Worker Misclassification: Risky Busines
Christine Poulias, Helios HR
Under the Obama Administration the Department of Labor is teaming up with the Department of the Treasury to crack down on employers who misclassify their workforce. In addition, the Internal Revenue Service has launched a program that will randomly examine 6,000 companies over the next three years for employee misclassifications. The federal government estimates it will raise $7 billion over the next ten years through tighter enforcement.
As an employer, you are at risk for misclassification if your independent contractors have job duties similar to those of your employees. Misclassifying a worker as a contractor costs the government substantial tax revenue, while the worker misses out on benefits afforded to actual employees. For employers that properly classify workers, the improper classification by other employers means higher unemployment taxes and increased workers’ compensation premiums.
Whether a misclassification is intentional or a matter of misinterpretation of legal guidelines, the repercussions are firm and no industry is exempt. Major corporations, including prominent shipping, beverage, cable/broadband and software development companies have all fallen under scrutiny and paid the price…to the tune of millions of dollars. And it’s not just the big fish being challenged. Smaller businesses have not only paid fines, but have been banned from the public procurement process as well.
So what’s an employer to do? If you are concerned that you may be at risk, consider the following*:
- Does the company control or have the right to control what the worker does and how the worker does his or her job?
- Are the business aspects of the worker’s job controlled by the payer? (How worker is paid, whether expenses are reimbursed, who provides tools/supplies, etc.)
- Are benefits (i.e. pension plan, insurance, vacation pay, etc.) offered? Will the relationship continue? Is the person performing work that is considered a key aspect of the business?
If it is still unclear if the worker is a contractor or an employee, visit www.IRS.gov to file a form SS-8 so the IRS can make an official determination on the worker’s status.
* Source: http://www.irs.gov/businesses/small/article/0,,id=99921,00.html
From Sweatshop to Career Destination: The Evolution of a Culture
In 1998, Edelman PR had about 1,300 employees, voluntary turnover was roughly 40 percent and its ’sweat shop’ reputation plagued them. Exit interviews indicated that the single biggest cause of turnover was lack of mentoring, coaching and training.
The leadership team took notice! A seasoned HR professional, Laura Smith, Managing Director of U.S. Human Resources, was hired to help address employee retention and evolve Edelman’s culture. In turn, the company launched Edelman University and created talent development programs that became the envy of every firm in the industry.
In a three year period the firm more than doubled in size, both in revenues and in employees. Rob Rehg, President of Edelman’s DC office, believes that increasing their focus on three key areas — Career Development, Mentoring, and Management Development — through their Managers’ Bootcamp (MBC), has contributed significantly to lowering their turnover rate from a high of 40 percent to less than 13 percent in 2009 — all while industry averages continue to hover around 20 percent.
Mandatory participation in MBC focuses on rewards and recognition, providing effective feedback, empowering employees, understanding generational differences and enhancing coaching and mentoring skills. As a direct result of MBC, they have seen measurable improvement in employee conflict resolution skills, performance management, feedback delivery and enhanced employee engagement.
While the work, prestige and brand bring employees to Edelman, it is their strong culture that is cited as one of the top reasons that keeps them at Edelman.
Edelman PR is a 2009 Apollo Awards winner. Register for the Apollo Awards breakfast on June 3rd and learn how other organizations like Edelman are building great cultures that enhance employee engagement, client satisfaction and retention. 2010 Apollo Awards™ Registration.
Listen to 2009 Apollo Award Winner Jere Brown, CEO of Dimension Data
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Best Practices Only Get You so Far
I found the article in the April 2010 issue of Harvard Business Review, “Best Practices Only Get You So Far”, an interesting read. As HR consultants and practitioners we tend to reference best practices and benchmarking stats quite frequently. However C.K. Prahalad, the Paul and Ruth McCracken Disringuished University Professor of Strategy at University of Michigan’s Ross Scholl of Business, believes companies become winners by spotting big opportunities and inventing ‘next’ practices.
Best practices, C.K. argues, may allow enterprises to catch up with competitors, but it doesn’t turn them into market leaders. C.K. believes organizations become winners by inventing ‘next practices’. Next practices are all about innovation: imagining the future, identifying the mega-opportunities–and building capabilities to capitalize on them. Check out the article in its entirety by clicking here
~Kathy Albarado
Can Working Remotely Work?
Samantha Byrd, HR Business Partner
With ubiquitous intranet connectivity, advanced telecommunication and networking technology, employer initiatives for work life balance, shrinking travel budgets, and disaster preparedness planning, many professionals are logging in, signing on, pinging, tweeting, or connecting to networks from home offices, hotel rooms, telecommuting locations or handhelds.
How can working remotely work?
Remote workforces are neither a reward for good behavior or for stellar performance. They are a business necessity. The opportunity to work remotely should not be a reward for good behavior or stellar performance. The case for working remotely is simple: it meets a business objective that impacts the bottom line. As with managing any team, the following key points highlight how to maximize performance of remote work teams.
Have confidence in your management staff - a major reason many companies resist having remote workers is that they are concerned their management teams will not effectively monitor and motivate remote workers. Managing a remote workforce is not significantly different from managing workers in an office, but requires a greater emphasis on regular, formal communication.
Have confidence in your workforce - provide opportunities for your employees and managers to gradually test remote work arrangements. Start with one day a week, or specific “assignments” to complete remotely. Where employees demonstrate effective performance, managers should encourage and support remote work.
Document performance requirements - communicate clear expectations. Managing a remote workforce is not just about when they are supposed to be at work but what the performance expectations are as well.
Provide the right tools - Software companies have flooded the market with portals, platforms, intranet tools and social networks to meet the needs of companies with remote workers. In addition, employers should ensure the appropriate hardware tools are available to support remote workers. Security and backup protocols may need to be formalized or customized.
Communication is key - There is no water cooler for the remote workforce - no informal communication, no quick project updates in the hall, no popping into your co-worker’s office to share a creative idea. Make sure your remote workforce knows how to connect, whether by phone, email, IM, or tweet.
Manage, manage, manage - remote workforces require increased frequency of contact, and scheduled check-ins. Ensure job requirements and performance expectations are clear. Initially, daily deliverables on specific tasks may be useful. Employees and managers should feel part of a team as if they were in the office. At a minimum, scheduled weekly one-on-one meetings with each employee are a best practice.
There are some added positive side effects to the business case for the remote workforce. Working remotely can benefit your employees who will put in more productive hours and experience fewer sick days. Remote working also removes cars from the road, thereby having a positive effect on the environment and moving your company toward green business practices.
So can working remotely work? Yes, just be prepared, execute, and communicate and you can reap the rewards
Are you Ready to Rebound? ~ Seven questions to ask by Donald Sull
The recession of 2007 has leaders realizing that they must set a broad strategic direction while remaining open to unexpected opportunities that appear along the way. History has proven that volatile markets do produce opportunities. You see shifting regulations generate unexpected sources of funding; changing consumer preferences create demand for new products or services; and distressed competitors selling off assets cheaply.
More than ever, companies need the capability to consistently spot and execute on unexpected opportunities before competitors do. Donald Sull conducted research over the last 10 years, studying firms hat excelled at execution in some of the world’s fastest-changing markets, and most unforgiving industries. Through his research he identified common obstacles that undermine an organization’s ability to execute on their established strategies and take advantage of unexpected opportunities. According to Sull, by asking themselves seven questions, manager can quickly assess their companies’ readiness to rebound.
• Do you miss opportunities that others spot?
o To continually identify gaps in the market, firms need real-time data and the ability to share it widely throughout the organization.
• Are your hydraulics broken?
o Organizational hydraulics are the processes to set strategic priorities, cascade objectives, and measure employee progress in achieving goals. In many organizations, execution stalls when executives deluge the organization with multiple—and often conflicting—priorities.
• Do you reward mediocrity and call it teamwork?
o Executives often socialize bonuses in the name of teamwork, arguing that differential payouts could stifle cooperation and long-term thinking. Sull believes this is a mistake. To ensure execution, organizations should recognize and reward individuals who do what they say they will with large bonuses. Paying for performance also attracts and retains ambitious employees and encourages them to execute on current priorities.
• Are your core values a joke?
o Companies that execute on their strategies ensure they have the right culture, people and leadership for execution. According to Sull, the most agile organizations share a core set of values: achievement that recognizes and rewards employees for setting and achieving ambitious goals; ownership to take personal responsibility for results; teamwork to foster coordination; creativity to challenge the status quo and integrity to offset the temptation to cut corners that can arise when employees strive to hit ambitious performance targets.
• Are you talking about the wrong things?
o Managers spend approximately three-quarters of their time in discussions—hallway encounters, formal meetings, phone calls and email exchanges. An organization’s execution depends on how well managers are able to set up and lead discussions for action.
• Have your Vikings become farmers?
o As a business matures, early entrepreneurs may leave for new adventures or settle into safe routines. New employees join the company for its perceived stability, not for adventure. Firms need farmers of course, but companies with too few Vikings on the payroll struggle to execute with sufficient urgency.
• Do you rely on heroic leadership?
o Executives who dash from crisis to crisis are a sign of organizational weakness, not leadership strength.
Donald Sull is a professor and faculty director of executive education at London Business School. His most recent book is The Upside of Turbulence from which some of the ideas in this article were adapted. To read more, check out Donald’s article in the March 2010 edition of HBR http://hbr.org/2010/03/are-you-ready-to-rebound/ar/1