employee compensation for drivers to fleet managers
TRANSCRIPT
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June 29, 2016
Employee Compensation for Drivers to Fleet Managers
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Beth Carroll
Managing PrincipalProsperio Group
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Agenda Introduction to Prosperio Group Developing a Cohesive Compensation Strategy 6 Fatal Compensation Mistakes Plan Design Samples for Common Trucking Roles FLSA OT Update Q & A – Open Discussion
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Introduction to Prosperio Group
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Transportation & Logistics Experience: We are or have been members of the TCA, ATA,
TIA, TMSA, NCBFAA, NITL, IANA, IWLA, WERC, NASTC, and the CSCMP.
We have published articles specifically on compensation for the T&L industry in The Logistics Journal and The Supply Chain Quarterly, and have given numerous speeches and webinars for the TCA, TIA, Fleet Owner, and other organizations.
Beth is a Certified Sales Compensation Professional (yes, that’s a real thing!)
We work globally, having completed engagements in 8 countries for companies with employees working in 39 countries.
Business Objectives & Strategy Organization Structure & Roles
Hiring, Training & Development
Process Management & Execution
Compensation
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Prosperio Group helps transportation & logistics companies use compensation strategically to drive profitable growth
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We have extensive experience across industries, but our clear focus is on the Transportation Industry
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Transportation Companies by Segment
BrokersTruck, Rail, Ocean, Air,Warehousing3PL/FreightMgmt/OutsourcingOther T&L/Supply Chain
Some companies are represented in more than one segment.
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T&L Companies: Trucking Co's Other Industries:Brokers v Pepsi Logistics Company v ABF Freightv ABF Multimodal v Pinnacle Freight v Barney Trucking Banking/Insurance Manufacturingv AM Transport v Quarterback Transportation (Canada) v Barber Transportation v Bank of America v AMCOL Asia Mineralsv Ameri-Co Logistics v Roadmaster v Bennett International Group / MBNA Merger (Thailand, China)v Barton Logistics v RWI Transportation v Brown Integrated Logistics v Fifth Third Bank v AMCOL Paper (UK)v Becker Logistics v Ryder Freight Management Group v Con-way Freight v PNC v AMCOL Australia Ptyv Blakeman Transportation v Tandem Logistics, Inc. v Con-way Truckload v US Bank (Australia)v Blue Ribbon Transport v Taylor Distributing v Gallano Trucking Food & Beverage v AMCOL HQ, HPC,v BNSF Logistics v Trinity Transport v Hill Brothers Transportation v ED&F Man Bio-Ag, MPGv Burris Logistics v Traffic Tech v Nussbaum v Kalsec v Bosch Automotivev CargoBarn v Trek Freight v Pride v Perdue Farms v Bosch Power Toolsv Choptank Transport v Tucker Worldwide v Roehl Transport v Solae v CETCO Lining Technologies v Connect Logistics v US Xpress v RFG v Wells Dairy (Co-Op) v Dur-A-Flexv CRST Logistics v ZMac v SAIA LTL Healthcare v Elster Solutionsv DART Advantage Logistics v Secure Land Transport v Express Scripts v Herman Millerv Des Moines Truck Brokers Stand alone 3PLs v US Xpress v Stryker Navigation v Kohlerv Dover Services v Land-Link Traffic Systems v Trustmark v Poly-Onev Eagle Transportation v M33 Private Fleets v Capital BC/BS PA v Siegel-Robert v Enterprise Truck Brokers v SheerTrans v Cozzzini Bros Professional Services v Williams Advancedv Fastmore Logistics v Sunset Transportation v East Penn v Martiz Materials (Taiwan)v Fetch Logistics v Universal Traffic Service (UTS) v Southeast Frozen Foods v Today's Staffingv GENCO ATC v Wegmans Software Not for Profitv GTO 2000 Freight Forwarders v US Foods v DealerTrack v CONNStepv Integrity Logistics v ABF Global v Reynolds & Reynolds v TCAv JH Rose Logistics v APL Logistics Global Sales (Singapore) 4PL, Supply Chain or Specialized Other v TIAv Kenco v Hannic Freight Forwarders v APL Logistics v Comcastv L&L Freight Service, Inc. v Panther Expedited v GENCO v Irving Oilv Landstar v Red Arrow Logistics v King Solutions v Starwoodv Logistics Group International v Sprint Forwarders v Manna Freight v Waste Managementv Majestic Transportation v Trinet Transportation (Canada) v MENLOv Overdrive Logistics v Penske Logistics
v Sterling Transportation 6
We’ve worked with 128 T&L companies in the last 9 years, and many other “general industry” companies in the last 19 years
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Transportation companies have many roles that benefit from sound incentive design practices, here are just a few:Trucking/Delivery Brokerage, Freight Forwarder 3PL, Int’l Logistics
Drivers (Regional, Team, Solo)1099/Contracted/OO DriversDriver Supervisor/ManagerOutside SalesCustomer ServiceInside SalesDriver RecruiterFleet Manager/Driver ManagerContractor RecruiterContractor RelationsLoad PlannerDispatcherCustomer ServiceKey Account ManagerOwner Operator ManagersOps ManagerSales ManagerWeigh & Reweigh Analyst/Manager (LTL)Tire ManagerTransportation Supervisor/Manager
Linehaul SupervisorOperations ManagerTraining SpecialistMaintenance ManagerShop SupervisorSecurity InvestigatorClaims Prevention MgrPackaging Engineer (LTL)Office Systems SpecialistTerminal ClerkBranch ManagerPricing ManagerA/R ClerkA/P Clerk
Outside SalesFreight Finder (Inside Sales)Account ManagerTruck Finder (Carrier Sales)Team LeaderOps ManagerBranch ManagerSales ManagerTerritory ManagerVertical DirectorLogistics ProfessionalNetwork Load PlannersAgent Load PlannersCarrier RelationsGlobal Forwarding AgentStation ManagerTrack and TraceOrder EntryGlobal Forwarding Manager
Outside SalesInside SalesLead GenerationAppt Setting RolesPricing/Sales SupportCustomer ServiceOps Team LeaderOps ManagerSales ManagerFreight Bill AuditBusiness Unit Leader
We have developed incentive plans for all of these roles…and more. 7
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Developing a Cohesive Compensation Strategy
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Structure, roles and compensation needs change as companies evolve Characteristic Start-Up ($0 -$50m) Growth ($50m - $300m) Market Leader ($300m+)
Organization Structure Flat Everyone does everything
More role differentiation Beginnings of freight or account
specialization may be found (e.g., TL and Reefer divisions)
Increased complexity Highly specialized roles, including
use of highly paid specialists
Typical Roles Found President (sells) Right Hand: Ops Mgr Load Planner/Dispatcher Accountant (PT)
President Operations Manager Maintenance/Safety Sales Reps Load Planners/Fleet Managers Customer Service Reps Recruiters Back Office Staff (Accounting, IT &
HR) Brokerage Staff (beginning)
All roles found in Growth Phase (with more headcount) PLUS Big Gun Sales (Contracts) Terminal/Branch Managers Project Teams Asset/Brokerage Coordinators O/O and Co Driver Recruiters Consultants/Specialty Customer
Service Providers
Typical Incentive Structure andChallenges
100% variable (using a draw) forall but accounting
OR 100% salary for everyone with
small periodic profit sharing
Shifting from “how much can I afford to pay” to “how much do I need to pay to get the right talent”
Dealing with legacy problems from Start-Up phase incentive plans (complacency, unfairness, lucrative annuities, can’t move accounts)
Mgmt discretion/subjective judgment may lead to morale/legal issues
Salary bands and career paths within roles (Load Planner I, II, III)
Need for Pay Grades cross company
Performance mgmt systems Customized incentive plans by role
w/annual governance Goals/expectations set by role Cost of comp managed from the
top
AABC
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Driver Sourcing Customer Sourcing
Asset Mgmt
Back Office Support
Recruiters Training
Fleet Operations Load Planners
Sales Pricing
Maintenance Safety
Drivers
Driver Retention Customer Retention
Contractor Relations
Fleet Managers
Customer Service Reps
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The interconnectedness of roles makes it critical to think about the ENTIRE SYSTEM when developing incentive plans
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Some companies tackle the whole system at once, others prioritize a group at a time – but there is a preferred order
Driver Sourcing Customer Sourcing
Asset Mgmt
Back Office Support
Recruiters Training
Fleet Operations Load Planners
Sales Pricing
Maintenance Safety
Drivers
Driver Retention Customer Retention
Contractor Relations
Fleet Managers
Customer Service Reps
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Wherever you start…you should proceed in this orderDefine Objectives• What problem are you trying to solve?• What is the company’s compensation philosophy?
Clarify Roles • What are key accountabilities?• What are the performance expectations?• What interconnections exist?
Define Desired Pay Levels• Set Target Total Cash based on the market.• Set Pay Mix based on the prominence of the role.• How much upside do you want?
Select Performance Measures• Identify 3-4 KPIs you can (already do) measure.• Assign weights to the measures.
Determine Plan Mechanics• Will you pay using linear or tiered goals? KPI tables? Commissions?• What is desired pay frequency?• What is crediting point?
Model the Plans• Test the economics using historical data.• Predict payouts under different proforma scenarios.• Who are the winners/losers?
Communicate the Plans• Use test groups to refine the communications.• Provide 2-3 layers of communication.• Ensure managers know the plans.
Reinforce the Plans• Provide performance feedback in advance of pay.• Use each pay event as a performance coaching opportunity.
Evaluate Plan Effectiveness• Every 3-6 months, look for signs the plan is working or is going awry.• Every year, look for tweaks that may be needed.
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Six Fatal Compensation Mistakes
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#1 – Incentive compensation is one part of a BIG PICTURE; designing in isolation is a HUGE mistake Your incentive plans must be aligned with and support your…
• Business Objectives & Strategy• Organization Structure & Roles• Company Culture• Desired Position in the Labor Market
‒ You need to define these things before even considering a commission rate!
Business Objectives & Strategy Organization Structure & Roles
Company Culture
Desired Position in the Labor Market
Compensation
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#2 – Incentive compensation is about more than money Employees expect to be paid. How you choose to deliver that pay sends powerful messages about what the company desires and values. Consider these two alternatives for paying sales reps:
‒ Company A: 100% salary with discretionary year-end bonus‒ Company B: 100% commission with strict rules about claw backs and a “charge” to the employee when support resources are addedWhat impression do you have about these two companies from just their compensation plans? What does your plan say about you?
Focusing too much on “fair” often misses the point…‒ An employee should not get an incentive for everything they do; credit splitting can become a nightmare!‒ Reconciling adjustments to the penny is very likely a waste of time, money and motivation. (Be sure you know what you are losing!)
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#3 – Incentive compensation design is a constrained optimization problem; there are risks! For every gain in an incentive compensation plan, there is a corresponding loss. Finding the right balance for your company takes considerable thought and WORK.
‒ If you think incentive compensation is easy or that anyone has a magic answer that works for everyone, you are deluding yourself. You also need to think about how your business will change in 5, 10, 15 years…are you setting yourself up for future problems with the plans you are using now?
‒ Hint: if you are using an annuity scheme with your sales reps or a team-based pool, the answer is YES.
Gain Lose
Long Term Focus
Strategic Emphasis
Team Work
Company Profits
Short Term Focus
Financial Emphasis
Individual Motivation
High Payouts
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#4 – “MORE” is not a goal; paying transactionally only tells people to do “more”Flat rates have no acceleration
The only way to double pay is double production
Retroactive rates are easy to calculate but may create odd economics
It drives employees to reach the bottom of the new tier, and may even push them to unethical behaviorThe company loses money on the sale that pays the new rate
Marginal rates are more complicated to explain, but often provide the best economic control for the company and best motivational value for the employeeNote that the pay curves can be designed to provide exactly the same payout at target performance (in this case $22,000 provides $770 in pay in all three methods)
ILLUSTRATIVE
$- $200 $400 $600 $800
$1,000 $1,200 $1,400 $1,600 $1,800 $2,000
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000
Commis
sion Pa
id
Monthly Gross Margin
Retroactive Marginal Flat Rate
Bottom Top-$ 9,999$ 0.00% 0.00%
10,000$ 15,999$ 2.00% 5.50%16,000$ 19,999$ 3.00% 7.00%20,000$ 24,999$ 3.50% 8.00%25,000$ 29,999$ 4.00% 8.50%30,000$ 34,999$ 4.50% 9.00%35,000$ 39,999$ 5.00% 9.50%40,000$ 5.50% 10.00%
Monthly Margin Retroactive Rate
Marginal Rate
Flat Rate = 3.5%
$- $200 $400 $600 $800
$1,000 $1,200 $1,400 $1,600 $1,800 $2,000
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000
Commis
sion Pa
id
Monthly Gross Margin
Retroactive Flat Rate
Bottom Top-$ 9,999$ 0.00%
10,000$ 15,999$ 2.00%16,000$ 19,999$ 3.00%20,000$ 24,999$ 3.50%25,000$ 29,999$ 4.00%30,000$ 34,999$ 4.50%35,000$ 39,999$ 5.00%40,000$ 5.50%
Monthly Margin Retroactive Rate
Flat Rate = 3.5%
0200400600800
100012001400160018002000
$0 $5,000 $10,000 $15,000 $20,000 $25,000 $30,000 $35,000 $40,000
Commis
sion Pa
id
Monthly Gross Margin
Flat Rate
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#5 – Believe it or not…there ARE laws about compensation (beyond Exempt/Non-Exempt) In some states, you cannot “holdback” part of an earned incentive to a future date as a means of retention (CA, NY, and CT are especially particular about incentive laws).
‒ Rephrase so that incentives are not earned until the future date trigger event (e.g., collecting money, clearing adjustments, payouts are calculated, etc.).‒ Once an incentive is earned, it needs to be paid to the rep; they have a legal right to that money as soon as you say they have “earned” it…even if they leave the company!‒ Even so…recent legislation in Maryland and Illinois ruled that commissions on booked sales were payable to the rep after termination, even when the plan document stated that commissions were not earned until money was collected from the customer.
California AB 1396, which went into effect January 1, 2013, requires all commission plans to be in writing with a signed copy given to each employee.‒ Lack of compliance could be a basis for a lawsuit under California’s Private Attorney General Act (PAGA) and Unfair Competition Law.‒ Note that a “Commission” is not the same thing as a “Goal Based Bonus”; CA defines a commission as “compensation paid to any person for services rendered in the sale of an employer’s property or services and based proportionately upon the amount or value thereof”.
Because “commissions” trigger such legal scrutiny, we recommend avoiding the word “commission” altogether and instead using the word “INCENTIVES” when talking about any variable compensation.
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#6 – You can’t “half-bake” your compensation plan and expect it to work 100% for you We’ve worked with hundreds of companies helping them develop new incentive compensation plans
Success depends on one thing and one thing only…YOU NEED TO OWN YOUR COMPENSATION PLAN
This means that you (and your leadership team)…Understand it… ALL OF IT and ALL OF ITS IMPLICATIONSKnow why it is the way it is…you know the trade-off decisions made and can explain these decisions to others (no plan is perfect)Know what data is needed to support it and have resources to get the data regularlyHave tested the data against historical data so you know what type of payouts to expect both in aggregate and for each individual and at different levels of performance (low/high)Use care when setting goals – this part especially cannot be half-baked or you will blow up your plan economics and then come back and tell us the plan is “broken”, when it isn’t…the goals are!Have communicated it thoroughly to your staff, with examplesProvide regular reports on progress and coach staff on how to improve performanceDon’t change it at the drop of a hat or without adequate data or research – use SOP guidelines for on-going strategic management (we can give you a sample)
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Sample Plan Designs for Common Trucking Roles
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Load Planner, Accountabilities: Revenue and RetentionTarget Total Compensation Base Salary Target Incentive
$13,500= +
ELEMENT #1: Revenue per Truck
70%
Design AttributesIncentive Compensation
ELEMENT #2: Driver Retention
30%
$1,000How much per period? $2,375What is the Annual Target
Incentive? $9,500 $4,000Whose performance counts? Individual Division
When do I get credit? Billed ApprovedTiered IncentiveHow is it calculated? Linear Incentive
What is the minimum level of goal attainment required for payout? 85% of Goal 60% Driver Retention
Is it capped? No YesQuarterlyWhen is it paid? Quarterly
Is there a modifier? None NoneWhen is it measured? Quarterly w/YE True-up Discrete Quarterly
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CSR, Accountability:Book lots of good loads
The amount earned is determined by performance on two dimensions: Team Monthly Booked Loads vs. Goal Team % of Booked Loads Delivered
The % of target incentive earned is found at the intersection of these two performance levels. The incentive is paid monthly based on monthly performance (every month starts fresh). This element is capped.
75.00% 84.00% 93.00% 102.00% 111.00% 120.00% 126.00% 132.00% 138.00% 144.00% 150.00%70.00% 79.00% 88.00% 97.00% 106.00% 115.00% 121.00% 127.00% 133.00% 139.00% 145.00%65.00% 74.00% 83.00% 92.00% 101.00% 110.00% 116.00% 122.00% 128.00% 134.00% 140.00%60.00% 69.00% 78.00% 87.00% 96.00% 105.00% 111.00% 117.00% 123.00% 129.00% 135.00%55.00% 64.00% 73.00% 82.00% 91.00% 100.00% 106.00% 112.00% 118.00% 124.00% 130.00%48.00% 57.00% 66.00% 75.00% 84.00% 93.00% 99.00% 105.00% 111.00% 117.00% 123.00%40.00% 49.00% 58.00% 67.00% 76.00% 85.00% 91.00% 97.00% 103.00% 109.00% 115.00%33.00% 42.00% 51.00% 60.00% 69.00% 78.00% 84.00% 90.00% 96.00% 102.00% 108.00%25.00% 34.00% 43.00% 52.00% 61.00% 70.00% 76.00% 82.00% 88.00% 94.00% 100.00%
85.00%-85.90%
86.00%-86.90%
87.00%-87.90%
88.00%-88.90%
89.00%-89.90%
90.00%-91.90%
92.00%-93.90%
94.00%-95.90%
96.00%-97.90%
98.00%-99.90% >100%
% of Booked Loads Delivered
% of Target Incentive
Booked
Loads
vs. Go
al
110.00%107.50% - 109.90%105.00% - 107.40%102.50% - 104.90%100.00% - 102.40%
98.75% - 99.90%97.50% - 98.65%96.25% - 97.40%95.00% - 96.15%
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O/O Recruiter, Key Accountability: Recruit and process quickly
The incentive is based on the number of objectives attained. The number and type of objectives may vary from quarter to quarter. Performance levels representing Minimum, Target, Above Target and Excellence attainment are defined for
each objective. Each performance period incentive is paid based on the relative points of each objective, as well as the level of
performance attained. The incentive is paid quarterly based on quarterly performance. This element is capped.
Does Not Meet Minimum
Meets Minimum
Meets Expectation
Exceeds Expectation
Meets Excellence
0% 50% 100% 125% 150%1 of >50 1 of 50 to 36 1 of 35 to 26 1 of 25 to 21 1 of 20 to 1
X 60%1 of >18 1 of 18 to 13 1 of 12 to 10 1 of 9 to 7 1 of 6 to 1
x 25%1 of > 7 1 of 7 to 6 1 out of 5 1 of 4 to 3 1 out of 2
x 20%< 95% 95% 98% 99% 100%
x 10%100% 115%
Closes / Leads 40%
Closes / Applications 20%
Recruiter Relative Weight
Performance Level Attainment% Earned
20%Applications / Leads
30 day Retention 20%
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Dispatcher, Accountabilities: Miles and Retention
Drive r Re tention (afte r 30 days)
% of Targe t Ince ntive
<44% 0%44% - 45% 25%46% - 47% 50%48% - 49% 75%50% - 51% 100%52% - 53% 125%
54%+ 150%
Mile s pe r T ruck pe r
W e ek % of Targe t
Inc e ntive< 2,300 0%
2,300 - 2,399 25%2,400 - 2,499 50%2,500 - 2,599 75%2,600 - 2,699 100%2,700 - 2,799 125%
2,800 + 150%
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Driver, Accountabilities:Miles, Service, Fuel, Safety
© 2015 Prosperio Group
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FLSA Update: What is the history? The government sets the min wage and OT rules for this for ALL employers who generate more than $500k in annual revenue/sales in ALL states through the FLSA (Fair Labor Standards Act) A state can be more favorable to employees but not less favorable than the
feds; home rule states are not exempt from this requirement FLSA has had (for a very long time) a two level check system to determine if
OT must be paid:‒ Check #1: Minimum salary required to consider a position EXEMPT from OT (no OT required) was $455 a week ($23,660 a year) and had been for many years‒ Check #2: Duties test that looks at the actual job description and determines if the position falls under one of the defined exemptions (Executive, Administrative, Learned Professional, Outside Sales, Motor Carrier Exemption, Retail Sales, etc.)
If salary failed #1, #2 didn’t really matter – you must pay OT (exempt for Outside Sales – it’s ok for them to have salary less than the min (or no salary))
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FLSA Update: Why did this need to change? Salary level at $23,660 ($11.38 per hour) was starting to fall behind and
would soon be eclipsed by minimum wage in many places (a min wage of $15 per hour is $31,200/yr); it was last updated in 2004 The duties tests are vague and subject to considerable interpretation, so
many jobs were being classified as exempt from OT that probably should not have been There is considerable lack of understanding/information on how all this
works with some managers thinking employees can “opt out” of OT (they can’t) The advent of the internet and 24x7 accessibility meant workers were
working far more hours (often at night and on weekends) yet being paid the same rate as prior
‒ Just the math: If you work 60 hrs a week and are paid $36,000 a year, that’s $11.54 an hour (just a comparison: this is less than I made as a Manpower temp in 1989).
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FLSA Update: What has changed? The DOL set the new salary minimum at $47,476 or $913 a week (going forward this will be updated every 3 yrs).
‒ This is based on the 40th percentile of weekly earnings of full-time salaried workers in the lowest-wage Census Region, currently the South (so 60% of workers currently classified as Exempt make MORE than this amount). For the first time, 10% of this number can be made up through non-discretionary variable compensation (commissions, bonuses, etc….provided they cannot be arbitrarily taken away; a Christmas bonus is discretionary, a 10% commission on all profit dollars is not discretionary).
‒ Practically, this means that $42,728.40 is the TRUE minimum salary, as long as your workers earn at least $1,186.90 in non-discretionary variable compensation EACH QUARTER (you must pay it quarterly or monthly – not annually).‒ If they don’t earn this minimum, you must do a true-up payment to bring them up to the $47,476 salary level each quarter.
The duties tests have not changed – so if your labor attorney said a position was non-exempt before, paying them > $47,476 a year in salary WILL NOT CHANGE THIS.‒ A person can earn $90,000 a year and still be required to earn overtime pay based on the duties test (the salary is just the FIRST CHECK).
There is a Highly Compensated Employee (HCE) exemption, which was raised from $100k to $134,004 (I really wish they’d round!) for total compensation (salary + variable compensation), but to qualify for this the employee MUST have a salary of at least $47,476 without consideration of any variable compensation. (They must perform EAP duties “customarily and regularly” but this is less strict than the “standard duties test.”)‒ Note this level is set based on the 90th percentile of all salaried workers in the United States (not the lowest census area)so if you happen to make more than this amount, you know you are in the top 10% of earners in the US.
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FLSA Update: What does this mean?By December 1, for any employees that are:
‒ Currently classified as Exempt (no OT) AND‒ Making less than $47,476 in salary
• Or $42,728.40 in salary with the remaining $4,747.60 coming from non-discretionary variable compensationYou must decide between these two options:
‒ Raise their pay to meet the minimum salary requirements OR‒ Reclassify as non-exempt and begin to track and pay for hours in excess of 40 per week at the 1.5x rate
• NV, CA, CO, and AK have different OT rules based on daily hours vs weekly hours (i.e., 8 or 12 hrs per day is the trigger for OT rather than 40 hrs per week)• NOTE: YOU DO NOT HAVE TO CONVERT THEM TO HOURLY EMPLOYEES UNDER THIS OPTION – you can use an approach called “Salaried Non-Exempt” which means they are still paid on a salary basis (you generally don’t doc them if they work 38 hours one week), but you must pay OT for hours > 40 in a week (so you still have to track hours and you still have to convert their salary to an hourly rate so you can use 1.5x that value for hours > 40 in a week)
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FLSA Update: So…what does this MEAN?You will be choosing between these options:
‒ Increase fixed compensation (added cost) and reduced motivation from any variable compensation as you would likely want to reduce the target incentive amounts, commission rates, performance thresholds and targets, etc. to make up for the increased salary level, OR‒ Admin burden of tracking OT and shift in pay mix from just salary + incentive to salary + incentive + OT (which practically means salary and incentive will also need to be reduced to account for the OT – UNLESS you can shut it off entirely, and then no change to pay needed)
• Under this option, there will be psychological fall out as well as employees may interpret this change as a demotion in status – HOWEVER, using the salaried non-exempt approach may mitigate this somewhat• Under this option you also have to use incentive pay to calculate the OT rate (it’s about 10% of the variable pay if the worker works 50 hours a week) [calc method is in the tool]
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FLSA Update: What are the risks of non-compliance?Class action lawsuit is most common, with generally these two outcomes:
‒ You settle and pay settlement fees OR‒ You lose and pay:
• Two to three years of unpaid OT• Back taxes and penalties• Legal fees
‒ You might also win…I suppose…We have a (free) tool to help you – give us your card so we can send
you our FLSA Option Analysis Tool.
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Q & A
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Brought to you by theTCA Recruitment & Retention Human Resources Committee