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No more double-coupon days at work

by Stephen Hawley Martin
for Virginia Business
November 28, 2006

Have you ever been to the grocery store and noticed the frugal shoppers - women with the coupon pouch as fat as bookie's wallet? They study advertisements in the Sunday newspaper. They time their trips to the store to optimize savings by shopping just when the sales start, or the freshness date markdowns hit, or the double coupon deals go into effect. They are there to get double, triple deals.

According to Lisa Disselkamp, writing in the new Oaklea Press release due out in January called "Working the Clock," many employees approach work the same way. They read up on the compensation policies. Their union contract is their compensation bible. They talk to other workers about how much they get paid. They scope out the schedule. They know that when Jupiter aligns with Mars they can work that shift and qualify for overtime, shift premium and holiday pay. They'll earn double or triple time for a single shift.

A recent newspaper article tells about a nurse who is earning six figures despite a base salary in the neighborhood of $50,000. She was making more than some senior-level managers.

Why does this occur? First it's necessary to look at these compensation programs and how they came about. Most have been offered to satisfy a demand in the labor market for incentive compensation for certain classes of workers, or during especially difficult-to-staff periods such as holidays and weekends.

Unfortunately, these well-intended programs are rarely considered as a package. They are created and managed in what might be called silos. The programs become entitlements in the minds of employees, meaning that once one is in place, it's difficult for an employer to retire it. Then, when another influence on labor creates a demand for a new pay policy, an additional program is written and implemented as though it were just one more item in a buffet line. Instead of replacing the red Jell-O with a healthy salad, employers simply add the salad to the menu.

Pay programs ought to be designed in concert with one another. If a particular situation qualifies an employee for a financial incentive, the program should define exactly what is required in order to qualify and how that program pays if the employee also qualifies for one or more other programs at the same time. If, for example, employees can earn a shift premium for working second shift, and a weekend premium for working the weekend, what happens when the employee works the second shift on the weekend? Does the employee qualify for both? What happens if the employee also is working overtime during the second weekend shift? That shift might also fall on a holiday making the employee eligible for the second shift premium + the weekend premium + overtime + holiday pay.

Count the number of programs in any company's compensation policy book. That may possibly be how many programs that can be "stacked" on top of one another to exponentially pay one happily overcompensated employee.

Is this really what it would normally take to get an employee to work that shift?

Work-force management technology systems can institute a hierarchy structure for compensation programs, capping the amount an employee can earn for working any shift. The employee above may have been earning $2 an hour extra for working a second shift, $3.50 more for working a weekend, and 1.5 times his base rate for overtime and double time for holiday. At a base rate of $10 per hour that's now a rate of $30.50 per hour or more when blended overtime also is taken into account. Automating this process could allow management to enforce a cap on this combined rate limiting the rate to a certain multiple of the base, say two times the base rate.

Or there's another option. The hierarchy could institute a matrix structure where employees who qualify for multiple programs are paid the premiums in a certain order until a set limit is reached. The matrix can be used to enforce a policy that stipulates how payment is to be handled when two or more programs coincide. In this scenario, perhaps overtime is always paid so the holiday double-time would be in effect. That limit having been reached, nothing more would be paid. Or, if the employee is in overtime and also on the weekend second shift, the weekend pay might take precedence because it is the higher rate of the two shift premiums. Suffice it to say technology offers a way to build equitable compensation to meet business needs without obligating the company to pay excessive compounding of premiums.

A system can also be set up to avoid double-paying overtime. In some states, California being one, daily overtime is mandatory. In that state, overtime also must be paid to someone who works more than 40 hours in a week. If someone works more than eight hours in a day, that person is entitled to overtime on the extra hours worked that day. If someone works more than 12 hours in a day, the person starts earning double time. If a person works seven consecutive days, even though they may only work one hour on each one, the seventh day is automatically paid at the overtime rate. After eight hours on the seventh day, double time kicks in. An automated system can be set up to make sure these overtime triggers are avoided.

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Stephen Hawley Martin is a former principal of The Martin Agency in Richmond and the author of more than half a dozen books including his newest, Lean Enterprise Leader: How to Get Things Done Without Doing It All Yourself. He is editor and publisher of The Oaklea Press, a book publishing business dedicated primarily to helping business executives increase productivity.