HREX Surviving to Thriving Growing on a Budget 091510

Leveraging the HIRE Act and
Smart Hiring Strategies
September 15, 2010
HREX Series:
Joyce Nelson
Partner & Vice President Client Services
Advex-Advancing Excellence, Inc.
Scott Buchanan
President
Human Resources, Inc.
From Surviving to Thriving:
Growing on a Budget

 Hire Incentives to Restore Employment
Act (HIRE): 6.2% FICA Exemption
 Health Reform Act
 Smart Hiring Strategies
© HREX-Human Resources Excellence. All Rights Reserved.
Agenda

Was the replaced employee
separated voluntarily or
terminated for cause?
Wages do not qualify
for exemption
Did employment begin after February 3, 2010?
Were wages paid to employee after March 18, 2010?
Did the employee work more than 40 hours during
the 60 day period ending on the date of employment?
Did the employee replace another employee?
Is the employee related to the employer (related to anyone
who owns more than 50% of the employer?)
Did employee complete Form W-11?
Wages paid to employee after
March 18, 2010 qualify for the exemption
from the 6.2% FICA tax.
YES
YES
NO
NO
NO
YES
NO
NO
YES
YES
YES
YES
NO
Qualifying for the Exemption from FICA Tax Under
the HIRE Act
(as of March 18, 2010)
©HREX-Human Resources Excellence. All Rights Reserved.

Without HIRE With HIRE
FICA 6.20% 0.00%
Medicare 1.45% (1) 1.45% (1)
FUTA 0.80% (2) 0.80% (2)
SUTA 2.70% (3) 2.70% (3)
Total 11.15% 4.95%
1) Scheduled to increase for certain high income individuals
2) May increase to 1.10% in those states that do not timely repay
Federal loans
3) Starting rate for new employer
NB: A retention benefit of $1,000 is also available.
HIRE Act Example:
Employer’s Portion of Payroll Taxes

 WOTC = Work Opportunity Tax Credit
 Can’t double dip on same wages.
 HIRE Act benefit is more certain and immediate but
WOTC may provide a greater benefit.
 Can take WOTC and the retention benefit from the
HIRE Act.
WOTC or HIRE Act?

 Present and Future
 Obama Administration credits the HIRE Act for 5.6
million new hires in the first 6 months of the
program;
 US Senator Charles Schumer (D-NY) is calling for a 6
month extension of the Act
 Expect election year activity
HIRE Act Present & Future

Employer does not qualify
for credit
(1) See transition rule for 2010
Does the employer pay a uniform percentage of
premiums for each employee enrolled? (1)
Does employer pay at least 50% of the premium
for single coverage?
Does the employer have fewer than 25 full-time
equivalent employees for the tax year (see worksheet)?
Are the average annual wages (see worksheet) for
the tax year less than $50,000?
Employer qualifies for credit.
YES
YES
YES
YES
YES
NO
NO
NO
NO
NO
Eligibility for Small Business Health Care Tax Credit
Does employer provide health care coverage?
(as of March 30, 2010)

 For tax years 2010 through 2013
– Tax credit up to 35% of employer’s portion of premium if employer
pays at least 50% of a benchmark premium
 For tax years 2014 & 2015
– Eligible small businesses that purchase coverage through the State
Exchange will receive a tax credit up to 50% of the employer’s portion
of the premium if that portion is at least 50% of total premium cost
 Phase Out
– This credit gradually phases out for firms with average wages between
$25,000 and $50,000 and for firms with the equivalent of between 11
and 25 FT workers.
Health Care Act Credit & Phase Out

Facts
ABC Company
40 PT employees = 20 FT employees
Wages $500,000 or $25,000 per employee
Employer paid health insurance premium $240,000
Credit Computation
(1) Initial credit before phase out $240,000 x 35% $ 84,000
(2) Credit reduction for employees in
excess of 10 ($84,000 x 10/15) ($56,000)
(3) Credit reduction for wages in excess of $25,000 0
(4) Total 2010 Tax Credit $ 28,000
Health Care Tax Credit Example

SMART HIRING
STRATEGIES
Survive
Thrive
Excel

 Effectiveness in driving results
through people?
 Ability to execute - right mix of
people, tools and practices?
 Large labor pool?
 HIRE Act: cost of extra person vs.
risk of lost opportunity?
Survive
Thrive
Excel
Challenges & Opportunities

Performance
Effectiveness
Effective
Management
Practices
Leadership
Effectiveness
Talent
Recruitment
Selection &
Retention
Team
Effectiveness
KPI’s &
Metrics
The People Side of a Successful Business

a) Hard to do well
b) Time-consuming
c) The most important thing you do
d) All of the above
Hiring is your hardest job but vital to your business’ success
Hiring Is…

 3-15 times individual salary (20% direct 80% indirect cost)
 Over 80% of recruitment decisions based on biographical
interviews with some form of reference check.
 On average, 45% of new hires leave in the first 6 months, and
 15% of new hires are fired within the first year*
* Charles A. Handler, Ph.D. (2009) Using Technology to Support Informed Decision Making Within the Hiring Process
Real Cost of a Bad Hire

89%
fail for reasons that have nothing
to do with skills or abilities
‘Failed’ employees
rarely fail because they
aren’t smart.
They fail because they
don’t fit.
Coachability
27%
Emotional
Intelligence
24%
Motivation
17%
Temperament
15%
Competence
11% Other 6%
Why Hires Fail – Success is More Than Skills

1. Inadequate salary and benefits.
2. Limited opportunities for advancement.
3. No recognition for good work.
4. Unhappy with management, how they were
managed or didn’t connect.
5. Bored with the job
6. Other (retirement, career change)
15%
20%
25%
30%
5%
5%
Top Reasons Why People Quit Their Jobs?

1. We don’t really know what we are looking for.
2. We don’t consistently use well-crafted questions to probe
and gather relevant information from each candidate.
3. We rely too heavily on one person’s opinion of the
candidate…usually our own.
4. Our evaluation of the candidates tends to be incomplete.
5. Hiring the ‘Best We’ve Seen’ rather than ‘What’s Best for
the Position’.
5 Most Costly Hiring Mistakes
42.7%
contain false
informationProbe, Probe, Probe….
Take the time, understand how they behave and are wired.

 Simple process for identifying and hiring A Players with a high
degree of success. It helps you get the “who” right.
 “A “Player 90% chance accomplishing outcomes. Good vs. Great
 You are Who you hire
 Four ‘S’s = ‘A’ Method for Hiring
• Scorecard (= job description with purpose, accountabilities,
outcomes, required competencies)
• Source (referrals, professional/personal networks, recruiters etc.)
• Select (structured interviews in pre-screening, top grading,
referencing)
• Sell (what matters to candidate: fit, family, freedom, fortune, fun)
“Who: The A Method for Hiring”*
* Reference: “Who: The A Method of Hiring”, Geoff Smart & Randy Street

 Pre-Screening Interview (15-30 min by phone)
1. What are your career goals?
2. What do you excel at professionally?
3. What are you not good at or unwilling to do professionally?
4. Who were your previous bosses and how will they rate you on a
scale of 1-10 when we speak with them?
 Top Grading Interview (1-2.5 hrs)
1. What were you hired to do or what did you do in your previous job?
2. What accomplishments are you most proud of?
3. What were the low points of your past jobs?
4. Who were the people you worked with what will they say about
you? (boss and coworkers specifically)
5. Why did you leave that job? (Push – Pull)
“The A Method for Hiring”: Selection
References: “Who: The A Method of Hiring”, Geoff Smart & Randy Street. “
“Topgrading: How Leading Companies Win by Hiring, Coaching and Keeping the Best People”, PhD, Bradford D. Smart.

 Reference Interview - Be aware of:
 Not willing to help
 Only wants to give dates of employment
 Use hypothetical questions
 Stick to same questions in screening interview
 Background Screening - Job related
 E.g. Criminal, physical abilities or drug testing, employment, education,
professional license, motor vehicle, fingerprinting, worker’s comp.
 Behavioral Assessments determine Organizational FIT :
1. Right People in the Right Jobs
2. Identify Training needs
3. Help Managers to be more effective in coaching process
4. Promote People into positions where they will succeed
5. Predictive value of traditional recruiting methods about 14%
6. Increase ability to target “A” Player (90% vs. 50%)
“The A Method for Hiring”: Is it Enough?

 On Boarding
 Plan to acclimatize new hire for a smooth transition
 Orientation and Training
 Clearly defined expectations, support etc.
 Evaluate Progress (Probation period)
 Attracting and Retaining
 Evaluate Your Self and Managers first
 Create a Culture of Recognition and Accountability
 Create a Healthy Work Environment
 Create an Atmosphere of Continuous Self-improvement
 Put Your Best Foot Forward
 Match Right People to Right Jobs
“You’re Hired!... Now What?

 Invest the time at front end to make everything else easier
 Systematic and targeted process to hire “A” players who will
achieve at least 90% of set outcomes vs. 50%.
 Get full picture: skills, experience, attitudes, values, interests, drivers
 Probe for the “What” and the “Who” to determine best FIT
 Standardized processes minimizes risk of discriminatory practices
and allows for a more objective and thorough evaluation process.
 Focus is on attracting and retraining a highly qualified workforce vs.
searching needlessly and hiring the wrong talent
 The cost of retaining an “A” employee is far lesser than recruiting a
new one.
Value of Recruitment Best Practices

 HIRE Act 6.2% FICA exemption
 Health Care Act 35% credit
 Hiring Best Practices
• Invest time upfront to avoid spending more time managing and firing
• Probe, probe, probe
• Full picture: Who + What + A Method lead to “A” Players
• FIT = The right people on the bus!
• Effective On boarding
• Recruiting and retaining quality talent = #1 priority
 Don’t Leave Your People Decisions to Chance…
The Extra Degree of Effort Separates Good from Great
Summary

Q & A?
For more information contact:
Scott Buchanan (727) 895-4700
Joyce Nelson (813) 514-2889
Thank You
2010 St. Petersburg Chamber of
Commerce Outstanding Business
of the Year Winner

HREX Surviving to Thriving Growing on a Budget 091510

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