Thursday, December 18, 2014

Merry Christmas from the NLRB!

And a stocking stuffer from the United States District Court for the District of South Carolina

The National Labor Relations Board (NLRB) was a very busy group of little elves this past week, wrapping up a couple of pretty gifts for labor, while simultaneously dumping coal into the stockings of businesses. Since earlier this year, when the board got slapped by the Supreme Court, invalidating many of their decisions due to illegally appointed members (see here ) it’s been chugging along in reaffirming many of those decisions and revisiting yet others. Which is the case with this past week’s gifts.

The board issued its final expedited election rules. Often referred to as the "quickie" election rules, or better yet, the "ambush" election rules, they allow for union representation elections to be conducted in 10 to 21 days following the filing of a petition by a union.  Currently, elections normally take 6 to 8 weeks, which allows employers to respond to union organizing efforts and fully inform employees of all sides of the issue. The final rule pretty much guts employer rights and their ability to respond in any substantive way to a union organizing effort. In addition, it requires employers to give union organizers personal information about their workers including home addresses, telephone numbers, shift schedules, work locations, and, where available, e-mail addresses. See Littler’s article here.

In the same week, the board reversed a long-standing rule in reference to an employer’s right to control its own property. In the 2007 Register Guard decision the board ruled that employees have no statutory right to use their employers’ e-mail systems for union organizing purposes. On December 11th,  the board reversed, in Purple Communications Inc., 361 NLRB No. 126 (2014). You can read more about this decision here. So, now businesses have no right to control how their own property and systems are used.

Well now, aren’t they generous! Conventional wisdom says that both decisions will most likely be challenged – again – in court.

Let’s hope the courts are a little more generous to business, as one was several days ago, giving us our stocking stuffer: EEOC Must Disclose its Own Background Check Policy. In suing BMW, the EEOC says the company’s background checking policy was discriminatory. BMW asked the court to compel the EEOC to disclose its own policy. The EEOC felt their policy was "irrelevant" to the case. The court disagreed, forcing the EEOC to fork it over.

Ahhhh, the holidays! I wonder what we’ll get for New Year’s.

Well, try to enjoy yourself anyway. Don’t embarrass yourself at the office holiday party; don’t let a co-worker drink and drive and never, ever give your boss a fruitcake. Seriously, those things are evil.

Merry Christmas, Happy Hanukkah!

Thursday, December 11, 2014

What Does it Cost to Hire/Fire that Employee?

More than you’d think…..

When the need to send an employee on his way (or chooses to leave), and then replace him comes about, the various people involved often have pieces of the cost picture but don’t think about the whole cost. The hiring manager may think about the lost productivity while the position is vacant or even the cost associated with other staff taking over the workload until you rehire. HR may think about the cost of recruitment, hiring, screening and onboarding that new hire.

It’s important for everyone to have and understand all the pieces – the whole picture – in order to truly understand the costs, both hard and soft, when either a bad hire is made and must be corrected, or a good employee is not retained. This is a metric referred to in aggregate as the cost-per-hire, and is calculated as the sum of these costs divided by the number of hires. But looking at the cost of even a single instance is instructive, and even eye-opening.

It’s estimated that the cost of a new hire is 1.5 times to 3 times the salary of the position being hired. Let’s break it down.

The Cost of a Vacant Position
Calculate the cost of the people who fill in while the position is vacant. This is either the wages, or a portion of the wages of existing employees performing the duties of the vacant position, or the cost of a temporary. Be sure to factor in any overtime costs.

The cost of lost productivity could be a minimum of 50% of the prior employee’s comp and benefits cost for each week the position is vacant, even if there are people doing the work. You’d use 100% if the position is completely vacant for any period of time.

Factor in the cost of the manager who has to figure out what work remains, and plan how to cover that work until a replacement is hired.

Often forgotten in this mix is the cost of lost knowledge, skills and contacts that the former employee is taking out the door. This can be significant, even if considered a "soft" cost. Try to put a dollar amount on it. Comparing it to lost productivity, a fair estimate may be 50% of the person's annual salary for one year of employment, adding 10% for each year after that. Think about all the institutional knowledge you’ve gained, the contacts you made and think about how valuable that is to your company.

Add the cost of things like unemployment insurance premiums and the time needed to prepare for an unemployment hearing, or the cost of a third party to handle that process for you.

The Cost of Lost Productivity
While your new hire is learning the ropes, she’s not fully productive, yet. After initial training is provided, the employee is probably contributing at a 25% productivity level for the first few weeks. The cost is 75% of the new employee’s salary during that period. During the next few months, the employee is contributing at about a 50% productivity level. That cost is then 50% of salary during that period. During the next 4 to 6 month period the employee reaches 75% productivity. Add in the cost of supervisors and co-workers spending time on bringing the new employee up to speed. The new employee doesn’t really reach full productivity until the 8-9 month range.

The Cost of Recruiting
Advertising your vacant position is expensive, no matter what media you use. Print ads (newspapers, professional publications, etc.) can run from a $200.00 classified to a $5,000.00 display ad; web ads are 300.00 to $500.00. Using a headhunter? Factor in 30% of annual compensation.

The cost of the internal recruiter's or HR’s time to understand the position requirements, develop and implement a sourcing strategy, review candidates backgrounds, prepare for interviews, conduct interviews, prepare assessments, conduct reference and background checks, make the offer and notify unsuccessful candidates. This can take anywhere from 30 hours to over 100 hours per position.

Then you have the time of the hiring manager or department to review candidates, including interviews, and select a finalist.

Add in the cost of drug screens, educational and criminal background checks and other reference checks. And since all these are often done for the top 2 or 3 candidates, the costs add up quickly. Don't forget to calculate the number of times these are done per open position as some companies conduct this process for the final 2 or 3 candidates. Do you utilize any other pre-employment assessment tools? Add those in, as well.

The Cost of Training
Determine the cost of training. This will include actual cost of any external training, the time and salary of internal staff conducting orientations and training, as well as the time for any on-the-job training or instruction. Include also the cost of any training materials.

The Cost of the New Hire
Getting a new employee started involves a lot more than handing him a new hire packet and calling it a day. Think about the cost to set up computer and security passwords or and identification and access cards, business cards, email accounts, cell phones, automobiles, etc.

Cost of Salary and Benefits
Salary costs have to be bundled with benefit costs. Life, health, dental, vision and disability coverage, etc., are hard costs to consider. According to Joe Hadzima, senior lecturer at MIT's Sloan School of Management, the salary plus benefits usually totals in the 1.25 to 1.4 times base salary range. So, the salary plus benefits package for a $50,000/year employee could equal $62,500 to $70,000.

That’s some real money, there. More than enough to put careful thought and effort into hiring effectively – not just putting butts in seats – but hiring for quality and fit. It should also show you the value of retaining your best and brightest employees and just as importantly, cutting your losses when you’re faced with a non-performing or disruptive employee.

Thursday, December 4, 2014

Workplace Wellness Programs

The ACA and the EEOC's Lawsuits

Last week’s post highlighted several news items about the Affordable Care Act (ACA), including news about the EEOC attacking several corporate wellness programs, despite the ACA specifically authorizing and encouraging such plans.

What’s the problem? And what’s the potential fallout? 

Wellness programs are designed to encourage healthy living and activities by employees, and hopefully, this will result in reduced costs to employer’s health plan costs, as well as healthier, happier employees who are more productive. Hmmmm. Pretty lofty goal. Most major employers have some sort of wellness program in place, and many small to mid-size employers are jumping on the bandwagon.

Plans have traditionally offered various rewards for participation in activities and health awareness programs. These rewards often start out as prizes and gifts for simply participating (regardless of outcome) in the activities and some biometric screenings, and then progress to including discounts on insurance premiums or deductibles, or penalties for not participating. Some programs will penalize participants (or remove rewards) for not reaching certain goals. While participation is voluntary, an employee can miss out on some substantial cost-savings for not "getting with the program". In fact, the state of Maryland’s program, in which participation is required as part of insurance coverage, allows for penalties of as much as $450 per person by 2017 for those who fail to undergo certain screenings and fail to follow treatment plans for chronic conditions. The state said the program could save $4 billion over the next 10 years. That’s a pretty big incentive for a major employer to maintain such a program. (I wonder if the EEOC will go after the state of Maryland’s program?)

It is these very rewards and penalties that the ACA allows and encourages, and the same ones the EEOC is now calling "illegal". How can that be?

The EEOC’s position is that what it sees as substantial penalties make the programs essentially "involuntary" and therefore in violation of both the ADA and HIPAA regulations. It reasons that if the penalty is too large or onerous, it’s not a truly voluntary decision not to participate (but who decides what it too large or onerous?) And this is where the cat fight begins…..

And that fight has angered a lot of people, enough that the Business Roundtable, a group of CEOs from more than 200 large U.S. corporations, is planning to meet with President Obama on the issue, according to a report by Reuters. "The fact that the EEOC sued is shocking to our members," said Maria Ghazal, vice-president and counsel at the Business Roundtable. She continues "They don't understand why a plan in compliance with the ACA (Affordable Care Act) is the target of a lawsuit."

In November, Roundtable president John Engler sent a letter to the Labor, Treasury and Health and Human Services cabinet secretaries who oversee the ACA asking them to "thwart all future inappropriate actions against employers who are complying with" the law's wellness rules, and warning of "a chilling effect across the country."

Since the EEOC’s recent lawsuits, there have been indications that some of these large employers might pull back their support of the ACA and instead stand with its opponents.

That could be a major setback for the Obama Administration, since large employers were some of the few entities to actually support the law. But they say they did so primarily because of its wellness provisions, which as noted above, stood to save them substantial amounts of money on health care plan costs, which could take the sting out of ever-increasing premiums.

Republicans want to change the law at the very least (remove the employer mandate; change the "full-time" definition to 40 hours/week, etc.). Also, more Democrats are even starting to criticize the Administration for its handling of the law. So, maybe all big business has to do is bring a few Democrats over to the other side of the aisle for the ACA to see some significant changes.

With the Supreme Court hearing a case on the legality of subsidies offered through the federal exchange, the EEOC lawsuits against wellness programs as a backdrop, the ACA could face some real backlash this coming year. When employers get a full taste of the reporting requirements that go along with the employer mandate, they could renew their opposition to the law. While the ACA is probably here to stay, I predict there will be substantive changes coming.