Workforce Management Time & Attendance Excellence June 2023

Top Picks

Employee Productivity: Belonging Is The Key To The Future Of DEIB

Four ways leaders can create a sense of belonging in their organization

- Justin Reinert, Principal & Founder, Performance Accelerated Learning

Revolutionizing The Employee Experience: Five Ways Analytics Will Drive Employee Success

Unlocking the power of people analytics to drive business transformation

- Arnaud Grunwald, Chief Product Officer, Betterworks

5 Tips For More Successful Digital Transformation In HR

You know digital transformation is important, but how do you implement it?

- Zachary Amos, Features Editor, ReHack

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Human Capability Valuation And Performance For Organizational Success

Unveiling the path to assessing and building organizations for the 21st-century economy

- Dave Ulrich, Norm Smallwood, Mike Panowyk and Joe Grochowski, The RBL Group

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Our mission is to promote personal and professional development based on constructive values, sound ethics, and timeless principles.

Excellence Publications

Debbie McGrath CEO, HR.com - Publisher

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Workforce Management, Time & Attendance, Excellence Team

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EDITOR’S

Debbie Mcgrath Publisher, HR.com

Itis no secret that technology has fundamentally altered human resources (HR) procedures, resulting in tremendous transformations in the sector.

Think about it — just a few years ago, we were drowning in paperwork, manually processing everything from hiring to attendance monitoring and performance reviews. But now, thanks to technology, we have seen a massive shift in how HR operates globally.

And not only does technology reduce manual labor, but also minimizes the occurrence of mistakes, ensuring accuracy and consistency and eliminating the risk of human oversight.

In Optimizing Efficiency: The Power Of Workforce Management Technologies, Partha Neog from Vantage Circle takes a closer look at how technology has become a blessing in some of the most critical aspects of HR work.

Arnaud Grunwald from Betterworks, in his article Revolutionizing The Employee Experience: Five Ways Analytics Will Drive Employee Success, discusses how by integrating people data analytics into performance management, HR will be able to understand the enablers of top performance, productivity, and engagement in employees, allowing their

Deepa Damodaran Editor, Workforce Management, Time & Attendance, Excellence

organizations to harness strategic people insights for the health of the business.

Read Human Capability Valuation And Performance For Organizational Success, where Dave Ulrich and other experts from the RBL Group unveil the path to assessing and building organizations for the 21st-century economy.

Also, check out the exclusive interviews, where HR legal experts shed light on the reasons behind worker misclassification and the challenges employers face in properly classifying workers amidst stricter rules and regulations. They also share key insights on this persistent problem and will help us gain a deeper understanding of how it can be prevented in the future.

That is not all. This issue also includes several other informative articles on workforce management and time and attendance that we hope will assist you in achieving excellence and efficiency in your workforce management efforts.

Happy Reading!

In a world of unparalleled challenges (global pandemic, racial injustice, political rivalry, digital 4.0, emotional malaise), uncertainty reigns. Finding opportunity in this context requires harnessing uncertainty and harnessing starts with reliable, valid, timely, and useful information. The Excellence publications are a superb source of such information. The authors provide insights with impact that will guide thought and action.

Dave Ulrich

Excellence publications are my ‘go-to’ resource for contemporary and actionable information to improve leadership, engagement, results, and retention. Each edition offers rich and diverse perspectives for improving the employee experience and the workplace in general.

Julie Winkle Giulioni Author, Virtual /Live Keynote Presenter, Inc.’s Top 100 Leadership Speakers

I regularly read and contribute to Leadership Excellence and Talent Management Excellence. I use many of the articles I read to augment my own presentations and I often share the articles with my clients. They are always quick, right on target for the latest issues in my field, and appreciated by my clients. If you want to stay up to date on the latest HR trends, choose a few of the different issues from the Excellence series of publications.

We’re eager to hear your feedback on our magazines. Let us know your thoughts at ePubEditors@hr.com

Rensis Likert Professor, Ross School of Business, University of Michigan Partner, The RBL Group

Dr. Beverly Kaye CEO, BevKaye&Co.

Optimizing Efficiency: The Power Of Workforce Management Technologies

Technology’s impact on recognition, surveys, and remote work

By Partha Neog, Vantage Circle

It is no secret that technology has fundamentally altered human resources (HR) procedures, resulting in tremendous transformations in the sector.

Think about it — just a few years ago, we were drowning in paperwork, manually processing everything from hiring to attendance monitoring and performance reviews. But now, thanks to technology, we have seen a massive shift in how HR operates globally.

And not only does technology reduce manual labor, but also minimizes the occurrence of mistakes, ensuring accuracy and consistency and eliminating the risk of human oversight.

Let us take a closer look at how technology has become a blessing in some of the most critical aspects of HR work.

1. Rewards and Recognition

Rewards and recognition in organizations have leaped with technology, offering new and dynamic formats. Traditional methods like personal notes or in-person appreciation are being replaced. Technology provides opportunities for organizations to rethink how rewards and recognition work.

In my opinion, cloud-based platforms are the best examples of providing memorable recognition experiences for every employee. Some key aspects of such technology include:

● Engaging all employees: Modern recognition formats involve managers and all employees in the process. It aims to improve engagement and satisfaction levels.

● Social media integration: Technology integrates rewards and recognition programs with social media, expanding the reach and celebrating employee achievements to boost their reputation and create a positive employer brand image.

● Infrastructure and security: Robust IT infrastructure ensures data security, performance, integrity, and privacy, critical for effective recognition and rewards programs.

● Greater freedom of choice: Modern technology enables online access to various rewards and experiences, allowing employees to customize according to their preferences. It also simplifies the redemption process, making it convenient and accessible from anywhere.

● Instant recognition: We can now enable quick and real-time recognition, allowing managers to give credit on the spot. Thus, technology has successfully discouraged the prevalent laid-back attitude often observed among many average managers. This approach has also significantly increased employee engagement, motivation, and satisfaction.

2. Employee Surveys Like Pulse Surveys

Using employee surveys, like pulse surveys, to measure employee satisfaction, experience, and general attitude within the organization has been made easier by technology. HR departments may create, distribute, and gather survey responses using online tools.

These tools help to undertake convenient online surveys, with mobile accessibility, automated distribution, and advanced analytics, ensuring anonymity and driving positive changes in the workplace. Furthermore, HR can effectively analyze survey data, spot trends, and take preventative action as quickly as possible.

3. Easy to Manage Work from Home

During the Covid-19 pandemic, we have all realized that technology has been an absolute lifesaver

when managing work from home. The “digital nomad” idea has also emerged due to incorporating technology in remote work.

A digital nomad uses technology to work remotely while traveling and exploring different locations. They rely on laptops, smartphones, and online tools to communicate, collaborate, and stay productive. This lifestyle offers freedom, flexibility, and the opportunity to experience new cultures. While it can present challenges, digital nomads embrace the benefits of working from anywhere and enjoy a dynamic work-life balance.

Additionally, even in remote work situations, automatic time-tracking systems assure compliance with labor laws, promote equitable compensation, and accurately record working hours.

4. Helps in Employee Well-being

Employee wellness is a top priority for organizations creating a healthy and thriving workforce. With the advent of technology, AI-based innovative corporate wellness platforms have emerged, offering a wide range of features and capabilities.

Like, say, wellness resources and information, wellness challenges and programs, health assessments and surveys, gamification, and rewards, and data analytics and insights. Using such technology-driven solutions, we can promote a culture of wellness, give employees the tools and information they need to prioritize their health and equip HR teams to create targeted corporate wellness programs for greater overall employee wellbeing.

5. Data-driven Decision-making

Imagine having access to a wealth of employee data as an HR!

Suppose you notice a decrease in productivity within a specific team, and rather than relying on instincts or assumptions, you examine the data. You find that team members who have participated in a certain training program routinely work harder and are more engaged. With this knowledge, you can invest confidently in expanding the training program to the full workforce, knowing it will increase productivity and boost employee happiness.

So what helps us with the data? Technology.

Additionally, it can help you monitor progress over time to determine whether your decision was a hit.

6. Personalized Learning and Development

With technology at our fingertips, we can now have an incredible opportunity to revolutionize learning and development within our organizations. Personalized learning programs are no longer a far-fetched dream but a reality that can unlock employees’ full potential.

Consider a scenario: Your talented team member shows great promise in data analytics. Through technology-enabled platforms, you can provide them with targeted online courses, virtual workshops, and interactive simulations that cater specifically to their interests and aspirations. As they gain specialized knowledge and skills in data analytics, they become a valuable asset, driving data-informed decision-making and boosting your organization’s competitive edge.

Conclusion

When I analyze the whole situation, companies are currently interested in technology that helps manage absenteeism, leave, and scheduling, despite the great enthusiasm surrounding big data and analytics. This is not to say that workforce technology holds little promise; it merely means that businesses must

understand how to reap the best from it.

We can conclude that even while organizations have made significant strides in deploying workforce management technologies, there is still plenty they want to get done, as well as new modules and approaches they wish to incorporate. However, along with the changing trends in technology, businesses should learn to be agile, empathetic, and adapt to the changing needs of their employees and customers.

Partha Neog is the CEO and Co-Founder of Vantage Circle. He has over two decades of expertise in product and executive management. Partha has a proven track record of scaling great businesses and was instrumental in developing and launching 99acres.com. Partha received the Excellence in Business award from the Sadin Pratidin Group, presented by the Chief Minister of Assam, Dr. Himanta Biswa Sarma, India.

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Employee Productivity: Belonging Is The Key To The Future Of DEIB

Four ways leaders can create a sense of belonging in their organization

By Justin Reinert, Performance Accelerated Learning

As the world becomes increasingly interconnected, it is more important than ever for organizations to create inclusive workplaces where everyone feels like they belong.

Diversity, equity, inclusion, and belonging (DEIB) are not just buzzwords. They are essential for organizational success. Studies have shown that companies with diverse workforces solve problems faster,

are more innovative, and are more profitable

But DEIB is more than just a numbers game. It is about creating a culture where everyone feels welcome, valued, and respected. It is about creating an environment where everyone can bring their whole selves to work. Many organizations still need to improve their diversity initiatives because the focus is just on an attempt to improve diversity statistics. Where they fall short is when organizations do not recognize they also need to adapt systems, structures, and norms to ensure that everyone feels included and has a sense of belonging.

Belonging is a key component of DEI. When people feel like they belong, they are more likely to be engaged and productive. They are also more likely to stay with their organization.

Here are four ways leaders can create a sense of belonging in their organization.

● Celebrate diversity. Organizations can celebrate diversity by highlighting the contributions of employees from different backgrounds. They can also create opportunities for employees to learn about other cultures and perspectives. One way to do this is by observing or celebrating religious or other holidays that their team members might be celebrating.

● Encourage open dialogue. Organizations can create a culture of open dialogue by encouraging employees to share their ideas and opinions, regardless of their background. Psychological safety is an important component here, as it is required for individuals to feel comfortable speaking up and sharing.

● Provide opportunities for mentorship and sponsorship. Mentorship and sponsorship programs can help employees from underrepresented groups develop their skills and advance their careers. When non-marginalized individuals mentor underrepresented identities, it can also create a reverse mentorship situation in which the mentor benefits and learns from the relationship.

● Create a sense of community. Organizations can create a sense of community by providing opportunities for employees to connect outside of work. They can also create employee resource groups (ERGs) focusing on specific diversity and inclusion issues. Providing these ERGs with a budget to help educate others in the organization about their identities can bring people together and help non-marginalized individuals understand their perspectives.

Creating a diverse and inclusive workplace where everyone feels like they belong is difficult. But it is essential for organizational success in the 21st century. Organizations can attract and retain top talent by creating a more inclusive environment, innovating more effectively, and building a stronger brand.

Apart from the advantages for organizations, there are numerous benefits for individuals who experience a sense of belonging. When individuals feel like they are part of a group, studies have found that people are:

● Happy and healthy. The Mayo Clinic has shown that people who feel a sense of belonging are likelier to report being happy and healthy. The study also found people are less likely to experience stress, anxiety, and depression.

● Creative and innovative. A recent report found that a feeling of belonging is correlated to higher creativity and a higher likelihood of employees contributing and speaking up. By leaders creating a culture of belonging where employees feel genuinely valued and do not feel the need to hide their identities, teams have more energy and confidence to be more innovative and more successful at work.

In short, the imperative to create diverse workforces where everyone belongs will only strengthen. It is good for businesses and individuals. The bottom line is that it is simply the right thing to do.

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Justin Reinert is the Principal & Founder of Performance Accelerated Learning.

The ABCs Of Global Contractor Compliance

By Excellence Publications Team

Intoday’s global economy, contractors play a significant role in helping companies execute their business goals. However, managing global contractor compliance is complex and can come with the risk of fines and other legal consequences. From tax and labor laws to data privacy regulations, there are many requirements that must be met to avoid costly penalties and global reputational damage.

Check out this webinar, where Tiffany Cruz, Employment Counsel, Global, at Globalization Partners, provides an in-depth look into the ABCs of global contractor compliance. Tiffany covers the best practices for managing global contractor compliance, such as conducting regular audits, using contract templates that include compliance with local requirements, and implementing compliance training for all team members involved in contractor sourcing engagement and retention process.

Also learn about the key factors to consider when engaging with contractors in different regions, including:

1. Accounting and tax compliance: Different countries have different reporting requirements that must be followed to avoid penalties and fines.

2. Labor and employment laws: Contractors are subject to local labor and employment laws that determine how they are engaged, managed, and compensated.

3. Data privacy regulations: Contractors may have access to sensitive company information, so it is important to implement data privacy protocols, processes, and training to safeguard your organization’s proprietary and confidential information.

Gain a better understanding of the key considerations and best practices for managing global contractor compliance. Whether you are a legal or HR professional responsible for contractor management or a business leader looking to expand your global operations, this webinar will provide valuable insights to help you navigate the complex world of global contractor compliance. Would you like to comment?

Revolutionizing The Employee Experience: Five Ways Analytics Will Drive Employee Success

Unlocking the power of people analytics to drive business transformation

By Arnaud Grunwald, Betterworks

Thecurrent economic climate is forcing organizations to prepare their workforce for agility and resilience to smoothly navigate the uncertainty ahead. Implementing strategies to identify performance drivers to empower their current and future employees is a key part of that equation. However, only 29% of HR professionals believe that their organization is good at making positive changes based on people analytics.

Currently, HR teams have an abundance of people data – including performance, engagement, behaviors and skill development – but bringing those data points together to understand a holistic picture of an employee’s performance drivers is a struggle. Consequently, there is no way to measure the impact of HR initiatives on employee behaviors and business outcomes.

Organizations that seamlessly integrate analytics with performance management data will unleash HR’s potential as architects of business transformation

Sparking the Shift to Outcome-focused People and Performance Analytics

Most people analytics today is transactional — focused on reporting compliance measures, rather than strategic impact. For example, the reports might capture which departments are lagging in completing performance check-in conversations but do not capture if and how these conversations lead to higher engagement, motivation, and performance. Analytics can instead empower HR to measure the strategic impact of people initiatives.

By enabling HR leaders to understand the drivers of high performance in employees and managers, they can focus on actions that better support achieving business goals. When HR has the capacity to expand from looking solely at compliance metrics to also understanding strategic employee performance metrics, it ignites a mindset shift. The business moves from a primary focus on reducing risk to an eagerness to try innovative things and create new opportunities.

Democratizing People Analytics and Creating a Data-driven Culture

CEOs of many companies have acknowledged that the human resources executive role is arguably the

most strategic in the company because businesses grow or die based on the quality of their people. To be strategic, HR leaders must democratize the people data they hold and communicate it effectively to decision-makers regularly. Integrating analytics can provide HR leaders and business partners the ability to communicate insights in a simple yet compelling manner with excellent data visualization and a compelling story. The ability to breathe life into the data with a visual narrative helps them get their point across and prompts people to take action.

Uncovering Drivers of High Employee Performance

Many of the largest organizations worldwide are moving away from annual performance evaluations to real-time and continuous analysis and enablement of performance. This increased frequency, when coupled with a system to capture this information, can provide meaningful data for use in employee performance analytics. Implementing analytics allows HR teams to use this wealth of data to identify engagement activities that directly or indirectly impact employee performance. HR leaders have a better understanding of what performance-enhancing activities to invest in.

Bringing the Fairness Factor to Performance Enablement

Work from home and pressure on businesses due to the economic slowdown have made it more difficult for companies to uphold their diversity, equity, and inclusion (DEI) standards. It is hard to be more human when the workplace is less and less human and more prone to bias, even if it is inadvertent. Analyzing people data helps HR leaders identify bias to better enable employees to succeed in the workplace –whether they are in the office, working remotely, or in the field.

These analytics support organizational equity and fairness by bringing to light the differences in developmental opportunities, feedback delivery, performance ratings, and engagement and satisfaction scores for different groups within an organization. For instance, it enables the HR leader to see if one gender is getting more feedback or praise than another and in which departments or locations this trend is most urgent to correct.

Bridging the Disconnect Between Employee Training and Job Performance

Even though companies spend millions on training programs, most do not bother to track the returns on these investments. Given the importance of

a properly skilled workforce, we cannot leave HR departments flying blind about the impact of their L&D programs. Implementing analytics will help HR leaders identify not only when training programs are adopted and completed but also their impact on employee performance. For example, an HR leader can see if all employees are getting the opportunity to participate in training and if there is a correlation between learning and high performance.

By integrating people data analytics into performance management, HR will be able to understand the enablers of top performance, productivity, and engagement in employees, allowing their organizations to harness strategic people insights for the health of the business.

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Arnaud Grunwald is the Chief Product Officer of Betterworks. He was the co-founder and CEO of Hyphen, an employee listening and engagement platform that was acquired by Betterworks in 2020.

Worker Classification, Or Misclassification, In The Gig Era

Excerpts from the interview:

When companies fail to classify workers properly, they are potentially inviting huge fines from tax authorities and the possibility of class-action lawsuits. In September 2022, Uber coughed up $8.4 million to settle a class-action lawsuit with California drivers, who claimed they were misclassified as independent contractors rather than employees. This is not the first time that Uber has been embroiled in a misclassification case. Similarly, Nike is now facing potential tax fines of more than $530 million for misclassifying thousands of its temporary office workers. Uber and Nike’s cases are not isolated ones. Microsoft, Time Warner Inc., FedEx, etc., have been caught in this mess in the past.

Employers continue to be misclassified as independent contractors. Why does this happen?

Can worker misclassification be prevented? In an exclusive interview with HR.com, Olivia Cicchini, Legal Specialist, Peninsula Canada, shares her insights into why companies continue to misclassify workers in the age of stringent rules and regulations and what are the challenges employers will face while classifying workers in the future, among others.

Q:Uber’s $8.4 million fine in 2022 and Nike’s potential $530m fine for misclassifying workers in 2023, among others - why do companies continue to misclassify workers?

Olivia: While no one can know for sure, it can generally be assumed that companies misclassify workers because they are either unsure of their legal obligations or are purposefully engaging in this behavior for cost-saving benefits. When an employee is incorrectly classified as an independent contractor, companies avoid paying certain taxes and benefits and have less of a legal responsibility toward their staff.

Q:Were these cases preventable? How?

Olivia: These cases can be prevented by consulting with a qualified legal professional during the hiring process. By asking specific questions to get to the root of the employment relationship, employers can better understand whether the worker will be considered an employee or not.

Exclusive interview with Olivia Cicchini, Legal Specialist, Peninsula Canada

Q:What are the takeaways for employers from such cases?

Olivia: Employers should look at these cases as cautionary tales of what not to

classified as in their employment contract, it is the worker’s risk of profit and loss, ability to subcontract work, protection from disciplinary action, and other qualifying factors that determine their status as an employee or independent contractor.

Q:With the proliferation of the gig economy, what are the challenges employers will face while classifying workers in the future?

Olivia: Starting with Ontario in 2022, governments in Canada are beginning to implement amendments to their employment standards legislation to provide protections for gig economy workers which in turn will help sort out the classification issues. Gig economy workers were typically classified as independent contractors. Once the new legislation takes effect, the workers will be afforded certain minimum standards and protections under employment standards legislation, forcing employers to reconsider that classification.

Q:What changes must lawmakers bring in to deal with worker misclassification more stringently?

do

when classifying workers. While companies may experience shortterm cost-saving benefits from misclassifying staff, they may be opening themselves up to liability. If the company does encounter a misclassification claim from a worker (or workers), it can mean public scrutiny, retroactive payments, punitive damages, and more. Classifying workers correctly from the start is always the best practice.

Q:What are the common mistakes employers commit while classifying workers?

Olivia: A common mistake employers encounter while classifying workers is that the workers' classification depends on the nature of the employment relationship, not their title. For example, some companies will call an employee an independent contract believing that this will be enough. However, despite what a worker is

Olivia: Taking gig economy workers as an example, the aforementioned legislation push is in progress but risks introducing confusion into the classification process before offering up clear categories. Generally, this may be more about ensuring employers understand the nature of the employment relationship and that they should not always be looking for costsaving benefits when misclassification itself can end up being a costly mistake.

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5 Tips For More Successful Digital Transformation In HR

You know digital transformation is important, but how do you implement it?

By Zachary Amos, ReHack

What company is not incorporating more digital assets these days? From software to robots, businesses are getting imaginative on how technology can improve bottom lines and make the workforce enjoy being at the job more. The name of the game is automation and efficiency.

What Is Digital Transformation, and Why Does HR Need It?

Since human resources (HR) manages everything from onboarding to health insurance documentation, how they organize information impacts everyone. If HR adopts digital tools, the rest of the company must do so as well.

HR sets the precedent for how workflows look and where to locate stored data.

HR digital transformation is automating and digitizing operations to focus more on data-driven decision-making and oversight. Every company in each sector is moving to digital resources for a good reason — the benefits are among some of the most notable workplace enhancements in history.

For too long, departments have relied on antiquated methods that result in lost data and time-consuming record-keeping. Digital transformation makes HR more dependable and, therefore, more reliable to every employee in the building.

1. Only Improve What’s Necessary

Using process discovery, departments can discover what ineffective, inefficient and time-consuming processes lower workforce quality of life and company betterment and find tools to solve those pain points. Here are some helpful questions HR teams can ask when beginning their audit:

● Would we benefit from a centralized hub where all data is collected?

● What are the most frustrating processes within the department and for those interacting with us?

● Do we have tech-savvy team members that can assist with the transition, or will there need to be additional resources and funding for training programs?

● What are the priorities for choosing providers and vendors? Is it financial, or is it based on service offerings?

Implementing technology for the sake of it is not reason enough to download and train on new software. It might overcomplicate a simple procedure, so HR departments must be discerning and implement tech that aligns with business goals. The process also encompasses reevaluating existing digital tools and considering how well they function. Are there better alternatives out there?

2. Always Consider Stakeholder Opinions

Stakeholders are investing in the products, and HR departments must convince them the investment will bring a return. Funding is void if the department does not provide a solid justification. Though that may seem like a failure, it is an insight into what will make an impact — if a department struggles to justify why it needs software to replace filing cabinets, is it necessary? Since their money is on the line, they will be more swift and judicious on the essentials.

However, this also puts pressure on HR teams to rally solid defenses for tools and distill and clarify those needs to those outside the HR world. Only 41% of companies believe in the ROI of training programs, so proving the value of digital transformation and fronting as many resources as possible is essential for buy-in.

3. Find Ways to Manage the Transition

Digital transformation could be highly disruptive to daily operations among training, installation and adoption. When HR departments carry such essential roles in a company’s flow, they must plan intermediary solutions to these interruptions. Planning these solutions should happen before any part of the digital transformation process.

4. Acclimate to Modern Data Management

HR departments have numerous data points on employees and the inner workings of businesses. That data must remain safe and accessible, but it often sits unused. Companies can leverage data to gain more insights about managing employees better or save companies money.

However, importing data into systems with AI, for example, could prove how many employees take on health insurance or call out sick. How does this impact company profits or efficiency?

Whatever the company wants to gain from that data, collecting that info and using it should be transparent to employees. HR departments may have to collaborate with IT teams to ensure it is safe from cyber threats and that they are not collecting more data than they need.

5. Never Stop Improving

Digital transformation may feel like a large-scale one-and-done business improvement. Using the technology will be a constant assessment of usefulness. Everyone using it will have suggestions and thoughts on user interfaces and experience. These are all invaluable tidbits that can inform future decisions.

The bulk of the improvements and installation of programs and ideas may happen simultaneously, but seeking new and better tools is a constant state of being. Technology will always get better, faster, more capable and maybe cheaper. Settling for what you have should only be a temporary phase.

Making HR More Tech-Forward

Digital transformation has the chance to bring HR, and therefore entire companies, into a streamlined future of data management. Recruitment, record-filing, and information acquisition become more straightforward and faster when programs and other tech resources can automate and retrieve data with a few clicks.

Zachary Amos is a tech writer with a special interest in HR technology, automation, and cybersecurity. He is the Features Editor at ReHack

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The misclassification of workers has become a concerning issue for companies, potentially leading to hefty fines and class-action lawsuits. Recent cases involving Uber and Nike highlight the repercussions of misclassification.

In an exclusive interview with HR.com, Matthew Iverson, a Partner at Nelson Mullins, sheds light on the reasons behind worker misclassification and the challenges employers face in properly classifying workers amidst stricter rules and regulations. He also shares key insights on this persistent problem and will help us gain a deeper understanding of how it can be prevented in the future.

Worker Misclassification: Why And How Not To Go The Uber And Nike Way

Excerpts from the interview:

Q:Uberpaid $8.4 million to settle a class-action lawsuit for misclassifying workers in 2022. Nike is currently facing a potential $530 million fine for misclassifying workers. Why do companies continue to misclassify workers despite stringent laws and hefty penalties?

Matthew: Many employee advocates and government enforcement agencies will say that companies misclassify workers because engaging an independent contractor is cheaper than hiring an employee. This does happen, but the answer is often more complicated than that.

Engaging an independent contractor is, in some cases, cheaper than hiring an employee. After all, employees receive many benefits, like overtime, health care and worker’s compensation, that independent contractors do not – and as a result, some companies use independent contractors in place of traditional employees because they believe doing so saves money.

But this approach only saves money so long as the company does not get caught. The penalties for violating misclassification

Exclusive interview with Matthew Iverson, Partner, Nelson Mullins

laws typically dwarf any prior savings. This is by design, as misclassification laws are drafted to make sure that the costs of misclassification outweigh its benefits.

Many companies, however, misclassify workers by mistake. Independent contractor laws vary widely by state. For example in Texas, an independent contractor is not an employee so long he or she is free from control or direction under a contract. In Massachusetts and California, however, an independent contractor is an employee, regardless of the level of control, if he or she merely works in the same course of business as the company that offered the contract.

This means, for example, that an accounting firm may not legally engage an accountant as an independent contractor in Massachusetts or California, regardless of the level of control the firm exerts over them. These differing standards create traps for unwary companies. There are also federal standards for classifying independent contractors that apply throughout the country, and those standards change frequently with the administration in power.

Finally, some companies, including many in the gig economy, structure their businesses so that contractors are an inherent part of their model. Ridesharing companies are an example of this phenomenon. The ridesharing business model, reduced to its essence, connects people looking for rides with other people willing to drive them in exchange for a fee. At least initially, ridesharing companies lacked the infrastructure and resources to formally employ hundreds of thousands, if not millions, of drivers across the country and the world. Most ridesharing companies viewed independent contracting as the only economically realistic option for the industry, and they accepted the risk of misclassification liability as the price the doing business.

Over the past decade or so, courts, regulatory agencies, and legislatures have focused on industries that make regular use of contractors, including those in the gig economy, and many companies were forced to fight pitched legal battles to defend their business models. Sometimes those battles were lost, and many gig-economy companies faced steep penalties as a result.

Q:Were these cases preventable? How?

Matthew: Some misclassification cases are preventable. If a company is using an independent contractor in a role that would normally be filled by an employee simply because the independent contractor is cheaper, this presents an obvious and avoidable liability risk. Informed human resources (HR) leadership can usually eliminate these risks by examining their companies’ independent contractors and putting those doing the work of employees on the payroll.

Other misclassification cases are more difficult to prevent because the misclassification risks are less obvious or less certain. The legal standards used to determine misclassification are subjective, and, especially in borderline cases, different judges may look at the same contractual relationship and reach different conclusions about whether it constitutes employment.

Companies that contract in multiple states also risk mistakenly misclassifying a contractor because they misunderstand the legal landscape outside their home jurisdiction. If a company is at all uncertain as

to whether its contractors are properly classified, it should consult a lawyer familiar with the independent contractor laws in all the states where they contract because there are ways to minimize misclassification risk through proper preparation.

Q:What are the takeaways for employers from such cases?

Matthew: There are three important takeaways for companies that use independent contractors.

First, companies that choose to use independent contractors to save money by reducing employee headcount should take a long, hard look at that policy. Their contractor relationships may well be illegal, and if caught, those companies may face legal penalties that drown the hoped-for cost savings.

Second, companies should not assume that because their contractor relationships pass muster in their home state, they also comply with the laws of other states. Likewise, companies should not assume relationships that were legal five years ago are still legal today. Companies that contract in new states or have not reviewed their contract relationships recently should consider having their contracts reviewed by a legal professional.

Finally, companies whose business models require contracting, like many gig economy companies, should fully understand the potential liability risks inherent in the way they operate. In many cases, misclassification exposure can be minimized, or at least reduced, by tweaking the contractual relationships to better comport with applicable law or by incorporating contractual safeguards against mass liability, like arbitration clauses. If your business model depends on independent contractors, informed legal advice is essential.

Q:Please explain the ambiguity that exists in the federal and state laws on classifying workers.

Matthew: Federal and state misclassification laws are ambiguous because they are not objective. The test for misclassification under the federal Fair Labor Standards Act, for example, relies on a multi-factored “economic realities test” that considers a variety of circumstances, including the amount of control exercised by the company that issued the contract, the permanence of the relationship, the skill required by the individual and the opportunity that the worker has for profit or loss.

All these factors are subjective, and there is no real consensus amongst courts over how they should be weighed or even how many factors should be considered in a particular instance. As a result, judges often apply an “I know it when I see it” attitude to misclassification. As different judges may see the same facts differently, this makes it hard to predict the legality of a particular contract in advance.

Although state misclassification tests often rely on a smaller number of factors, and some state tests weigh the outcome more in favor of or against a finding of employment, all tests have subjective components that make a misclassification outcome hard to predict.

Q:What changes must lawmakers bring in to deal with worker misclassification more stringently?

Matthew: Lawmakers attempting to address misclassification face two problems.

The first problem is that there is no consensus within most governments regarding what types of independent contractor relationships should be prohibited. Lawmakers have opinions that fall across the regulatory spectrum. Some want no restrictions at all, others want to eliminate independent contractors and most fall somewhere in the middle.

The second problem lawmakers face is that because independent contracting takes so many forms, and companies can be creative in their attempts to avoid formal employment, it is difficult to craft statutory language that prevents the misclassification of independent contractors.

Both problems combine to produce statutes with vague language born of political compromise. This vague language provides plaintiffs’ lawyers with openings to bring misclassification claims against entities that most lawmakers likely never considered to be operating illegally.

For example, some plaintiffs’ lawyers have recently argued that franchising should be reclassified as employment under some states’ independent contractor laws. Vague statutory language also leaves courts with the unenviable task of figuring out which relationships lawmakers intended to prohibit.

If lawmakers want to deal with misclassification effectively, they should first reach a consensus as to which types of work relationships they wish to criminalize and which they do not, and then craft statutes that delineate between the two.

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Human Capability Valuation And Performance For Organizational Success

Unveiling the path to assessing and building organizations for the 21st-century economy

By Dave Ulrich, Norm Smallwood, Mike Panowyk and Joe Grochowski, The RBL Group

Arecent and exceptional Summit on Workforce Valuation and Performance conference at the Ross School at the University of Michigan brought together thought leaders from multiple disciplines (government regulators, attorneys, economists, statisticians, investors, academic researchers and consultants in strategy, information, and HR) to explore the topic:

“To get even basic information about the workforce to enable valuation and to guide investment decision-making. We need better information on the twenty-first century economy to inform capital allocation, policy, research, and management. That is the premise behind this gathering.” (Thank you to Jerry Davis as sponsor and host.)

To make progress on this important agenda of accessing information to assess and build organizations for the twenty-first century economy, three questions arise.

Question 1: What is Organization?

Determining what information to collect starts with a clear definition of what constitutes an organization. This definition of what comprises an organization seems simple: “An organization is a setting where I work, play, learn, live, shop, and worship.” But underneath this definition are five assumptions or views that define “organization,” each with a model and framework so that information can be collected to improve how organizations operate (see Figure 1). Figure 2 offers images, exemplar authors, and repre sentative books for each of the five views.

Five Definitions of an Organization Figure 2: Logic of Organization Form

Without a clear and accepted view of how to define an organization, different people will examine organizations and source information, like the ancient Buddhist parable of blind people touching an elephant and having different interpretations. For example, the

statement framing this summit (“information about the workforce .. . to inform capital allocation, policy, research, and management”) is based on a definition of an organization as a collection of individuals rather than the other four views.

Figure 1:

Each of the five organizational views is a legitimate way of defining and collecting information on organizations. However, creating and agreeing to a standard framework and language of what makes up

an organization has profound implications. A classification framework is the basis for scientific inquiry by organizing otherwise complex ideas into actionable categories (see Figure 3 for examples in a number of settings).

As noted in the last row of Figure 3, we do not have a generally accepted classification typology for organizations that would:

● Focus attention on what information to collect to improve organization operations.

● Avoid piecemeal (single item) measures of an organization.

● Organize innovative initiatives (e.g., skill-based organization, hybrid work, digital efficiencies) into accepted categories for evolving and cumulating insights.

We have proposed a human capability framework that cuts across the five views of the organization and classifies a myriad of people and organization initiatives into four pathways:

● Talent: Human capital, workforce, employee, labor, and individual competence or skill

● Leadership: Individual leaders at all levels and collective leadership reputation

● Organization: Capability, workplace, culture, teamwork, and system

● Human Resource: HR practices, department, analytics, and people

Within this human capability framework, new and innovative initiatives will inevitably emerge, while the four pathways can remain relatively stable (much like new diets will emerge but the four food groups remain stable). Figure 4 shows 38 initiatives in the four human capability pathways.

Figure 3: Value of a Classification Framework

The human capability framework integrates the five views on organizations (see Figure 5) and offers a robust definition of an organization that can “enable valuation and to guide investment decision-making” as this summit proposes.

Question 2: Why Does “Organization” Matter? Who Will Use the Information Collected?

With a clear definition of “organization” (as human capability suggested in Figure 4), information can be collected “to inform capital allocation, policy, research, and management.” Often, information is collected based on what is available rather than what has an impact. An old joke goes like this:

Figure 4: Four Human Capability Pathways and 38 Initiatives

Figure 5: Integration of Five Views of Organization into Human Capability Framework (Four Xs allocated for each row.)

A policeman sees a drunk man searching for something under a streetlight; he asks the drunk what he has lost. He replies that he lost his keys, and they both look under the streetlight together. After a few minutes, the police man asks if he is sure he lost them here, and the drunk replies, no, and that he lost them in the park. The policeman asks why he is searching here, and the drunk replies, “This is where the light is.”

Likewise, looking for information in existing databases is easy because they are relatively effortless to access. But this information may not help organiza-

tion stakeholders make better decisions. This is like adding up and reporting uniform numbers for competing sports teams; the information is accurate and easy to access but not relevant to winning the game.

Relevance comes by identifying organizational stakeholders who will use human capability information to make better decisions. Organizations interact with an array of stakeholders, who each get unique value from their interaction with the organization. Information about human capability investments should be linked to the value created for each stakeholder (see Figure 6).

What Each Stakeholder Receives from Improved Human Capability

Question 3: How Do We Better Access Information on “Organization”?

Defining what organization means and offering relevant insights to stakeholders shapes what information to collect and why it matters. How

to access such information becomes the next challenge. Five different data collection tools come with pros and cons.

Figure 6:

Figure 7: Information Collection Methods for Human Capability

Collection Method Primary Purpose/Outcome Pro Con

Existing data

Observation

Interviews

Access current databases (discussed above)

Inductive: Explores options as case studies

Idiographic: Deep dive into case study

Available and often reliable data

Identify issues that others may not see

Explore cause and effect

May not lead to relevant insights

Not scalable across firms or time

Limited to an individual experience

Surveys

Deductive: Predictive analytics that confirm and test patterns in data

Provides graphs and charts about what has happened or might happen

Limited to questions asked, sample, and analytics tools

AI/natural language processing

Validate what people/ organizations do (not say) at scale; scrape or score databases to determine what has been done

Scalable and reports content, context, and evidence without survey biases

Newer methodology not fully deployed; relies on accessing reliable data; some technology limitations

The bad news is that each of these information collection methods has limitations. The good news is that they can be combined to help business and HR leaders make more informed human capability decisions. We have worked with numerous clients through interviews and tailored advice to improve their specific human capability agenda. We have done extensive, large-scale surveys to offer norms and guidance for how human capability investments deliver stakeholder outcomes (called the Organization Guidance System: www.rbl.ai).

Human Capability Valuation And Performance For Organizational Success

More recently, working with AWS, we have utilized AI and NLP to scrape data from 7,000 firms reporting their human capital to the SEC in 2021 and 2022 (see Figure 8 for a high-level summary).

With this large database and AI methodology, we found that the total human capability score explains 44 percent of employee productivity, 26 percent of cash flow, and 25 percent of future investor confidence.

What Does All This Mean?

This article contains a lot of information around how to make progress on human capability valuation and

performance. In this exceptional Summit and other settings, talented colleagues are exploring ways to provide “information on the twenty-first century economy to inform capital allocation, policy, research, and management.”

The three questions we raise at least partially answer and provide progress on this important effort.

Would you like to comment?

Dave Ulrich is Rensis Likert Professor, Ross School of Business, University of Michigan, Norm Smallwood is Partner, The RBL Group, Mike Panowyk is Senior Consultant, The RBL Group and Joe Grochowski is Managing Director, The RBL Institute.

Figure 8:

SEC Human Capability Scores 2021 and 2022 (7,000 firms with 1 to 10 score for each cell)

Why Employees Should Know The Truth About ‘Unlimited’ PTO

The risks and consequences of unlimited PTO

By Rob Whalen, PTO Exchange

Despite all the headlines about stubborn inflation, banking crises, and a possible recession, the labor market has remained surprisingly tight. This puts recruiters in a difficult position,

as candidates have plenty of options and the competition for talent is intense. It is no surprise that human resources (HR) teams are looking for a competitive advantage, and many believe

they have found one: unlimited paid time off (PTO) policies. What better way to attract candidates than to tell them that they will be able to take all the time off they want?

But unlimited

PTO is a mirage.

Many employees whose companies offer the policy have discovered that there will always be concrete limits on how much vacation time they can take. In fact, the evidence suggests that employees tend to take less PTO when they have an unlimited plan. This is largely out of concern for what their managers and colleagues will think, as well as anxiety about falling behind on work. Companies realize that unlimited PTO does not really exist, but they also know the policy allows them to avoid paying out large sums of accrued time off because unlimited PTO is no longer considered earned wages.

PTO Exchange and Lighthouse Research & Advisory recently published a report titled, Biased, Burdensome, and Burned Out: The Real Story of Unlimited Paid

Time Off. The report draws upon a survey of HR leaders and employees whose companies have adopted unlimited PTO, and the findings suggest that it is time to interrogate this increasingly popular policy more closely.

Employees Need a Better Understanding of Unlimited PTO

Interest in unlimited PTO has risen over the last several years as more companies have begun to offer the policy as a way to attract talent. Employers present the policy as an answer to the demand for workplace flexibility, arguing that it allows employees to take PTO whenever they need it. Many candidates accept this claim at face value, but companies fail to disclose that unlimited PTO allows them to circumvent the legal requirement (in California, Colorado, Illinois,

and many other states) to keep track of accrued time off and pay out the balance when employees leave.

This means companies can eliminate large balances of unpaid vacation time from their balance sheet, which can grow to millions of dollars. Meanwhile, they know the word “unlimited” is not truthful – the amount of PTO employees receive will always depend on a manager’s authorization, and these decisions are bound to be inconsistent. The interviews we conducted for the report indicate that, while employees are often optimistic about unlimited PTO, reality eventually sets in. Reputational pressures, managers’ discretion, productivity concerns, and a wide array of other factors conspire to place hard limits on the amount of PTO employees can take.

Know

The longer employees have worked under an unlimited PTO plan, the less likely they are to say it benefits them. At a time when candidates place a premium on transparency in the hiring process, too many recruiters present a distorted view of what candidates can expect with unlimited PTO policies. While this may get employees in the door, it can have negative long-term consequences for the company.

Unlimited PTO Presents Serious Risks for Companies

While employees should be aware of how unlimited PTO actually works in practice, companies should be more familiar with the negative consequences of the policy. For example, unlimited PTO introduces the potential for bias where none existed before. While traditional PTO can create balance sheet liabilities, it is more transparent and consistent than unlimited PTO. It does not require managers to make constant judgments about how much vacation time employees should be allowed to take, nor does it cause employees to question the amount of time they use.

A previous PTO Exchange report found that there are significant variations in how much vacation time diverse employees take. Nonwhite, female, and low-income employees are significantly less likely to take all their vacation time, and there is a possibility that unlimited PTO will make these gaps even more pronounced. One of the main reasons employees fail to use

all their PTO is pressure from coworkers – pressure that diverse employees often feel even more acutely than their peers.

Many HR teams are embracing more objective tools for hiring and promotion, such as structured interviews and pre-employment assessments. This is not just because these tools are more predictive than their subjective counterparts –they also reduce bias. Strangely, companies are moving in the opposite direction with their benefits policies. Unlimited PTO makes companies more dependent on subjective (and often flawed) human judgments, which can lead to unfairness, discrimination, and unhealthy workplace culture.

An Alternative to Unlimited PTO

Unlimited PTO attempts to address a problem that does not exist. The popularity of the policy suggests that many employees feel they are not receiving sufficient PTO, but hundreds of millions of vacation days are actually wasted every year. A 2022 survey found that around three-quarters of employees failed to use all their vacation days over the preceding year, and even when they do take time off, they often continue working.

A third of employees say they cannot take PTO because their jobs are too demanding, while 83 percent report that their workplace cultures discourage taking time off. Even when the employees in our survey finally

manage to take some vacation time, a remarkable 75 percent say they are expected to keep working. This is not sustainable – employees have never been more focused on finding a healthy work-life balance, so workplace cultures and policies that constantly intrude on their time off should be abandoned.

It is difficult to imagine unlimited PTO improving this status quo, as employees will feel even greater pressure to justify their time off and continue working while they are supposed to be on vacation. This is why HR teams should explore innovative approaches to PTO that do not rely on empty promises, such as a convertible structure that uses the value of unspent vacation days for other financial priorities – from student loan payments to retirement contributions.

Ninety percent of employees say a flexible benefit like this would make them more likely to stay with a company. This is a powerful reminder that HR teams can offer the flexibility employees want without misinforming them about the benefits they will receive.

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