2011: Year in Review

As 2011 winds down and we prepare to welcome 2012, here is a look at how the HR practices at Boston area employers evolved over the past year and what their expectations are for hiring, recruiting and HR expenditures in the year ahead.

The data on Boston employment trends and issues was taken from a quarterly survey of Boston-area employers conducted by my company, Professional Staffing Group. For the past two years we have surveyed our clients each quarter about their plans for staffing and hiring, salary and compensation, concern over retention and recruiting talent and budgets for HR spending.

When we surveyed our clients at this time last year, results revealed the most positive outlook on hiring and compensation since the recession began. At that time,

  • Many more employers expected to add staff is 2011. The number of employers planning to add staff spiked in the fourth quarter of 2010. 54 percent of employers said they planned to add staff over the next 12 months.
  • Uncertainty about employment was decreasing. In the third quarter of 2010 25 percent of respondents answered “unknown” when asked about headcount levels for the year ahead, but in the fourth quarter only 10 percent answered “unknown” when asked to predict headcount levels in the next 12 months.
  • Compensation was increasing. More employers said they had increased compensation for their staff by the end of 2010 and 82 percent said they expected to increase compensation in the year ahead.
  • Employers were holding the line on expenditures. The majority of respondents answered that they planned to keep budgets at the same level when it comes to tradeshows/conferences, seminar attendance, travel in general, internal training and development, professional certification, and reimbursement for continuing education.
  • The number of respondents who said employee engagement is a significant problem doubled from those who were asked the same question the previous quarter (18% in Q4 vs 9% in Q3)
  • Employers were starting to feel the strain when it comes to recruiting: The number of respondents who answered “not a problem” (29%) or “significant problem” (18%) remained essentially the same, but the number who said recruiting top talent is a minor problem jumped to 50% from 37% in the previous quarter.

Three months later, things were still looking good. Respondents to our Q1 2011 survey indicated that:

  • Compensation increases were continuing and more employers were giving higher increases
  • Employers were positive about hiring, but cautious
  • HR budgets largely remained flat
  • Although concern over retention hadn’t changed much, employers expressed more concern about recruiting and employee engagement

However, by the mid-point of 2011 many employers and HR managers were putting the brakes on. In our Q2 survey we found that:

  • Planned employee headcounts had leveled off
  • Compensation increases had also leveled off
  • Employers continued to hold the line on expenditures
  • Employee training and development was the one budget that employers said they planned to increase
  • Recruiting continued to become more of a concern

Three months ago we posted the results from our Q3 survey, which found:

  • Staffing level expectations had continued to moderate
  • While less robust, hiring expectations were still positive
  • Compensation increases slipped slightly
  • Spending on HR-related items was expected to level off

It’s clear that 2011 didn’t produce the growth that employers were optimistically seeking back in Q4 2010. However, by most indications the worst we can say about the past year is that employers proceeded cautiously by tempering compensation increases and hiring and holding steady on HR expenditures.

A look at the November report from the state’s Executive Office of Labor and Workforce Development is encouraging. According to the report, Massachusetts’ unemployment rate in November fell to its lowest level in nearly three years as employers added jobs for the second consecutive month. Other signs that the state’s hiring levels may be picking up: more employers, both large and small sized, say they plan to hire; online job advertisements have increased; and fewer people are applying for unemployment benefits.

 

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the chairman of the American Staffing Association’s Board of Directors. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

Evaluating the Annual Performance Review

In recent years the annual performance review has undergone a makeover. For instance, now we no longer assume reviews only occur annually and most are no longer delivered “top-down” but incorporate input from multiple sources, including the employee being reviewed. Some companies have experimented with the frequency of performance reviews and some have tried eliminating them altogether. But, in some form or another, performance reviews play a necessary role in company culture.

Performance reviews are an essential part of our workplaces, they just might look different these days.  Here’s what’s new:

Performance is reviewed more frequently –whether it’s because a new generation of employees has expectations of instantaneous feedback or whether the work we are doing is more project based and easier to review upon project completion, managers are increasing the frequency of their feedback as this Wall Street Journal article asserts.

Reviews are moving online – paper-based files are indeed a thing of the past, but it’s not just online accessibility and file sharing that companies are taking advantage of. Now, some firms are using social media conventions to highlight performance and share feedback. Social media enables organizations to be more transparent and share goals, expectations and status updates. Social media can also make it easy to recognize and reward good work, e.g. through endorsements, recommendations or ‘badges’ for excellence.  In a few years we may be used to a whole new form of online reputation management.

Workers aren’t always visible – as the number of remote workers increases, managers face challenges in communicating, making accurate evaluations and ‘connecting’ with their staff. Reviewing the performance of a telecommuter or remote worker is similar to the review of a traditional office worker, but along with the benefit(s) of working remotely comes additional responsibilities and remote workers should also be evaluated on their ability to participate in group or department meetings and events and their ability to communicate and report on progress.

Self-evaluation – while 360 degree reviews seem to have seen the last of their 15 minutes’ of fame, self-evaluations are in vogue and perhaps here to stay. From having employees take a “first cut” at their evaluation, to implementing a back-and-forth comment-response approach, performance reviews aim to be more interactive.

Probably the only thing that hasn’t changed over the years is the dread that some employees and managers have for them. I’d like to say that the changes we’ve seen have resulted in a more positive experience for everyone involved but getting to that point that appears to be a tough balancing act.

On the one hand, employers use performance reviews to benchmark career advancements and distribute merit rewards. On the other, they use performance reviews to give constructive feedback and motivate performance.  Too much of one and not enough of the other can result in miscommunication, misperception and unhappy workers.  Another reason performance reviews get a bad rap is because they involve people – and people bring their own biases, personalities and politics to the process.

As employers and HR representatives, there are several steps we can take to aim to improve the performance review process.

First, ensure the frequency of the review fits the circumstances.  Not all work is suited to a formal review just once a year.  Take a look at the various types of work performed in your organization and shape the review process to that schedule. For instance, it may make more sense to evaluate your product developers after the launch of the latest product release.

It’s also important to avoid surprises at the time of the evaluation. Layering your feedback throughout the review period helps to “set the stage” for a formal discussion and also helps the employee prepare for a more interactive and constructive discussion.

In recent years there’s been talk of doing away with formal performance reviews, but personally I can’t imagine running an effective HR function without them. Performance reviews are necessary contributors to company goal-setting, feedback and coaching and useful for setting performance expectations and establishing parameters for reward.  Perhaps the most important step we can take to make them more effective is to explain their role in our organization and how they are linked with other important business metrics.

Please share your thoughts on making performance reviews more effective in the comment section below.

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

Planning Tips for Staffing a Contingent Workforce

Reports on contingent staffing show that up to a quarter of jobs in many organizations are filled with contingent staff, and that nearly 90 percent of employers have either maintained or increased the size of their contingent workforce since September 2008, the beginning of the economic crisis.

Contingent staff includes a wide range of employee types, including:  temporary employees hired through an agency or directly by the employer, part-time employees, outsourced jobs and job functions, retirees who return to work, consultants, freelancers, independent contractors and on-call workers.

Why is contingent staffing an attractive workforce option right now?  In times of economic uncertainty many employers are wary of investing in full-time hires but see contingent staff as a way to mitigate risk. As I wrote previously, contingent staffing is also attractive because it offers employers flexibility (for bringing in skills only when needed), cost savings (by not carrying a worker’s salary during slow periods) and the opportunity to “try before you buy” with a new employee.

Whether you’re considering contingent staffing or already employing flexible staff, here are some tips for incorporating it effectively and determining the right mix for your organization:

Consider factors that impact contingent staffing – most often this means considering financial factors, such as salary, benefits, cost of training, and determining if it’s beneficial to have the same work done by contingent staff. Your ability to predict staffing needs 6 months or more into the future is also an indicator – if you don’t have certainty around your medium-term staffing needs, short-term contingent staff could be a good option. Other factors include the type of work involved and whether the talent pool for that type of work job is deep.

Ask yourself if this is the right time to bring on contingent staff – Are you gearing up for a big project, production cycle or seasonal demand? Do you need certain skills, but only for a finite time period? Do you want to make long-term staff increases, but prefer to take baby steps first?

Determine the right mix of contingent staffing for your firm – The “right” mix varies by industry, it varies by company, and it even varies over time for individual companies.  You should look at your particular circumstances and assess the right mix for your organization.

Consider the impact of contingent staffing on permanent hiring – Contingent staffing provides a great opportunity to try out people before you hire them permanently.  You may want to consider some level of contingent staffing as a recruiting source.

Ask a professional – it may make sense to bring in a workforce planning expert to help you determine the right staffing strategy, particularly if you don’t have many in-house HR resources or if you find there a great number of variables to consider in your planning process.

Employers have numerous options when it comes to contingent staffing and how to fit those options into their workforces. With smart utilization of contingent staffing, employers can better meet their product and service demands while mitigating certain financial risks relating to hiring permanent staff.

 

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the Treasurer of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

Recruiting: Knowing your sources

Knowing what sources bring prospects to your organization is quite important to companies with ongoing hiring needs. If you know what is working, you can direct more resources toward these successful sources and/or save money by reducing expenditures on low-yielding sources.
Unfortunately Source of Hire Data is Typically Wrong

Most HR professionals I speak with feel their source of hire data is inaccurate and they want to know how to improve their system to capture the correct information. In getting to the solution, we first need to understand why the data is wrong; some of the typical reasons include:

  • Recruiter apathy –Not all recruiters value the source of hire information, therefore coding applicants accurately is just not important to them. For instance: maybe coding activity is done inconsistently, maybe it is not done at all, maybe the first drop-down selection for source of hire is picked.
  • Incentives/conflict of interest – If management values a particular source over another, recruiters may provide biased responses. Some recruiters even think the information will be used against them, or to make them seem less necessary.
  • Inconsistent system – If the way the question is posed to candidates is inconsistent, the results will be less reliable. Who is asked (recruiter vs. applicant) and when it is asked matters.
  • Applicant bias – Applicants may tell you the answer they think best positions themself to get the job. If you record the response at the wrong time you run this risk. For instance, the applicant that has been desperately calling for weeks and applying to multiple corporate website postings might think they have a better chance of landing the job if they say a recruiter called them.

An Easy and Effective Solution = Ask the New Employee Post-Hire

New employees will respond more thoroughly to questions because they often want to help their new employer. Furthermore you are getting the information straight from the source without any recruiter bias or apathy.

I would suggest asking the new employee during onboarding. First explain why you want the information to get maximum cooperation. I recommend not limiting possible responses to just one answer. Instead, provide choices of multiple factors based on responses from past hires and also leave a blank field. If the new hire does have multiple responses, ask for the responses to be ranked.

Two questions on source are necessary:
1. What source originally made you aware of our company?
2. What source made you aware that we had a current opening in your field? Or, if you were not aware of an opening, what source made you think to contact us? Or if we contacted you, what was the source of contact?

Lastly, don’t forget to ask for referrals. The best time to ask is when a new hire starts employment. Correction, the best time to ask is anytime, but it is really effective to ask new hires.

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

Internally Mobile Workforces

Giving employees opportunities to advance their career by moving up or even moving laterally to other jobs in an organization is a good way to maintain employee engagement and retention.

Now is the time

As this recent Boston Globe article points out, nearly two-thirds of workers want to leave their current position.  About the same numbers of employers say they’ll be hiring this year, according to a quarterly survey of HR professionals conducted by my firm, Professional Staffing Group.

Internal mobility can be a win-win for employers and employees.  It gives employees relief from a job they may have grown tired of without forcing them to give up the security of their current workplace.  It gives employers a way to place experienced workers, who are already accustomed to the company and may have a shorter learning curve, without the expense of recruiting and training new external workers.

Most Companies Don’t Handle Mobility Well

Many organizations do not handle internal mobility well and therefore pay the price in terms of employee turnover.  Such organizations cling to the hope that the employee will be satisfied in his or her current job or they let company politics come in to play and allow managers to block transfers.

Best Practice Recommendations

Have realistic expectations – It is important not to hold internal job candidates to unreasonable standards, expecting them to be the perfect fit.  Companies risk doing damage to their culture when they reject an internal candidate then turn around and hire someone from the outside who is not any more qualified for the job.  Sometimes knowing too much about internal candidates can get in the way; you know more about internal candidate’s flaws as compared to external candidates who don’t try to show you their shortcomings in the interview process. Unless the flaws are critical and impact the employee’s ability to do the new job, don’t let minor shortcomings stop you from making the transfer.

Ensure company culture and senior management support the initiative – Senior management’s visible support is necessary to develop and maintain a culture that allows for and even encourages internal mobility.  Without high level senior management commitment to mobility, internal politics can take over and managers can block transfers or even discussions of transfers.   Senior management should reinforce the long term benefits (retention and job satisfaction) of maintaining a culture that encourages internal mobility.

Make it easy –Most barriers that companies construct around internal hiring are well-intentioned; they are designed to prevent inter-departmental poaching and to promote transparency. But they can also make it restrictive for employees to take advantage of internal mobility and in some cases make it seem easier to look for a job outside the organization. Employers can make internal mobility as easy as possible by eliminating the need for applications, or for updated resumes, or permission from managers when applying to internal job postings.

Market your internal mobility policy –Management should consistently support and promote internal mobility at meetings, through email communications, signage in common areas and any other internal communication opportunities.

Pay internal candidates the same as you would pay an external candidate – Compensation should be in-line with what you would expect to offer an external candidate with similar qualifications.  In other words don’t lower the compensation just because your internal transferee is currently making less money; such actions serve to motivate employee to look for external opportunities.

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

 

Charitable Giving at Work

Epic flooding, wildfires, hurricanes, tsunamis, wars, a nuclear meltdown.  Combined with ongoing need and the increased demands felt during our economy’s last recession, it seems there have never been more opportunities to support those in need.  Because there is power in numbers, workplace philanthropy is an effective way to support others in need.

According to a study commissioned by the United Way Worldwide, just over one-third of full-time employees work at a company offering some type of workplace giving campaign. Almost one-quarter of employees with a workplace campaign were asked to give to more than one cause during the year and 54 percent of those asked to give to a workplace campaign donated.

Workplace giving campaigns offer benefits to the office as well:

  • Workplace giving campaigns can improve employee engagement by instilling a sense of pride toward their employer, a sense of accomplishment for making a difference, and a greater connection to co-workers
  • Studies also show that if employees are philanthropic through their work, they are more likely to recommend their employer
  • The newest generation of workers takes a company’s charitable efforts very seriously. According to a USA Today article, “61 percent of people aged 13-25 feel personally responsible for making a difference in the world.” Additionally, “69 percent consider a company’s social and environmental commitment when deciding where to shop, and 83 percent will trust a company more if it is socially/environmentally responsible.” Most importantly, 79% said they “want to work for a company that cares about how it affects or contributes to society.”
  • Giving campaigns can be part of branding and marketing efforts if the campaign is linked to the company’s mission or industry, e.g. a building supply company that donates to construction repair efforts

However, workplace giving campaigns can backfire if employees feel pressure to participate or feel that the effort is not a company-wide one, i.e. senior management does not participate. Asking employees to give above and beyond their job responsibilities can be a delicate task and should be handled sensitively.  It’s also important to establish a company-wide policy — how extensive and formal the policy is depends on the organization.

When determining how to set up a workplace giving campaign or set policy, here are a few recommendations:

  • Look for innovative giving campaigns that can advance your company’s broader corporate responsibility goals and strategies. Seek philanthropic partners who understand and work with the company’s commitment to support brand strategy while providing value to employees and consumers beyond the dollars they raise.
  • Utilize technology to reduce the resources and time needed to run a campaign while expanding the options for sharing campaign information.
  • Support causes that resonate with your employees; they’ll be more enthusiastic if they’re working for a cause they believe in or have a hand in choosing to support
  • Have senior leadership set the tone and demonstrate involvement
  • Understand that workplace giving is a long-term commitment. If a giving campaign isn’t successful or doesn’t seem to resonate with employees, shift tactics and learn from the experience to establish a new campaign that is successful.

 

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

 

Job Outlook for 2011 College Grads

By Aaron Green

Prospects for this year’s college graduates are better than they have been in the previous two years. The Massachusetts economy continues to grow: the state unemployment rate hit a two-year low in April and employers added nearly 20,000 new jobs. Massachusetts’ unemployment rate, at 7.8 percent, is well below the national average of 8.8 percent and for job seekers with college degrees it is about half of that.

Many of the colleges and universities in Boston celebrated their commencements this month. Here’s a look at the job market for this year’s college graduates:

The National Association of Colleges and Employers (NACE) predicts that employers will be hiring 19.3 percent more college graduates this year compared with last year. CareerBuilder also asked employers about their plans to hire college graduates and nearly half (46 percent) of the 2,800 surveyed said they plan to hire recent graduates.

Twenty-six percent surveyed by CareerBuilder said they plan to offer higher starting salaries than they did in 2010. Salaries are up from the previous year for the first time since 2008, with an average starting offer of just over $50K. Engineering and computer science jobs are among the highest paying jobs for new graduates.

The Class of 2011

The U.S. Department of Education projects 1.7 million students will graduate with bachelor’s degrees in this 2010-2011 winter-spring graduation cycle. Females outnumber males with the Department of Education reporting 140 females to every 100 males in the Class of 2011 (58 percent of college graduates are female, with 42 percent male). This class is the most indebted in history with an average personal debt of $23K after graduation.

In general, the Class of 2011 is a wary bunch used to seeing their classmates leave campus without a job to move back home with parents and put other adult milestones – like buying a home – on hold.

Many will have held at least one or two internships during their college years, which is a good idea career-wise as forty percent of entry-level jobs are being filled by former interns.

If you’re among the 46 percent of employers who will be hiring recent college graduates this year, it’s important to keep in mind that these candidates don’t have the same resumes or interviewing skills as more experienced job seekers. I recommend these six essential questions for interviewing recent college graduates.

 

Responding to Rejected Candidates

Right now human resources professionals are inundated with candidates they can’t hire. While this situation is not new, the volume is increased and candidates seem to be more sensitive to how they are treated. Last month, the Boston Globe ran an interesting article on candidates’ reactions to the manner by which they are rejected. The challenge for many HR professionals is simply responding to all rejected candidates.

Why don’t applicants get a response?

There are a number of factors that have made it difficult to respond to all applicants:

  • Technology enables an overwhelming amount of employment inquiries. Email and online submission processes make it easy for job seekers to quickly apply for numerous open positions. On the other hand, employers need time to evaluate and screen each of those submissions.
  • The down economy and higher rate of unemployment means more candidates are applying for positions.
  • HR departments are stretched thin. Many organizations cut back on HR resources to weather the recent recession and are ill-equipped to handle the current workload.
  • Intercompany communication can lag. Sometimes an HR manager doesn’t know what to tell the candidate because they have not heard back from key participants in the hiring process.

Return on investment: why it is worth the effort to create a process and culture that ensure all candidates receive a response

Availability for future positions: The candidate you reject today might be perfect for a future opening; treat candidates well today and keep them interested in your organization.

Referrals: While the candidate might not be right for your company, if you treat them well they still might refer other people.

Candidate gains new skills: The candidate you reject today might go on to gain new skills and be desirable to you down the road.

Public relations: Being unresponsive to candidate can really generate intense bad feelings which can hurt your employment brand as well as your overall brand.

What should employers do?

Employers should develop a process that ensures all candidates that apply to your company get a response. The process may define who responds and how they respond depending on how deeply the applicant went in the interview process. For instance, if the applicant went on three rounds of interviews, you may want a senior person to have a live phone conversation with them explaining why they were not selected. On the other hand, it might be acceptable to send a standard email to an unqualified applicant who applied online to a job board posting.

In addition, employers need to create and maintain the proper culture which values treating candidates with respect and adhering to the process.

While responding to rejected candidates can be time consuming, in the long run I believe it is time well spent.

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

Incivility in the Workplace

Are we becoming a nation of uncivil servants? The January shooting of Congresswoman Gabby Giffords prompted numerous politicians and media to illustrate how uncivil and hot-headed our nation has become. There were subsequent calls for “civil discourse” and our government attempted to lead by example by pairing Republicans and Democrats as seat-mates for the President’s State of the Union address. It’s easy to see how our hurried, stressed and litigation-prone society can be less fun to be around and some have noticed that attitude carrying over to the workplace. Uncivil behavior in the workplace is unpleasant and costly, but can be prevented.

What is incivility in the workplace?
According to Wikipedia, workplace incivility has been defined as: “low-intensity deviant behavior with ambiguous intent to harm the target… Uncivil behaviors are characteristically rude and discourteous, displaying a lack of regard for others.”

Examples of uncivil behavior at work can range from:

  • losing one’s temper or yelling at someone in public
  • rude or obnoxious behavior in the workplace
  • badgering or back-stabbing in the workplace
  • withholding important customer/client information
  • sabotaging a project or damaging someone’s reputation

To more subtle acts, such as:

  • arriving late to a meeting
  • checking e-mail or texting during a meeting
  • not answering calls or responding to emails in a timely manner
  • ignoring or interrupting a colleague in the workplace
  • not saying “please” or “thank you” when customary

In the book The Cost of Bad Behavior: How Incivility is Damaging Your Business and What to Do About It, authors Christine Pearson and Christine Porath interviewed workers at 800 employers, and found:

  • 96 percent have experienced incivility at work
  • 48 percent of employees claim they were treated uncivilly at work at least once a week
  • 10 percent said they witnessed incivility every day
  • 94 percent of workers who are treated uncivilly say they get even with their offenders

How did we get here?
It’s not hard to find examples of stress and hardship that could make people less civil: the tough economy, less than ideal employment situations, even the effect technology has on speeding up our communications and decision making, and lengthening our work hours by increasing our accessibility.

Some workplace observers even blame the slip in civility on the shift toward casual dressing, which causes more casual behavior and communication, in turn lowering standards of behavior. While casual dressing may or may not be a cause for incivility, it’s an example of the many workplace practices that have changed in our culture. When evaluating causes of incivility, employers should consider all the changes in their environments including the increased use of technology, teams that are more widely distributed geographically, and the increase in diverse workforces, to name just a few.

Workforce Management featured a January 2011 article, The Degeneration of Decorum, which reported that: “Incivility tends to rear its ugly head in organizations that have distinct pecking orders, where people are separated by rank…some experts say the worst fields for incivility are education and health care, where the abuse comes from the top and leads all the way down to the school playground or the operating room.”

The cost of uncivil behavior in the workplace
An uncivil workplace is an undesirable place to work or do business with. Incivility has wide-reaching impact on efficiency, effectiveness and job satisfaction in the workplace. Where uncivil behavior is found, it’s common to find poor communication and ineffective use of meetings, lower standards for customer service, decreased workplace productivity and lower rates for employee recruiting and retention.

As reported by Workforce Management: “In polling thousands of managers and employees about the effects of incivility, Pearson and Porath found that after being the victim of on-the-job rudeness and hostility, two-thirds of employees said their performance declined. Four out of five said they lost work time worrying about the unpleasant incident, while 63 percent wasted time avoiding the offender. More than three-quarters of respondents said that their commitment to their employer had waned, and 12 percent even quit because of bad treatment.”

What should employers do?
Employers and organization leaders are responsible for creating a foundation or environment where employees can shine. Office culture is often set from above, meaning that the management team needs to lead by example. Increasing awareness around incivility and its impact is a good place to start and, if necessary, create workplace policies around civil behavior where standards for acceptable behavior are established (just as you might create a policy for the use of social media).

HR managers can ensure that civil language and practices are imbedded into every level of an organization, including job descriptions, hiring practices, training policy and the day-to-day code of conduct. For example, use the hiring processes you’ve got in place, such as personality tests and reference checks, to look for signs of incivility in a candidate or new hire.

Other tips for fostering civility:

  • Recognize and reward employees who model strong civil habits – or empower employees to recognize their peers
  • Provide training and coaching to help employees identify problems
  • Foster open communication practices such as forums for sharing ideas and input, safe environments for sharing concerns or reporting incidents, and explain the importance of good communication and its impact on organizational success

Reducing incivility not only makes your organization a more enjoyable place to work, but it also has a positive impact on the bottom line through improved employee retention and performance.

Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.

 

Massachusetts Independent Contractor Law

Both the IRS and the Commonwealth of Massachusetts have had a heightened interest in misclassified independent contractors in recent years. The Federal and State governments have recently announced additional funds being allocated to hire more auditors because they anticipate a good return on investment. More auditors = more tax dollars found.

In general, business people tend to be more familiar with the IRS rules regarding independent contractors than with the state rules. The IRS follows a “common law test” for assessing the classification of contract workers, which is meant to reveal how much direction and control the business retains over the worker. The IRS developed a list of twenty factors to be used as an aid to apply the common law test. In addition to the federal test, Massachusetts employers have the state law to consider, which I am focusing this article on because:

Massachusetts law is more stringent than federal law
The Attorney General issued an advisory which stated, “The Massachusetts Independent Contractor Law (MICL) excludes far more workers from independent contractor status than are disqualified under the IRS common law test.”
As employers we should be paying closer attention to Independent Contractor law at the state level. Here are the requirements of Massachusetts law and their effect on businesses.
Massachusetts Law requires a three part test
The MICL creates a presumption that an individual performing any service is an employee. To overcome this presumption, the party receiving services must establish:

1.  that the worker is free from its control and direction in performing the service, both under a contract and in fact; and

2.  that the service provided by the worker is outside the employer?s usual course of business; and

3.  that the worker is customarily engaged in an independent trade, occupation, profession or business of the same type.

The law requires that all three parts of the test (sometimes called prongs) must exist in order for an individual to be classified as anything other than an employee. The burden of proof is on the employer, and the inability of an employer to prove any one of the prongs is sufficient to conclude that the individual in question is an employee.

Some examples of how the law will apply
Based on my interactions with businesspeople, prong two seems to be the most problematic and least understood, so I will illustrate the application of the law in this regard:

Example #1: An accounting firm brings in a painter to repaint their office and classifies as an independent contractor. Assuming this person meets the tests for prongs one and three, the classification is allowed because the work being done is outside the firm’s usual course of business.

Example #2: An accounting firm brings in an accountant to assist them during their busy season and classifies as an independent contractor. This would be a violation of prong two because the service provided is not outside the employer’s usual course of business.

It is significant to note that the MICL does not take into account where the work is performed as part of this assessment. I took the time to point this out because it is a common misconception that if an independent contractor works outside of the employer’s place of business (i.e. from home), that fact satisfies the requirements to be classified as an independent contractor when this is not the case; where the person works is not relevant.

Consequences of misclassification

When employers don’t understand the application of the law and misclassify someone as an independent contractor, there can be costly repercussions. Employers can potentially be responsible for FICA and Medicare taxes and can even be responsible for the federal and state taxes that “should have”been withheld from the employee. In addition, they can be responsible for state unemployment taxes, worker’ compensation, and overtime if applicable. Penalties can accrue and in certain cases (i.e. overtime) treble damages can be assessed. Even if unintentional, what is often intended as a cost savings strategy can turn into a costly oversight.

Summary

While the use of independent contractors is extremely important to many companies, it is an approach fraught with inherent risks. The increased government attention to independent contractors and the large penalties involved take these risks to a dangerous level for Massachusetts businesses. Businesses need to examine their independent contractor relationships to ensure they comply with the rules or alternatively consider taking the appropriate steps to restructure their relationships.
Aaron Green is founder and president of Boston-based Professional Staffing Group and PSG Global Solutions. He is also the vice chairman of the American Staffing Association. He can be reached at Aaron.Green@psgstaffing.com or (617) 250-1000.