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ARC: HOW TO CONTEND WITH EMERGING RISKS AS THE ECONOMY CONTINUES TO RECOVER

Recovering economy creates numerous employment-related risks

Disengagement, increased stress for employees can result in liability, workers comp issues

Employment Risks

Whether employers decide to expand their staff or maintain current employee levels, risks abound in an improving economy.

Talent risk is a growing issue for organizations and human resource leaders worldwide, said Bhushan Sethi, New York-based financial services people and change practice leader for PricewaterhouseCoopers L.L.P.

“One of the biggest risks that we see right now is the disengagement of employees,” said Mr. Sethi, who focuses on financial services companies such as banks, asset managers and insurers.

In the past, the bonuses were healthy across some corporate functions, “but that game has changed in terms of salary and bonus and stock value,” he said.

The financial services industry is still cutting staff, further driving disengagement, Mr. Sethi said.

“The biggest risk in organizations right now in my sector is the loss of productivity because people are disengaged because of fear and angst,” Mr. Sethi said.

But many companies are focused on engagement and trying to redefine the “employee value proposition,” said Elise Freedman, director of talent management at Towers Watson & Co. in Arlington, Va.

“Engagement levels are dropping. Employees have quit but stayed,” Ms. Freedman said. “They're doing what they need to do, but they've been overworked. Bonuses and merit increases haven't been” what they once were.

Increased stress at work causes employees frustration, “especially from your high potentials and top talent,” Ms. Freedman said. “The risk is as things continue to turn around, they will start to consider other options.”

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Ken Oehler, New York-based global engagement practice leader at Aon Hewitt, said companies need to get the basics right, which includes pay and benefits.

“Things that attract employees are different than the things that retain employees,” Mr. Oehler said. “More and more, we're seeing things like work-life balance are becoming a top attraction.”

Issues affecting employee retention include the chance for advancement, senior leadership making the right decisions and employee stress, particularly in the weak economy as companies downsized and tried to do more with less, he said.

“These things, if it reaches a toxic level, will drive people to leave,” Mr. Oehler said. This affects costs associated with employees leaving the company and affects the employees who stay.

Increased stress also can trigger employment liability issues under the Americans with Disability Act, said Angella H. Myers managing partner at Myers Law Group L.L.P. in Dallas.

Employees may request ADA leave “because employees under increased stress from work ... may have increased depression, anxiety, panic attacks; and if overworked, their personal relationships may suffer,” Ms. Myers said.

As the economy improves, some organizations are hesitant to hire until they see evidence of permanent growth.

While a company with too few employees may be concerned about meeting production demands, what they should focus on is quality control and injury risks, Ms. Myers said.

Additionally, some employees may be tempted to work off the clock to meet deadlines, which can violate the Fair Labor Standards Act, she said.

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“Sometimes, we see an increase in that where you're working faster, you're working harder or you're working longer,” Ms. Myers said. “I think you would expect to see, depending on the industry, perhaps an increase in workers compensation claims.”

As for risks associated with a mobile workforce, Aon Hewitt's Mr. Oehler said, “There's no one-size-fits-all (answer) here.”

“Some of it's an organizational philosophy. Some of it's trying to meet the needs of demographic groups,” he said.

“There's some very big risks for some jobs if you allow the talent to work from home,” Ms. Myers said.

From an employment law perspective, how employees work from home, clock in or out and the requirement to maintain such records, may violate the FSLA, as well as raise workers compensation concerns, she said.

To address some of these issues, some employers are developing strategic talent acquisition frameworks, experts say.

“A lot of our clients are looking at their culture now in a different way given the economic situation and the turmoil in the financial services” industry, PwC's Mr. Sethi said. “These types of topics are now back on the agenda and on the table.”

“The No. 1 thing (employers) need to look at is that they actually have consciously developed their talent strategy and their employment brand so that they can figure out where they're trying to go, what do they want to be, and that they're making sure that their processes all support and align that,” Towers Watson's Ms. Freedman said.

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