What Do Great Leaders Do Next?
Leaders’ successes typically revolve around the ability to develop and implement brilliant visions. They help their staff move forward in their careers; they build their organizations; they make their communities better places. The blur of health and social trauma over the last five months (with no end in sight) gives leaders a very different challenge.
It’s hard to create a brilliant vision with this level of uncertainty; it’s hard to help people advance in their careers when a computer screen is the only connection; it’s hard to find the energy to move forward when the race is a marathon and the footing is muddy.
In addition to remaining positive and staying connected with your team, consider the following during these historically difficult times:
- Take care of yourself and your staff. If you’ve been working without a break, find a way to take one. Strong leaders say some of their best thoughts come during down-time. Needs are different for each person. To the extent that you can provide equitable flexibility, now is the time to do so. Also, be aware of the temporary COVID requirements for your HR policies.
- Refresh your strategic plan with an eye towards a 12 to 18-month window. There is no doubt that we can’t see far into the future, but having a cohesive plan will provide a sense of clarity, even if you’re planning for uncertainty. Focus on your mission and consider whether you need to adapt the strategy to react to any changes in the needs of the people you serve.
- Communicate with your Board, if you have one. If you are a nonprofit leader, your Board should be supporting you. Sometimes well-meaning Boards don’t know what to do. This is the time to over-communicate, be clear about your needs, and be sure to thank board members for the extra effort. Don’t have a board? Consider creating an advisory or “kitchen” cabinet board. These can be paid or unpaid advisors to your company that meet on a regular basis with you.
- Find a way to meet new people. New connections often bring opportunities and spark new ideas. Virtual networking is bubbling up. Take advantage of it. Be on the look out for Warren Whitney’s Fall Leadership Network invitation. It will be on September 17th from 9.00 – 10.00 and include time for virtual networking.
- Keep an eye on the numbers, especially the projected cash flow. This is the time to stay on top of receivables and update your cash flow projections at least weekly. It’s also a good time to review your internal controls, especially if you have had to change procedures because of COVID. Know your key business drivers and metrics. We work with our clients to help them understand these key variables and create dashboards to get frequent readings on business performance.
- Build up someone else. That’s what the best leaders do!
The professionals at Warren Whitney are grateful for the opportunity to support you and your business. We are ready to help in short or longer-term roles or advisory services in the areas of finance and accounting, human resources, strategy, board development, and recruiting. We welcome the opportunity to discuss your business with you.
Most businesses have moved beyond the initial shock of the COVID-19 pandemic and are adjusting to a new reality. Now, organizations need to remain flexible and devise strategies to keep their workforce engaged while planning for uncertainty. With the unpredictable nature of the pandemic, businesses are faced with repetitive attempts at forecasting and budgeting. Projections need to anticipate multiple scenarios to pivot quickly. Another challenge is managing employee burn out, morale, and feelings of being disconnected.
Warren Whitney’s team recently facilitated Peer Group Roundtables addressing these critical topics with HR Leaders and CFO/Controllers. These constructive roundtables produced guidance beneficial for all businesses. Below are guiding strategies that set out to:
- Establish organizational culture that supports employees during times of crisis
- Bypass employee burnout to reach long-term engagement
- Assist with budgeting for unpredictable revenue streams and expenses
- Provide finance and accounting guidance
HUMAN RESOURCE – STRATEGIES TO KEEP YOUR WORKFORCE ENGAGED
CREATE PHYSICAL CONNECTIONS
Many employees are feeling isolated and burned out. They may miss the personal aspect that the working environment offers. Here are ways to connect and demonstrate your commitment to your workforce. These gestures can make your team feel valued, safe, and part of their work-life community.
Show your appreciation. Employees value time off. Consider giving them a self-care day that doesn’t deduct from their PTO bank. Also, be flexible with work schedules due to child care limitations. Being understanding of their situation will go a long way. Additional ideas to show you value your employees are:
- Sending gift baskets for special occasions (or no occasion at all)
- Giving spot awards to standout employees
- Providing “superhero bags” that have PPE and other goodies
Connect with your employees. Make concerted efforts to have a one-on-one with team members. During these check-ins, acknowledge the challenges and give them the chance to discuss their problems. Other ways to build comradery are: 1) Have team members share their lessons learned, 2) Organize virtual happy hours, and 3) Offer safe community service volunteering opportunities.
Host outside meetings. Hold get togethers outside in large open areas; consider informal picnics with boxed lunches. Hold similar meetings for new hires.
ESTABLISH AN OPEN DIALOGUE
Regular and highly connective communication will break feelings of isolation and disconnection. There is no such thing as over-communicating. Below are ways to reach and engage with your team.
Leverage internal communications tools. Use the intranet or internal technology tools to keep teams informed by posting:
- Your updated safety handbook that includes the company policy on infectious disease and COVID.
- A message from the CEO or President that covers the FAQs.
- Facts & supportive data points to keep employees informed.
** Consider tools for departments to easily share ideas (i.e., VOXER, SLACK, or TEAMS).
Use video to deliver messages. Create videos from the CEO & Senior Leadership, delivering an authentic & relatable message. Acknowledge employee concerns about returning to work. The videos can be short, low-tech, and even recorded on an iPhone.
Organize video calls. Show your support by facilitated video calls with the HR team or the CEO with the key supervisors. During these meetings, ask for input and allow time for Q&A.
FINANCING & ACCOUNTING – FORECASTING/BUDGETING IN FLUID TIMES
BUDGETING TIPS FOR UNPREDICTABLE REVENUE STREAM AND EXPENSES
Budgeting is especially challenging now, with the uncertainty of many variables being so high. Flexibility will be a crucial component of your business’s success because long term unknowns are hard to predict. Frequently assess risks and update your forecasts to make sure they reflect changes. Equally important is regularly reviewing the dashboards with your management team. Make sure your dashboards include Key Performance Indicators (KPIs) like: Line of Credit usage, Cash on hand, Payroll, Staff headcount, Inventory, and Accounts Receivable.
Revise your budget. Consider zero-based budgeting; build each line item from the ground up. Know that your budget is going to be lean, with little buffer for course corrections. Plan for:
– Lower margins and decrease projected revenue.
– Increased cleaning and technology (for remote work) costs.
– Cash flow: Review your cash forecast weekly with 2 to 3 scenarios.
Expense Management. Look at the budget line by line to cut costs and minimize discretionary spending. Review contracts and determine which ones can be re-negotiated and which will not happen. Consider refinancing debt to cut interest costs and evaluate office space if teleworking is effective.
Scenario planning. Decrease your risks by anticipating potential strategic pivots. Understand your key drivers, which are different for every industry, and focus on them when running the scenarios.
If you have any questions or seek further clarification on these items, please call us at 804.282.9566. Warren Whitney is available to evaluate your readiness for today’s new operating environment. Our fractional assistance and project work can help you think through decisions and execute strategies. We can put together cash flow projections, manage HR issues, adapt technology and processes, and devise a strategic plan. We Make Potential Happen.
HOW CAN YOUR BUSINESS BENEFIT FROM A FRACTIONAL LEADER?
And steps to find the right firm.
For those not familiar with the concept of fractional leadership, it is an efficient and cost-effective model for businesses to outsource functions when they do not have the expertise in-house or are going through a transition. This form of leadership offers an objective perspective and can guide businesses when faced with challenging decisions. Their role is to become a trusted advisor, lead through change, and offer unbiased advice.
This practical solution gives companies access to experienced talent without paying for the committed costs of a full-time employee with benefits. And based on the needs, this can either be a short or long-term engagement. Interim needs vary from filling a vacancy while a candidate search is taking place, to covering for an employee taking medical leave, or preparing your company for a merger.
As a result of our current economic environment, fractional leadership has become more popular. Businesses that have recently streamlined their operations have hired a fractional leader because they still need access to a high level of expertise and must close the leadership gap. A big challenge is finding a consultant that is the right fit for your company and qualified for the job. Equally important is making sure their values align with yours.
Here are steps to guide you through the process to find the firm that will deliver results and become a valued partner.
First. Clearly define your needs and challenges. List the goals, expectations, and deliverables for the engagement. What are the expectations upon completion of the project? Be sure to define the scope of work. Prepare and share any relevant materials such as financials, charts, policies, or other reports.
Second. Ask for referrals from a trusted source. Your CPA, banker, or attorney is a great resource. The more people you ask, the better understanding you will have of the marketplace. Pay attention to names that are mentioned repeatedly. If you are new to an area, local business groups or the chamber of commerce may be able to help.
Third. Do your research. Once you have a strong list of key players, look at their websites to see how their values and approach aligns with your needs and company culture. Talk to current and former clients, if possible, to hear first-hand about their working experience with the firm.
Fourth. Schedule meetings with the top firms. Conduct these meetings like you would conduct an interview. Prepare your questions ahead of time and share your goals and expectations.
Fifth. Pay attention to the following characteristics during these meetings:
- Unimpeachable character. First and foremost, a competent consultant must be a person of integrity who demonstrates professionalism, confidentiality, and commitment.
- Solid experience. A consultant’s work experience is their asset to you. Ask how many years of experience they have as well as training and degrees. The more seasoned they are, the more value-added solutions they are likely to provide. Also, consider the types of companies they have worked with before and knowledge they may have of your industry or relevant fields.
- Creative problem-solving skills. Understand what their approach will be to deliver a results-oriented solution. Does their response sound authentic? Are they able to provide specific examples of how they have addressed similar situations?
- Excellent interpersonal skills. Try to envision working with this individual and how well they will integrate with your team. Will they proactively address issues and conflict and minimize unneeded drama?
- Outstanding communication skills. Pay attention to how they communicate their thought process. Their ability to lay out their approach provides insight into their level of communication.
Once the interviews are over, expect to receive a detailed proposal from each firm. The proposal is an essential element of the decision-making process because it provides additional insight into thought processes and written skills. The proposal should capture:
1) The scope of work, as discussed during the meeting.
2) The approach to resolving the problem with milestones and a timeline.
3) A clearly defined cost and payment structure for the project.
4) The individual’s credentials and experience.
5) The firm’s strength, longevity, and reputation.
Consideration of value: While cost is always a factor, examine the entire package of expertise you are receiving for the investment you are making. Often a good consultant can provide a return many times the investment (ROI) through efficiencies, savings, and/or increased revenue.
Benefit of working with an entire firm vs. a single individual: When hiring a consulting firm, your businesses is more likely to be supported by a team of of professionals who know your business, have a wealth of experience, and a strong support system. The firm can bring together different skill sets from multiple disciplines to assist with a variety of challenges. The benefit of the team is having the backup, just in case.
After deciding which firm to engage, remember you can always ask for references. It is a step that can be revealing to help make you feel more comfortable with the choice.
Warren Whitney provides fractional leadership in the areas of HR, Finance & Accounting, and IT to include the roles of HR Leader, CFO, CTO, CIO, COO, and Controller. While we typically work in our clients’ offices, we can also work remotely. Based in Richmond, Virginia, we also serve clients throughout the Commonwealth of Virginia and beyond. We are passionate about the work we do and welcome the opportunity to speak about the services we provide. To learn more, please contact Stephanie Ford at SFord@warrenwhitney.com or 804.282.9566.
RETURN TO WORK STRATEGIES – How to navigate and protect your business for a smooth transition.
As Virginia starts a phased reopening by easing “stay at home restrictions,” businesses need a well-thought-out transition plan. Your plan should take into consideration not only your employees’ and customers’ health and safety, but also fiscal stability, strategic direction, and technology. This multi-layered plan must address regulations, the environment, and internal communications as well as the emotional well-being of your employees. Flexibility is critical, and your business will need to be positioned to respond to a changing landscape as the situation evolves.
When devising your plan, consider these pieces of advice from our team in the 4 areas we serve our clients.
PREPARE THE PHYSICAL WORKPLACE
- Give your office a post-pandemic makeover! Normalize the “6 feet rule” in the office and consider providing the baseline of PPE such as masks, gloves, and hand sanitizer.
- Regularly clean the worksite and follow the CDC guidelines. Consider hiring an industrial cleaning company or aks your existing professional cleaner about their standards.
- When planning the return to the office, consider:
- Flexible schedules to include part-time in the office and teleworking
- Create odd/even workdays in the office
- Stagger start and end times
- Designate days for specific work to be completed
It is important to note that doing everything possible to make the workplace clean demonstrates your commitment to maintaining a safe environment. This will build confidence and reduce the tension employees may have about returning to the workplace while COVID-19 concerns continue.
FOCUS ON INTERNAL COMMUNICATIONS
- Communicate your organization’s policy explaining the protocol. Transparency is key; include the thought process of how and why you devised the policy.
- Make sure the policy is easily and readily accessible both online and in the workplace.
- Survey your employees regularly to understand their main concerns and that their voice is valued (i.e. survey monkey, calls, focus groups).
- Build a desire for workers to return to work and explain why especially if employees are successful at teleworking.
- Keep employees engaged and mentally healthy. An example could be collaborating with a local gym for virtual yoga classes.
Over communicate the safety protocols as the workforce re-enters the physical workplace. Employees will feel secure knowing management has considered federal guidance and is establishing procedures to develop a culture of safety.
Refer to the state guidelines. External guidelines can help bridge the gap between varying employee opinions. https://www.governor.virginia.gov/media/governorvirginiagov/governor-of-virginia/pdf/Virginia-Forward-Phase-One-Business-Sector-Guidelines.pdf.
FINANCE & ACCOUNTING
MANAGE INTERNAL CONTROLS
- Make sure internal controls continue to be practiced especially in the remote working environment.
- Investigate new ways to accomplish signature and approval responsibilities.
- Evaluate how receipts have been handled in light of “working-at-home.” Who is proofing cash receipts? How are deposits made and who makes them?
- Continue to communicate the controls and review of policy requirements.
- Review by-laws for borrowing/banking transactions requiring board involvement.
- Ensure all bank reconciliations have been prepared and company credit card receipts have been documented.
- Make sure all mail has been reviewed and time-sensitive items have been handled.
- Determine a rotating schedule on personnel to ensure there is at least one person in the accounting department who can be physically present the majority of the week.
- Take your ledger to the cloud (i.e. QuickBooks Online or remote access).
ESTABLISH FISCAL STABILITY
- Continue to forecast cash flow and report out with your team weekly.
- Run various forecasting scenarios to reflect potential best and worst-case scenarios.
- Rebuild your operating cash reserve. If you recently took shortcuts, document where you mitigated risk. It is easier to remember now than when you are being audited.
- Monitor PPP forgiveness and everchanging rules for new SBA loans.
- Develop a strategy to: improve liquidity, build working capital reserves, and access credit facilities. There is no guarantee there will be an additional aggressive stimulus package.
DOCUMENT LESSONS LEARNED
- Do your post mortems. What did you learn that would have been helpful had you put it in place beforehand? Can you do it now and be more prepared if/when we are forced back into lockdown?
- Record your organization’s strengths and build action steps around weaknesses, threats and opportunities.
POSITION FOR SUCCESS
- Evaluate business partnership and merger opportunities to ensure the relevancy and strength of your organization.
- Consider potential alternative revenue streams. Work with your team and board to identify innovative and creative strategies that are mission-aligned to retain your organization’s relevancy and success.
- Bring new thought leaders to the table to help reposition your organization in innovative ways.
- Consider a mini-board retreat to reevalute and modifiy your strategic plan.
TECHNOLOGY & OPERATIONS
UNDERSTAND YOUR TECHNOLOGY
- Survey management and staff to identify issues with technology and processes; record these issues (small or large – either may cause bigger problems).
- Evaluate your relationships with your vendor partners. Ask yourself:
- Can they support technology changes?
- How will we be impacted if they go out of business?
- Will my business have the rights to continue using software provided by the vendor?
- Regularly review your information security and technical risks. With malicious activity on the rise, risks need to be addressed by a combination of policies, technology, manual controls, training, and knowledgeable support staff.
PLAN FOR CHANGE
- Be prepared to address new customer and partner expectations.
- Re-consider new technology that has been put off that may help stabilize operations. Evalute the short and long-term benefits of the technology changes. If choosing to upgrade, be patient when training employees and remember this is a huge change for all involved.
- Think outside the box when resolving issues or ways to increase efficiencies. Even if you are not ready to make changes now, do the research so you are prepared to react when needed.
If you have any questions or seek further clarification on these items, please call us at 804.282.9566. Warren Whitney is available to evaluate your new operating environment. Our fractional assistance and project work can help you think through decisions. We can put together cash flow projections, manage HR issues, adapt technology and processes, and devise a strategic plan. We Make Potential Happen.
We have seen our world change overnight. Forced to embrace a new sense of normalcy, this is a time of uncertainty when businesses need deep experience and flexibility.
Warren Whitney serves clients in the areas of Strategy, Finance/Accounting, Human Resources, and Technology/Operations. We provide fractional leadership to successfully transition businesses during disruptive times.
Author: Stephanie Ford
Good news/bad news: Your business is expanding and achieving projected growth. The rush of growth is exciting, but it comes with a new challenge – access to capital to maintain momentum. In any credit market, financing can be tricky to obtain. You might already know this first hand — have you applied for a commercial loan and been rejected? Feeling anxious and unsure how to move forward? Here are steps to best prepare for your next meeting with a commercial banker.
Before joining Warren Whitney, I spent 12 years as a commercial banker. The better prepared a business owner was for the request, the more likely they would receive financing. Owners that came to me with a binder chock full of financial statements, detailed reports, and a strategic business plan were impressive. Entrepreneurs that provided few concrete materials and simply shared a stream of consciousness of their ideas gave me little to work with. How to position yourself to get funding for your business is critical in today’s credit markets. Preparing a request for financing should be taken seriously, and good preparation will yield better results. Here is a framework for thinking about your approach.
- Think hard about why you need to borrow. Specifically identify the purpose and develop a business case for the need to borrow and repayment. The best way to do this is to prepare monthly cash flow projections of sources and uses of cash. This prediction of needs and surplus will help to identify how much you need to borrow and how quickly your business can repay the loan. The purpose of your borrowing need will also help to determine what type of loan is best for your company, such as a revolving line of credit for working capital needs or a term loan for permanent improvements to real estate or equipment purchases.
- The more complete a package of information you can provide to the bank, the better. If you have a business plan, share it with your banker. In addition to 3 years of financial statements and tax returns, also include any other key reports that you use to run your business. This may seem excessive, yet even routine reports such as an accounts receivable aging and accounts payable aging aid in giving the banker insight to your customer management and diversification. Be sure to share any key metrics that are valid for your industry, such as inventory turns, job costing reports, days to market, customer returns, utilization rates, etc. Providing organizational charts and competitive industry details is also valuable.
- Just as important as preparing your loan request package, give serious evaluation to the bank and banker you want to work with. Financial institutions vary widely in strength, size approach and focus. Consider what is important to you: branch convenience, technology & services, commercial focus & approval process, legal lending limit, or ability for the bank to grow with you over time, etc. Think about whether these needs are best met by working with a large national institution, a strong regional player, or a small community bank. Once you have a sense of the type of institution that would best fit your business, research to determine the best local contact at that bank for you. Most commercial banks have several bankers in one department with a manager above them. Finding the right person and personality for you to build a long-lasting relationship with can make all the difference in the growth of your business over time, particularly through the tough years.
The classic 5 C’s of Credit has been an excellent guide for many over the years on the borrowing process. If you can imagine yourself in the shoes of the banker, thinking through their concerns, it will help you prepare your request and business case.
During the entire request process, the banker is also evaluating your character to try to determine if you would be a trustworthy borrower. So be sure to have your personal finances in order as well. Complete a detailed personal financial statement (any bank can provide you their form), know your credit score, and clear up any incorrect items with the credit bureaus. Provide background about your relevant experience and track record of profitability and repayment ability. This can also include any prior company experiences. Most of all, be forthcoming with both the good and any downside to your experience. Bankers never like surprises.
You should know that the bank will be examining your financial statements and then calculating certain financial ratios. Two of the most critical ratios are leverage and debt service coverage. Leverage is measured by debt/net worth, and the lower the better. While the target varies per industry, a good guideline is under 2:1. Cash flow is a measure of income/debt payments or more specifically EBITDA/(prior year’s current maturities of long term debt + interest expense). It is essential that this ratio exceeds 1.2:1.0, no matter your industry. The higher the better as you want to show the bank you have sufficient cash flow to service your debt along with a cushion for good margin.
The key takeaway: it is good if you are able to calculate these in advance so that you can anticipate how favorably your numbers will be viewed in the eyes of the bank.
This refers to your net worth or equity value in the business which is determined by the value of your assets less the amount of your liabilities (how much you own minus how much you owe). The higher your net worth, clearly the better.
Note: negative net worth is a red flag to the bank and a sign you may still be at the level of borrowing from friends and family or other non-traditional sources such as factoring receivables or venture funding.
After the bank examines your cash flow repayment ability, they then look to collateral. Consider your business assets and personal assets you have available to offer. This may include real estate, investments, accounts receivable, inventory, equipment, and even your personal residences. How large and liquid are they in relation to the loan you are requesting? The reality is, they should be larger than your loan request as banks discount the value of most assets and only lend 40%-80% against most assets.
Since our economy has been strong for many years, this is a great time to position you and your company for a bank partner – one that will stand with you through the tougher times that may be ahead. However, if you have encountered any difficult spots in your business in the past few years, address them upfront. Prepare to tell the story of your business and how you worked through the challenging times. Different banks may also have different tolerances for different industries. This may be based on the performance of the industry overall, the bank’s experience in that industry or their amount of current exposure to that industry. Ask about their preferences to find a better match and increase your success rate. Remember, no industry was untouched in the “great recession.” If you were operating your company then, how you faced those challenging times (or any others since) will be insightful.
Be aware that in the technology-driven and cost-conscious banking world, many financiers have moved to automated underwriting and credit scoring for not only personal credit needs, but also for commercial lending in certain cases. Generally speaking, the smaller a loan request it is (and the larger the bank), the more likely it is to be subject to automated underwriting. And the larger the loan request and with more complex the companies and legal entities, then it is more likely to be underwritten by a banker or analyst who takes the time to know you and your company’s story.
Navigating financing strategy in today’s market can be complex. To put your best foot forward, much preparation is needed. Seek the guidance of an advisor(s) for input into your request and positioning. Warren Whitney’s team of Fractional CFO’s can be a valuable resource in this process. To learn more, contact Stephanie Ford at email@example.com or 804.282.9566.
Contributor: Janet Marsh
Perhaps you are familiar with the quote often attributed to Benjamin Franklin, “If you fail to plan, you are planning to fail.” There are no truer words when dealing with high-stake initiatives, such as board governance.
Now is the time to develop your board’s Plan for 2020 to reach a higher level of effectiveness. Good governance is a direct reflection on the performance of your organization, and these Top 10 Tips provide ways to develop a high-performing board. Read More
Contributor: Kevin Grey, Warren Whitney’s Human Resource Director
WHAT BUSINESS OWNERS NEED TO KNOW
On September 24, 2019, the U.S. Department of Labor (DOL) announced a final rule increasing the earning threshold to exempt executive, administrative, and professional workers from the Fair Labor Standards Act (FLSA) minimum wage and overtime pay requirements.
The new rule, effective January 1, 2020, raises the federal overtime exemption threshold from $23,660 per year ($455 per week) to $35,568 per year ($684 per week). This law was last updated 15 years ago.
To better understand the new overtime law, Warren Whitney’s Human Resource Director, Kevin Grey, explains:
- The meaning of the new federal overtime rule
- Ways to be cost-effective
- How to communicate the change to affected employees
- Penalties for non-compliance
1) The meaning of the new federal overtime rule
This law impacts employees currently classified as salary exempt that are making over $23,660 a year and under $35,568 a year. For these employees, you will be required to:
- Reclassify the employee as non-exempt (if appropriate).
- Compensate the employee at time-and-a-half as overtime pay for any hours worked in excess of 40 hours a week.
Employers should analyze their salary exempt workforce in consideration of the new threshold and communicate any changes to the affected employees before it takes effect on January 1st, 2020. This is a good time to update your position descriptions as you conduct your review.
There are additional provisions under the final rule to consider:
- The duties requirements for these employees remains the same.
- Non-discretionary bonuses and incentive payments (including commissions) may be used to satisfy up to 10% of the new salary level requirement.
- The annual salary level for classified highly compensated employees is being raised from the current level of $100,000 per year to $107,432 per year.
- The final rule does not include automatic increases to the threshold.
2) Ways to Be Cost-Effective and minimize the impact on your balance sheet
i. Pay Overtime as Necessary
If your employees typically work 40 hours a week and occasionally or seasonally work overtime, it might be advantageous to reclassify them as non-exempt. In this scenario, you would budget for overtime instead of raising their yearly salaries above the threshold. Limit workers’ hours to 40 hours a week. If possible, redistribute workloads to ensure that non-exempt employees remain within a 40-hour workweek.
ii. Hire Temporary Workers
To limit your non-exempt employees to a 40-hour workweek, you may find the need for the occasional temporary worker to meet business demands. Hiring temporary workers can be more cost-effective than either raising salaries to be above the threshold or paying overtime.
iii. Raise Salaries above the Threshold
If you have employees consistently working more than 40 hours a week and these employees are already being compensated at or near the salary threshold, it might be worth considering raising salaries above the $35,568 threshold. However, keep in mind that the employees’ duties must pass the Duties Test required by the FLSA. In the event of a DOL audit, the job description must support the exemption. If it is not within your budget to increase salaries, you will have to reclassify the salary exempt positions to non-exempt.
3) Be sensitive when communicating the change
There are employees who tie professional esteem to being salary exempt. If you determine that paying on an hourly non-exempt basis is more cost-effective for your business, be sensitive to the affected employees when communicating the changes. Even if there is no change to their income or duties, they may perceive their now non-exempt position to have less professional status.
In Virginia’s particularly tight labor market, effectively disseminating information to your workforce is important to ensure your employees don’t feel slighted as your business moves to ensure compliance with new regulations.
4) DOL Penalties for non-compliance under the FLSA
Penalties and sanctions for non-compliance with the FLSA are severe and aren’t a risk worth taking. In addition to the back payment of lost wages to all affected employees, willful violators may be prosecuted criminally and fined up to $10,000. A second conviction of violating the FLSA can result in imprisonment. Employers with repeated violations may be subject to fines of $1,000 per incident.
All businesses must comply with FLSA rules to not only avoid penalties and/or sanctions but to also protect their most important investment; their employees. Warren Whitney’s Human Resource professionals have hands-on experience helping organizations with HR compliance. If you have questions about the new overtime rule or other compliance-related issues, please contact Kevin Grey at 804.282.9566 or firstname.lastname@example.org.
Learn more about Kevin Grey www.warrenwhitney.com/kevin-grey/