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encouraging an employee to leave?????

Hazlett's picture

As part of Stephens continuing education in employee/employer relations--- please tell me if I should have handled the following situation differently.

We are currently working in a recession--times are tough. Our business has abundant work at this time---due to a hail storm 6-8-07----but most folks here are not so lucky--and most contractors seem to be very slow.

thinking things through--and talking with my wife- i have tried to put in place a system where we can do the most good for the most people. not just customers--but the employees as well.
Yes-- i will probably make some money.

Basicly-we have 6 direct employees
A) Myself
B)1 laborer---friend of the family----like a son to me-somewhat overpaid but he is now earning his keep and learning a lot( VERY happy with his pay)
C) sort of an apprentice level person( he has had 2 raises in 2 months--seems happy with his pay-and has repeatedly and recently thanked me for his opportunity here-he is always the FIRST person on the job each AM)- he is progressing exactly as expected
D)- 3 experienced men-all with at least 10 years experience

when I factor in everyones dependents-we have ,in effect,
16 people" Eating at my table"

I have run 2 help wanted ads this year-- the first one ( several months ago)netted well,WELL over 100 applicants in 2 days.
the second one 2 weeks ago netted over 70 aplicants from a 2 line,1 day ad.

additionallythe 2 most recent hires have told me--that the employment situation is as grim as they have ever known it.

the pay rate for these men-is at the upper end of their trade, locally.--many of the applicants are ready and willing to work for 30-40% LESS than what these men are currently paid---but i have no intention of "going there"

One of the most experienced men-has been dropping hints for a couple weeks" boy--gas is getting Soooooo expensive!- I drive 30 minutes each way to work-this is killing me" Etc. employee also exerts constant pressure for "more hours"-yet when I make specific arrangements to get him more hours-there is always a reason he can't work those hours

Last sunday( after turning down extra hours the preceeding friday) the employee left a message on my answering machine at 11:00 AM" Steve--- I have drive shaft troubles in my truck--don't think i will be able to make it in Monday"

Tuesday-he shows up all smiles, deeply tanned, happy as a clam

Weds-thursday-more of the same"Gas is expensive, I drive so far" routine,LOL

Thursday-after work( while turning down additional hours) he asks for a one on one conversation

he feels--due to how far he drives--AND his new baby---And his"wide range of skills"-- that he deserves more money
specifically-he wants a 25% pay bump AND- he wants the ability to do side jobs at his discretion. AS he puts it-he wants to be able to tell me" I have a side job-probably be gone mon,tues,Weds--be back to work thursday
He also lets slip-that last weekend he made $1500 working a side job( this would be when his "truck problems" wouldn't let him work for ME? )

I don't think fast on my feet--- so I told him I would think about it and see if the 2 of us could arrive at a reasonable compromise

thought about it overnight--and yestrday--pay day--- I asked him to continue the conversation

" 'Fred'----- I thought about our conversation yesterday---and I think you are absolutely right. you aren't ever going to be happy with your rate of pay here, you have wide ranging skills that we don't really use here because of the type of work we confine ourselves to---and you probably CAN earn more money on these 'side jobs'. I think what is really going to be best for you-is that you concentrate on these side jobs--commit yourself to the 'side jobs'-and that will free up your position for me to fill it with someone who is really happy with your current rate of pay. I think you are making the right decision---20 years ago I had to make a similar decision with a wife and baby at home-and another baby on the way-- I have never regretted it---and 20 years from now I think you will see this time as the most exciting, productive time of your life. I kind of envy you'

'Fred' basically replied--" I want to do these side jobs-- but I also wanted the gauranteed paycheck-it could be a long way between these projects!"

I don't think that he thought i would call his bluff and show him the door

And-----I don't think he realized what he was asking for was that he was only willing to work for me on days he didn't have anything better to do.----- which is no way for me to run a business

BTW- the way we work is that I care just about nothing for speed. each morning the crew spends a few minutes walking through what we are gonna do that day so we are all on the same page---it is a pretty defined game plan
if we finish the days task by 2:00--( 6 hours)- i pay for the full 8 hours and we all go home--conversley-if the days task ends up taking 9 or 10 hours-- i PAY for 9 or 10 hours
this week- Monday we were done1:00, tuesday 3:00, weds 2:00, thursday 3:15)-we start 8:00

what should i have done differently?
my inclination is to continue with the "many hands make light work" and replace 'fred'
but I am toying with the idea of asking the crew if THEY would preferr i didn't replace fred- and split freds pay amongst all of us
stupid idea????

stephen

(post #119686, reply #1 of 49)

to clarify....is Fred gone?


I think you handled it well. I also don't see a reason to turn your business into a commitee to decide on pay, staffing etc. I would just take my time on hiring, If it becomes obvious you need to fill that position then do.

"this dog may be old but he ain't cold. And he still knows how to bury a bone."

Lattimore

 

www.rehmodeling.com

(post #119686, reply #5 of 49)

rob,
yes 'fred' is gone.
I don't think anybody enjoys showing a new father the door

BUT I think i have to do what is best for the most people.
my inclination is to replace 'fred'-which returns us to a situation of being somewhat overstaffed

being overstaffed---is actually more profitable for us per week.
in order of importance
1) the business MUST make money
2) the customers property MUST be protected

we are roofers
being overstaffed means we can go out and do a project fairly safely on a day that is a bit "iffy"-with some confidence that we can get things completed before the rain

with 'fred' position refilled--confident we can finish work by 1-2:00,--we can all work and earn on a day I might otherwise decide we need to stay home due to expected mid-afternoon rain.

Stephen

(post #119686, reply #2 of 49)

Make Fred a 1099 sub and either accept his bid/rate per hour or not. If he has his ducks in a row and you need him, offer him a tasty morsel to work for you instead of his side job. If he is outta side jobs, offer him what you think is fair to have him along side your crew.


He'll carry his tax and Ins burden and yer off the hook of the benefits of the short day/full pay scene.


Spheramid Enterprises Architectural Woodworks


"Welcome to Poo-ville, can I have your socks?
Seriously Folks, I need a home for 3 lovers of your life.

www.richmondrenovationsandrestoration.com  

(post #119686, reply #6 of 49)

sphere,
i don't see any benefit to me/us if following your proposal

what I end up with that way--is constantly trying to talk someone into showing up for work-when he has already decided he isn't being treated fairley--which isn't gonna be good for any of us.

sure- might be a benefit to 'fred'-but it does nothing for the rest of us.

BTW- I have ZERO objection to paying 8 hours for 6 hours of actual work--as long as we meet the days' objective- i am happy.
stephen

(post #119686, reply #9 of 49)

Odds are that he wouldn't qualify as a 1099 under the scrutiny of the IRS.


I tried to find the IRS checklist for employee Vs Contractor & 1099s but struck out but found plenty of other references referring back to the IRS checklist.  For example: http://www.accountingpartners.com/irschecklist.shtml.


Be careful with 1099s.

(post #119686, reply #10 of 49)

I was a 1099 for 3 yrs to Grant, no problems whatsoever.

Spheramid Enterprises Architectural Woodworks


"Welcome to Poo-ville, can I have your socks?
Seriously Folks, I need a home for 3 lovers of your life.

www.richmondrenovationsandrestoration.com  

(post #119686, reply #13 of 49)

I left a place because they thought I was a 1099 but CPA was positive I wasn't (and I agreed) and taxed accordingly. 

(post #119686, reply #14 of 49)

Odds are that he wouldn't qualify as a 1099 under the scrutiny of the IRS.


I agree.  I don't have it right here, but the IRS has a good site which clarifies who is a sub, and who is not.


Furthermore, many states are specific who can be and who can not be a sub.  This is due to both the general and the sub using the sub game as a way to dodge the L&I people.

(post #119686, reply #22 of 49)

That is because they don't have a checklist.

Used to be a 20 questions type of deal, but that was only a place to start a discussion about it.

It was never if you checked yest to 7 out of 20 that you where an IC or no to 7 out of 20 that you where an employee.

I undertand that in most cases the WC insurance companies have much stricter rules.

Either the person has there own WC insurance or in some states a waver or the insurance company treats the payments to the "IC" as wages and you have to pay WC on them.

.
.
A-holes. Hey every group has to have one. And I have been elected to be the one. I should make that my tagline.
. William the Geezer, the sequel to Billy the Kid - Shoe

(post #119686, reply #32 of 49)

1099 is a matter of some interpretation:
http://www.irs.gov/businesses/small/article/0,,id=99921,00.html

Usually if they have their own business, have a risk of profit/loss, work for other people or the general public, get no benefits package, provide their own tools and work with minimal supervision, they can be considered 1099'ers.

Edited 4/26/2008 10:41 pm ET by byhammerandhand


Edited 4/26/2008 10:41 pm ET by byhammerandhand

(post #119686, reply #3 of 49)

Good question.

First, I think you did the right thing with Fred. Fred should not have taken Monday off. He let his side job interfere with his real job. You were fortunate to get to the real story as quick as you did. Fred will probably be better at hiding his true intentions with his next employer.

To Fred: bad timing on your new business launch dude!

Back to your question. Polling the group seems fair and sensible and you would think that it would produce the best results for your team. But...will it? You are still left with five people. If they split their votes, two might be unhappy.

I don't think I'm being helpful with an opinion but I think you need to make the call and do what is best for the company. Ultimately what is best for the company will be best for the employees. This will be true whether they understand that or not. For you, it's a business decision. For them, it's a personal pocket decision.

If I were voting: I'd vote for the replacement. I like the idea of skating out of there early on some days....then I can go do a side job LOL!

Bob's next test date: 12/10/07

(post #119686, reply #7 of 49)

Blue,
i just wanted to say "Thank you' for some of your previous advise.

remember our previous conversations RE:-people don't change ?
I still disagree with that- as i observe people changing all the time
BUT- they don't change on our schedule.
I have been making a very conscious effort to manage/assign tasks based on what people ARE vs. what i want them to be.
our "apprentice'- has a Masters degree in fine arts.-- I assigned him to clean a few siding scuffs with our' magic eraser '-- he was quite content-did a fantastic job
I would never have assigned the same task to our" bull in a china shop" installer who is equally happy laying shingles or dragging a tarp full of shingles from backyard to front yard.

so--- I don't think your"people don't change" view is actually true--but managing as if it IS true---seems to be working effectively.

Stephen

(post #119686, reply #16 of 49)

You are welcome Stephen and thank you right back at you. I have applied a lot of the things I've learned from you!

I think you are properly applying the theory about people's talents. I don't really think that the author ever intended the advice "people don't change" to be absolute and infinite.

Bob's next test date: 12/10/07

(post #119686, reply #4 of 49)

what should i have done differently?
my inclination is to continue with the "many hands make light work" and replace 'fred'
but I am toying with the idea of asking the crew if THEY would preferr i didn't replace fred- and split freds pay amongst all of us
stupid idea????


I really admire how you handled this situation.  I've had one or two prima donas like Fred on my crews and they just don't seem to be able to see the larger picture.  Giving them the chance to find out for themselves, firing them gracefully, was the best answer for me too. 


I wasn't able to lay it out for them the way you did for Fred so I just waited until we finished the job we were doing, then told the guy that I didn't have any more work for him. 


Why replace him if you're not working full days anyway?  I think I'd follow your second idea but instead of splitting his pay I'd tell the crew that, without Fred, I can afford to add a weekly gas allowance to their pay as an expense.  That way it's non-taxable and it also responds to a specific problem that depresses everyone. 


Taking that burden off them should make the gas allowance a real incentive.  And it also allows you to meter the allowance so that some of Fred's former paycheck is kept in reserve for future gas price increases.


 


 

(post #119686, reply #8 of 49)

Hudson Valley Carpenter,
thinking about the "gas allowance"
i see a few problems
1) it subtly puts me in sort of the position that 'I' am 'responsible' for gas prices
2) very easy for it to constantly be ratcheted up
3) once instituted-very hard to do away with
4)-none of the other guys live more than about a 10 minute drive from our typical work area-some live right with in it.

to clarify--all these men are on a legitimate pay roll--full with holding, covered by workers comp etc.
i wouldn't mind,really-paying some"bonuses" from time to time-if i could arrange it with minimum tax implications--but i don't see how
workers comp for roofers is very expensive-so paying bonuses that go through pay roll is EXTREMELY expensive relative to what the worker actually recieves.
I am open to alternatives-- but as a practical matter-currently the best "benefit" i think i can offer is the full days pay, for typically short hours
the fathers on the crew seem genuinely astounded to go home each day with enough time/or energy to attend there son's baseball games or to go fishing etc.
stephen

(post #119686, reply #12 of 49)

I like how you do it and how you handled it. 


I agree with showing him the door.  Not only for the reasons you stated but because the attitude of "I work when it works for me" will slowly work it's way into the entire crew. 


I would hire someone else.  Maybe with a little less skill that can learn and still contribute.  You may work everyone a few extra hours but for a bit but will save some money at the same time.  Kind of taking the road of "a little of both".  But either way you will be fine as you know yourself and your operation and numbers.


I would never get into the gas allowance deal.  There would be no end to trying to track it.  DanT

(post #119686, reply #18 of 49)

thinking about the "gas allowance"
i see a few problems
1) it subtly puts me in sort of the position that 'I' am 'responsible' for gas prices
2) very easy for it to constantly be ratcheted up
3) once instituted-very hard to do away with
4)-none of the other guys live more than about a 10 minute drive from our typical work area-some live right with in it.


It's my belief that any pay bonus or perc should create some kind of incentive for the employee to perform more willingly.  So my thought is that calling it a gas allowance has more incentive potential than calling it a cost of living pay increase.  


A cost of living increase has become a common, accepted practice in many wage/salary jobs so it doesn't create an incentive to perform, whereas something more unusual, gas money, might. 


BTW, you're already presumed to be "responsible" for gas prices as part of the cost of living which wages must be tied to, either directly through an agreement about it, or indirectly as prevailing wages increase.


The added benefit of the gas allowance being a non-taxable expense makes it all the sweeter. 


It doesn't matter if they walk to work, the idea is to be sensitive to their position as wage earners.  That creates a bond which makes them more responsive to your needs as their employer.


Another way to approach this incentive idea is profit sharing.  That makes a more direct connection for everyone between effort and reward but...it can also be divisive, like when someone doesn't pull his weight. 


I've had good results from sharing profits; better attitude, more reliable, increased productivity, pride in work.  I'd be happy to do that with anyone who has proven themselves on the job for a couple of months but I would make them earn the right to participate in profit sharing. 

(post #119686, reply #25 of 49)

Sounds like you pay a bonus to the guys every day that you knock off early and pay them for a full day.

John


J.R. Lazaro Builders, Inc.


Indianapolis, In.


 

John

J.R. Lazaro Builders, Inc.

Indianapolis, In.

“You can either wait for the storm to pass, or you can learn to dance in the rain.”

"I'll be long gone before some smart person ever figures out what happened inside this Oval Office."—Washington, D.C., May 12, 2008

(post #119686, reply #31 of 49)

I also think you handled it well, particularly thinking about the situation before responding. It appears to me you have very good management and motivation skills. I'll be watching your posts as it looks as if I have much to learn from you. i could have seen myself responding without thinking and ending up making an enemy out of him.

(post #119686, reply #11 of 49)

Good way to deal with it Stephen.  Probably much better than I would've done.  As for crew size I always preferred working 1 man short than 1 man extra as long as safety wasn't compromised.  Less BSing when all hands are loaded with work but I always had to reign myself back from having too high of expectations when -1 man. 

(post #119686, reply #15 of 49)

Stephen


I liked your approach to the way you handled the guy, go home and think/talk about it rather then some off the cuff reaction.


I think what you did was right. I wouldn't have anybody around my job site that puts more energy into his side jobs over his existing one. Why should you or your guys have to be second fiddle to Freds side jobs. And is it your problem that Fred lives where he does and has to spend X-amount on gas?


I have my job because of a guy like Fred. I came back here to Iowa after living in TX for 3 1/2 years and immediately got a job for my old boss, was just going to be temporary until work was caught up.  The guy that replaced me did a lot of side work, to the point of not being on our job site when needed cause he had commitments elsewhere, kinda like Fred. 


At least Fred was up front with you (well sorta) and told you about he side jobs, in my case the guy that I worked with was putting down time worked on our site but off working on his side jobs, not to mention taking another employee with him, all the while we need to finish a house by a certain time and these guys are off doing something else, and still getting paid! At least Fred wasn't steeling from you. The guy I'm talking about would field about 15 calls a day regarding his other work so you have that to contend with too. Why do you want to pay a guy to be there that would rather be elsewhere. Especially with a good pool of people that would love to have a job.


Doesn't seam like you need the guy around as a 1099 either, probably cause some hard feelings with other employees.


the pay rate for these men-is at the upper end of their trade, locally.--many of the applicants are ready and willing to work for 30-40% LESS than what these men are currently paid---but i have no intention of "going there"


I'm glad to see this, one should get paid for what they are worth, not what an employer can get by with!


Doug

(post #119686, reply #17 of 49)

I understand having enough men to work on "effy" days. I have had guys like this and i found that whatever they got was never enough and they were bound to leave you in a lurch sooner or later, You cant have a roof open with rain coming and not depend on people. I spent a few days working to midnight waterproofing a house, i cant do that any more. My last guy had a gas card and i caught him filling up his buddys truck for there side job. I kept giving and giving and he kept taking and taking but it was my fault, I needed him and he took advantage. I wanted to give him the hours so i did not hire anyone else but he left me when i needed him anyway. If i had to do it all over again i would have a few roofers working so i never had to depend on just one or 2. Sounds to me like someone up there was watching over you before this guy really acted up, I bet in a week or so your guys will start telling you all the other stuff he did behind your back.

(post #119686, reply #19 of 49)

My .02

You handled it well.

He wants gone and to be able to make his own way. He sees $ because he has just made a killing on a few weekends and is feeling [JOBSITE WORD]y.

Keep your game plan intact and fill his position with someone who wants to be the employee.

Now I also agree with sphere.

Encourage him to set up his own business, tell him that as the occasion arises he will be on your first call list when you need help.

Offer to help him with any questions about the legal aspects of going into business for himself. It is perfectly legal to hire a sub to assist you and 1099 him . One of the "Arms Length " criteria is the % of work he does on his own and away from you.

Do not in any way make this sound as if you are offering him anywhere near full time employment or even 1/2 time. You want him out on his own but still willing to lend a hand and get paid and paid well for it.
I would bet that a number of guys here have gotten just that kind of offer and start from some of their employers, I know I did.

You just might end up with a guy whose workmanship you know and is available for those situations when an extra hand is helpful.


They can't get your Goat if you don't tell them where it is hidden.

Life is Good

(post #119686, reply #23 of 49)

 It is perfectly legal to hire a sub to assist you and 1099 him .


It depends on the state.  1099 is Fed, and how and why states define a sub can vary greatly, even among the departments of a sate.


For instance Oregon



 

has a lengthy definition.  What can be of particular interest is "Nature of Work, #6:  To what extent may it be expected to carry it's own accident insurance".  By extension, this is often extrapolated to include L&I insurance.  Often, states are concerned that a job will be loaded up with so-called "independent contractors", who are actually acting as hourly employees.  As (wrongly defined) subs, they are not required to pay into the UI and L&I funds, thereby removing a source of income to the state.  And if an employee is injured, the employer may not be covered by L&I, and more liable to be sued by both the state and the employee. 

 

So in reality, there is more to the definition of a sub contractor than a 1099.

(post #119686, reply #24 of 49)

I agree.

I didn't mean to imply that handing someone a 1099 automatically made them a legal subcontractor.

What I intended to be understood is that there is no issue with hiring a legal sub and handing him a 1099, as a matter of fact I do believe that is the law.

Hazlett would have every right (or at least in this state he would) to use a sub to assist him on his jobs, just have to meet the criteria is all.

I have quite often worked as a "Hired Gun" on various jobs and my "negotiated contract" was based on an hourly rate. The manner and time in which I perform is mine to decide but the outcome can (and had better) meet the expectations of whomever is hiring me. They can set schedules and hold me to them , but they cannot dictate that I show up at 8 and leave at 4 unless that applies to every other sub on the job.

If there are job rules concerning subs I must be treated as one.

I checked with every legal office I could and was told that there is nothing wrong with that as long as the other criteria are met. Perfectly legal.

I do carry all the insurances.


Edited 4/26/2008 4:38 pm by dovetail97128


Life is Good

(post #119686, reply #26 of 49)

Thats exactly what I did for years.


My tools, my time, materials furnished by the contractor. I show up, do my job either hourly or at a predetermined price, I invoice, I get paid.


The kicker is the half of Soc.Sec I have to pay that is not paid by an employer, the benefit is that no withholding is going to uncle sam intrest free for a year on the taxable income.


Both ways have advantages and disadvantages..the schedule C exemptions and write offs can be a deciding factor..if you don't supply any materials or purchase tools, you are liable to be paying a lot of income tax..Idealy you show a loss, but after a few yrs, the IRS gets wonky and you have a hobby , not a bizness.


Spheramid Enterprises Architectural Woodworks


"Welcome to Poo-ville, can I have your socks?
Seriously Folks, I need a home for 3 lovers of your life.

www.richmondrenovationsandrestoration.com  

(post #119686, reply #28 of 49)

"the benefit is that no withholding is going to uncle sam intrest free for a year on the taxable income."

You have to be careful with this one. IIRC, your withholding needs to be within 10% of your total tax, or you pay a penalty (basically interest) on the amount you were low.

If you have a wife working a normal job with normal withholding, you might be okay. But a primary wage earner who pays no quarterly estimated tax payments will likely pay one way or another.

 


Jon Blakemore

RappahannockINC.com

Fredericksburg, VA

 

Jon Blakemore

RappahannockINC.com

Fredericksburg, VA

(post #119686, reply #29 of 49)

Well yeah, thats the estimated game..which can be a carp shoot if ya don't have a steady gig..no matter how ya slice it, you are gonna pay.

Spheramid Enterprises Architectural Woodworks


"Welcome to Poo-ville, can I have your socks?
Seriously Folks, I need a home for 3 lovers of your life.

www.richmondrenovationsandrestoration.com  

(post #119686, reply #27 of 49)

Washington is probably one of the more rigid states.  That is because there is no state income tax.  So the state must ensure that their income stream stays strong.  Without a continued influx of employer contributions, L&I, and UI could dry up.  States with a income tax could (?!) afford to be less rigorous in their enforcement.


But, I actually see nothing wrong with periodically sticking it to the man, as long as one is careful in their choices.


 


Of course, I would never do it myself (legal disclaimer)


Edited 4/26/2008 4:47 pm ET by McMark

(post #119686, reply #33 of 49)

I agree that Stephen handled the situation very well.


I think that it is very useful to keep good relations with all your employees past and present, even if your goals are somewhat at odds. Being straightforward is the best way to encourage this.


We recently had a 15 year employee go out on his own. He has been doing side jobs for most of that time but always on his own time. He valued the fact that he had a regular paycheck over the additional money. He finally decided that he would take a chance and go fully on his own.


We have offered him work as a sub, but he is simply too busy with his own work to fit us in. We have also given him a number of referrals, knowing that his work will be top notch. Hopefully Fred will have similar success.