MANAGING YOUR LABOR DOLLARS IN A DECLINING ECONOMY

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MANAGING YOUR LABOR DOLLARS IN A DECLINING ECONOMY

• Presented to
• 2009 National
• Smart Start Conference
• by
• Mike Womble, SPHR
• Carolina Human Resources, Inc.
• Sanford, NC

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REMINDER

• Federal and State Minimum Wage
• Current 6.55/hour (eff.7/24/08)
• Changes 7.25/hour effective 7/24/09
• (10.68 Increase)

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NEW COBRA REVISIONSAmerican Recovery and
Reinvestment Act of 2009

• Certain individuals may receive a subsidy for 65
  percent of the premium (Involuntarily terminated
  employees covered beneficiaries).
• Must be eligible for COBRA continuation health
  coverage or coverage under State law
• These individuals are required to pay only 35
  percent of the premium.
• The employer may recover the subsidy provided to
  assistance-eligible individuals by taking the
  subsidy amount as a credit on its quarterly
  employment tax return. 
• The employer may provide the subsidy  and take
  the credit on its employment tax return  only
  after it has received the 35 percent premium
  payment from the individual.
• IRS web site http//www.irs.gov/newsroom/article/
  0,,id204708,00.html

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DEALING WITH LABOR REDUCTIONS

• As the result of the current economic situation,
  you realize you must reduce your payroll by at
  least 10 and maybe more later. It is uncertain
  how long this may last.
• The simple solution is to lay off 10 of the
  workforce but is that the right solution and are
  there any other options?

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Option I Manage Overtime

• Minimize overtime
• Eliminate overtime
• Part-time Employees????

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Option II Reduce Work Week

• Go to a 7 hour work day
• This is an app. 10 reduction at best (although 1
  hour is 12.5 of 8) remember the cost of
  benefits.
• 4 day work week
• Again, we may be reducing the hours worked by 20
  but we have not reduced our total labor cost
  because of the cost of benefits.

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Issues to Consider with Reduced Work Week

• Salary exempt staff
• Fluctuating work week staff
• Morale
• How do you handle paid time off benefits?
• Vacation
• Sick/Personal Days
• Bereavement
• Jury

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Option II Issues

• NC Wage Hour Law You must do what you say you
  do in policy or in practice..notification of
  change required in writing.
• Suggestion Review your policies and issue
  amendment notice, if necessary

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Option III Rotation of Staff

• Rotation of staff on reduced work week
• Rotation of staff on full week layoff
• If you lay off ¼ of your workforce once every
  four weeks, you have reduced your direct labor
  payroll by 25........
• but remember, the employees will probably be
  eligible to draw up to 50 of their base period
  high quarter wages.

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Option IV Voluntary Lay-offs(Attached worker
status)

• Options
• Rotating the work force
• Fixed by certain employees
• Considerations
• First week 3 day work week to allow employees
  to meet waiting week and still have some income.
• Should bring employee in once every 4 5 weeks
  to retain attached worker status

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Attached Worker Status

• Employer files unemployment claim for employee
• Employee does not have to seek employment
• Employee retains participation in all company
  benefit plans

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Option IV Involuntary Layoffs

• How to handle
• Seniority
• Position
• Performance may be a good chance to get rid of
  some deadwood
• Caution be sure you can defend your decisions

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Bottom Line

• Make decisions based on whats best for the
  organization and its employees, and
• COMMUNICATE ! ! !
• COMMUNICATE !!!
• COMMUNICATE !!!

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• Mike Womble, SPHR
• Carolina Human Resources, Inc.
• Sanford, NC