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Human resources.

Utah's human resources professionals are proving their worth as companies face mounting issues such as healthcare changes, undocumented worker challenges and compliance issues. Our human resources and staffing experts discussed the challenges and successes they have experienced as they face these and other complex issues.

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We'd like to give a special thank you to David Cherrington, professor of organizational leadership at Brigham Young University, for moderating the discussion and to Holland & Hart for hosting the event.

PARTICIPANTS:

Back Row;

Randy Price, Big-D Construction;

David Cherrington, BYU;

Dusty Fenwick, KLAS Enterprises;

Tera Sunder, Nelson Laboratories;

Roger Tsai, Holland & Hart;

Chris Thomas, Intrepid;

Michael King, USANA Health Sciences;

Brian Lee, Performance Progression

Front Row:

Lisa Meiling, Sorenson Development;

Clark Cotterell, Management Recruiters;

Peggy Stone, Academy Mortgage Corporation;

Dalynn Jones, Employer Solutions Group;

Sharon Roux, The Summit Group;

Monica Whalen, The Employers Council;

Brad Fagersgren, ISI

There are some incredible issues that HR is going to have to deal with in respect to entitlement programs, Social Security, workers' compensation and so forth. What is your perspective on how this is going to impact human resource management?

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FENWICK: Funding the entitlement programs has shifted slowly toward the corporate sector. We used to be able to make sure our ducks were in a row--take, for example, unemployment. We could make sure that we never had any unemployment costs outside of our regular rates, and nowadays we are hard put to not have to pay for individuals' unemployment, and we see that with a lot of areas.

PRICE: As entitlement programs get cut, we'll see a workforce that will continue to age, and the opportunities for individuals to retire will diminish. We'll see people working longer. We already see it in construction. The average age of a construction worker is about 45 right now and it's continuing to go up, and those people are not leaving the workforce.

FENWICK: Which is also going to hit healthcare; it's going to hit workers' compensation.

The Social Security Administration is saying that the current program is not sustainable. What are your thoughts?

LEE: First of all, I never believed it was going to last this long. I don't know what the solution is, but I don't think long-term social funding is the right answer. People are going to have to find a way to save for their own retirement plan, for their own future, because waiting for the government to do it has not worked.

Even in the early days when we had defined pension plans and so forth, people would just assume that everything was going to be taken care of when they retired, and I saw a lot of discouragement when they found out what's really there.

The same thing is true of Social Security. People assume that it's just going to take care of them, and when they find out what the benefits are like, they find out that's not true. So there has to be another solution that we can pursue personally and maybe even in business to help enhance that.

ROUX: We've added to the problem recently because of the temporary cuts in the employee's portion of that contribution. Employees are paying 2 percent less, the employer's portion is staying the same, but at the time when we say we can't fund it, we've cut back the money going into it. There's some talk now that that will continue beyond 2011. So we'll see what happens there.

Within my own employee population, I thought people might take that 2 percent and increase their 401(k) contributions. Two people did it--and one of them was me. I thought that was interesting.

We want to have the lower contribution, we want lower taxes, but we want that benefit to be there and we're not saving on our own for it either. So that's just compounding the problem.

FENWICK: And it's never going to change until the rhetoric changes, where politicians are not promising that everybody will be taken care of anymore. It perpetuates the idea that, "Oh, I'll be taken care of somehow. Somehow they'll find a way." At some point there is going to be the time where everybody jumps up and says, "We've got to make a change now." Nobody wants to hit that point while they are currently in power because it's going to be very painful at that transition point.

But it starts with the rhetoric, and we've got to educate our employees and say, "Hey, you might be told this by your elected officials, but here is the reality and here is what you need to start doing." Less on the recommendation side and more on the--I wouldn't say mandatory side, but you are going to be faced with some situations like this if you don't start taking care of yourself now.

COTTERELL: I held a meeting about two months ago with all my employees, prompted in part because some had decreased their contributions to our 401(k), and I actually had one or two people who had a loan out against their 401(k). So I held a meeting about what retirement is like and what it's going to cost. I think people are surprised when they actually do the research, if they want to maintain the standard of living they have now and what that will mean 20 or 30 or 40 years down the road, how much they need to be contributing--not just to a 401(k), but also if they have children that plan to go to school with 529s or other investments.

I don't plan on Social Security and I encourage my employees to not bank on that as well. And I think George Bush may not sound as crazy as he did a few years ago about the privatization of Social Security. If you are going to be putting money in from your paycheck, you might as well have some control over it, instead of just funding other people's retirements that we will never see. We've got to take control of it.

SUNDER: We do a lot of education, but the reality is that people are having really hard times. And if their spouse loses a job, it's not about when I retire. It's about, I don't want to lose my house. It's about, I want to put food on the table. So it is a great dream for a lot of people to be able to retire, but it's just that right now.

Especially some of the younger people. I've got one kid who says, "I just finished my MBA and I spent $72,000 on it." And he wants us to double his salary because he paid that much money for this MBA that he has no experience in--so kind of setting the tone for him to understand that your investment in your education is over your lifetime. It will and should pay back, but who-ever told you as soon as you finished your MBA you were going to be worth double what you make today was selling you a bill of goods. You are still doing the same job you did for me yesterday. I don't pay for master's degrees. I pay for contribution.

I hear people in my offices daily who are really, really struggling. They are trying really hard and it's just the economy is killing them, and they don't see a light at the end of the tunnel right now.

THOMAS: The currency in today's economy is experience. A degree is important. We don't overlook a degree, but experience is so much more important than that degree.

STON E: I teach part time at Westminster College in the MBA program, and I don't mislead any people. But I think to get people to sign up, maybe sometimes they are a bit slack, but a lot of the students in the program are very stressed for a lot of the reasons you just said. They are focusing on today and taking care of their families, but yet they've been told that if they get a better education, they will position themselves for a better career. So it's kind of a balance that you have to help people strike.

And you are right, an MBA or an advanced degree is a lot more valuable with some experience. I'm seeing a lot of young people coming into our workplace with a real lack of education and experience but with high expectations. So it's managing all those things and trying to find some kind of a balance.

Are you seeing misuse of workers' compensation payments and unemployment compensation?

JONES: We had a lot of unemployment claims with all the client companies that we work with. The state is being a little more lenient on allowing people to have unemployment, and we work pretty aggressively to keep them off. There's a lot of people that really know the system and they are good at staying on unemployment. They don't want to work if they don't have to. It's frustrating to see them get it and continue to work the system. I think there are a lot of people that truly qualify and are using it just as a way to get by, but there are a lot of people that are quite happy to be on it and do everything they can to stay on it.

MEILING: It's certainly easier to get unemployment. There are people who we would have had no issues with--yet, they easily get it. But on the workers comp side--and I don't know if it's the culture of our company, but our highest claims are with our agricultural companies. And these guys will work with a broken back. I mean, they are on the opposite extreme, where we're like, "No, really, you have to see a doctor."

JONES: A few years ago, you knew that you could handle a claim and they would not be getting it. And now when so many people are on it--and we should be holding those funds sacred--it seems like anyone is getting on it, and you work a lot harder to get people that should not be on unemployment off when it should be the other way around.

SUNDER: I've won one claim since I've been at Nelson, and it's a lot of work. I had 62 pages of documents. We're a federally regulated industry, so I have documents and SOPs and federal regulations and everything to back it up. We lost. I think one of the reasons was the judge didn't understand why it was so important that we did what we did and why, from our federal standing, we had to do what we did. But it's frustrating because you are doing it the right way, and you are documenting it the whole way through.

And where do you really want to invest your time? If you are losing all the time, I'd rather invest it in training and developing my people to the point that they are performing where they need to perform, because I don't want to lose people.

PRICE: We operate in multiple states, and we're grateful that the majority of our employees are located in Utah from a workers comp perspective. Utah does a very good job of managing workers comp, and if you get in with a good workers comp carrier, they will educate you as to the system and the process. Some states are much more employee friendly and don't allow you to manage the claims as aggressively as we can in Utah.

PRICE: There are some entitlement mind sets that people get into. And bureaucratic administrators have a tendency to lean towards the employee rather than the employer in administering those programs. So by nature, by just the way that the system is set up, unemployment is going to go to the employee.

KING: It comes down to the accountability of the employee. Whether it's a 401(k), or being terminated and the ability to receive unemployment, or even workers comp for that matter--if employees are doing the things they are supposed to, they don't have to deal with these issues. It's often about educating them that you really have control over your future, but you need to take control of it, and you need to have accountability for the decisions that you make.

We've had a new healthcare law now for just over a year. Most of the provisions of that law have not taken effect. The major date for most of them is 2014, but there are a few of them that will occur before that, and some of them won't occur until as late as 2018. What are we seeing at this point?

COTTERELL: We are at 25 employees. We're a small business, and we just had open enrollment; our premium increase was a little bit below the national average. But about 40 percent of that increase was tied directly back to the legislation--no longer having that maximum cap for lifetime out of pocket and then also the ability to do the preventative healthcare, which was then 100 percent covered by the employer.

I found it interesting that of that increase, a big portion was not because of what we as a firm had done as far as too many CAT scans or trips to the E.R., but rather it was this legislation. For the employees, it's an added benefit for them to be able to get those, but it costs us money.

Did your company bear the cost, or did you pass some of it on to the employees?

COTTERELL: No, we bore the cost. That's one of our real attraction and retention tools. For a small business, we've got an excellent healthcare plan. To the question about how does that affect the quality of the overall program, there are things that we'd like to change or enhance, but when that cost is going to legislation as opposed to added benefits, we've got to make that choice.

LEE: There is a provision in the new law that says if the claims are not a certain percentage of the premiums, insurance companies have to refund some of the premiums to the company. So the insurance companies have to cover themselves for that eventuality, and that is another thing that's jacked up premiums this year.

I heard the same thing--there is a much larger increase this year and some percentage of that is due to these provisions in the new law, some of which are anticipated, some of which are reality now. And the insurance companies don't know any more than anyone else what's going to happen for sure, and they are trying to hedge their bets and protect themselves as well. So the cost is going up and my clients have to pass it on to employees. They just cannot bear it all.

JONES: In working with smaller employers that want to have a benefit plan to attract higher talent, when those costs go up, it's a significant cost every year that is painful. And when the costs go up because of legislation and it's not adding any value, they reevaluate their whole business strategy because it's tough for them as a small employer. The economy is down, things are down for them, and then their costs go up with health insurance. Do they want to offer it at all? Do they want to reevaluate their whole employee structure? So it's been difficult for them.

SUNDER: I heard an interesting statement: "We need to start managing health and stop managing healthcare." So that is what we are trying to do at our company. We are really looking outside of the box.

We are working towards opening an onsite medical clinic at our company, a zero cost clinic for employees. It takes the barriers away from employees getting the care when they need it so that it doesn't become a bigger deal. And it's no copay, it's no cost for medical tests, and it's zero cost for prescriptions--and it's paid for 100 percent by the company. But it's the right thing to do for our people.

FENWICK: It's not just the healthcare reform laws, it's also regulations and mandates that were put into effect by the stimulus and other regulations that have come through. In my company, we work with the hospitals and healthcare networks, and some of the biggest things that are impacting them are the infrastructure mandates on hospitals and healthcare networks that they are required to hit by a certain time frame. We are watching some of our partner hospitals going out of business, or three or four hospitals consolidating and merging into one. Healthcare networks are buying each other out across the country because the impact is so great.

Healthcare costs will rise and it's not just the healthcare reform laws. It's all the other mandates requiring them to get up to speed on infrastructure. And, frankly, the worldwide standard on technology and billing, the United States is about seven years behind Europe and Canada and Japan. These mandates have good intentions, as with a lot of legislation, but it's really putting a strain on healthcare.

The Department of Labor is now more frequently auditing companies. What impact is that having?

STONE: The mortgage industry is becoming a lot more regulated than it once was because of the meltdown. We are finding that not only is the federal government coming in to see what we are doing, but various states that we are in are auditing us as well. They are seeing that as a way to generate revenue because state revenue is down as well.

LEE: They've targeted specific industries, where they think there has been high abuse--overtime pay and so forth. Healthcare is one of the industries affected in Utah. And restaurants. They've specifically said the Department of Labor is going to audit at least 65 restaurants this year in Utah.

I've had people call me in huge panics saying, "I just got this letter from the Department of Labor," or "I'm having an audit." There is backpay in most cases because people are not clear on the law or they just choose to ignore it, and it is having an impact among smaller employers. I don't know if the larger employers are affected as much, but definitely smaller employers are feeling it.

WHALEN: Increased enforcement of employment laws is a reality. Many different government agencies have initiatives in place right now to beef that up. They have hired hundreds of additional field operatives, investigators and auditors. It is hitting Utah employers, and it ranges from cracking down on misclassification of workers as independent contractors, to 1-9 audits, to wage an hour audits.

We're also seeing an increase in the number of equal employment opportunity complaints--your garden variety discrimination claims. Claims are up at the EEOC. Claims are up at the UALD. And for the first time, retaliation claims have emerged as the number one most frequently cited offense that employees feel employers are committing.

FAGERSGREN: I thought it was interesting that the Department of Labor put together that app for employees to be able to track their own hours from their phone. I think that creates a divide between employers and the government, which is enforcing those laws. Because an employer would say, "Why are you empowering my employees to build a case against me? I'm just trying to follow the rules and trying to pay them, and I've got a vindictive employee tracking their hours."

COTTERELL: Would you attribute the increase in claims to the difficulty in the economy and the labor market? It seems like before they would have said, "He can stick it. I'm going over here," whereas now they don't have that opportunity.

WHALEN: I attribute the increase in claims to three things. First, as more adverse decisions are made about people's employment--for example, layoffs--more people are affected by that and they question the fairness of those decisions. So with the layoffs that have occurred in the Utah economy over the last couple of years, you saw' many employees, especially older workers, ask how was that selection made and why me.

Second, employees are becoming more educated about their rights, which is not necessarily a bad thing, but what that means is that they are less likely to sit idly by when they feel that a law has been broken.

And third, there is a lot of stress in the workplace among employees, as well as among management and executives. When there is tension and stress, if leaders retreat into their offices and don't continue positive communication and good employee relations initiatives, then you begin to get an us versus them culture. With the increased stress in companies, there has been a side effect that when you run into communication breakdowns or tension problems, employees are more quick to.jump to conclusions that the employer is doing the wrong thing and challenging them on that.

How is HB 116 impacting human resources? Are we seeing Utah becoming a magnet for more illegal immigration?

TSAI: We've got about 12 to 15 million undocumented people in the United States, about 120,000 in Utah. That is equivalent to Provo's population. WeVe seen a decrease in terms of the number of undocumented flowing into the United States through the southern border. Usually it's about a half a million a year. It's decreased to about 300,000 and that's partly because there are not as many jobs.

But at the same time, within the last decade, there has been a huge flow into Utah and other states. Are we unique? I was just in Reno, Nevada. They are the magnet. They have the highest percentage of undocumented workers and undocumented people--close to about 10 percent of their overall population. In Utah, 40 percent of all new Utahns in the last decade are minorities--not just Hispanic, but Asian, Pacific Islanders. Utah is number two in terms of growth of the Asian American population.

The Utah Legislature has dealt with immigration in the last four sessions, and I'm sure they will continue to deal with it in the next four. The bill that you mentioned, 116, really doesn't go into effect for quite a while. You see states all over the country trying to introduce their own legislation in order to create a solution to this problem, which is that a whole lot of people don't have real immigration options. Most of those people would be waiting decades to try to get into the country. So at this point, we say, "We want you for work, but we don't want you to be here."

And so 116 was a really innovative solution. It was headed by the Salt Lake Chamber and supported by the LDS Church, and it was pushed by the Utah Compact. It was pretty amazing what a conservative state could push forward.

In terms of overall federal action, what we are seeing is the federal government is still enforcing on employers; you cannot have undocumented workers. Every six months or so you will see in the headlines--there are 1,000 employers that are audited on their I9s, and the average fine of those 19 audits is usually around $30,000 to $50,000.

Then there is also this new technology with the E-Verify, which has been voluntary for most employers for the last five years. But that will likely become mandatory. Utah is now one of four states that mandates E-Verify.

So at this point, we don't have a solution. States will continue to push on creating their own laws, and they will be spurred by the fact that Arizona's law mandating E-Verify and other sorts of restrictions was upheld by the Supreme Court.

SUNDER: What you find if you speak to some business owners in Arizona is that the law has not helped them. When you have undocumented workers, you generally have what they call blended families. So one person may be undocumented but the other people in the family may be legal to work here, but for fear of the undocumented worker being caught in a raid or something, they leave. So you lose the documented workers as well as the undocumented workers, which is what has happened in Arizona.

It's really a futile effort to try to drive these undocumented workers out, no matter what you put into place. They are part of the community for a reason. They pay taxes on gasoline. They pay taxes on food. They pay taxes through their rent. And if they are working with an illegal card, they are getting their Social Security and Medicare taxes taken out. They are basically maintaining the system because they will never get it back. They can't go and apply for those things because they are here illegally.

So it's a double edged sword because they are contributing to the economies of a lot of these cities and states, yet there is this negative inference that they are all bad people and we need to get rid of them because our workers need to work.

I'm proud of what we have done here in Utah, and I'm scared. Maybe we've taken some heat. But I'm a little afraid of what would happen if we repealed that bill, how other states and governments will look at us, as we had the compassion to try to do something the right way and be in the forefront, and then we backed down from it.

WHALEN: The more difficult question is, what about the undocumented men and women and children who are already here? It is a complex issue that is not best addressed by ideological extremes. I also fear that we have a bit of that going on here in Utah. Hopefully cooler heads will prevail because we need a business friendly solution that includes a dose of reality and compassion.

By a dose of reality, I mean we rely on and depend upon foreign workers to fuel our economy here in Utah. And when we look at the families that envelope those workers that we rely upon, they are oftentimes our best neighbors, our brightest students, our hardest workers. They are the type of men and women who we want to maintain and keep in Utah, and this rabid push to punish them and send them back for a mistake that was made decades ago will ultimately end up hurting the Utah business community. So there needs to be a solution that takes into account some reality and compassion, and that does not end up putting us back a few decades in terms of our strong economy.

The other thing that concerns me about the immigration rhetoric is that once again employers are the target of the enforcement and the compliance efforts, and it is getting very scary and problematic for employers as they try to comply with ever increasingly complex laws, commit administrative resources to complying with E-Verify, and face the potential of some very serious fines if they make an innocent mistake.

MEILING: The solution has to be simple. Right now, it is so complex. On our agricultural side, we've been fortunate with our employees whom we've rehired on a seasonal basis, for some of them as long as 20 years. I think they've been doing E-Verify for three years.

On our scientific side, I've had a couple of employees we've sponsored and the process is so cumbersome. There's been a couple of them we've done for a whole year. The attorneys didn't file something correctly and we started all over again. I have employees that it's taken two or more years to sponsor. They've lived in this country for 25 years, they've worked for us for 10. How complex does it need to be? It's ridiculous. It's incredibly expensive, and it's like every barrier is put up to make it not happen.

WHALEN: There is a misperception out there that undocumented workers broke the law just because they were lazy and didn't want to go through the proper channels. The reality is that the process to enter the country and get an immigrant visa and become a permanent resident is very, very expensive and very, very long. And for a vast majority of workers, it is impossible and there is no way that they can come to the United States and work legally under our current system.

TSAI: A lot of that anti immigrant sentiment has even filtered over to higher skilled workers. This could be a guy who is an international student at the U, has a Ph.D., is trying to get a green card, is from India or China. The waiting list for a green card for those individuals with a master's degree or above is about five years, which is pretty ridiculous. There are ways to keep them here in the interim, but that is a long process for them.

And Utah desperately needs both the lower end workers and also the high end workers with technical expertise--the engineers, the executive level managers, the environmental engineers, healthcare workers--and a lot of those areas are filled by immigrants from around the world because that is where the talent is.

What's happening with hiring in Utah? Is it going up or down? Do we have more employees than we need?

JONES: We've seen with our clients a significant uptick in hiring just since the first of the year. It hasn't been huge, but just across the board, all of them seem to be hiring more.

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WHALEN: As far as unemployment, Utah is holding steady at lagging the national employment figures by around 2 percent. I hear a mixed bag in terms of hiring. Many industries and companies are hiring perhaps a little more cautiously. Some companies report that they are not hiring, but the business climate and the efforts that Utah is putting into attracting business are very strong, and we are doing much better than many other parts of the country in those regards.

So the numbers, in terms of job creation as well as unemployment, continue to be fairly positive for Utah.

PRICE: There's still a large pool of applicants out there, depending on the industry and the type of skill set that you are looking for. In construction, there's still 20 percent plus unemployment in that industry. So when we do hire, there are plenty of qualified individuals right now. That's going to change if the economy ever strengthens, but right now there's a lot of applicants.

ROUX: We actually have the opposite problem because we are in an industry that has specific skill sets that are required for the work that we do. I'm finding that even though there are a lot of unemployed people, I have a mismatch of qualifications and we're really struggling to find highly qualified people.

THOMAS: One of our top challenges in HR is finding that specialized employee. The other element is people are reluctant to move. There is that perception that the economy is not strong and so it's a bigger risk to go somewhere. If it doesn't work out, then what do I do? So the process, the timeline, is much more than it has been in the past to recruit somebody to some of our top positions.

ROUX: The time to fill is longer, and we're doing more national searches now, sadly. I would prefer to have someone here locally.

THOMAS: We have some of the very best educational programs in communications. BYU is ranked very high in their advertising and public relations. Many of these people go out of state, and we're trying to find the people who've gone out of state and trying to bring them back--New York, San Francisco, Seattle, a number of different markets. We're really struggling to find that right skill set. If we can find it here, we'll take it from here. It's just finding that specialized top talent, and we can't get people to move from your company to ours.

PRICE: There is a reluctance, if I am an employee, to look when the economy is a little bit flat because if my employer finds out, then I'm the next one on the layoff or reduction list. There is no incentive for me to go look next door even though it might be a better opportunity.

COTTERELL: We are seeing what we refer to as a candidate driven market with those more qualification specific type companies. And qualified candidates now have multiple offers to choose from. Before, the biggest challenge we would have as an executive recruiting firm was recruiting a candidate knowing that their company was going to do all that they could to retain them--so counteroffers and all those types of things. That's still the case, but now we're seeing once a candidate is open to looking, they are saying, "Well, gee, there are more companies hiring, and f m going to see what else is going on."

THOMAS: To that point, to be willing to take that risk, they want a lot more. And, frankly, if we can find the right people, we're willing to pay it. There are good, high paying jobs if you have the right experience and the right skill set.

We have to create an environment and a culture that is terrific. That's the secret to recruiting really good people. Your reputation is going to precede you for better or worse. There's lots of things you can't control, but one thing you can control is your culture and we really invest highly in that

TSAI: Out of state recruitment is still a major issue for large companies. American Express, Zions Bank, Rio Tinto, the U--there was a collaboration of HR managers within each of these companies, which were having a tough time recruiting out of state talent to Utah. Trying to attract high level managers, technical folks to the state was tough. The stigma that Utah has nationwide, if not worldwide, still exists and that stigma is a tough thing to break, regardless of what the reality is here.

WHALEN: Keep in mind that creating and maintaining a positive culture does not have to cost a lot of money, either. A critical piece of it, however, is strong leadership from the top, and that is where HR can really show its value, by investing in leadership programs and coming up with great recognition and reward programs that are affordable and pump up the culture. UB
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Title Annotation:Industry Outlook
Publication:Utah Business
Article Type:Discussion
Geographic Code:1U8UT
Date:Sep 1, 2011
Words:5771
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