Trish - Way to go, consider the pot officially stirred!! I went through this a few years back where we moved ISE's from Exempt to Non and it was a mess. These guys were high earners (many $250K+) and 80% of that came from commissions. They actually could care less about their base and would work around the clock if we let them. We did get through this but it was disruptive and we did lose some top performers...
After an acquisition, we went through this. Our ISRs were exempt, but the acquirer treated them as non-exempt.
Major culture shock. Having to track time changes the way people feel about their work. A mess indeed.
Trish, you are right on target when you state, "Common sense is not in play here." We began our Inside Sales in 2011 and went so far as to get an outside legal firm to review this issue. We chose the non-exempt path, per advice through counsel. Since, I have had challenges with culture clash and the stigma mentioned in the article. If I had one wish....the federal and state laws would be updated, allowing us to serve our customers when they want to be served, not when we have office hours.
I've been fighting this change for several years. My organization is exempt and I'm trying to keep it that way, but every year HR and Legal ping me about the issue. I've added duties like trade show attendance, the ability to meet clients and limited travel which seems to keep me in the gray area. For the acid test, my team's comp plan has their commission at 60% of earnings at OTE. Some exceed this and some come up short. I've argued that the comp structure is intended to support the exempt model, but I'm wondering if that is valid? Great topic and very relavent!
It might be interesting to start looking at these stats as it relates to different inside sales operations, i.e. call center operation where the core hours are essential to cover the customer demand vs. the true consultative sales operation where tracking the hours might be (or is) a nuisance…
First, thanks to all who have commented so far. It is a painful issue and most assuredly needs to be addressed at both the federal and state levels.
As a point of clarification, and shame on me for not mentioning this in the post, when we use the term inside sales we are referring to those operations outside of a traditional "call center" where staffing is based on hours of operation. Thanks for pointing that out Jelena!
Finally, to Mike's comment re:commission structure... there is OTE and then there is actual earnings. I think the intent of the law is based on actual earnings but, once again, I am not providing legal opinion here.
Stay tuned folks, I think this thread will get interesting!
Trish, awesome post. I wasn't previously of aware of how complicated this actually is. Do you know how these laws are enforced? Is this something that financial auditors look at closely, or is more of a tax/IRS issue?
Trish, thanks for tee'g this one up! On behalf of the community and our association, we will begin looking into more specific lobbying efforts in Washington. Some of our large enterprise member companies have efforts underway.
Leadership can help mitigate many of the concerns and issues that have been discussed over the years. Having spent many years myself (and still at it) leading non-exempt groups, it is possible to turn this issue into a a small nusance while still growing a highly professional, engaged, proud and happy team and culture.
When I observe those high-performing and professional teams, they have found a way to treat their non-exempt status as more of something they simply "check the box" on while going about their business... in essence, it has become a non-issue.
Also, I was surprised (and happy) to see that 40% classify as exempt. My informal discussions with member companies seemed to indicate a lower percentage...wonder if its a particular demographic that responded?
@Ori, at least from what I have see/read the issue isn't so much enforcement as after-the-fact class action lawsuits.
Groupon is a big/recent example. But I know many bigcos (like Oracle, Glako, IBM, Novartis, etc.) have faced litigation.
A found a bunch more here: http://goo.gl/itdrQ
@Bob - glad to hear some organizations are not feeling the pain of having a nonexempt status.
I collected the data from our network of b2b tech companies. While doing the research we found that it tends to be the larger organizations that are using the nonexempt status while others are flying under the radar so to speak.
Another interesting trend we are now hearing is that many are classifying their leadgen teams as non exempt but maintaining an exempt status for those teams that carry quota.
We will continue to update as we learn more.
What's interesting is how the lines are really blurring between "account executives" and "inside sales" - I sell a web based product, so the workflow and sales process is the same for both groups, and since we are selling a cloud based product, travel is usually the exception rather than the rule. The only differentiation is which buying audience each serves. 90% of my team has at least a Bachelor's degree, 2-5 years of sales experience, and they are not managed by the clock. I treat them like any other professional sales person, and they manage their own schedules. If I had a time clock and hourly wages, my team would feel subordinate to the Account Executive team which I've worked diligently to maintain as a healthy ecosystem.
Interesting discussion. I'm curious, do the upcoming Obamacare regulations cause people to look at Inside Sales (or even Sales Reps) differently - in order to comply or be free from the regulations? For example employee vs. contractor? Probably for another discussion.
Another curious question for @Mike Conner: if the internet tax passes (hope it doesn't), how will that affect your selling of a web-based product?
Not sure Steve. I sell a web based subscription product that allows access to business and IT books and videos. Some states already tax our product, but that is only a handful at the moment. I had a guy from Texas complain once. I suggested he write his congressman.
@Steve. What great questions! I am going to have to noodle on those for a bit....
@Steve, to the employee vs. contractor question. I haven't seen many try to got that route.
It is a nearly universal 'Thanks-but-no-thanks' flag for top talent. The job market for sales reps is just too hot, imho, to try to play that game.
Its fascinating to get informative data identified with bargains operations, in bargains its extremely critical to aquire business needs when you are experiencing business improvement stage.
It is an unfortunate situation for Sales Development Reps. I view their position as an interview for an ISR position. The law was originally intended to protect them from unfair labor practices, but it only hurts them as they get paid on initial presentations and are evaluated on their hard charging work ethic.
Many of them have no other responsibilities and plenty of bills and they are trying to shoot out of the gates fast. They are forced to cut their hours to meet the regulations and not put the company in jeopardy if the man comes to audit.....
Disclaimer: I am not an attorney, and do not represent what follows as legal advice. But a boatload of research on the topic informed this article in our BtoBEngage newsletter.
UNCLE SAM CARES HOW YOU PAY AND YOU BETTER PAY ATTENTION!
Your phone-based marketers and sales reps must, by law (FLSA 1937), be non-exempt employees. You can pay them as much as you want to, but you must account for their time and wages on an hourly basis, with overtime beyond 40 hours per week.
Many HR departments and even more managers don’t know this. But the US Department of Labor does. They are vigorous in enforcement and they never, ever lose a battle over it. Indeed, more than a few employers have been hit with huge overtime back-pay settlements, fines, and long-term governmental oversight for ignorance or willful violation of this rule. It dates from the 1930s Fair Labor Standards Act, everyone except the unions hates it, but there is no congressional will to do anything about it. So abide by the law, adjust your comp plan, and move ahead.
Net: exempt or non-exempt is not a matter of opinion or preference. It is a matter of law since the Roosevelt administration. Consult your corporate counsel orwww.DOL.gov
I re-invigorated the conversation Michael because upon further research, at least with in the technology space, people are paying leadgen reps as nonexempt and inside sales reps as exempt. Weird huh?
Hi Trish! You do the Group and the inside sales community a service by re-visiting this topic from time to time.
You are correct that in the high tech world, some companies try to fit the law to their preferences. However, arbitrary distinctions between “lead gen” and “inside sales” and “professional” mean nothing to DOL. Neither do invented titles such as “Account Executive” or the adjective “professional.”
It is our understanding that, unless specifically exempted, employees must be classified as non-exempt. That is why I respectfully urge Group members to consult their counsels and also the US Dept. of Labor.
I have a question. I have always worked a salary career, but recently I was offered a role in IT as a Risk Analyst as a non-expempt in NY . I do no selling at all and its more admin and research role. For some reason its not sitting well with me because this title used to be Exempt but according to HR they changed it to Non-Expempt for any new hires. I asked many questions about this during the interview but they were vague about this. What do you all think?
@Melanie. I would go to HR and ask them very specifically for the reason. It might be nothing or you might uncover an issue.
@trish thank you for your feedback. I actually did
Many times in the interview. They said Compensation evaluated the position and decided this role with its responsibilities went from salary to non-exempt. Maybe in the future with more responsibilities it may change.
Agh I just dont know. I accepted the job offer but hesitant only cause of this. The salary is 60k and I don't get why its hourly.
@Melanie - It sounds like primarily a risk management decision.
Except for the annoyance of timeclocking, I don't see any downside to being hourly. On the plus side, you'll be one of the few who will be compensated for over & above hours.
Congrats on the new gig and best of luck.
Thank you @Matt. After talking with HR again, they said I will clock in at mt desk only when I come in the morning and when i leave. Not for lunch. Also it may change to salary once there is more roles added to the position. I guess i will just go for it and make the best of the new job. Other than that this this a great company.
I'm working with a company that uses a 3rd party to support our HR/Payroll functions. The company, Insperity, "insists" that our inside sales folks are considered non-exempt...feels like this is pushed because we have to pay them more for the payroll licensing of their services/product (more people clocking in/out). Does anyone have experience managing a 3rd provider on this topic> Thanks