overtime – Page 2

March 19, 2021July 24, 2024

Wage and hour violations cost restaurant $697K

The U.S. Department of Labor under the Biden administration is ramping up its enforcement of wage and hour violations as a popular Chicago restaurant whose employees often worked for tips only was fined nearly $700,000.

The department’s Wage and Hour Division recovered $697,295 in back wages for 60 employees following an investigation of Tank Noodle Inc. Investigators found the employer owed some workers more than $10,000 each in back wages and identified numerous violations of the Fair Labor Standards Act’s minimum wage and overtime requirements.

Inaccurate time and attendance records

The agency also found the business owner failed to keep accurate records of the number of hours employees worked, as required by law.

In October 2020, the wage and hour division notified Tank Noodle, a popular Vietnamese restaurant in Chicago’s trendy Uptown neighborhood, that they were in violation of the FLSA. Tank Noodle signed an agreement to pay the back wages they owed Dec. 7, 2020.

Using an effective time and attendance system helps prevent the kind of wage and hour violations that led to the steep penalty incurred by Tank Noodle, said Tasmin Tresize, president of Workforce.com.

“While it’s unclear what type of workforce management system was utilized, it has evidently led to major violations in the wage and hour code,” Tresize said.

Shortly after the November presidential election, Michael Lotito, an attorney with Littler in San Francisco and co-chair of Littler’s Workplace Policy Institute, offered his thoughts on changes in Labor Department enforcement under the Biden administration. He was quoted as saying the division will likely revisit overtime standards and issue rules dealing with pay entitlement for off-the-clock work, like checking email from home.

“Enforcement will be aggressive, especially against certain industries like fast food, janitorial, construction and other targets. The department will also coordinate with state DOLs to cooperate with one another as investigations progress,” Lotito said.

Large amount of back wages owed

The Tank Noodle investigation recovered a considerable amount of back wages for 60 employees in an industry whose essential workers are often among the lowest paid, said Wage and Hour Division District Director Thomas Gauza in Chicago.

“Failing to accurately record the hours employees work does not prevent a federal investigation, the discovery of violations and ultimately, back wage recovery,” Gauza said in a press statement. “This case shows that employers that attempt to gain an unfair competitive advantage by flouting the law will be held accountable.”

Violations of tip pooling, overtime requirements

Investigators found that Tank Noodle employed some servers to work only for tips, failing to pay them any direct wages, as the law requires. Tank Noodle also shorted servers when the employer pooled tips each day, and divided them evenly among all staff, which illegally included management, according to the Labor Department.

The FLSA does not permit management to participate in tip pooling arrangements. The restaurant violated overtime requirements when it paid some workers flat amounts per day, regardless of the number of hours that they worked, the Labor Department said. Doing so resulted in violations when those employees worked more than 40 hours per week but the employer failed to pay overtime.

Tresize noted that as the Labor Department looks to be taking a more aggressive approach to each case, “It’s important that businesses invest in solutions to reduce their noncompliance risk.”

Effective restaurant employee scheduling best practices

Using best practices for an effective restaurant employee schedule will boost wage-and-hour compliance, avoid understaffing and labor cost overruns. One way to start scheduling in advance without the hassle of paperwork is with an online restaurant scheduling system.

See how to build your restaurant’s employee work schedule with ease and remain in compliance with all labor laws. Sign up for a free trial of Workforce.com’s shift scheduling software today.

September 30, 2020November 16, 2020

COVID-19, hazard pay and overtime

Wage and hour compliance is complicated enough for employers. Layer a pandemic on top of wage and hour compliance, and you have an absolute nightmare for companies.

Consider, for example, hazard pay.

Suppose you are a private-sector employer that decides to offer your employees a monetary incentive to return or remain at work during the pandemic. Must you include this hazard pay in the regular rate when calculating the overtime premium for non-exempt employees receiving this payment?

According to the Department of Labor, the answer is yes.

Yes. Payments your employer provides you to perform work constitutes compensation for employment that must be included in the regular rate, subject to eight exclusions described in section 7(e) of the FLSA. None of those exclusions apply to the incentive payments described above.

The answer changes, however, if the payments are made pursuant to a state or local government program, directly from the government or indirectly passed through the employer.

Bottom line? Wage and hour issues are complex; pandemic wage and hour issues are even more complex. If you have any doubt whatsoever about whether you are correctly paying your employees, reach out to your friendly neighborhood employment lawyer for guidance.

August 27, 2020June 29, 2023

Management tips on overtime equalization and tracking hours

scheduling; time and attendance; forecasting

Many schedules like 24-7 operations have built in overtime, just to make sure there’s coverage, but in any organization there’s potential that employees may accrue unplanned overtime. For managers trying to run a tight ship, this can complicate a precisely planned schedule and budget.

Sometimes there’s too much work and not enough resources or employees to accomplish these tasks, leading companies to give too much overtime. “That’s a matter for management and leadership to assess and to determine whether they need to hire additional talent,” said Chuck Buiocchi, senior director of BPS operations at Kelly Services.

It’s vital that managers get payroll correct, and while many companies still use old school paper time cards, third party platforms can help a lot, he added.

Several workplace experts shared management tips for organizations trying to manage overtime more accurately and precisely. Here is their advice.

Overtime equalization can help you decide who gets extra hours

Some employees may want more overtime hours to help ensure financial stability, Buiocchi said. Managers want to be fair to employees in situations like this, and if there’s more demand for overtime than supply, they’ll want to create a method of allocating those hours fairly.

Overtime equalization — the attempt to balance overtime among employees — can be dependent on factors like employee tenure and reliability. But more often than not, organizations have to consider the people with the most relevant skill sets first, Buiocchi said.

Sometimes overtime is built into schedules and interested employees can ask for those hours, but in general managers want to avoid unnecessary overtime as much as possible.

Also read: A technology integration is an intervention to dissolve common payroll errors

The key here is understanding the root cause of this increased need for labor, Buiocchi said. If employees are spread too thin, maybe it’s time to hire more employees. If the reason for more overtime is a decrease in productivity, drill down on what’s impacting productivity and address it. This is a much bigger project and requires deeper discussion, but it’s necessary if something is impacting the team to such a degree, he added.

Allocating overtime hours during the pandemic

The COVID-19 pandemic has complicated overtime allocation to some degree. Now when determining overtime equalization, organizations may deal with a world of juxtaposition, said Traci Fiatte, chief executive officer, professional and commercial staffing at Randstad US. Some employees are dying for extra hours and income for a variety of reasons, like those working 60 or 70 hour weeks at two different jobs because their spouse lost their job. But others don’t want to go to work at all or are scared.

Meanwhile, employers are desperately trying to manage overtime and not pay it, because many organizations’ revenues have declined since the pandemic began.

Smart scheduling is especially important during the COVID-19 pandemic, when offices or places of operations might have to stagger out their shifts so that employees can be socially distanced, Fiatte said. Or maybe they need to operate at a lower capacity than usual so that employees can more easily stay away from each other. She also suggested adopting scheduling tools that allow managers to take floor plans into account as they create schedules and socially distant staff appropriately.

“Overtime is best managed when you know who is working when and where, even in terms of floor planning — which is a concept we never had to worry about pre-COVID. We certainly had to worry about shift scheduling before, but we never had to worry about who was where,” she said.

Even during the COVID-19 pandemic, companies are eager to produce as much as they usually have or more, but whether or not they’ll have the same employee headcount as before is uncertain, she said. And with fewer employees, maintaining that production schedule can be tricky.

One strategy organizations have adopted to address pandemic challenges is relying on more shifts with fewer employees, she said. During times like this, that may be more effective than longer shifts with more people on the floor at the same time.

Actions speak louder than words

One of the main problems with labor tracking and monitoring is that it’s difficult to accurately track or monitor overtime, said Albert Rizzo, adjunct assistant professor at the NYU School of Professional Studies within its human capital management program. HR needs to do it and not just pretend to do it, he said.

Also read: Shift scheduling strategies can be improved through technology

Also, he added, HR needs to make sure the overtime policy is not just a few lines in the employee handbook but something that’s actionable. Best practices here depend on the size of the company.

For a mid-sized company with many employees, for example, one common mistake is that HR is given the responsibility to track labor, Rizzo said. But it’s actually be more efficient and accurate if lower level managers were given the task of tracking this.

“Rather than put the burden on one department like HR or one HR manager to track, the best practice would be to get the person closest to the employees typically incurring the overtime and have that person manage it,” he said.

While many managers view overtime as a problem, they should be looking at it more from the solution mindset, he added. When team members are accruing too much unplanned overtime, there’s a solution to be discovered. Managers can speak to the people accruing the extra hours and find out why that’s occurring. Maybe there’s no clear policy on what constitutes overtime and what doesn’t. Maybe the location is short staffed.

Ensure that your employees are properly classified

HR needs to make sure they’ve properly classified employees to begin with so that exempt employees are truly exempt and nonexempt employees are truly nonexempt. Misclassification frequently happens in HR, Rizzo said.

Regarding overtime, perhaps an analysis could be done on what exact duties employees are performing. Managers can potentially shift certain duties from A nonexempt employee to an exempt employee who won’t be paid overtime for working extra hours.

“HR should be very careful about classification of exempt and nonexempt employees,” he said.

Cover your tracks with labor tracking

An important part of this conversation is what the burden of proof is on overtime claims and who holds that burden, Rizzo said. If an employee claims they have worked unpaid overtime, employers must have the information on file to disprove that claim. If the employer doesn’t have any records that accurately track if the claim is true or not, the U.S. Department of Labor will pursue assuming the employee is telling the truth.

Also read: Labor analytics: A how-to guide for company leadership

“If an employee says 60 hours and the employer has no way to refute the claim or doesn’t refute it sufficiently, then the employee’s statement of how many hours they worked will be taken as the truth,” Rizzo said, adding that this is something employer often take for granted or don’t know.

“There has to be a real tracking system, Rizzo said. “It doesn’t have to be sophisticated but it does have to be monitored carefully.”

August 25, 2020June 29, 2023

Labor tracking in an increasingly complex legal environment

Labor tracking is necessary for employers to ensure they’re paying their workforce correctly, but the unique labor laws of certain cities and states throw a wrench in an organization’s practices.

The word “complex” does not even scratch the surface of how complicated labor tracking is given the various state and local labor laws that govern sick leave, overtime, minimum wage and more, according to Traci Fiatte, chief executive officer, professional & commercial staffing at Randstad US. “If you’re not using an automated [employee] scheduling software and you have employees in multiple states, I’m not sure how you keep track of it all,” she added.

According to Workforce.com’s 2020 “HR State of the Industry” report, only 40.5 percent of respondents said they used HR software for workforce management, including time and attendance, and only 29.5 percent said they used it for compensation management. There’s still room for improvement for organizations who’ve yet to use automated software to help with labor tracking and management.

Rely on specialized employees and software

Fiatte suggested that organizations have personnel dedicated to understanding varying laws and a payroll system that can be programmed to understand the different laws.

For example, overtime is an area of labor law where different regulations can confuse an already complex process, and software may have the capabilities to allow managers to take overtime laws into account when they plan schedules. In most states, “overtime” is defined as anything more than 40 hours a week, but in California it’s defined as more than 8 hours worked in a day.

“Unless you have a system to track that, you almost need a staff dedicated to manually tracking it, which I can’t imagine any large employer being able to do,” Fiatte said. “The name of the game is automation and making sure you have the right systems to help manage it.”

The biggest gap here is that while big national brands have this figured out, others may not.

“The companies I worry for are the companies that are small enough that they may be family-owned, regionally-based or [spread across] four or five states, but they don’t have the level of sophistication to have legal teams or HR teams to be managing the variances between state laws,” Fiatte said. “It’s those companies that could be taken by surprise two years from now when they get audited, and they’ve broken a bunch of laws they didn’t know they were breaking.”

Organizations in a situation like this can find a specialist to help them manage the dynamic and complex labor law environment, she added.

Encourage managers to stay up to date on the latest labor laws

Chuck Buiocchi, senior director of BPS operations at staffing company Kelly Services, said that at his organization they use the latest technology to ensure managers aren’t expected to know everything. They also have a group whose sole purpose is to keep the rest of the organization abreast of changing labor laws.

Buiocchi said he would encourage managers to stay as up to date as possible on changing labor laws. While they may not become experts, keeping themselves educated is a smart thing to do.

Keep documentation

Labor tracking helps organizations control wage costs, but that’s not the only benefit. It’ll also help any organization audited by the Department of Labor.

“I can’t stress enough the importance of labor tracking, not only from a financial standpoint in terms of making sure people are paid properly but even in terms of the legal standpoint,” said Albert Rizzo, adjunct assistant professor at the NYU School of Professional Studies within its human capital management program.

“If the company ever gets audited by the Department of Labor, it only takes one employee to make a complaint about failure to get paid minimum wage or overtime for that to trigger an audit by the Department of Labor,” he added. “And once that audit is triggered, they could very well go after the employer and every employee to see if the employer has paid any one of those employees improperly, even if they’ve never lodged a complaint.”

Encourage straightforward conversations

Companies must be very deliberate about payroll policies, procedures and expectations and how that information is communicated among leadership, management and employees, Buiocchi said.

“We will not allow people to work off the clock,” he said about his own organization. “We don’t trade for comp time or anything like that. We live to not only the letter but the spirit of the laws in which we operate, and we expect our leaders and our employees to do the same. And we set those expectations and we manage the performance for those who don’t meet those expectations.”

Also read: Give managers the time they need to sharpen up their all-around skills

If someone works off the clock, in this case, supervisors can have a conversation with that employee, make sure they get paid, make sure they don’t do it again and discipline them if necessary. Maybe the supervisor finds out that the direct manager of the employee is mismanaging something or overworking employees, and then it’s up to the supervisor to find a resolution for that.

June 28, 2020June 14, 2020

Overtime and FLSA outside sales exemption

employment law, labor law, overtime records

Eugene Martinez was a sales representative for Superior HealthPlan, Inc. Martinez’s duties included soliciting Medicare Advantage Plans. Superior classified Martinez as an independent contractor pursuant to the terms of his sales agreement. Martinez subsequently filed a lawsuit against Superior, alleging that he was misclassified as an independent contractor and was entitled to overtime pay under the Fair Labor Standards Act. Superior filed a motion for summary judgment regarding Martinez’s FLSA claim, arguing that even if Martinez was an employee he would not be entitled to overtime pay because he fell under the FLSA’s outside sales exemption.

The U.S. District Court for the Western District of Texas held that Martinez was not entitled to overtime pay because the outside sales exemption applied. The court assumed that Martinez was an employee for purposes of argument and focused on Martinez’s actual job duties for Superior. The court noted that Martinez spent virtually every weekday in sales appointments away from Superior’s offices. The court deemed that the FLSA’s outside sales exemption applied and Martinez to the extent that he should have been classified as an employee and was not entitled to overtime pay. Martinez v. Superior HealthPlan, Inc., 371 F. Supp. 3d 370 (W.D. Tex. 2019).

IMPACT: Companies that employ sales representatives should be aware of the fact that such employees are not automatically exempt under the FLSA. Under the FLSA, an employee may be classified as exempt from overtime pay if he or she is paid above the FLSA’s earnings threshold and his or her duties meet one or more exempt “duties test” categories (i.e., executive, administrative, professional or outside sales exemptions).

May 11, 2020October 19, 2021

Shift scheduling strategies can be improved through technology

shift scheduling, technology, custom fields

Life is good for an organization when shift scheduling is established and working well. Let scheduling get even a little sideways, however, and that tightly run ship can quickly become an all-hands-on-deck disaster.

Shared calendars, lost emails, hard-to-read spreadsheets, white boards and even Post-it notes are not how to schedule employees. Comprehensive scheduling software tools can prevent a Titanic-like calamity from disrupting your employment schedule.

Effective employee scheduling gives managers immediate insight into how many staff members to schedule at any given time and optimizes planning breaks, setting vacations, adding time for training and addressing unplanned absences. A streamlined scheduling plan also cuts the time associated with onboarding new staff members to full productivity.

Here are some ways that scheduling software can save time, streamline scheduling and control costs.

Employee scheduling software saves time and money.

The old Benjamin Franklin adage of “time is money” is as true today as it was in ol’ Ben’s era. It certainly applies to scheduling the right employee into the right slot.

Whether it’s a 12-hour on-floor hospital shift or a four-hour lunch rush slot, scheduling software is a time-saver when it comes to matching an employee’s skills and availability to the proper shift. Managers will have a real-time schedule that changes with the organization’s needs. Scheduling software also removes the labor-intensive task of constantly rebuilding a schedule to free up you and your staff for other opportunities. In other words, you are saving up Benjamins by freeing up time.

Employee scheduling software streamlines the process.

Saving time is important, and scheduling software helps you make better use of that time. All schedules can be created and distributed electronically, and employees can use their phone to clock in and out, eliminating the need for onerous back-and-forth emails or missed phone calls.

This also puts much of the responsibility on the employee to communicate a potential absence or shift swap. Such functions turn the stress of scheduling employees into an HR department win.

Employee scheduling software controls costs.

A 2017 Quickbooks survey found that 49 percent of employees admitted to time theft, which annually costs companies more than $11 billion. Scheduling software tools cut down on fraud that may be taking place in your company.

Overtime, while often unavoidable, is another opportunity to save money through scheduling software. You have enough people to get the job done, but not so many that you’re cutting into the bottom line. Scheduling software provides the tools to cut costs in the form of unnecessary overtime by showing which employees are eligible for overtime assignments and who already clocked too many overtime hours.

Don’t be a ship helplessly tossed about in the swirling seas of scheduling employees! Find out about the benefits of Workforce.com’s comprehensive scheduling software today. You’ll see how it can boost efficiency and control costs across your entire enterprise.

December 2, 2019October 28, 2019

Court Drills Company Over Bonus Pay

Bristol Excavating entered into an agreement with Talisman Energy. Talisman paid all workers on its drilling sites bonuses for safety, efficiency and completion of work.

At some point, Talisman and Bristol agreed that Bristol’s workers were eligible to receive the bonuses; however, this arrangement was never codified. The Labor Department found Bristol should have included the bonuses in workers’ regular rate of pay for purposes of overtime compensation. In rejecting this, the Third Circuit emphasized an employee’s regular rate of pay is between the employer and employee.

Then it assessed the employer’s involvement in the bonus program: (1) whether the specific requirements for receiving the payment are known by the employees in advance of their performing relevant work; (2) whether the payment is for a reasonably specific amount; (3) whether the employer’s facilitation of the payment is significantly more than serving as a pass through vehicle. In applying the test, the Third Circuit found there was not enough clarity about the requirements or amounts of the efficiency or completion of work bonuses to require Bristol to include these bonuses in overtime compensation.

However, the terms of the safety bonus were sufficiently clear. Bristol employees knew the criteria for earning the bonus and how much they would receive, and Bristol invoiced Talisman for payment of the safety bonuses on behalf of its employees.

Bristol should have included the bonuses in its employees’ regular rate of pay. Sec’y United States Dep’t of Labor v. Bristol Excavating Inc., No. 17-3663, 2019 WL 3926937 (3d Cir. Aug. 20, 2019).

IMPACT: Employers with leased employees in the Third Circuit (New Jersey, Delaware and Pennsylvania) should audit their compensation practices in light of the new test announced in this case.

January 8, 2019June 29, 2023

Beware Pre-Shift and Post-Shift Workplace Activities

In Integrity Staffing Solutions v. Busk, the Supreme Court held that the FLSA only requires employers to compensate employees for time spent performing pre-shift (preliminary) and post-shift (postliminary) activities that are “integral and indispensable” to an employee’s principal activities.

What are “integral and indispensable?” Those activities that are (1) “necessary to the principal work performed” and (2) “done for the benefit of the employer.”

In Busk, for example, the court held that post-shift security screenings were not “integral and indispensable” for an Amazon warehouse employee, because such screenings are not “an intrinsic element of retrieving products from warehouse shelves or packaging them for shipment,” and the employer “could have eliminated the screenings altogether without impairing the employees’ ability to complete their work.”

In light of these standards, consider Mireles v. Hooters of Am., LLC, filed late last year in a Houston federal court. A Hooters waitress claims that her employer unlawfully withholds pay for “postliminary” activities.

According to the lawsuit, Hooters requires its “Girls” to be “approachable, upbeat, and attentive to the needs of the guests as she socially engages with and entertains each individual guest at the front door and on the floor.” Accordingly, it requires that they spend substantial post-shift time “conversing with customers about topics unrelated to Defendants’ food and beverage offerings or local attractions, and spending substantial time waiting for managers to reconcile their sales receipts and tips towards the end of each shift.”

Are these waitresses entitled to be paid? Who knows. The point to be made runs much deeper.

There is a fine line between what is “integral and indispensable.” If the waitresses are required to be “attentive to the needs of the guests” and “socially engaging,” then I can craft an argument that time spent schmoozing post-shift should be compensated, just as I can make the point that such activities have nothing to do with the principal work of serving wings and beer. These off-the-clock cases are difficult, expensive and risky. If you lose, you’re not just paying your lawyer, but also the plaintiffs’ lawyer.

In other words, before you decide that your employees’ pre-shift and post-shift time is non-compensible, stop, take a deep breath, and call your employment lawyer.

December 1, 1999November 14, 2018

Compensation Budget Information

The amount of money companies spend on employee compensation each year represents a significant portion of operating expenses. Average payroll costs run anywhere from 23% (retail) to 41% (service firms) of the entire operating budget of an organization.

As a result, compensation planning is clearly one of the most important responsibilities of today’s compensation professional. Annual compensation planning involves preparing budgets to address salary increases, salary structure adjustments, promotion increases and variable pay expenditures. Typically, the budget process occurs well in advance of fiscal year end so that cost projections can be included in operating budget forecasts for the coming year.

Compensation professionals can access a multitude of resources to assist them in establishing realistic and competitive projections for the annual compensation planning process. These resources include published surveys from private research companies, surveys from professional affiliations, local area data from city or state entities, national information from government agencies, articles in industry magazines or professional publications. In addition, other methods include networking with other compensation professionals in their market or industry and attending a variety of seminars and presentations focusing on current trends and practices in compensation.

Compensation plans will undoubtedly be developed every year in consideration of the following practice trends:

Salary increases have remained relatively flat over the past two years, hovering at 4.0–4.5%. According to the American Compensation Association’s (ACA) 1999-2000 Total Salary Increase Budget Survey, which combines responses for cost-of-living adjustments, merit increases and equity adjustments, no significant change is projected for 2000:

Total Salary Budget Increases—United States

	Actual 1998	Actual 1999	Projected 2000
Nonexempt Hourly Nonunion	4.1%	4.1%	4.1%
Nonexempt Salaried	4.2%	4.2%	4.2%
Exempt Salaried	4.5%	4.4%	4.4%
Officers/Executives	4.6%	4.5%	4.5%

The same type of budget information is also available from ACA or other resources in various data segments including industry, region, and company size. In a recent survey from PricewaterhouseCoopers, Compensation Planning Survey: 2000, average projected merit increases for FY2000 by industry are as follows:

Industry	Executives	Mid Mgmt	Professional
Business Services	4.3%	4.2%	5.0%
Communications & Telecomm	5.0%	5.0%	4.8%
Computer, Electronic Equipment & Related Products	4.9%	4.8%	4.8%
Financial Services	4.1%	4.0%	4.2%
Healthcare	4.2%	3.7%	3.6%
Services—All Other	3.9%	4.1%	4.0%
Utilities	4.0%	3.8%	3.8%
Wholesale/Retail	4.4%	4.3%	4.3%

Companies with particular concerns regarding high tech, or information technology talent will be pleasantly surprised to find merit data readily available. The PWC survey reports planned increases for IT positions with hot skills at 5.6%, down from 1999 increases of 5.9%. Many other publications include comprehensive salary planning data for the information technology market as well.

Salary structure adjustments are typically applied in blanket fashion to all existing salary ranges within an organization, i.e., the adjustment amount is added to the minimum, midpoint and maximum of traditional salary ranges, or to the market anchor or broad range of a less traditional salary management structure. Salary structure adjustments have remained fairly steady over the past few years and typically lag merit increase budgets by approximately 1.0—2.0%. FY2000 is no exception as reported by PWC:

2000 Planned Salary Structure Adjustments
Executives	2.9%
Middle Mgmt	2.9%
Professional	2.9%

Only one area is experiencing a significant difference from the norm in salary structure adjustments, of course, information technology. More and more companies are reporting establishing separate salary range programs for IT positions, and adjusting those ranges at a more accelerated pace than the standard ranges. Survey data suggests IT ranges will move as much as 2.0% to 3.0% more than the ranges established for non-IT jobs.

Promotion budgets are typically calculated as a percent of base salaries and refer to the amount set aside or specifically budgeted for promotional increases throughout the year. Survey data indicates the following budgets planned for 2000 promotions:

Executives	2.3%
Middle Mgmt	2.2%
Professional	2.2%

Variable pay plans are designed to reward employees for achieving specific company and/or individual performance goals. This includes bonus or incentive plans that typically pay out in cash based on achievement of specific annual performance measures (although more frequent payouts may be made depending on business cycle and ability to measure results).

The size and amount of awards in incentive or bonus plans typically varies from period to period based on company and/or individual performance results. Variable or incentive pay plans are becoming a significant element of total compensation packages across all industries. Consequently, companies are reporting an increase in the amount of funds used for these plans.

In the US, 63% of ACA’s survey respondents currently use at least one type of variable pay plan. Variable pay is still most prevalent among management and exempt salaried employees. ACA’s respondents use across their organizations as follows:

74% use variable pay to award performance at management and exempt levels
43% use variable pay to award nonexempt salaried employees’ performance
38% use variable pay to award hourly employees’ performance

According to recent Hewitt Survey Findings: Salary Increases 1999-2000 the average cost of variable pay plans as a % of payroll was reported as:

	Actual 1999	Projected 2000
Salaried Exempt	9.3%	9.6%
Salaried Nonexempt	5.5%	5.4%
Nonunion Hourly	5.1%	5.1%
Union	4.7%	4.1%

A recent survey in the November 1999 IOMA’s Pay for Performance Report indicates that variable pay plans are No. 1 on HR/compensation manager’s wish list of items to adopt or expand the use of in their organizations.