For those businesses that are growing, or looking to grow, thinking about hiring strategies in a post-COVID-19 world can be tricky.
Times have changed and so has the way we need to approach hiring.
There are so many restrictions and regulations to navigate as a business owner. On top of that, today’s workforce is looking for more than just a paycheck they can truly live on, they’re looking for opportunities to grow personally and professionally, to make an impact with their work, and to be recognized for it.
Needless to say, finding and hiring the right people for your business in today’s market is challenging, but it doesn’t have to be overwhelming.
I asked my friend Kate Kilberg, who is a practicing business attorney, to join forces with me to help business owners understand both the legal side of hiring and how to create a meaningful work experience for your team. In this Q&A mini-series, we’re answering questions and sharing the expert coaching advice and legal guidance you need to build your dream team and grow your business.
Part II: Understanding employment contracts and the personal priorities of today’s workforce
Dana Corey: When it comes to hiring an employee versus an independent contractor, I think part of the confusion is that people don’t actually know the rules around hiring part-time employees. They think that because they’re not going to have a set schedule, or what would be considered standard employment hours, they have to hire contractors rather than employees. The truth is, you can hire employees under a variety of conditions.
So, let’s talk about employment contracts. I’m hoping you can answer a few questions here, Kate.
When does it make sense to have an employment contract?
Can employment contracts be used to incentivize employees to commit to a specific term of employment? Is it legal to offer a bonus at the end of the contract?
What are the penalties for breaking the contract for both employers and employees?
Kate Kilberg: That’s a great question, Dana, and also one that comes up quite a bit. To be really clear, it’s important to know that in most states, I think probably all states, honestly, but definitely, in Oregon–employment relationships are assumed to be At-Will.
An At-Will employment relationship can be terminated by the employer or employee at any time, for any reason. There is no requirement for “just cause.”
There can be a downturn in the economy, which leads to an employer needing to lay some people off, even though they’re superstars. There are no stringent requirements to meet. Still, you want to be really careful about whether you want that relationship, which does have its benefits, especially for employers. Most employers generally prefer to maintain that At-Will status because you don’t have to document cause to terminate employment.
Now, there are different reasons why you might want to have an employment contract, even though it changes that At-Will relationship status.
⇨ Generally, for more high-level managerial positions, people tend to use employment contracts, and they do that exactly for the reasons that you’re asking about.
Maybe you have a really talented candidate, and you want to give them an incentive to accept your offer instead of a competitor’s. You may offer an incentive that if they meet certain performance measurements, they’ll get bonuses at certain points along the way. Or if they stay with your company for a year, they’ll get a bonus. That’s one reason why you might do an employment contract.
⇨ Or maybe you’re hiring for a position where it’s really hard to find someone who’s qualified. So you want to have some sort of contractual agreement with that employee saying that they need to give you 90 days notice, or six months, or however long you think it might take you to find a replacement. That’s another scenario where you might want to have an employment contract.
⇨ Another reason would be if you’re working with a lot of trade secrets and intellectual property, an employment contract can put in protections in place stating that if an employee leaves, they can’t compete with your company, and they can’t take employees or trade secrets with them.
Those are all reasons why you would want an employment contract instead of just having an At-Will employment relationship.
Let’s say you have a two-year contract with somebody and after six months, you realize it’s just not working out–they’re not the right fit, they’re not what you thought you needed, or they’re not bringing what you thought they were going to bring to your business. If you choose to terminate at six months, you probably are going to be on the hook to some extent. You can’t just fire them just because you want to, that would essentially be an At-Will scenario.
When you have an employment contract, what’s most likely going to happen is that you’ll have to go back and renegotiate the contract. That individual has a contractual right to the money that you have promised to pay them over the next two years, so you may have to liquidate damages.
There are advantages to employment contracts and there are also disadvantages.
There was also a case of a company that hired a whole new C suite and promised them all six-figure bonuses in March of 2020. Then, as we all know, COVID-19 came into the picture, and that company had to let people go, they didn’t have the revenue to support the company, and they were on the hook for millions of dollars.
Now, that applies on the flip side, as well. If an employee commits to a two-year contract and wants out at six months, you have a right to renegotiate your contract. You can’t actually make them stay, but you can say, “this damages my business and I’m not going to pay out the salary that I promised over two years.”
You can actually penalize that type of thing, but I prefer the carrot rather than the stick, myself.
Dana Corey: I absolutely have to agree.
This actually came up with a client of mine recently because they need to hire someone with a very particular skill set. They’ve been looking for quite a while without any luck and somebody from another state applied recently. So, my client was asking about how an employment contract might protect her company if they hired that person and brought them to Portland, where the company is based, and then that person decided they don’t actually want to stick around. So this is really great and so helpful, thank you so much.
Before you ask me your next question, a live viewer, Jen, commented in the chat and said, “I’m late joining this. What about noncompetes?” She works with licensed massage therapists and wants to know–
How do you keep an employee, or former employee, from going down the street and opening a business that’s competitive with your own?
Kate Kilberg: So, if that’s something that you’re worried about in your industry, that would be a reason to have a non-compete provision in an employment contract.
Different industries have different rules, for example, lawyers are not allowed to have non-competes with each other. I don’t know specifically about regulations for licensed massage therapists, but that is definitely one of the reasons why you might choose to have an employment contract. Just be aware that you’re therefore giving up that flexibility of At-Will employment.
Now, Dana, I asked you earlier about how employers can really make the employment experience feel fulfilling? (Click here to read Part I of this Q&A mini-series and find out the answer.)
Can you talk about what else employees are really looking for in this job market? And will you speak to specific steps that an employer might take, particularly for small and mid-sized businesses, to meet those needs without going broke?
Dana Corey: So, whenever we think about a compensation program, the first thing employers think is, “Oh, it’s going to cost money.”
There are always costs associated with any kind of compensation.
Yes, of course, because employees want a wage that’s commensurate with their experience, their role, and their responsibilities. They want health insurance because, in this country, that’s the only way really that they can guarantee having access to health insurance. So there’s pay, health insurance, retirement packages–there are all those pieces that center on money.
On the other side of financial compensation, what employees really want is flexibility. Since the pandemic started, we’ve watched as a lot of companies that insisted the work couldn’t be done remotely learn that their employees can do their work, and can be counted on to do their work, even from their own home, and even wearing pyjama bottoms. That flexibility to do their job, and also be physically present as part of their family, or for other responsibilities outside of the work they do, has become incredibly important to folks. And understandably so.
Another intangible factor that is important to today’s workforce is they want to feel like they matter.
Let’s be honest, we all want to feel like we matter and now we’re seeing that as a widely-recognized priority.
Part of making sure that your team feels like they matter is giving recognition and words of affirmation. I always go back to the love languages and words of affirmation because, while they’re designed for romantic relationships, we all want to be acknowledged and to know that our contribution counts.
When it comes to hiring and retaining great people, trust is also an important factor.
I think one of the biggest mistakes employers can make, and one of the biggest issues that employers and employees can run into, happens when business owners insist on micromanaging their team.
Every business owner starts off by having a finger in every pie, doing all the work, and making everything happen. Then you get to the point where you’re hiring people to do the work you delegate to them better than you can do it. In order for that relationship to work, you have to trust that you hired a person who actually knows what they’re doing. Your job is to say, “This is the result that we’re looking for.”
And then you have to trust them to do it. It is not your job to tell them how to get there.
A sense of belonging is something that people want from their work, but what does that actually mean?
It means that people want to feel like even when they’re doing something hard, they’re doing it as part of a team, that they’re in it together. They want to know that their work is making an impact and that their contribution counts.
Something that gets overlooked all the time, is that some of the jobs that need to be done in a business can be kind of boring sometimes. Yet, no matter what that mundane task is, it’s an integral piece of getting the desired result for that business.
You need to make sure that your people feel valued, that they know how integral they are to your company’s success, and how appreciated their work, their time, and their knowledge truly are.
Of course, you can throw money at them, that’s never a bad thing. But there are other things that people want. I’m going to give you a really cheesy example: Employee of the Month.
People thrive on being acknowledged by their colleagues, not just their boss. When people that you’re working with notice that you’re doing a really good job and say so out loud, to you, or to your boss, or another team member, that can be a really powerful and meaningful motivator that makes folks feel like they’re appreciated.
So, how does that happen? It is the business owner’s job to create an environment where that is an expected way of working with one another. Business owners need to nurture a practice of pointing out when people are doing a great job, or when somebody does something that makes things easier, or goes above and beyond for a client or another team member.
Words don’t cost money. But they do have a cost because people can tell if you’re bullshitting. People can tell if you’re doing things just as a business tactic and tactics don’t work. Authenticity, authentic recognition, and authentic appreciation, people can feel that, and we respond to it.
How to Hire for Success
In today’s market, finding, hiring, and retaining people with the skills and talents you need goes far beyond negotiating salary expectations. When you begin the hiring process, it’s important to remember that there are advantages and disadvantages to every employment situation.
⇒ An At-Will employment relationship can offer freedom and flexibility, but it’s a two-way street. You don’t have to give cause to terminate employment, and neither does your employee.
⇒ Employment contracts create an opportunity to incentivize results and foster a long-term commitment, however they may also increase your risk of liability.
⇒ Noncompete agreements may or may not be regulated in your industry. If you have further questions, follow up with your lawyer or contact Kate here.
⇒ Practicing trust, empowerment, and recognition with your team goes a long way to creating a culture of belonging that will catapult your company to new levels of success.
Get more expert insight and legal guidance to help you navigate the hiring process, including what you can and cannot say in job ads and interviews. Plus, learn practical ways to nurture a culture of belonging within your company.
Click here to read the final installment of this Q&A Mini-Series on the Legalities and Strategies of Hiring for Business Owners. Or tune in to watch the original interview here.