving up paid employment entirely. Flexible work arrangements include the following: • part-time employment; • flexible work schedules, including flextime (which grants employees some control over the timing of the workday) and compressed work schedules (which allow employees to work longer days but shorter weeks); • job sharing; • changing jobs within the company, which can facilitate shifts to part-time work and offer new opportunities to older employees seeking new challenges; • telework arrangements, which enable employees to work from home or teleworking centers closer to home than their normal workplace.
  30. 30. Phased Retirement Options • Many workers prefer to phase into retirement gradually with their current employers instead of changing employers or moving directly from full-time work to full retirement. But traditional defined benefit (DB) plans inhibit these arrangements. Many older employees cannot afford to reduce their work hours unless they can draw on their retirement benefits, but federal law restricts employers’ ability to pay benefits from DB plans to workers who remain on their payrolls. • However, the movement by many private employers from traditional DB plans to defined contribution retirement plans and hybrid plans (such as cash balance plans) that do not discourage work past the traditional retirement age should make phased retirement options easier to implement. • Some employers are also pursuing other strategies to accommodate their workers’ interest in phased retirement, such as allowing employees to continue working without losing traditional pension benefits, creating formal plans to move older employees to part-time work, rehiring retired employees as part-time workers, and using former employees as contractors.
  31. 31. Transition to Part-Time Employment for Older Workers Before enactment of the Pension Protection Act of 2006 (PPA), IRS regulations did not allow firms to pay retirement benefits from DB plans before termination of employment, except in a limited way. PPA allows payment of benefits to in-service workers who are age 62 or older, although new regulations under PPA are still pending. Even before this change, some firms have been able to institute programs that allow older workers to reduce their hours gradually while still receiving some pension and health benefits. Other employers are able to meet regulatory requirements and pay retirement benefits to older workers by terminating the employees and rehiring them part time. The law is unclear about what constitutes termination of employment, but it would seem that some time would need to elapse between terminating and rehiring before the former employee could be considered a new hire.
  32. 32. Hiring Former Employees as Independent Contractors As an alternative to paying pension benefits to active employees, the firm could terminate employment and then rehire the former employee as a consultant or independent contractor. Independent contractors do not receive employee benefits, but they can receive full retirement benefits while working for their previous employer. Although there are no restrictions on paying pension benefits to former employees who are independent contractors, issues arise in determining whether the provider of labor services is really an independent contractor.
  33. 33. Training Opportunities for Older Workers Publicly funded training programs have been serving older workers for decades. Although previous legislation authorized special funding blocks for older workers, many states have consolidated these funds into a single funding stream for all adults in an effort to provide universal access to these services. This legislation does, however, allow states and local areas to give priority to special populations, such as older workers, when allocating training funds. Community colleges are leading efforts to develop job training opportunities for older workers. Such colleges are recruiting workers age 45 and older, creating educational and vocational training programs tailored to older peoples’ learning styles, and offering student advisor and supportive services for older students.
  34. 34. Outlook for Older Workers The key issue for future employment prospects is how the business community will respond to the increased availability of older workers. Relatively few employers have actively begun to recruit older workers, primarily because they do not yet foresee worker shortages. The industries that have most vigorously recruited older workers, such as health care and energy, already face imminent labor shortages. As the population ages and worker shortages develop, more employers may adapt workplace polices to appeal to older people. However, some observers who believe that globalization will enable people working overseas to meet the U.S. economy’s employment needs dispute claims that labor shortages are inevitable and that the demand for older workers will soar.
  35. 35. AGENDAQ & A Talent Takeaways Series Live Q&A
  36. 36. AGENDAAGENDA Resources & Support Talent Takeaways Series ✓ Resource Library ✓ Product Information ✓ Product Tour & Demo HRsoft.com
  37. 37. When the Money Runs Out: Retaining and Motivating Long Term Employees Without Increasing Pay Presented by: Michael F. Maciekowich National Directors Astron Solutions, LLC www.astronsolutions.com 800-520-3889

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