Posts Tagged ‘hiring’

Utilize Employee Referrals to Hire Top Talent

Thursday, March 23rd, 2017

If one of your top sources for hiring isn’t from employee referrals, then you are missing out on an incredible source of quality hires.

When your business is ready to hire a new employee, where do you typically look first? If you’re like many smaller companies, you may start by asking current employees for referrals. Hiring from the networks of your current team has always seemed like a good idea. Recent research now shows that it’s actually the most effective way to find a match for your company.

  1. Leadership IQ 2012 Global Talent Management Survey found that employee referrals were the most effective recruiting channel for front-line performers.
  2. According to recent Glassdoor research report, “Why Interview Sources Matter in Hiring,” employee referrals boost the odds of a successful job match by a statistically significant 2.6 to 6.6 percent.
  3. A recent jobvite survey found that while only 7 percent of applicants came from employee referrals, that 7% accounted for 40% of new hires.  Hires came faster through employee referrals at an average of 29 days, versus 39 days from a job board and 55 days from a career site.  Forty-seven percent of referrals stayed with the company for more than 3 years versus only 14% hired through job boards.
  4. For more hard facts touting the benefits of referrals, click here.

Although employee referrals more often result in accepted offers, most companies do not seem to be using those referrals enough. According to CAI’s latest NC Policies and Benefits Survey, 69% of local employers do not offer a bonus for employee referrals.  That number reveals that companies might have better luck sourcing and hiring the right candidates by focusing on asking for and rewarding employee referrals.

Why are employee referrals so effective in finding the right hire for an open position?

Much like turning to TripAdvisor reviews before choosing a restaurant, employee referrals provide useful context to both the job seeker and the company. Job seekers gain insights about prospective employers from the employee, and companies learn about the reputation of candidates from the recommender.

If you want to maximize the effect of employee referrals for sourcing your next great hire, consider taking the following steps:

  1. Ask for referrals. Don’t assume your current employees are focused on your hiring needs; instead, actively communicate with them about open positions and the types of candidates you seek. Regularly remind employees that they are well suited for recommending others who would fit at your company, and ask them to refer candidates in their networks.
  2. Be specific. Don’t just ask employees to send their friends and family members to you. There’s no reason to be bombarded with résumés of people who may be trusted but are not a fit for potential positions. Instead, share details about specific job requirements and the experience the new hire will have.  Even better, give employees Facebook and Linkedin links about the job they can share with their friends.
  3. Reward successful referrals. If a current employee refers a job seeker who you eventually hire, they should be rewarded. Establish a reward system and communicate it to all employees. For instance, you might reward them with a small monetary bonus, gift card or special privileges at work.  According to CAI’s latest NC Policies and Benefits Survey, the average bonus payout is $575 for non-exempt hires and $747 for exempt hires.  Now at first glance, those numbers seem reasonable and would clearly motivate some people.  At the same time, the average recruiting fee paid to an agency is 21%, or $6,300 for that $35,000 administrative person or $12,600 for that $60,000 engineer.  What would happen if you paid $2,000 for successful employee referrals ($500 up front and $500 after 6 months and $1,000 after a year, or something like that)?

It’s important to remember that people trust one another more than they trust companies. Embrace this way of thinking, and empower your own people to help you recruit with a human approach by embracing the employee referral. CAI members always have access to the latest salary and policies and benefits survey information to help them make smart hiring decisions and retain top talent. Find out how CAI can help your company.

Tom Sheehan brings 20+ years of extensive, broad-based strategic, tactical and practical HR experience to CAI’s Advice & Resolution team.  He advises HR and other business leaders on talent management, organizational effectiveness, employee engagement, M&A’s, and employee relations.

HR Metrics that Matter: Talent Acquisition

Thursday, March 2nd, 2017

Unlike many other functions, human resources has not been able to develop and/or sustain universally accepted performance metrics.  As a result, HR metrics often vary widely from company to company and industry to industry. Additionally, the metrics that are most commonly used are not always the best indicators of HR performance or impact.  In fact, HR leaders often make the mistake of using metrics that relate specifically to how well HR is performing administrative tasks.

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The following measures are geared toward measuring HR’s actual impact on the business.

1. Quality of Hire

This metric can be calculated from a combination of a number of factors, including: performance review ratings, actual job results, 9-box ratings, and 6-month Quality of Hire Evaluation Form to obtain the hiring manager’s perspective. You could also review hires that turned over, hires on the promotable list, and hires on the performance improvement list to help determine quality of hire.

2. Time to Fill Key Roles

Not all job openings are equal. In fact, some mission-critical positions carry a lot more weight than a ‘rank-and-file’ opening. Recruiters and HR business partners should prioritize their job openings so that the key roles get the greatest attention. It doesn’t really matter if your overall time-to-fill metric is only 30 days, if it is taking 3 times that long as that to fill key roles.

3. Onboarding Effectiveness

There are basically two simple ways to determine if your onboarding process is effective. The first way is to conduct a post-onboarding survey with new hires on or about 90 days after being brought onboard.

The second way to ensure that the first 90 days are properly scripted into a series of events aimed at supporting the new hire, and ensuring they have been given exposure to the right people.

By asking for completed and signed-off copies of the checklist, with signatures of both the new hire and manager, you improve the likelihood that the onboarding process will be taken seriously.

4. New Hire Dropout Rate

One way to tell how effective the organization is in terms of selecting, hiring, onboarding, and training new hires is to review turnover data. If the turnover rates for new hires (say the first 180 days) or newly hired (first year) are significantly higher that the remaining employee population, you likely have real issues.

Start by asking these questions:

  1. Are we presenting a realistic job preview during the interview process?
  2. Do we have properly trained interviewers asking the right questions?
  3. Are we doing a good job of checking references?
  4. Do we have our act together in terms of a scripted onboarding progression?
  5. Are the hiring managers effectively setting clear expectations?
  6. Have we met the commitments we agreed to during the ‘courting’ stage?
  7. Are we selecting based upon cultural fit?
  8. Do we involve coworkers in the interviewing process?

CAI members have access to all forms, tools, and templates for talent acquisition / recruiting / onboarding online at myCAI. Not a member? CAI can help you build an engaged, well-managed and low-risk workplace, give us a call at 919-878-9222 or visit www.capital.org/membership to learn more.

Tom Sheehan brings 20+ years of extensive, broad-based strategic, tactical and practical HR experience to CAI’s Advice & Resolution team.  He advises HR and other business leaders on talent management, organizational effectiveness, employee engagement, M&A’s, and employee relations.

 

The Labor Market Squeeze

Thursday, November 17th, 2016

The post below is a guest blog from Dax Hill who serves as Principal, Health & Welfare Consultant for CAI’s employee benefits partner Hill, Chesson & Woody.

Many employers are expressing concerns that it’s becoming increasingly difficult to find qualified applicants.  A couple of recent surveys outline the problem facing employers: labormarketsqueeze

  • Graham Personnel found that 59% of employers are having difficulty hiring qualified applicants.  They also report the top three employer concerns are:
    • Retention and employee relation issues (28%)
    • Recruiting (27%)
    • Other factors in their organization including sales and marketing (10%)
  • A 2016 SHRM survey found similar results. In their survey, SHRM reports that 68% of employers had difficulty filling full-time jobs in the past 12 months.  In 2013, only 50% of employers reported hiring difficulty.

These elevated numbers are concerning.  Employers understand the importance of recruiting the right talent, and the impact it has on their growth and productivity.  Recruiting and retaining talented individuals with the needed skill set has always been the lifeblood to organizations.

With the tightening labor market, employers are assessing what they need to do to either become, or remain, competitive.  Health benefits are an area of focus that employers are using to differentiate themselves.  In fact, 38% of SHRM respondents stated they leveraged their health and welfare benefits to gain a competitive advantage in recruiting.

What is your strategy towards offering health and welfare benefits to your employees?   How do you want your benefits to compare to the competition?  What benefits do you need to offer to recruit, retain and reward your employees?  What are other organizations doing to control cost and to also remain competitive?  These are all questions you should be asking yourselves.

If you are curious how your medical benefits “stack up,” we can assist you.  For the past 11 years, we have partnered with Capital Associated Industries (CAI) to produce a North Carolina state wide survey with nearly 650 respondents.  This survey allows you to compare your medical benefits and cost to other organizations of similar size, industry type and in your area. Having this type of information can be valuable, especially as you recruit in this tight labor market.  If you are interested in learning more about benchmarking your health plan, contact us!

Fixing a Broken Performance Management System – Part I

Tuesday, July 5th, 2016

As a manager, few things are harder than delivering honest performance feedback to an employee.  Of course giving bad news isn’t supposed to be Performance-Review-Chalkboardfun.  Some managers avoid giving bad news altogether hoping performance improves on its own.  Others sugar coat the news to the point that the employee can’t see the problem.  Then there are those managers who just “tell it like it is” with no filters or tact.  They may succeed in getting their point across but at a cost.  

Many managers struggle equally at giving good performance news.  Some pour on the kudos so much or so generically that employees aren’t sure what specific actions are being praised.  And then far too many other managers don’t take the time to give any feedback at all, usually because they are so “busy.”   It’s no wonder why HR professionals and executives alike regularly bemoan the state of their performance management process.  So it seems that the only people that like how performance management is practiced at many companies are those slackers who aren’t being appropriately addressed …

At what cost? Employee underperformance is at epidemic proportions in some companies.  On average, U.S. managers waste 34 days per year dealing with underperformance.  Tolerated underperformance is also a leading reason top performers, who have to work harder to cover the slack, leave for greener pastures.  Eventually this underperformance affects customers and that of course affects the top and bottom line.  Don’t believe me, think of how frustrated you are as a customer when you’re at the hands of an underperforming employee.  How does that employee’s behavior affect your future buying patterns? 

The Cure.  Fortunately the cure for poor performance management is simple to understand and it doesn’t hurt.  And to be clear, the problem isn’t with whatever appraisal form you use. I’ve never seen an appraisal form that makes up for poor hiring, unclear expectations, infrequent or non-existent 1:1 meetings with employees, poor managers, poor execution,  and so on.  More on the form in next week’s article.

First, most employee performance problems are really hiring problems.  We regularly hire people that don’t fit our culture and then we waste valuable time trying to “fix” them.  I heard it put once, you’re hired [too quickly] for what you know and fired [too slowly] for who you are.  The cure: only hire people that fit your culture.   At this point I normally see executive eye rolling when I speak on this subject.  I realize that “defining your culture” seems like another “squishy” HR thing to a busy executive but the process really can be quite simple.  Minimally take your company values and find people that possess those values.  Of course this assumes we have values, and that we live those values daily.  Applicants either possess the values or they don’t.  This isn’t a 1 – 10 rating kind of thing.  If they posses the value, then take Gino Wickman’s advice in his book Traction and ask yourself for each applicant:  Do they Get it [the role], Want it [to work with you], and have the Capacity [knowledge, skill and capability] to do it (GWC).  I could add twenty more steps for defining your culture, and they probably won’t get you any farther than your values and GWC.

Second, there should be no disagreement over what successful performance looks like at your company. Instead of using out dated and/or generic job descriptions, consider setting clear expectations and measures for each employee that are directly or at least indirectly tied to organizational priorities.  So for example, a typical CFO job description might say “Assure optimum utilization of financial resources through sound forecasting and cash management.”  Alternatively, a success profile would say:

  • Reduce costs by 10% across-the-board to achieve EBIT objectives for the next fiscal year. 
  • Establish cross functional cost reduction teams within three months completing work in 12 months.
  • Within nine months, achieve a 15% price reduction in raw materials.
  • Develop a back-up sourcing plan to ensure cost reduction of $700,000 in year one.

Now imagine you’ve taken the time to establish annual performance objectives like that with each of your employees.  I realize it takes time for the manager.  But think how much easier it would be to measure performance, to deliver feedback.  Think of how much ownership the employee would have over the results.  And think of how much better your company performance would be if all employees were working a similar plan.  Unfortunately, without such specificity, the responsibility rests on each manager to subjectively determine if someone’s performance is satisfactory.  And that is a very uncomfortable place to be and is one explanation for why typical performance ratings don’t reflect reality.

So, hire people that fit your culture and provide crystal clear expectations of success for each employee and you’re well on the way to fixing your broken performance management system.  Tune in next week when I cover more secrets to fixing your broken system.

If you have employees in North Carolina and need help implementing or fine-tuning your Performance Management system, CAI can help with advice, information, tools, templates and more.

Recruiting is not rocket science, or is it?

Tuesday, June 21st, 2016

recruiting_the_bestPerhaps you’ve heard the name Elon Musk. He’s got quite a résumé. Musk is the CEO of SpaceX, an American aerospace manufacturer and space transport services company. His company builds rockets that send people and cargo into space.  Musk is realizing his vision at SpaceX by building simple and relatively inexpensive reusable rockets that go into space multiple times. He hopes to achieve turnaround time capabilities that are similar to commercial airliners.

Oh, by the way, Musk is also the CEO and product architect of Tesla Motors and cofounder of PayPal.

I tell you this because of how Elon Musk views the importance of hiring great talent. Musk’s recruiting strategy at SpaceX is to demand the best person on the planet — whether they were there to build a rocket or serve ice cream on campus.

Dolly Singh, SpaceX’s former Director of Talent quoted Musk as saying, “Find me the single best person on the freaking planet, then convince me why out of how many billion people on the planet that this is that guy.”  Singh continued, “And he does that even if it’s the cook. When we built a yogurt booth inside of SpaceX, he said, ‘Go to Pinkberry and find me the employee of the month, and I want to hire the employee of the month.’”

The point is, Musk as one of the most innovative and successful business leaders in the world, is still laser-focused on hiring great talent. He understands that bringing in mediocre talent will likely prevent him from realizing his dreams.

The late Steve Jobs, cofounder, CEO and Chairman of Apple Inc. believed in hiring A players.  According to Jobs, “A small team of A+ players can run circles around a giant team of B and C players.”  A-players are motivated, engaged and creative. They are performance-driven and have high expectations for themselves and for others. B and C-players, on the other hand, often do just enough to get by and to be paid for it.

We can learn a valuable lesson from Musk, and Jobs…Settling for ‘so-so’ talent will likely get you ‘so-so’ results. So the next time you are looking to hire someone, think like a rocket scientist and hire only the best.

CAI helps more than 1,000 North Carolina employers with their HR needs including talent acquisition process or strategies.  Contact CAI today!

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Tom Sheehan brings 20+ years of extensive, broad based strategic, tactical and practical HR experience to CAI’s Advice & Resolution team.  He advises HR and other business leaders on talent management, organizational effectiveness, employee engagement, M&A’s, and employee relations.

Creating a Consumer Experience for Candidates and Employees

Thursday, May 26th, 2016

We are all aware of the changing dynamics in recruitment, employment and retention.  Companies should think of potential applicants and employeesRecruiting_and_Retention as consumers and create an experience that meets the candidate/employee needs as well as company needs to attract and retain the talent they need.

Technology, globalization, and the increased demand for top talent have changed the workplace landscape.  People can market themselves and access  information on companies and job opportunities to “shop” for what best aligns with their desires for organizational fit and personal growth.  That makes it more important than ever to think of candidates/employees as consumers and to make their experience a “delightful” one.

We have heard a lot recently about transparency.  Candidates searching for job opportunities want to learn as much as possible about potential employers up front.   Social media has made it easier for candidates to search for information on prospective employers (and vice versa).  What information is available to candidates online regarding your company from an employee feedback, social responsibility, and culture, etc. perspective?  How do you manage your organization’s social media profile?

After putting the best foot forward to hire and on-board top candidates that are the best fit for your organization, the consumer efforts shouldn’t stop here.  Treating employees as consumers and being interested in their aspirations and needs supports efforts to retain and engage employees.

According to Steve Lopez, Manpower Group, Companies talk about retention, but the culture does not always support that.  The rewards, measurement, and work environment often support retaining people in a job rather than retaining people within the organization. He proposes a consumer model for employee retention with the following components:

  • The User Experience – what are the goals, objectives and motivations for considering the job and staying with the company?
  • Content – Do you openly share the company culture, job content and expectations, opportunities for advancement and growth?
  • Functionality – What systems are in place to meet the user needs on a day-to-day basis in terms of exchange of information to support organizational needs as well as employee needs (two-way communication, receptive to employee feedback/suggestions, development plans)?
  • Interaction/Information/Navigation – Make resources available throughout the employee/consumer experience to provide what employees need to do their jobs.  This starts with the on-boarding process to educate new employees about the organization, to inform employees how to best obtain responses to their questions, inform them of tools they need and how to access various resources, etc.
  • Visual Experience – Does the desired visual experience for the employee reflect your company brand, web presence, culture, and the physical work space?

By approaching your employees as consumers you can create a world class experience and culture for your entire workforce, which enables positive business results. CAI can help with your company with talent acquisition, talent management, developing a better workplace and more.

(Source: Rethinking Retention, Steve Lopez, Manpower Group)

Supreme Court and Technical Flaws of Background Checking Paperwork

Thursday, May 19th, 2016

The alarm bells for employers have been sounding for the last few years about getting your federal Fair Credit Reporting Act paperwork in order.  The proliferation of class action lawsuits around Printproper release forms and the pre-adverse and adverse action paperwork has cost companies millions of dollars.  In large part, the class action suits have been driven by a Ninth Circuit Court (the federal court that covers California) ruling that identified that technical flaws in your company’s background checking documents was “injury” enough to have standing.  This change in the barrier to having standing in federal court made the creation of class action lawsuits very easy to file, and to win.

The new six to two ruling sends the matter back to the Ninth Circuit, but essentially states that in many cases the plaintiffs have to show some injury beyond a technical flaw in the company’s process.  Will this ruling abate the rising tide of FCRA driven class action lawsuits?  Only time will tell.

Making critical hiring decisions for your company is a huge responsibility. Not only is it critical to the success of the company, but also the safety of your employees and getting it right isn’t easy. Last year, approximately 90% of businesses in the US did some sort of background check on prospective employees to help protect their companies against the significant liabilities of negligent hiring lawsuits.

Unfortunately, the number of businesses out of compliance with the latest background checking standards grows every year and regrettably, most hiring professionals do not realize it until they are named in ever more frequent class action lawsuits.

Chances are that you are ordering background checks, but are you compliant?

Background checks compiled by third parties, such as CAI’s detective agency*, are covered by the federal Fair Credit Reporting Act (FCRA).  The FCRA covers more than financial records; it also includes reports that research criminal records, employment records, education information, driving records and even something as simple as an address history.  The FCRA was broadened in scope in 1997, and is designed to provide a safeguard for the applicant who has an adverse action taken against them based upon the results reported in the background investigation.  That is, if the applicant is denied an employment opportunity in whole or part by information contained in a background check, he or she has the right to view the information and dispute the record.

How do you comply?

  1. Have a permissible purpose (employment).
  2. Obtain written consent from the applicant.
  3. Run the check through a reputable third party Consumer Reporting Agency (CRA), like CAI.
  4. Look at the results and decide if the applicant fits the needs of your company:
    1. If the record is clean, keep the authorization form in a secure place.
    2. If the applicant is not hired due to something uncovered in the background check, then you should do the following:
      1. Mail a copy of the report, and
      2. a summary of the applicant’s rights under the FCRA, and
      3. a pre-adverse action letter [that includes the third party’s (CRA’s) name and contact info to the applicant].
      4. If your company is in North Carolina, you also want to send a copy of the NC Security Freeze to the applicant.
      5. After a reasonable amount of time (around five business days) you want to mail the declination letter to your applicant. During this time you should hold the position to give the applicant a chance to respond.
      6. After the “reasonable time” you may hire the appropriate applicant, thus filling the position.
      7. Store the rejected applicant’s signed written consent for six years.  SHRM recommends that you store the negative report for two years.

Hiring can be very stressful and CAI knows that it is better to get it right the first time.

Kevin von der Lippe

Kevin W. von der Lippe is a licensed private investigator at CAI and for 19 years has managed our detective agency and background checking business.  He is security minded and proficient with the federal Fair Credit Reporting Act (FCRA) and the enforcement of Title VII of the Civil Rights Act of 1964, as administered by the EEOC as it relates to background checks. Capital Associated Industries Services Corporation is a licensed investigative agency, specializing in corporate pre-employment background screening. Our corporate agency license is BPN 001473P11.

Contact Kevin at 336-899-1150 or kevin.vonderlippe@capital.org. or www.capital.org

Assessing New Graduates When Hiring

Tuesday, May 17th, 2016

Interviews typically focus on both the education and the work experience of the candidate. In the case of recent graduates, however, the work experience is often not as much a factor to behiring recent graduates considered.

Below are some ideas that you could integrate into your interview process with new graduates that may provide additional insight into their readiness for entering the workforce and your organization.

What do you plan to contribute to the organization?

Ask your candidate what they feel they can contribute as a new hire, knowing what they know about your organization already and applying their education to this position.

Demonstrate job-specific skills

If the opening is in marketing, ask them to prepare a press release about the organization. If the opening is for a software engineer, provide a short test to assess their skill level.

Temp to perm

Many companies will bring an employee on first as a contractor to assess their skills and performance before making a permanent offer of employment.

Interview outside of the box

Invite a candidate to lunch with a current client or ask them to review a live proposal the company is working on and provide their input. This will give you an idea of how the candidate responds to different, non-standard interview situations and how well they think on their feet.

Focus less on experience, more on trainability

Naturally, most new graduates will not have a lot of experience in the beginning. Focus the interview questions and evaluate their responses around their ability to be trained for the current opening. Can they take direction? Do they appear to be open-minded? Are they eager to learn?

Provide a real world problem to solve

During the interview process, pair the candidate with an employee who is currently working on a problem in their field of study. Get feedback from the employee on how well they responded under pressure and if they were able to contribute to the process. Their ideas do not have to solve the problem, or even be good ideas. The more important thing is that they had ideas and were able to collaborate with others.

Are we a good fit for you?

Most interviews focus on why the candidate is a good fit for the company. Turn it around and ask the candidate why the company would be a good fit for them. This will provide some insight as to what they are expecting from your organization and what interests them about the job.  This insight may also help with retention down the road, should an offer of employment be extended.

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CAI Advice & Resolution team member Renee Watkins is a seasoned HR professional with a diverse background in Human Resource. Renee provides CAI members with practical advice in a wide-range of human resource functions including conflict resolution, compliance and regulatory issues, and employee relations.

Talent Acquisition: The Power of Recruiter Pushback

Tuesday, April 26th, 2016

One difficulty faced by most recruiters is how to balance the desire to provide great customer service to the hiring manager with the need to speak freely about real issues pertaining to the recruitment process. Conducting a brief job specifications meeting with the hiring manager (prior to initiating the recruitment effort) helps to identify the target and set clear accountabilities for both of you. However, there are clearly times when you need to pushback if the hiring manager is not properly partnering with you.  keepcalmandpushback

Done appropriately, pushback can elevate you from being an ‘order taker’ to becoming a trusted advisor whose input and views are solicited before anything takes place involving talent acquisition.

Here are a few reasons that pushback can be helpful:

♦ Pushback sets clear roles, responsibilities, and timelines for successful partnerships. Once established, it will lead to a far more effective working relationship.

♦ Pushback enables an honest exchange of ideas and open dialogue in areas of disagreement. This exchange ultimately translates into doing the right thing for the hiring manager, the candidate, and the company. For example, sometimes you just need to ‘speak up’ and tell the hiring manager that the candidate they have locked onto is just not a good fit.

♦ Pushback demands accountability from your hiring managers and yourself as it relates to the quality of the process, the interview experience, and the candidate experience. For example, if the hiring manager is claiming to be too busy to review résumés or conduct interviews, pushback may be in order.

♦ Pushback educates and informs your hiring manager about the candidates, the market, the desirability of the position, sourcing strategy, obstacles, compensation levels, and the teamwork required to close the deal.

How do you establish pushback so that it is seen as a positive experience that will enhance processes and improve results?

Here are some tips to start:

  • Do not select your most difficult hiring manager to practice on and be sure you prepare for the conversation in advance. For example, if you are pushing back on the way candidates are being treated in interviews, make a list of what the behaviors are and why they are detrimental.
  • Don’t allow pushback to turn into rudeness or disrespect. Always approach the topic in a respectful manner and be prepared to lay out a well-considered case while being open to new ideas. Remember, HR roles are usually advisory in nature and the hiring manager may, or may not, choose to follow your advice.
  • Pick your battles. While some hiring managers welcome feedback and change, many struggle with it. Bringing a laundry list of complaints to the table may put your hiring managers on the defensive. Don’t be afraid of a healthy dialogue. At times it might resemble an argument, and that’s okay as long as the conversation is productive and the end result is positive for both parties.

In summary, think about pushback as a tool to open the lines of discussion and unplug the talent acquisition bottleneck. Plan your strategy, come to the table armed with research, advice based upon experience, and be prepared for some healthy pushback on your pushback. You will be a better recruiter for it.

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Tom Sheehan brings 20+ years of extensive, broad based strategic, tactical and practical HR experience to CAI’s Advice & Resolution team.  He advises HR and other business leaders on talent management, organizational effectiveness, employee engagement, M&A’s, and employee relations.

 

When Are You Required to Pay Interns?

Tuesday, April 19th, 2016

With summer months fast approaching, many employers are considering employing interns.  CAI’s Advice & Resolution Team often receives questions regarding pay requirements for interns.  There seems to be one school of thought out there that says the employer can decide whether or not they pay interns.  Well in fact, the USDOL (United States Department of Labor) has issued guidance on this issue (Fact Sheet #71.)  This fact sheet Internspecifies tests that must be met to exclude interns from minimum wage and overtime requirements under the FLSA (Fair Labor Standards Act).

The following criteria must be applied when making this determination:

  • The internship, even though it includes actual operation of the facilities of the employer, is similar to training which would be given in an educational environment
  • The internship experience is for the benefit of the intern
  • The intern does not displace regular employees, but works under close supervision of existing staff
  • The employer that provides the training derives no immediate advantage from the activities of the intern; and on occasion its operations may actually be impeded
  • The intern is not necessarily entitled to a job at the conclusion of the internship
  • The employer and the intern understand that the intern is not entitled to wages for the time spent in the internship

If ALL of the above factors are met, an employment relationship does not exist under the FLSA, and the minimum wage and overtime requirements do not apply.

Of course, the decision to pay an intern goes beyond the legalities of such.  There are many differing opinions as to whether or not employers should pay interns.  Local columnist, Alice Wilder at the Daily Tarheel, has written an interesting article on the virtues of paying an intern, that may be useful in making your decision.