[5-30-16 SALESFORCE SPECIAL ALERT] Implications of Final Department of Labor FLSA Rules

The United States Fair Labor Standards Act of 1938 requires that employees be provided overtime pay unless they qualify under one of the FLSA exemptions.  On Mayflsa-regs-graphic

  • Increase the minimum weekly salary to $913 ($47,476 annually) to be considered exempt.  The current limit was $455 per week or $23,660 annually.
  • Increase the highly compensated employee exemption total compensation to $134,004. The current threshold is  $100,000.
  • Establish a mechanism for an automatic update of salary limits and thresholds every three years.
  • Amend the salary basis test to allow employers to use nondiscretionary bonuses and incentive payments (including commissions) to satisfy up to 10 percent of the new standard level.

The effective date of this final rule is December 1, 2016.  Employers need to consider the many issues, decide on a course of action, and then have all programs and documented policies in place by this December date. Failure to be in compliance with the new requirements can result in significant employer liability. The changes outlined in the final rules will likely impact financial results, human resources, and information systems.

Consider the following questions:
1.Which employees will be affected?  Gather lists of employees that are currently classified as exempt and have annual salaries below $47,476.
2.What will your strategy be for those impacted?  Develop alternative strategies for those employees that are impacted.  The DOL website offers a general guide to various strategies.  Evaluate the various strategies and the impact changes will have (i.e. increase pay to the minimum, change status to non-exempt, budgets required to deliver pay increases, etc.)
3.How will these changes affect your employees?  Not all employees will view the changes as positive.  Many companies will need to decide whether supervisors who are changed to non-exempt will maintain managerial responsibilities.  Engaging with your employees to understand their issues and answering questions they may have will be appreciated and beneficial.
4.How will these changes impact your compensation and incentive planning and administration?  Take a look at your current salary structure and job slotting.  Increasing wages for employees in certain salary grades may create compression problems between grades.  Also, look closely at your nondiscretionary incentive and bonus payments to see if the amended salary basis test helps you satisfy the standard salary test.
Given the deadline of December 1 to have your company’s new programs, systems, and policies in place and communicated, consideration should be given to conduct a few mid-year reviews of programs that usually wait until year-end.  Getting a sense in mid-summer of what is working and what is not working can avoid a last-minute rush to renew a program that has early warning signs. Among these programs are:
– Executive annual bonus plans
– Middle management annual bonus plans
– Salesforce incentive plans
Contact Us
Simply reply “Let’s Discuss” to this email if you would like to discuss your FLSA compensation issues or wish assistance with a mid-year review.  Please feel free to contact Tim Weizer at (312) 479-6411 or tim@salescne.com or Neil Lappley at (847) 864-8979 or nlappley@lappley.com.  Please also forward this email to anyone you feel will be interested.
/0 Comments/by

[MAY 2016 COMP ALERT] Senior Management [In the Dark about Pay]

When we have the opportunity to talk with executives and managers about their compensation programs, it can be surprising how many don’t understand the complete picture. While they are usually well-versed in the plan mechanics, such as metrics and targets, they are often in the dark when it comes to the broader rationale behind the […]

Read more
/0 Comments/by

[MAY 2016 SALESFORCE ALERT] Lower Risk of Sales Incentive Plan Failure

A recent client engagement underscored the need and importance of using an online tool in reviewing a sales incentive plan and making recommendations for improvement.

The company is a middle market company located in the Midwest.  It offered the B2B markets a high quality and premium priced product line.  In recent years, there were multiple changes in the sales leadership and several changes to the design of the sales incentive plans.

The primary issue was that while sales revenues had increased 7.5 percent in 2015, the sales incentive payout was more than 200 percent of the previous year. The company needed to implement a sales incentive program for the long term that also fit their immediate needs.

The Approach 

The six-step approach we used is summarized below. Note that in Step 1, we included the use of an online salesforce effectiveness survey to solicit the opinions of both sales associates and perceptions of the senior leadership team of the company.

Step 1: Plan and gather data; use salesforce survey

Step 2: Conduct market benchmarking analysis

Step 3: Interview leadership team

Step 4: Interview selected sales team associates

Step 5: Develop recommendations and refine and specify plan details

Step 6: Present recommendations and deliver final report

The survey itself offered many fundamental benefits:

  • Topical. Contains questions on important topics including: product quality, marketing efforts, quota setting, sales associate training, sales strategy clarity, incentive earnings potential, and time allocation (now and should be).
  • Inclusive.  Able to get input from all the sales associates, rather than from selected interviews.
  • Comparative. Time allocation results compared to overall benchmarks.
  • Quick. It could be completed within 10 minutes.
  • Anonymous.  Participant asked to check off whether he or she was a sales associate or executive.

Survey Results and Their Role in The Recommendation

A few important findings follow:

  • A reality gap exists.  Except for product quality and sales associate proficiency, there was little agreement between the ratings by the sales associates compared to those by the leadership team.  A gap is not unusual. This gap, however, was wider than we have seen in many uses of this tool.
  • Sales Associates view their incentive plan as moderately fair, motivating, and competitive to the external market.
  • The allocation of time for travel was a major differentiator.  Sales associates said they should travel 24 percent of the time, while the executives felt that only 5 percent should be needed.
The online salesforce effectiveness tool’s results were helpful in three ways:  First, the role of the company’s key sales position was not reflected properly in the incentive plan design resulting in the pay mix having too much leverage vs. the position’s role. Second, account retention was seriously underweighted vs. new account acquisition. Third, the company’s limited marketing efforts were insufficient drivers in the selling process.

The next time when conducting a sales incentive plan review or redesign consider using a salesforce effectiveness survey. You will be surprised at your important discoveries or just pleased with confirming data. Both outcomes will increase design effectiveness and improve your sales incentive plan.

Contact Us

We welcome your feedback on our Salesforce Alert eNewsletters and would like to talk with you further regarding your salesforce experience and input. Please feel free to contact Tim Weizer at (312) 479-6411 or tim@salescne.com or Neil Lappley at (847) 864-8979 or nlappley@lappley.com.
/0 Comments/by