As the coronavirus pandemic continues to plod along, professional services companies are taking stock for the long term. It’s clear that the new normal is likely to extend into 2021. That has specific billing and payroll implications for the professional services sector, because they deal with billable and non-billable time — as well as work across different projects.
Stand out from the competition as a trusted payroll provider by addressing the top challenges employers in this industry are facing. Let’s explore five payroll pains your customers are feeling right now.
New Labor Laws
On January 1, the Department of Labor raised the salary threshold for overtime pay. How did these changes impact your prospects? The coronavirus came immediately on the heels of the DOL’s changes, which means employers may still have employee classification issues to figure out.
Here’s a quick review. The salary threshold for executive, administrative, and professional overtime exemptions under the federal Fair Labor Standards Act (FLSA) increased from $23,660 ($455 per week) to $35,568 ($684 per week). Anyone earning a salary at or below the threshold must now be treated as an hourly employee for overtime, at non-exempt status.
Employers should have worked through the calculations to determine the best financial outcome — whether to issue raises so that all employees maintained a salaried classification, or to reclassify employees who were under the threshold to hourly. But with the advent of the coronavirus, all expectations for revenue and profits may have been thrown out the window. Either that, or your prospects may not have had time to take stock before the coronavirus disruption.
Either way, now may be a good time for them to reevaluate the classification of their employees. You can help them understand how to approach this issue.
Bonuses and Incentives
For employers in the professional services industry, keeping the best people is always a top-of-mind consideration. Especially during COVID-19, when companies have to do more with less, they want to be doing it with their best people. Bonuses and commissions are often effective ways to retain the best talent.
Differentiate your payroll solution by addressing the incentive challenges your prospects are dealing with. Ask about the bonuses and commissions they currently have in place. Are they confident that they’re in compliance with applicable labor laws — specifically, the Fair Labor Standards Act (FLSA) if they have hourly employees? How are they handling overtime for prior periods?
We’re working with some project-based companies who have heard customers say, “These seem like pre-COVID rates that you’re charging us. We want the COVID rate.” In other words, customers are expecting discounts. They don’t have the money, and they expect vendors to understand that in a competitive landscape, they need to be willing to cut pricing.
When your prospects are doing billable hours at specific rates, and they’re being asked to take a haircut on that rate to account for a pandemic, they need to know that they’re still profitable.
Profitability seems simple at first: revenue minus costs. But project-based organizations need to understand the profitability of individual projects. That gets trickier. Payroll sales reps that take the time to ask about these challenges will stand out from other HCM providers.
Ask questions like these:
- Do you have the labor tracking for billable hours to really know if you’re profitable on each project?
- How are you determining if each job position is billed out at the ideal rate?
- Have you audited the true costs of labor and benefits against what you’re billing out at?
- Do you know your actual margins, or are you guesstimating?
Working from Home
If your prospects are working from home for the first time, they may be wondering how to make sure they have accurate time records for their remote workers. This is a real issue for any company that has project-based timekeeping or hourly employees who claim overtime.
The idea of guaranteeing accurate time sheets can seem impossible when dealing with remote workers, but you can provide much-needed assistance. Ask questions like these:
- Do you have an electronic timekeeping system that workers can access from home?
- How do you ensure the right time is allocated to the right project?
- How are you communicating your time-and-attendance policies and preventing unauthorized overtime?
- Do you have issues with late timesheets?
- Are you relying on manual methods to address company-specific pay policies?
Pay Period Models
If your prospects have classified some employees as hourly, they may be making payroll harder than it needs to be. Using a semi-monthly or monthly payroll cycle introduces complexities that employers can avoid if they switch to weekly or biweekly.
When employers pay on the 1st and 15th day of the month, they often need to do some calculation gymnastics around getting the overtime rate correct. Because payday doesn’t always line up with the end of the week, they won’t know the correct overtime until the next pay period, which means they’ll need to provide back pay.
If your professional services customers have hourly employees, help them to take a hard look at paying weekly or biweekly. Show them how your solution can make overtime calculations easier. If they’re convinced that they want to stay semi-monthly for business reasons, be sure they’re aware of what it takes to be in compliance for overtime pay. Walk them through the solutions you offer to make that easier.
Win More Project-based Clients
As we prepare to enter 2021, project-based companies need to understand what the new normal will look like long term. It’s time to start making lasting payroll changes. By understanding the greatest challenges and questions that the professional services industry is wrestling with, you can stand apart from the competition.
As you engage with prospects, consider IDI your go-to partner for industry knowledge and sales support. Check out the sales enablement assets in the IDI Resource Center, and contact us with specific questions you may have.