Employee Referral Programs

Even though there are many reports about high unemployment I want to tell you that hiring is still taking place.  I always tell my clients that one of the most cost-effective ways to recruit is via an employee referral program.  

If you are considering adding an employee referral program, let me give you some thoughts to contemplate:  

Referral bonus amounts need to be significant.  If  for example your referral bonus is $75, than I need to tell you that you need a reality check.  The bonus has to be meaningful if you want your employees to share with prospective candidates how great your company is and why they should work for you.  How much is meaningful?  We use metrics in human resources so I would calculate your cost per hire and use that as your guide.  The formula to calculate cost per hire which I use is:

(Advertising Costs+ Agency Costs + Employee Referrals + travel C + Relocation C + Reference Checking C )x
1.10 Number of Hires

For example:  My consulting firm estimates $7000.00 to hire a Product Manager in your company.  Your company could offer a referral bonus of $2500.00 and still save money depending on other costs.  In addition, you get the added benefit of increased employee engagement in the recruiting process.  The referral award needs to be in proportion to the cost you would pay for the employee search.  

I also believe that companies should limit the waiting period for paying referral bonuses.  I believe it should not be longer than two months.  The employee has provided your company with a candidate and the responsibility for selection and retention lies with your organization and not the employee.  The manager would now be responsible for the candidates retention.  Why would an organization make their employee wait for their referral bonus?  If your new hire leaves your employ after four months then the issue lies with your manager and your onboarding process and not with the employee who originally referred the candidate. 

Referral bonuses can be a great recruiting tool for your company.  However, remember the that the success of the program lies with appropriate pricing, timely payment and effective management of the program by the hiring managers.  

I have to admit that I'm one of those Blackberry believers.  The amount of things I can do with my Blackberry continues to amaze me daily.  I recently saw a video entitledThe Growth of Mobile Stats and Figures which will Shock You  and learned the following:  

• Over 70% of the worlds population now have a mobile phone, that’s over 5 billion mobile subscribers, and in places like the US, it’s 9 in 10 people. 
• Children are now more likely to own a mobile phone than a book.

Now that’s a pretty crazy statistic.  When I saw that I thought how important is mobile technology to business?  59% of small businesses say wireless technology is essential to their business.  How much business is your company losing if your employees are not mobile savvy.  I have to believe that it's in the best interests of small businesses to teach their employees how to be more productive using this technology.  

I'm not saying you need a "you can't use your cell phone while driving policy".   Small business should consider training sessions for their employees on how they can be productive using their mobile devices.  Mobile phones today allow you to do more than just update your Twitter account.  

If your organization is looking for new ways to increase employee productivity, exploring mobile productivity training sessions could make a lot of sense for you.  In the words of Steve Jobs, "It's not the tools that you have faith in - tools are just tools. They work, or they don't work. It's people you have faith in or not."  Teaching your employees how to be productive on mobile phones is a win win for small businesses.  

Anti-Harassment Training - It's 2011 -Do we Need it?

I'd like to take this time to talk about the overall value of anti-harassment training.   Back in 2010, an ex-staffer filed a complaint of sexual harassment against ESPN (http://blog.ctnews.com/takeonlife/2010/10/).  

The first line of defense we drill into managers during anti-harassment training is we will conduct a thorough investigation.  We cannot guarantee confidentiality.  We will investigate and hold those employees who violate the company anti-harassment policy accountable.   We will not sweep this under the proverbial rug.  

It got me thinking a few things about anti-harassment training and investigations.  For instance:

Conducting anti-harassment training gives the company a chance to say, “You the employee are accountable for your own stupid behavior.”  It's a line of defense companies use if a lawsuit is filed.  

Even if you are a baseball star, ESPN announcer, rock star, golf superstar, accounting manager, stock clerk, whatever…if you make sexually inappropriate comments or create a hostile environment with words and deeds, you will pay the consequences.  

In today’s second by second news world, you can’t outrun social media.  Not going to happen.  If one of your employees makes headlines in the opening salvo on TMZ, then I suggest you have a strong plan in place to handle the fallout.  Don’t make the assumption it can’t happen to you.  We all know what happens when you assume. 

I know that most business owners, especially small business owners, believe that since it's 2011 don’t people know by now that discrimination and harassment are wrong?  They believe why should I spend time and money on training when everyone by now knows the drill.  

I believe it's a great thought albeit pie in the sky.  A moment later, I receive an email from friends sending me links to news stories involving people like Brett Favre or  Quinton "Rampage" Jackson.  

Executives Can Be Liable for Wage and Hour Violations

Saying that it should “come as no surprise” to the president and CEO of Gristedes, a popular grocery chain, the U.S. District Court for the Southern District of New York held the executive individually liable for millions of dollars in unpaid overtime compensation.

In this class action lawsuit that spanned a number of years, mid-level managers at the defendant’s chain of New York-based grocery stores claimed that the company misclassified managers to avoid paying them overtime. Although the case was settled in 2009, the employees claimed that the settlement’s payment schedule was not adhered to. Therefore, the employees argued, the president/CEO/sole owner of the grocery store should be held individually liable for what amounted to millions of dollars in unpaid overtime.

What the court said. The court rejected the CEO’s argument that he exercised no control over the employee classification system or payment of overtime. Instead, the court determined that the CEO was an “employer” within the meaning of the Fair Labor Standards Act (FLSA) and New York Labor Law.  The court held the CEO personally liable.  

The lesson here for executives - it's more important than ever to ensure that your company wage and timekeeping policies adhere to the FLSA.  Ensure your timekeeping records are accurate and will hold up in a court of law. 

Although most employers indemnify CEOs and presidents against personal liability in most situations, it is important to note that if the company’s policy is inadequate or incomplete, executives are still liable. As a result, auditing an organization’s FLSA classifications is more important than ever— especially to executives.

The U.S. Department of Labor (DOL) recently announced availability of a new timesheet application enabling your employees to independently track their hours to help determine the wages they are owed. Consequently, if your organization is still relying on manual or outdated timekeeping systems, you many now face increased exposure to wage and hour audits and/or lawsuits.  

To Do List for Health Plans

There are new rules for employers who offer health coverage under the reform law which will have an impact on various provisions of the plan.  Here are some of the ways in which they will be affected:


Coverage for young adults. All group and individual plans that provide for dependent coverage must continue to make such coverage available for an adult child, regardless of marital and tax-dependent status, until the person turns 26. Coverage generally does not need to be provided to an adult child eligible to enroll in his or her employer’s group health plan.

Starting in 2014, however, even if the adult child has coverage available through his or her employer, the parent’s plan will not be able to exclude the adult child until the child’s 26th birthday. 

Until 2014, the law’s provision regarding coverage of children under 26 will cause many adults under that age who do not have coverage available through employers to enroll or re-enroll in the parent’s health plan. Traditionally, this group has relatively low utilization expenses. Nonetheless, employers will need to be mindful of potentially increasing plan costs from previously ineligible children.


No caps on lifetime benefits. All lifetime limits in individual and group health plans must be eliminated on “essential health benefits” as defined by the U.S. Department of Health and Human Services. Many employer plans currently impose a $1 million or $5 million lifetime limit on coverage. Further, annual benefit limitations for items deemed as “essential health benefits” must also be eliminated by 2014. 

Pre-existing conditions get coverage. For plan years beginning on or after Sept. 23, 2010, there can be no exclusions of coverage for pre-existing conditions for health plan participants under 19, regardless of the current carve-out for creditable coverage, as stipulated in the Health Insurance Portability and Accountability Act of 1996, known as HIPAA. And starting in 2014, there can be no exclusions for pre-existing conditions for anyone, regardless of age.


For a copy of the Health Care Reform timeline, please send an email through my website and I will send you the timeline.