HR Professionals: Got a Compensation Question?

For me, one of the neat things about being an editor here at BLR® is the opportunity to interact with HR and compensation professionals on a regular basis. As the comp editor, I’m asked about managing the compensation process and, for the most part, they’re pretty routine queries about things like how to market price a job and how to set up job grades. Every now and then, though, I get questions that are a little farther afield, like these …

compensation

fullempty / iStock / Getty Images Plus

Question: We’re changing pay frequencies from weekly, semimonthly, and monthly to biweekly for exempt and nonexempt employees effective 01/01/2018. We would like to process and pay all employees on the same date. Can you provide examples of a biweekly schedule with pay period begin and end dates?

Answer: Given January 1, 2018 falls on a Monday, I would set the new weekly pay period from Monday through Sunday. The first payday would be January 19, 2018 and would cover 2 weekly pay periods, from January 1 through January 14.

To get everyone started out on the new pay schedule, pay all employees for any outstanding pay earned through December 31, 2017, within the first week of January 2018. Pay days would fall on every other Friday, beginning with that first check on January 19, with all employees paid 1 week after the end of the pay period to give ample time for processing payroll.

Some employers, however, schedule their nonexempt and exempt paydays on alternating weeks, keeping exempt employees’ pay current rather than 1 week in arrears. If that schedule were adopted, the first payday of 2018 for exempt employees would be Friday, January 14.

Question: What is the CEO pay ratio and how is it calculated?

Answer: The CEO pay ratio compares the CEO’s pay to the median pay of all other employees in the organization. The formula is to divide the CEO’s total compensation amount by the median of all other employees’ total compensation to get the ratio.

For example, if the CEO is paid $250,000 and the median pay of all other employees is $60,000, the ratio is 4.16. It sounds simple but the challenge is determining total pay for the CEO as well as the median total pay for all other employees. Note, it must be the median, not the mean (average) or the mode.

Question: In a salary data report, what is the difference between the “mean” and the percentiles (10th, 25th, 50th, etc.)?

Answer: The “mean” is the average of all the data points for a given demographic element. It can be skewed if there are more data points on either end of the percentile spectrum. The median—the 50th percentile—is the middle data point with half of the incumbents in the survey paid at or lower than that point and half paid higher.

Whether an employer uses the mean or the percentiles is at the employer’s discretion. With that said, the 50th percentile is considered the market rate for an incumbent who is fully competent in the position.

Question: How do I know whether a worker is an independent contractor or really an employee?

Answer: To ensure compliance with the Fair Labor Standards Act (FLSA), it’s a good idea to determine if a worker is an employer or an independent contractor before any work has been done.

The U.S. Department of Labor (DOL) provides guidance on evaluating employees vs. independent contractors. The six factors identified by the DOL are used as guidelines to determine whether sufficient “control” is present to determine if a worker is an employer or an independent contractor.

The Supreme Court has indicated that there is no single rule or test for determining whether an individual is an employee or independent contractor for purposes of the FLSA. The Court has held that all facts relevant to the relationship between the worker and the employer must be considered. It’s important to note that the existence of a written agreement between the worker and the employer is not sufficient for determining worker status.

Sharon McKnightSharon L. McKnight, CCP, SPHR, draws from more than 20 years of management experience, including 6 years as a director of human resources, to develop compensation administration tools and write about compensation issues. Her experience in both operational and HR management provides her with a practical approach to providing online resources that address the challenges facing compensation and human resource professionals.

The post HR Professionals: Got a Compensation Question? appeared first on HR Daily Advisor.

This post originally appeared on HR Daily Advisor
Author: Sharon McKnight