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December 9,
2002 Issue
'Tis the Season...for
Employee Relations Nightmares?
It’s the holiday
season. Employees’ thoughts turn to visions of the large
cash bonuses they have come to expect year in and year out.
Potential employee relations nightmares include numerous
aspects of holiday bonuses. Let’s explore.
First, what are potential legal issues in providing year-end
or holiday cash bonuses? Epstein, Becker & Green, P.C., as
quoted on
www.workforce.com, state that employers may legally pay
discretionary bonuses to employees. The biggest issue to be
aware of is discrimination claims. While an employer
can give an employee any bonus it wants for any reason, an
employer may not award bonuses on the basis of an employee’s
protected characteristics, such as gender, race, or national
origin.
There are two kinds of potential bonus discrimination. First
is the obvious intentional discrimination, such as providing
a bonus only to white males. More difficult is adverse
impact discrimination, in which discretionary awards are
distributed unequally between protected and non-protected
employee classes. Be sure discretionary bonus policies are
applied in a non-discriminatory fashion and do not result in
statistically significant adverse impact.
Bonuses can also impact wage and hour issues.
Providing discretionary bonuses to exempt employees based on
hours worked could put the exemption status in jeopardy. For
non-exempt employees, the employer must be sure the
discretionary bonus is clearly discretionary – the
non-exempt employee had no anticipation of receiving it, and
the bonus is not tied to hours worked. Otherwise, Fair Labor
Standards Act (FLSA) overtime rules apply to this bonus.
A third issue is worker’s compensation liability.
According to
http://hr.cch.com, if the year-end or holiday bonus is
based on an uninjured worker’s tenure at the company
throughout the previous year, the bonus may be prorated over
the entire year, not just the quarter in which it is paid,
for purposes of calculating the injured worker’s average
weekly wage. This ruling was decided in Kiebler v.
Workers’ Compensation Appeal Board, Commonwealth Court
of Pennsylvania, No. 2113, C.D. June 16, 1999. If a year-end
bonus is based on employment throughout the prior year, make
it clear to employees. An organization may be able to
prorate the bonus over the entire year for the purpose of
calculating workers’ compensation benefits.
Another issue to address is the impact of a weak economy.
It is especially challenging to motivate staff during a weak
economy. Fewer dollars are earmarked for bonus programs. It
is very difficult for management to permit the payment of a
year-end or holiday bonus during slow times.
The problem is one of confusing bonuses with compensation.
The intent of a year-end or holiday bonus is to provide a
way for the organization to say thank you to employees for
their collective efforts over the past year. Holiday bonuses
were never intended to become the yearly compensation
entitlement employees look forward to as a way to pay off
holiday expenses. But that is what they have become.
According to InMarketing, an incentive recognition company
in Mahwah, NJ, “when you pay people for doing a good job, it
becomes part of their salary expectation. A gift, however,
is a luxury separate from compensation that shows respect
and commends accomplishment.”
For those with limited budgets, the use of gifts may be a
viable alternative. According to Pat Zingheim of
Schuster-Zingheim and Associates, Inc., “if you create a
recognition program that is fun and makes a big deal of
successes, people will get excited abut it.” Remember, it
doesn’t have to be about the value of the gift. It’s about
the celebration and recognition that go with it. It shows
employees they’re appreciated, and gives them a symbol of
that recognition.
Issues to address in developing your alternative year-end
bonus program include the following:
- Understand the message. What are we
attempting to communicate to our employees? Is it a
thank you for a great year? Is it a way to recognize the
fact that they hung in there during a rough year? Take
advantage of the moment and send the right message.
- Pick the right gift. Take time to investigate
what is important to your employees. In a community
facing an economic downturn, perhaps a gift that can be
used by the employee and their family would be valuable
– gift certificates to a local food store, for example.
- Who is to be included? Are all levels of the
organization eligible for the gift? What about part-time
employees and management? How you determine this also
sends a message. Many organizations make the mistake of
limiting the holiday or year-end recognition to
non-management staff. If the goal is to thank everyone,
then all should be included.
Regardless of the method and all the legal precautions you
take, year-end or holiday bonuses are always difficult to
administer. These bonuses do very little for organizations
that do not regularly recognize employees. There are always
some employees who feel they should get more than others due
to their individual contributions. There are others who have
come to count on the cash and are upset when a gift is
substituted. These issues become non-issues if the
organization consistently communicates organization-wide
successes and failures throughout the year.
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Copyright 2007, Astron Solutions, LLC
ISSN Number 1549-0467
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