Why the status quo bars companies from exploring new ways to operate

Status quo thinking manifests itself in many forms. One is a “this is the way we have always done it” mentality, an attitude that sometimes morphs into a company’s culture — and that in turn could stifle a company’s growth potential.

Joe Cole, executive vice president at Sequent, says it’s often a company’s own success that fosters status quo behavior.

“Many companies founded by entrepreneurs early on, regularly challenge the status quo out of necessity as they attempt to establish themselves in the marketplace,” he says. “Then as they achieve success at some point, they become, as Jim Collins points out in his book ‘Good To Great,’ either fearful, complacent or dare I say arrogant.”

Smart Business spoke with Cole about challenging the status quo.

What drives companies to fall into complacency?

By nature, humans are creatures of habit, and that may help generate the status quo.

Also, success lulls companies into business complacency — ‘Things are going pretty well in this tough economy.’

Then there’s the concept of losing perspective. As you get immersed in the day-to-day operations, the concept of not being able to see the forest for the trees also allows the status quo to become ingrained in an organization’s thinking and culture.

Why is challenging the status quo so difficult?

The status quo is perpetuated because of myths about what is required from an organization to change and why an organization should change.
Being creatures of habits and routines, we take comfort in them, so when organizations want to challenge the status quo, change is disruptive, which equates to upheaval.

The reality is change does not need to be disruptive. In fact, any change, to be truly transformational, has to work within the natural flow of the organization. There are two types of fear: fear of the unknown and fear of being left behind, of watching others win. The latter can often blur the vision of leadership as leaders attempt to change for perhaps all the wrong reasons.

How do you keep employees from doing what they have always done?

People and organizations, including many leaders see change as ‘revolutionary,’ that it is an event with a launch, tag line, activities, etc., versus being a natural component of an organization’s DNA. Markets shift, attitudes shift, dynamics change in the marketplace and so your ability to respond to that — your nimbleness — is something that has to be part of the corporate DNA.

That is where leaders have to be willing to insist the concept of ‘We’ve always done it that way’ can’t reside in their organization. They need to lead by example. Then change can happen, and it can be a more natural change versus an upheaval.

Can change be driven from the bottom up?

Yes. Bottom-up organizations have the benefit of providing the people who directly interact with customers the ability and mechanisms to espouse their perspective derived from direct interaction with customers.

Where does a company best start the process of change?

It should step back and analyze its current operations. Don’t keep any sacred cows; everything is fair game. In our world, we focus on the people side of organizations; therefore, we seek to educate our prospective clients that perhaps there might exist a better way to attract, retain and align human capital versus the way you have always done it — that is, traditional HR.

Ask them to contemplate, ‘What might be changed in these areas that could really free you up to focus on the core functions of your business?’ The first thing is awareness and asking yourself rhetorical questions that perhaps, ‘I am a victim of my own thinking and there might be a better way to run this part of my business.’

It is at this point where a leader is open to new ideas and thinking, and he or she can truly embrace an introspective look at the business operations, customers, market opportunities and in turn challenge the status quo in a way that is liberating, transformational and ingrained in the organization’s DNA.

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How to overcome the barriers to a European presence for your business

Once your company grows to the extent that a global presence is being considered, crossing that threshold often takes some level-headed thinking. And if it is going to be successful, the first step is a strategic one.

“It is really important to have a defined strategy before entering the market,” says Rita Hook, PHR, European Development Director, Sequent. “Companies need to have done their homework: Where is their market? What is the market potential? Do people really need and/or want their product? It also requires a rather extensive boots-on-the-ground marketing plan in the geographic area that best fits, so your strategic approach is really important.”

Smart Business spoke with Hook on how to overcome the barriers to launching a European presence.

My company wants to expand to Europe, but how long does such a project take?

It’s not a two- three- or four-month endeavor. It is more like an 18-month endeavor. You have to make that commitment. More U.S. companies fail to get established in Europe because they didn’t plan properly.

So in terms of that success rate, they may think, “We should go to Poland, we should go to France” There are many more employer friendly countries. In fact, many Europeans would advise against setting up in France.

However, with an understanding of your niche market and access to distribution, with preparation, you can avoid the potential of failure. An example of the importance of understanding your market is this point: employment contracts in particular countries must be provided to your job candidate in his or her native language as well as in English.

What can be the risks and the complexities of such a venture?

The notion is probably correct that you can expand your foothold in the European market, but there is a lot more planning needed than if you were to expand your market locally.

Americans also think there’s only going to be a little bit of a language barrier … doesn’t everybody speak English? They may, but the rules and regulations are much more complex and are not very employer friendly.

So make sure that you have your HR structure set up properly. It is important to plan your exit when the time comes to unwind your project or support with employees in Europe, so you are in a better position to avoid undue financial hardship. You can avoid foreign pitfalls by setting up the project correctly from the get-go.

What should I know about building my own plant in Europe?

We met with a company recently that felt it really needed to go to Poland to set up a manufacturing plant because it had an interested client. Our advice, before it invested $500,000-plus to set up a small plant, was to see if there was a more cost effective way to get into that niche market.

Often there’s no need to set up a costly permanent entity. An HR B.V. is an alternative to setting up a permanent structure, and you can establish an HR B.V. in Western Europe that represents an American company.

Consider incorporating in the Netherlands. It is more akin to crossing state lines to conduct business than it is to say, “We are going to cross the pond.”

An HR B.V. would be comparable to setting up a corporation in the U.S. like an LLC. We recommend that everybody base that out of the Netherlands. The employment rules there are a little bit friendlier than they are in France or some other regions.

Any other differences should I be aware of?

In France, for example, employees expect a meal ticket, and they are allowed an extended time to go to lunch.

In European countries, it is not unusual for a new mother to get a two-year paid maternity leave. Most U.S. companies are not familiar with such practices.
You don’t want to be surprised that you didn’t know about those matters. The major benefit of partnering with a shared services organization is that when it comes to setting up employment, this inside knowledge can be crucial to a successful global presence.

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How to avoid common mistakes during the hiring process

It’s no longer a buyer’s market for hiring managers. Companies that aren’t careful about the hiring process could be shut out when it comes to attracting top candidates.

“Websites like Glassdoor and Indeed allow people to write reviews about a company’s interview process. Creating a negative candidate experience could be very detrimental to the company and its image,” says Li-Lun Chen, a recruiter at Sequent.

Smart Business spoke with Chen about top hiring manager mistakes that should be avoided.

Where do companies make mistakes in preparing  job descriptions?

Often, hiring managers aren’t sure what they want, or they have a list of criteria or prerequisites that is too long or unrealistic. A good description should provide a sense of the day-to-day work involved with the job.

One of a recruiter’s biggest pet peeves is a hiring manager who says, ‘I’ll know it when I see it.’ Translation: The hiring manager doesn’t know what he or she wants. At the other end of the spectrum, some managers will have a page-long list of criteria. That’s called a ‘purple squirrel’ in the industry. It’s the nonexistent, mythical creature that a hiring manager thinks is ‘out there.’

If you’re hiring a payroll specialist and your company uses certain payroll processing software, you don’t have to find someone who knows the exact same software. A candidate who has experience with any other software should be able to learn your system quickly.

Make sure prerequisites are vital to the job. Don’t mandate that someone have three to five years of experience, for example. Length of time in a position (even in a similar job title) doesn’t equal success.

Another problem occurs when companies combine jobs. They need a payroll person and a front desk coordinator but can’t afford two full-time hires. As an alternative, hire part-time employees rather than combining two completely different roles.

What’s the best way to conduct interviews?

Team interviews are a good option when a new hire will probably be working with multiple people. Part of the interview process is not only evaluating if someone can do the job, but also how they will interact with others. Team interviews are great for making an assessment of cultural fit.

As far as mistakes go, there’s a big one — a hiring manager who is distracted or late for an interview. You’re busy, but so is the candidate. Checking emails or scanning your phone creates a negative impression.

Also, too many hiring mangers like to hear themselves talk. Ask the candidate a question and listen to the response.

Hiring managers forget that they still need to hook candidates, especially those who may be happily employed elsewhere. Be enthusiastic and tell why you enjoy working for your company. But be realistic — you don’t want to oversell it.

How should referrals be handled?

Referrals are a great way to get additional candidates, but a referral shouldn’t replace the interview process or sway a decision. These candidates generally are a better fit for the company because a friend or former co-worker has informed them about the workplace and the job. But you should ask the same questions and evaluate referrals the same way as other candidates. A referral doesn’t mean you hire the person because your VP said he or she was a good candidate.

What contact needs to be made after the interview?

Definitely maintain contact with all applicants who were brought in. Let them know the decision, good or bad. Being timely about interview feedback helps everyone. And, no — telling a candidate six weeks later that he or she didn’t get the job isn’t timely. You don’t want a candidate’s bad experience to go viral and give your company a virtual black eye.

On the applicant side, a thank you note goes a long way. It shouldn’t impact the hiring decision, but it creates a good impression — particularly if it’s handwritten.

For the past six years, hiring managers have been in charge. Now the tide has turned — candidates have more power. Hiring managers need to adjust. They need to be mindful of their company’s brand and sell candidates on the benefits of the firm.

Insights HR Outsourcing is brought to you by Sequent

How to attract and retain a multigenerational workforce

Terri Walker, SPHR, Principal Human Capital Consultant, TriNet, Inc.

Terri Walker, SPHR, Principal Human Capital Consultant, TriNet, Inc.

For the first time in modern U.S. history, companies are employing four generations of workers. Four generations in the workplace can mean more opportunity for success or more problems, depending on how an organization deals with the generational differences.

“We’ve never had four generations working side-by-side, a 20-year-old working with colleagues that may be 50 years older. In order to work together, you have to honor those differences, and you can’t expect everyone to act and think like you do,” says Terri Walker, principal human capital consultant at TriNet, Inc.

Smart Business spoke with Walker about the ways various generations view their jobs and how to manage employees to create a happier, more productive workplace.

What challenges come with having four generations of workers?

An older, more experienced worker (born before 1946) or baby boomer (1946-1964) may have different values than someone coming to the workplace for the first time. Those employees likely expect a level of respect that a Generation X (1965-1977) or Generation Y/millennial (1978 and later) employee wouldn’t automatically give just based on age. The younger workers value the knowledge and achievements you bring to the workplace more than just the fact you’ve been there a long time.

Additionally, there are differences in how generations communicate. Frequently, Gen X/Gen Y workers prefer instant messaging (IM) or email, whereas other workers might value meeting face-to-face and going to a person’s desk to have a conversation. Older workers may feel it’s rude to IM or send a text when you’re in the same building, while the younger worker thinks you’re bothering them by taking time to walk to their desk.

No one way is right or wrong; they’re just different. When you understand and respect these differences, you’ll have a more productive workplace. You don’t have to agree with each other’s values, but you have to respect them.

What are the risks of managing everyone the same?

You’re going to have employees who are not satisfied with their work environment because policies are too loose or too stringent. Employees generally know and understand work duties, but management style is what drives them toward other opportunities. High turnover brings costs in recruiting, management time and loss of productivity. The last thing you want is churn because of the work environment.

It’s up to management to bring everyone together, to find what motivates employees and tailor rewards that keep employment interesting for all. Someone who’s been with the company for years may be waiting for that gold Rolex watch at retirement, while a younger employee wants an immediate — though smaller — reward for a job well done, maybe a Starbucks gift card.

Most of us grew up with the golden rule that you treat others the way you want to be treated. However, a new rule has come into play, the ‘titanium rule’ — treat others the way they want to be treated. That involves understanding what motivates them and treating them accordingly.

How can a company bring people together?

First, look at and understand your employee base. What are the different generations? Does one generation dominate your workforce or management team? How well do they work together?

What methods does your organization use to communicate? How is technology being utilized? How are managers communicating with employees? Also, look at turnover to see if there are peaks in a particular department, which could indicate a problem with communication or work style.

Once you’ve conducted an analysis, work with executive management to find the gaps where you could be doing better. Make sure managers, supervisors and all employees feel they are valued. This approach creates a robust, productive workplace where everyone is engaged and respected, which brings real benefits in dollars and cents.

Ensure that your leaders have the knowledge and skills to communicate and work effectively with all employees. It takes flexibility and open-mindedness, a willingness to look at different ways of doing things. Successful organizations and managers incorporate these elements into their structure and practice them daily.

Terri Walker, SPHR, is a Principal Human Capital Consultant at TriNet, Inc. Reach her at (510) 352-5000 or [email protected]

See how companies grow their business and engage their employees, or follow us on Twitter: @TriNet.

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How to design a road map toward an engaged workforce

Kelly Pacatte, MBA, SPHR, senior human capital consultant, TriNet, Inc.

Kelly Pacatte, MBA, SPHR, senior human capital consultant, TriNet, Inc.

Can you prove the ROI of employee engagement? According to a Gallup survey, companies with world-class engagement have 3.9 times the earnings per share growth rate compared to their competitors with lower engagement. The challenge is planning a route to get employees engaged.

“Our research has shown that there are three buckets — the engaged group, the disengaged group and the people in the middle. Ideally, we want all employees to be engaged. The first step is to move the disengaged group to the middle bucket,” says Kelly Pacatte, MBA, SPHR, senior human capital consultant at TriNet, Inc.

Smart Business spoke with Pacatte about strategies to move workers forward to becoming engaged employees.

How can companies motivate disengaged employees toward that middle bucket?

There are four basic tips to follow:

  • Pay according to market value. Many executives don’t like to hear it and would rather offer training or take similar steps. But paying accordingly is critical in moving disengaged employees up.
  • Limit organizational reductions in force. While hard to do, it’s impossible for employees to become engaged if they fear losing their jobs.
  • Manage organizational changes. Whether a market change or leadership change, proactively communicate it to move disengaged workers into the middle.
  • Increase trust. Make sure all employees see the value in their company and believe in the brand. Executives must be visible and accountable.

While paying accordingly is important, pay isn’t necessarily a motivating factor; it’s a baseline. Employee motivation is like Maslow’s hierarchy of needs. People need to be taken care of, have the supplies needed to do the job, know what their job is and be paid accordingly. Once those baseline needs have been met, you can move employees to becoming engaged.

Does engagement strategy differ by company?

To have an engaged workforce, every company needs to deliver key components:

  • Leadership that clearly communicates goals and where the organization is headed.
  • Leadership that connects with employees.
  • The jobs employees are doing must provide meaningful work.

Implementation varies by company, but those are factors that all companies use to increase engagement. Sometimes, that may mean increasing employee development or focusing on mentoring opportunities; the ways these are done differ by company and industry.

How do you decide which programs will accomplish these goals?

The process starts with an employee engagement survey to determine what areas need work. The survey provides a baseline for how engaged the workforce is. To achieve best results, develop the survey with experts from a third party who understand what motivates employees. In addition, employees are more likely to respond because there’s no fear of retaliation.

When you receive the results, company management needs to realize you can’t change everything. Based on responses, develop a plan for areas that require immediate attention. If there’s something that can be done, work on a plan to change that. If not — and this is key — explain why. It’s important for employees to know that action is taken regarding a survey. Maybe there was overwhelming feedback that more training is needed, but you don’t have the ability to do that right away. Senior leadership needs to let employees know they were heard. While leadership can’t work on a development strategy immediately, it will take specific steps to deliver on the request.

If you’re doing a survey, some changes have to be made. Employees don’t want to spend time filling out a survey, only to find out nothing has changed.

After you implement changes, measure to see if there’s been an increase in revenue or productivity. Generally, a baseline is measured before the survey and six months to a year later to see if those factors increased.

Engagement takes a long time. But if you are genuinely trying to increase employee engagement, you will get a return on your investment.

Kelly Pacatte, MBA, SPHR, is a senior human capital consultant at TriNet, Inc. Reach her at (972) 789-3960 or [email protected]

See how companies grow their business and engage their employees, or follow us on Twitter: @TriNet.


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How upfront planning leads to a higher return on your investment

Some leaders take an “old school” approach to change management — employees get a paycheck, so they’ll deal with any changes without a need for much explanation. But that sets the organization on a path toward failure.

“The biggest problems are when leadership does not account for the fact that resistance is definitely an option,” says Mark Deans, practice leader in Organizational Development & Change Management at Sequent.

“You could build a perfectly streamlined business process, or add the most efficient tool, but if employees don’t understand how to execute it to meet your expectations, it’s not going to succeed. Try as you might, you can’t make people do things,” Deans says.

Smart Business spoke with Deans about ways to ensure successful implementation of a change process.

What is involved in change management?

It’s supporting a change in business processes or systems, technology, etc. The practice of change management applies to any significant change in an organization, including leadership change as part of an acquisition or divestiture. It’s about how employees are supported through the change process.

The methodology is that there is a journey the organization, departments and individuals go through, and each has a completely different time path. Two people might do the same job, but each has his or her own change capability, and it’s a matter of identifying and managing all of those within an organization to make the change as seamless as possible.

How does the change process work its way through an organization?

First and foremost, leadership must be on the same page. Start with getting leaders aligned so they can be the driving force behind the change, helping each individual understand his or her part.

Organizations are taking a more holistic view nowadays. A change might mean more work for some departments but provides an overall net benefit for the organization. It used to be that each silo fought for its own interests. Now, it’s about how departments operate together, and some teams taking a hit if necessary to ensure the overall organization is as successful as possible.

One of the first steps is acknowledging the need to change, and the benefits. There should be some compelling reason, whether it’s regulatory changes, an attempt to improve market share or boost the bottom line. If the overarching goal is to improve margins, explain what that means for each group, and ultimately for each individual. You have to manage change upfront and get everyone onboard at the start rather than waiting for problems. It’s analogous to going to the dentist. If you see your dentist on a regular basis, keep your teeth clean and get X-rays, you can catch cavities when they start and are easier to fix, instead of not going for a long time and having major damage. The same holds true for change management, if you start a project and haven’t thought about how to communicate it to employees, going back and fixing it is much more difficult.

Is it important to state a desired outcome?

Absolutely. That is where some companies fail as well. They make a change and aren’t sure why. A company buys hundreds of iPads as part of a mobile technology strategy without addressing the intended use. So people are updating their Facebook status or playing Angry Birds because they don’t have a burning business reason to utilize these tools. That might be a ridiculous example, but there are plenty of cases in which companies want to hurry up and do something because it’s a shiny, new object.

You also need to accept it if a change didn’t work. Evaluate the success of the change, including what happened and didn’t happen as planned. Change projects always take longer and cost more than expected. Organizations that handle change well go back and figure out what they did well, and what could have been done differently. Then they remediate anything that did not get executed as well as planned. They learn from the experience so the process can be improved next time.

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How employee management has developed into a specialized skill set

William F. Hutter, CEO, Sequent

William F. Hutter, CEO, Sequent

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]


Know what to ask a professional employer organization before hiring one with these 20 important questions.


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How to create a happy workplace

Beth Thomas, executive vice president, managing director of Consulting Services, author of “Powered By Happy,” Sequent

Beth Thomas, executive vice president, managing director of Consulting Services, author of “Powered By Happy,”

Business leaders understand the value of employee engagement, yet many have been slow to implement plans within their organizations.

“It’s interesting that 75 percent of leaders have no engagement strategy, even though 90 percent say it has a positive impact on business success. So while they think it’s important, they’re not actively engaged in affecting change. I think they don’t fully understand the impact it can make on the bottom line,” says Beth Thomas, executive vice president and managing director of consulting services at Sequent.

She says employee engagement is about creating an environment where employees understand the company’s values and what is expected of them, and are committed and dedicated to their work.

“Employee engagement is probably the biggest reason why companies are successful. Engaged employees generate 40 percent more revenues than disengaged ones and are 87 percent less likely to leave an organization,” says Thomas.

Smart Business spoke with Thomas about ways to boost employee engagement and the impact it can have on an organization.

What can companies do to foster employee engagement?

There are five keys to creating conditions for thriving, engaged employees:

  • Empowering employees. No one wants to be micro-managed; they want to feel that what they bring to the table is valued. They were hired for a reason — let them do that job.
  • Sharing information. People get anxious and disconnected when there are a lot of closed-door leadership meetings. Create a connection by bringing employees into the growth of the company with quarterly or town hall meetings.
  • Minimizing toxic behavior and negative feedback. Hire the right talent that will fit the culture and bring positivity. Then hold employees accountable to the values and expectations of the organization.
  • Offering performance feedback. Everyone wants to know how he or she is doing, and it shouldn’t be just once a year. Empower them and let them know they’re in charge of their careers, and can move forward if they are motivated and dedicated.
  • Appreciating employee value through reward and recognition. Have an employee of the month award and profile that person because people will want to emulate what they are doing. Make it very clear what is needed in order to be successful and profile those behaviors, characteristics and performance standards so everyone knows what is valued. That includes recognizing all the qualities that are valued; it doesn’t have to be based on the same performance. An employee might not be a high-powered salesperson bringing in six-figure deals every month, but might be the most positive person in the office and contributes to the organization’s culture.

Does employee engagement start with the hiring process?

Absolutely. When you are hiring people, it’s just as important to assess their ‘soft skills’ as their knowledge, skills and abilities. It’s more difficult to train people to be team players. Having the personality to go above and beyond to meet a customer’s needs or to be a trusted adviser is a soft skill that is largely innate and takes a lifetime to build. It’s important to evaluate those qualities to ensure they match the organization’s culture beyond the skills they bring.

Is it the workplace culture that promotes engagement?

Yes, it’s about the culture, but also all the employees and the leaders. It’s important for employees to ‘hang with the gang that gets it’ — those people at work who are successful — steal shamelessly and emulate what they do. Conversely, when employees hang with the people who are negative and contribute to toxic behavior, leadership sees them as being one of them, even if they’re not participating in those activities.

Engagement goes hand in hand with happiness. In a work context, happiness is about finding what in your career makes you happy. While it may sound trite, happiness leads to engagement in your work, which motivates you to give 110 percent or more discretionary effort. This is what contributes to business success, not only boosting your own career but at the same time increasing the company’s bottom line. Who wouldn’t want that?

Beth Thomas is an executive vice president, managing director of Consulting Services and author of “Powered By Happy” at Sequent. Reach her at [email protected].


Event: Get your company “Powered by Happy” with the employee engagement workshop.


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How to examine employee health insurance options under the PPACA

Dwight Seeley, Vice President, Employee Benefit Programs, Sequent

Dwight Seeley, Vice President, Employee Benefit Programs, Sequent

Employers are scrambling to figure out the impact of the Patient Protection and Affordable Care Act (PPACA) on their business and whether it makes sense to “pay or play” when it comes to providing health insurance coverage for employees.

“Pay or play regulations were released Dec. 28, so we’re all trying to digest this. Employers want to know what the rules mean for them,” says Dwight Seeley, vice president of Employee Benefit Programs at Sequent. “I have several meetings scheduled to review the math of the penalty phase with companies so they know where they stand.”

Smart Business spoke with Seeley about the pay or play provisions under PPACA and what employers need to do in preparation for the Jan. 1, 2014, start of health care exchanges.

How do companies prepare?

They need to determine answers to these questions:

  • Do they have a general understanding of pay or play?
  • Are they considered a large employer?
  • Will any employees receive federally subsidized exchange coverage?
  • Does the company plan offer minimum essential coverage?
  • Does the plan provide minimum value?
  • Is the plan affordable?
  • What penalties could apply and what is the potential cost?

First off, pay or play applies to employers with at least 50 full-time or full-time equivalent (FTE) employees, so you have to determine if that applies to you. PPACA rules are different from those of the IRS. Under PPACA, a full-time equivalent is considered 120 hours per month, 30 hours per week. There’s a fairly detailed structure for measuring FTEs based on employees with variable hours, seasonal employees, etc. Companies that have variable schedule employees, part-timers or a lot of seasonal employees are going to be challenged to determine how many FTEs they have.

If you have 50 or more FTEs, what do you need to do to avoid penalties?

Businesses can avoid penalties by providing minimum essential coverage with a plan that offers at least minimum value and is affordable. No guidance has been given on minimal essential coverage but there’s a general idea of what it’s going to look like based on industry standards.

Once you’ve established that a plan provides minimal essential coverage, you then look at whether it meets the minimum value requirement and if it’s affordable. It’s considered poor if it pays less than 60 percent of total benefits under the plan. To be affordable, it has to cost less than 9.5 percent of an employee’s household income.

What are the potential penalties?

If you do not offer coverage and at least one full-time employee receives a federal subsidy, the tax is $2,000 per the number of full-time employees minus the first 30. An employee can get a subsidy if their income is between 100 to 400 percent of the federal poverty level — about $92,000 for a family of four.

If you offer coverage that’s considered unaffordable and at least one full-time employee receives a federal subsidy, the annual tax is the lesser of $3,000 per subsidized full-time employee or $2,000 for all full-time employees.

Should some employers drop health care coverage and pay the penalties?

Studies corroborate the fact that a lot of employers feel they still need to offer health insurance as a differentiator and as a recruitment and retention strategy. What they want is to get the numbers straight in order to make an informed decision. That means going through the penalty scenarios and working out the math. Any penalties will not be deductible or tax favored, whereas the health insurance you’re providing is tax favored, so you have to calculate the impact from pre-tax and post-tax perspectives.

One other challenge that’s not being talked about is the cost companies are going to incur to implement the administrative changes required by the law. They’re going to have to put in new processes to allow easy access to data the way it is defined by the PPACA, such as an ongoing way to monitor the number of FTEs.

The published regulations contain many detailed examples so there has been an attempt to provide direction. Still, the sheer volume and complexity make it a lot to absorb.

Dwight Seeley is a vice president, Employee Benefit Programs, at Sequent. Reach him at (614) 839-4059 or [email protected]


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How to handle time off and pay for weather-related absences

Jenny Swinerton, General Counsel, Sequent

Whether it’s a major event such as Hurricane Sandy or simply a snow day, businesses need to be aware of the wage and hour implications of weather-related absences.

“It is important to have clearly defined policies in place that address the many pay-related issues that are involved with a weather-related closing,” says Jenny Swinerton, general counsel at Sequent. “In addition, it’s always a good idea to implement a contingency plan that identifies essential personnel who are vital to the continued operations of the company and establish procedures for communicating with employees regarding emergency closures.”

The same issues apply in cases when businesses close because of an outbreak of the flu.

“This is expected to be one of the worst flu seasons we’ve had in years, so it’s a good time for businesses to review their existing policies to ensure that they address all of the various issues that arise when an employer is forced to close for any reason.”

Smart Business spoke with Swinerton about weather-related absences and how the Fair Labor Standards Act (FLSA) dictates pay requirements.

What happens to employees’ pay when a business closes because of weather? 

Employees are treated differently under the FLSA depending on whether they are classified as nonexempt or exempt. Briefly, nonexempt employees are those who are entitled to overtime pay. Exempt employees are those who are paid on a salaried basis and also meet specific legal requirements to be exempt from the overtime pay requirements.

The FLSA requires employers to pay their nonexempt or hourly employees only for those hours that the employees have actually worked. As a result, if a nonexempt employeed are unable to come to work or the office is closed, the employer is not required to pay them.

Exempt employees generally must be paid their full salary for any week in which they perform work. So, if an employer closes the office because of inclement weather or other disasters for less than a full workweek, the employer must pay the exempt employee’s full salary for the week. The employer may, however, require the exempt employee to use vacation or paid time off.

Does the length of a shutdown determine how you handle absences?

It really doesn’t matter for nonexempt employees because they’re paid only for hours worked. So if you shut down for a week, you don’t have to pay nonexempt employees during that time. With salaried employees, unless an employer suspends operations for an entire workweek, they must be paid their regular weekly salary regardless of the number of hours they worked. This becomes tricky with telecommuting because an exempt employee is often going to be checking email or responding to phone calls even while stranded at home during a storm. If exempt employees work for a small portion of the workweek, they must be paid for the entire week.

If you make deductions from exempt employees’ compensation for absences attributed to inclement weather, you may jeopardize the employees’ exempt status and incur liability for any overtime they may have worked.

What happens if an employer’s business is open, but exempt employees don’t show up?

If the employer remains opens during or after a natural disaster and an exempt employee cannot report to work, the Department of Labor considers this to be an absence for personal reasons. But deductions may only be made from the exempt employee’s salary in full day increments. However, it is important to remember that if a salaried employee performs even a little bit of work during the day, employers are still required to pay the employee’s full day salary.

What else should be considered?

Employees who are instructed to remain on call during inclement weather and who cannot use the time for their own personal benefit must be compensated for this time. Additionally, if employees are performing job duties outside their normal scope, such as sweeping the floor, they may be considered a volunteer and do not need to be paid for that time.

Read Sequent’s blog — frequent posts from a wide range of Sequent experts regarding HR, technology and consulting.


Jenny Swinerton is general counsel at Sequent. Reach her at (614) 410-2362 or [email protected]

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