staffremaining after the action will be prepared and equipped to complete all required work without undue burden. Unless the firm has allowed nonproductive employees to remain on the payroll, simply cutting the number of workers without a plan in place to achieve each departments workload objectives will result in chaos and confusion, and key work may not be completed properly, if at all.

Recognizing Job Function

Management of a large professional services organization ordered that accounting operations personnel be reduced by an arbitrary amount because of consolidation with another division. Almost immediately, a third of the combined staff was laid off under the belief that the team would be more productive even though new procedures had not been developed and the workload remained the same as before the consolidation. Once the staff left, their work was attended to by remaining staff on a when they could get to it basis. One of the tasks performed by the departing staff was the reconciliation of the travel advance account, including airline tickets. Over the next two years, the firm lost more than a half million dollars in airline ticket fares because unused tickets were not reconciled with the airlines in a timely manner, a function that had been performed for less than $30,000 per year by staff that had been laid off without the benefit of improved procedures.

Records Management

The HR department is responsible for maintaining all government required forms and other prudent information on each employee. Depending on local legal requirements and firm policy, this information should be maintained in separate files for each employee with current data on a regular basis (e.g., daily, weekly, or monthly). Rules as to specific data requirements vary from state to state, but, in general, these records should be maintained in separate file folders: (1) personnel file, which is available for the employees inspection, (2) employees benefits file, (3) medical or disability files, and (4) an investigation file, which may be used to temporarily house confidential meeting notes and other forms of documentation related to the employee. Contents of these files may include:

Personnel File

Resume and employment application Employment offer letter

Immigration paperwork (e.g., I-9) and tax verification forms (e.g., W4) Copy of Social Security cards and drivers license

Personnel action forms

Temporary employee authorization forms (if applicable) Written acknowledgment of the firms key policies Leave ofabsence approval

Final reports related to investigations made of employees conduct

Disciplinary documents Performance and bonus evaluation forms

Employee Benefit File

Benefit forms supporting the employees selection of specific benefits Vacation earnings and usage details

Benefit tracking documents including requests for reimbursement

Medical or Disability File

Workers compensation claim data

Relevant medical and/or disability-related documentation

Investigation File (Confidential) Interview notes Complaints against employee Preliminary results of background investigation Managers documentation of performance incidents

As a matter of policy, report drafts and notes should not be included in files and should routinely be destroyed after their immediate usefulness has expired in order to maintain only relevant information in each employees files. Further, no information about any other employee should be included in an employees files to maintain each employees privacy rights. The investigation file is a confidential temporary file used to collect relevant information related to an investigation of the employee. After a summary level report about the incident(s) has been written and included in the personnel file, preliminary information should be destroyed in accordance with local legal counsel guidance.

Benefits Administration

In general, HR personnel are responsible for designing and administering benefits offered by the firm. This is a critical element in remaining competitive in the employment market. Well-managed firms ensure that at least one person in the HR group is fully versed on all aspects of every benefit offering and has been trained to know where the line is drawn among offering a full

explanation, including some interpretation based on the individuals situation, and advice (which should not be offered). Discussions about benefits typically are one of a new employees first impressions of the firm and, if well executed, can help the new employee form a long-lasting, favorable opinion of the firm. Getting this one right is a no-brainer that many firms often miss.

Compensation Administration and Forecasting

Responsibility for salary administration and forecasting is both a finance and HR function. Which group takes the lead on these critical processes is generally a function of the relative strength of the personnel involved as well as the personal preference of the executive team. Either way, both teams must work together to ensure that forecasts coordinate all changes in compensation known by both HR and finance. In particular, HR should review compensation plans to identify potential equity issues that may present legal liabilities. Compensation plans are discussed further in Chapter 10.

Salary Adjustments. The art of determining actual salaries paid to employees and all adjustments made thereto relies heavily on being competitive in the local, regional, and national marketplace, depending on the nature of each position. Salary surveys often are the best measure of determining the relative worth of a position. National or regional salary surveys for many industries and positions are available for free or a nominal cost from various professional organizations including placement firms, trade organizations, and consulting firms. In certain situations, competitors within a city or region work together to retain an independent consultant or CPA to conduct an industry-specific salary survey tailored to local economic conditions and position descriptions. Such data, when updated annually before initiation of the annual planning process, can be used very effectively to ensure that employees are compensated fairly for their efforts.

A general rule of thumb to guide the use of survey data is that employees should be paid within a 20 percent band (i.e., ± 20 percent) around the median compensation level for any given position. When an employee first begins taking responsibility for a position, he or she is paid at a rate that is 20 percent below the median for the position. Over time, and as the employee becomes more competent at the position, the employee would receive raises within that band until such time that he or she reaches the top of the band at 20 percent above the median. After that point, raises generally would reflect only cost of living adjustments (i.e., to the median salary) as reported for each position in the annual salary survey. To receive a larger pay adjustment, an employee would have to be promoted into a higher paying position. Maintenance of such a salary administration program generally results in an equitable pay scale that balances the internal payroll with realities of the relevant local market.