Musings by Kim Silvers, SPHR, PHRca

Congratulations on getting thorough another year of YOU KNOW WHAT (an acronym also known as COVID-19).  If you’re as weary of hearing about this as yours truly (and those surrounding her) you may welcome this distraction on the road ahead. Let’s end the year looking at what’s already coming down the pike on the 2022 employment front.  Here are five of our predictions ….

  1. It’s a “sellers” market and will continue to be. In our world the “seller” is the applicant or employee with skills to offer and the “buyer” is the employer. Who would have guessed this job market would evolve as it has on the other side of the YOU KNOW WHAT shutdown in 2020? We see employers will become more creative with recruiting packages, including “shopping” their competitors’ and clients’ key contributors and offering them 20 – 30% more. Signing bonuses aren’t just for ball players and MBAs.  And every person who touches your business will be a potential compensated scout for your hiring needs.  Savvy employers will offer a noteworthy referral bonus for anyone who brings in a viable and/or hired candidate.  By the way, if you are publicizing the names and accomplishments of your rock stars, you may want to low key this for a bit.

Our Gumby-like employers will become more flexible with how and where work gets done, particularly for knowledge workers.   Margins will be squeezed even more in the name of keeping talent in seats and work flowing. Employers who fail to take notice of how their applicants are demanding more flexibility, money and paid time off will be left in the dust. How to stem the tide?   This starts with a salary survey to ensure you are paying at least market rates. Adding unique benefits to keep the attention of talent has become even more critical to retention.  A robust onboarding program is key to engagement.   Exit interviews will be critical, but don’t wait until they leave to ask for feedback. And all of this begins with a well-trained supervisor. (We offer tools for many of these programs if you want to think out loud about the options).

  1. Non-discretionary bonuses for non-exempt employees will fade away. In light of the complexities of calculating the regular rate of pay for non-exempt (hourly) employees who have earned more than their base rate, the non-discretionary bonus will be too much work and risk to include in the compensation package. We predict the bonuses that remain will become discretionary – at the whim of the employer with no specific deliverables required of the hourly employee.  Discretionary bonuses are nice, but non-discretionary incentives tied to specific performance deliverables keep people more focused on the target. The tail will wag the dog on this one.

But there are other pieces of compensation in CA that will continue to complicate how people are paid and what’s on the darn pay stub. The regular rate of pay calculation could include a productivity bonus, shift differential, commission, hazardous duty pay, piece rate, on call pay, pay in lieu of taking health benefits, etc.  If these types of pay categories are paid out the employer will need to have each non-exempt employee’s regular rate of pay calculated for any overtime worked, as well as for CA Paid Sick Leave, meal and rest break premiums for missed or short meals and breaks, and reporting time pay.  Moreover, this regular rate of pay calculation must be retroactive to the period of time covered by the non-discretionary bonus or other compensation. (For example, a quarterly productivity bonus requires calculating the regular rate of pay for every pay week in the entire period the bonus was earned.) And then there’s the difference in the calculation for production bonuses vs. flat rate bonuses. (Don’t get us started.)  If you haven’t been calculating regular rate of pay, it’s worth a call to your employment counsel. You’ll want privileged conversation on this strategy and how to fix the last three or four years of pay.

  1. Any independent contractors remaining will become a target on the backs of business owners. Regardless of how many exceptions are added to AB 5 and its offspring, the criteria for having non-employees do the work that is core to the business is going to be harder to justify. (The core work of the business is only one of several criteria.) These misclassification issues are usually surfaced through an unemployment or workers’ compensation claim. (Those are for employees, right?) The state agencies investigating those claims will be eager to learn more about the work arrangement and settle up unpaid taxes along with penalties.

If you have a questionable independent contractor, we recommend you speak with legal counsel.  They are the only professionals designated to counsel on this matter under CA state law.  Or you could just hire the worker as an employee and save a lot of risk.

  1. PAGA (Private Attorneys General Act) claims will take down many more businesses. Bless those generous employers with good intentions but not much knowledge of CA labor code, because their employees often know more than the boss. PAGA authorizes aggrieved employees to file lawsuits to recover civil penalties on behalf of themselves, other employees, and the State of California for an employer’s labor code violations.  The aggrieved employees generally retain 25% of any civil penalty recovered and the remaining 75% goes to the California Labor and Workforce Development Agency (LWDA). (Paga means “pay” in Spanish.) In essence, a PAGA claim allows an employee to step into the state’s shoes (become a private attorney general) to enforce certain labor code violations.  Since employees who prevail on PAGA claims could recover attorney’s fees and costs in addition to the penalties as they apply to each employee, an employer’s potential exposure on PAGA claims is quite significant. And guess who makes the most money on these claims?  You guessed it – plaintiffs’ attorneys

The California Chamber of Commerce noted earlier this month: “Lawsuits filed under PAGA have increased more than 1,000% from the law’s first year in effect with the LWDA receiving approximately 4,000 PAGA notices each year since 2014.” 

Something needs to change here.  Watch for the 2022 CA statewide ballot initiative The California Fair Pay and Employer Accountability Act for some possible relief.  And arm yourself with knowledge and/or a partner to stay on top of the basic employment laws, particularly those around wage and hour.   

  1. Technology will continue to aid in communication and lowering payroll costs. It will also challenge the personalization of the work experience and service delivery – the reasons employees and customers come and stay. The online experience with a bot may be the first line of interaction and can address predictable questions; there are some very cool tools out there and we love them. But accessible, knowledgeable individuals who can listen and reason will win the day in enhancing employee relations and lowering turnover costs.


If you’d like help to create programs to better manage your talent pool, lower risks, and train your supervisors to be great representatives for your firm, please give us a call.