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Real cost of hr

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Real cost of hr

  1. 1. The Real Cost of HR Mistakes Kathryn Kissinger HR Services 2013
  2. 2. “Think hiring a professional is expensive? Wait and see what happens when you hire an amateur!”This statement is VERY true, especially in HumanResources.A client of mine (whose name has been changed toprotect their confidentiality), recently had a veryexpensive lesson on the real cost of HR.“Dan” runs a small construction firm with less than 10workers. He hires a friend’s wife to handle the “officestuff”. They are both very good at running theconstruction business, and things are going well. Kathryn Kissinger HR Services 2013
  3. 3. One day, Dan gets a letter from the Ministry ofLabour. A former employee is complaining theyhaven’t been paid properly and are owedovertime. The Ministry requests that Dan sendin all of the complainant employee’s timecards,which he promptly does.A few months later Dan gets a letter back fromthe Ministry, saying he owes this formeremployee nearly $15,000 in unpaid overtimeand holiday pay. Kathryn Kissinger HR Services 2013
  4. 4. You see, Dan had a “verbal employment contract”with his workers, which said they were to work sixshifts, totalling 72 working hours, each week. Theyagreed to be paid $15 per hour and only getovertime after the 72 hours, and a $5 per hour shiftpremium was paid to the workers “in lieu” ofovertime. In addition, when paying the employees,Dan lumped all the money together under“earnings” on the paystub, with the total amountpaid for that week. Payroll deductions were thenmade on the lump sum. Kathryn Kissinger HR Services 2013
  5. 5. Do you know what he did wrong?1. Overtime is paid after 44 hours each week, regardless of any“agreement” with your employee. If your “agreement” violatesany section of the Employment Standards Act, the wholecontract is void. Overtime is NOT calculated on shift premiums.2. When the Ministry calculated what was owed to thecomplainant, they used the “lump sum” as the base rate of pay.The Ministry calculated that the worker was earning $22.50 perhour (the base wage, shift premium, and vacation pay were allrolled together on the paystub, which was then divided by thehours worked, totalling $22.50 per hour). Overtime on $22.50equals $33.75 per hour. Kathryn Kissinger HR Services 2013
  6. 6. How did I fix this?While waiting to hear back from the Ministry on thecomplaint, Dan hired me to create a written employmentcontract, and go over the calculations for the otheremployees on his payroll.We fixed the overtime issues and paid out the amountsowing to the other employees (who had not complained,but were still entitled to the compensation) foroutstanding overtime and vacation pay.Dan was able to show the Ministry that an error incalculations had been made, that professional HR help hadbeen obtained and the other employee’s wages had beencorrected. Kathryn Kissinger HR Services 2013
  7. 7. Based on the actual agreement with the employeesDan owed the complainant about $8,000.00.Because the complaining employee did not approachDan first with his concerns, the Ministry allowed Danto pay out the lesser amount based on the fact thatthe other employees were treated the same way. The cost to Dan for HR services was less than $2,000.00 and he received two employment contracts, had a few policies updated and got lots and lots of advice. Which option is REALLY less expensive? Kathryn Kissinger HR Services 2013

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