Kronos Supplemental Pay; A Sea Story

The year I turned 12 I went to sea. Yeah… I know, this sounds like one of those stories Grandpa would tell you when you needed to be reminded how soft you kids have it now and how much harder it was then. I will confess my motive in telling you this story in a moment but for now just realize it it is true—my mother really did put me on a plane from California to British Columbia, all by myself, to work aboard the Lloyd B. Gore, a 128ft, 250 ton tugboat in the summer of 1979. I learned two big lessons. First, don’t ever tell immigration officials the purpose of your visit is to ‘go to sea and work on the docks’ (something about work visas, child labor trafficking and other sensitivities). Second, I learned about the value of Differential (aka: Supplemental) Pay first hand.

My father, who was actually legally working there on an engineering project, came to the airport to pick me up. After being paged, he went to the little room with the big lights in the back of the customs office and completely refuted my story with his own explanation about me being here merely to visit him for a few weeks. He then took me to the dock where the Lloyd B. Gore was tied up and handed me over to the Captain and his wife and, after a couple of laughs about the misunderstanding at the airport, left me to work on the boat.

For my regular duties I earned merely room and board. For premium work, like scraping the hull or selling prawns off the dock I earned $5.00 per hour; which was pretty good for a 12 year old in 1979. At one point the Captain had me grinding fiberglass down in a hold until I realized how much fiberglass itches. I told him I didn’t want to do that even at premium pay. His last offer was $50 an hour but I refused and soon had only my regular duties left. That night I was assigned the Midnight to 8am Watch as part of my ‘regular’ duties. So much for shift differential.   

Down the wharf a few boats was a crab fisherman. He offered me $50 a day to work on his boat on my days off. I instantly agreed.  My first job was actually steering the small boat while he set and pulled up the crab traps. Very cool. My next job was shoveling out the rotten bait from the hold—it was no surprise why even a crab wouldn’t eat that stuff. There wasn’t any premium pay offered. I worked as fast as I possibly could.

I tell you this story so you will believe me when I say I understand the basic reasons and desires and necessity (at times) for differential pay for different jobs and/or shifts, etc. I have a growing concern, however that too many people, including myself, do not know the cost of differential pay. And by cost I don’t mean the 50 cents more an hour the employee is getting but what it costs the organization to implement, maintain & explain rules that deliver that 50 cents over time.

We don’t know this cost for two reasons:

1) No one (at least no HR, Compensation, or Labor Relations Manager I’ve met in 25 years) has ever asked.

2) Most of us think that, because Kronos Timekeeper uses lines of code (pay and work rules) to calculate such things there is no premium cost to calculate premium pay compared to any other kind of pay. Does this smell a little fishy to you too?

In both our union and non-union staffed clients it is amazing to see the variety of differential/premium/supplemental pay polices. While our Kronos Application Consultants are amazingly clever at implementing gems like “Detail pay at a $2 premium above the hourly rate of the highest paid supervised employee on their crew (that day) including overtime but not including call in pay”… where was I? Oh yeah… while the ACs are amazingly clever at implementing pay policies like this it simply must cost more to sustain complex rules than simple ones. But what if we could get people paid the same net amount for the same net work without all that complexity? Maybe all those overhead dollars could then be re-invested in the workforce and company directly. Perhaps if we knew the total cost of implementing some proposed premium rule up front we would look for simpler solutions that cost less to implement and therefore actually leave more money available to pay the people who are seeking more pay.

Again, my point is why don’t we allocate this cost at all? If you go to the people that love to drill down into labor numbers, my friends at the Bureau of Labor and Statistics, you will find amazing breakdowns of what they call supplemental pay by pay type (OT/Bonus/Etc), occupational group, wage quartiles, and other such pivot points my statistics professor droned on about while I was sleeping. (http://www.bls.gov/opub/cwc/cm20090317ar01p1.htm)  But no where do they even mention the cost of calculating and accounting for all this supplemental pay. (note to self: don’t forget to add in the tax savings if the BLS didn’t have all this supplemental pay to have to sort thru).

Perhaps this is a tiny number and we could probably double or triple this total overhead cost and it would still be a rounding error in the overall labor cost. And certainly, since consulting companies like Improvizations (whose consultants make a living implementing these complex rule sets) only represent a portion of that total overhead cost you could certainly double or triple our hourly rate and not feel it at all… right?

So, the question to you all is, before I reach my 1,000 word blog limit and start incurring time and a half per word, how do we go about costing this? Please comment or contact me. I want to know.