Business owners understand the need to go to dentists to get their teeth cleaned and to mechanics for car repairs, but yet they attempt to manage their employees internally instead of getting help.
“Managing the business of employment requires a completely different discipline and skill set from what is needed for the core business activity,” says William F. Hutter, CEO of Sequent. “Just because you are in the business of making widgets doesn’t mean you understand what it takes to be an employer in today’s environment. Rules and regulations relative to being an employer have changed a lot during the past 10 years.”
Smart Business spoke to Hutter about government regulations, employee retaliation and other issues involved with the business of managing people.
Why should companies pay more attention to employee management?
So many companies spend time on their communications budget for things like high-speed Internet and phones; that’s an insignificant portion of the total budget. For service companies, people represent 40 to 70 percent of the total cost of operations. It’s such a big segment, but no one seems to approach it appropriately because it requires a separate discipline. Issues relating to employees have a risk tail — it’s a contingent liability that can last three to five years after an event occurs. How many companies really know how to manage that liability? Small to midsize businesses don’t have the resources or expertise to do that and protect their biggest asset, which is their company.
What is involved in employee management?
There are common responsibilities that come with being an employer — compliance, wage and hour, health care reform, retirement plan fiduciary liability, workers’ compensation management, proper forms, reporting, employee file maintenance, etc. In professional practices, there are also issues regarding licenses, accreditations and certification; those are business drivers that contribute to your business success.
The hiring process, however, has nothing to do with what you’re passionate about and the business you opened; the business drivers for your specific discipline. Each new piece of legislation, each government-required form, each legal precedent set because of a lawsuit filed by a employee begins to change how you need to think about managing the business of employment.
In 2010 and 2011, retaliation charges became the most frequent complaints filed with the Equal Employment Opportunity Commission, surpassing race discrimination. An employee filed a complaint of some sort — harassment, hostile work environment — and then was terminated and filed a claim of retaliation. That retaliation claim is pursued by the government at no cost to the former employee. And 41 percent of all federal discrimination claims are charged against companies with 15 to 100 employees.
One of the newest areas for claims is in absenteeism and attendance. The Department of Labor has developed a free app employees can download to their smartphones and keep track of hours worked to see if they’re due overtime pay, which in essence is wage and hour enforcement at the employee level.
What can companies do to prevent claims?
Make sure employees are properly classified as exempt or nonexempt under wage and hour law. For example, to be exempt you must have hire or fire authority, supervise two or more people and be able to affect company policy. Not all professionals are exempt; it depends on the actual job task. For computer programmers, they have to be paid 6.5 times minimum wage per hour to be considered exempt. But fruit and produce delivery truck drivers are exempt because they are involved in interstate commerce.
Most companies don’t want to keep track of time because it requires monitoring by managers. But it’s a major liability and all it takes is one complaint to create problems.
Think about how to keep track of hours and reporting requirements of health care reform and look-back periods, or just one required form, the I-9 — there are 40 different fines that can be levied for that form alone. This shift in focus toward compliance and away from innovation has great cost to the business. That’s a cost of doing business and you need to move those tasks elsewhere because you never get that opportunity back.
William F. Hutter is the CEO of Sequent. Reach him at (888) 456-3627 or [email protected]
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