Salaried vs. Hourly Compensation: How You Pay Your Staff Matters
The wild west nature of the domestic staffing industry often blurs the line of ethical compensation.
Domestic staff suing their wealthy celebrity employers for unpaid overtime, no scheduled breaks, and toxic work environments are validated as “part of this industry.” I see this repeatedly at client properties, during coaching calls, and in the media related to high-profile celebrity lawsuits.
In the short term, I get it. Classifying your household staff as salaried employees seems like a win-win relationship that guarantees everyone a regular paycheck with the added benefit of not keeping a daily time sheet. However, what may initially seem like a win-win scenario can snowball into a situation with a damaging outcome.
From your staff’s perspective
Your new staff is happy because they aren’t aware of the hours and overtime they’ll be expected to work and how often the principals will be away from the property. They feel they’ve signed up for the security of a regular paycheck with added benefits. Little do they know that repeated overtime may soon become an exhausting expectation.
When your staff feels depleted and devalued, or their personal lives and health starts to be affected, they will become more reluctant to go the extra mile. Even if they get reimbursed, they will reach eventual burn-out where no amount of money will remedy this unsustainable work schedule. Once they realize that they can make equal or better hourly pay with added benefits like overtime compensation, control over their time, and a healthier work environment, you will start losing them.
Here’s what happens to your estate manager
An estate manager often has no control over how employees are paid or classified. Yet, they’re the ones who take the biggest hit when a disgruntled employee files a complaint with the Equal Employment Opportunity Commission (EEOC).
Soon after a claim is filed, a caseworker will call for the timekeeping records. Most homeowners don’t have these state-required documents and rely on the estate manager to “sort it out.” Countless hours are lost to EEOC interviews and fulfilling documentation requests. This is valuable time an estate manager often has to give up fulfilling a role that isn’t theirs.
Why principals should care
Many principals willingly accept the financial consequences of misclassifying their household staff. The ease of no timekeeping records, producing the same paycheck every two weeks, and knowing the amount of payroll and taxes to withhold each pay period may seem like the most convenient option.
Even if the only immediate punishment for this behavior is a slap on the wrist and a fine to pay, there are risks that all the money in the world can’t mitigate.
Here are the eight most damaging consequences of improper classifications, unfair compensation, and overtime exploitation:
A disgruntled employee working inside your home and hiding behind a smiling face risks ill or vindictive behavior.
Frustrated employees are less likely to support each other with teamwork (i.e., assisting with heavy lifting), which means your risk for injuries and property damage increases.
Instead of assisting with day-to-day needs, your estate manager will likely be overwhelmed by the administrative burden of claims and lawsuits.
You might lose top talent and develop a habit of high staff turnover. This type of reputation will get you blacklisted by the best domestic staff recruiters.
Besides unpaid overtime, the employer can be penalized with fines up to $1,000 per violation, plus interest. Multiply this with your number of staff, and you’ll start to calculate the actual cost of this risky compensation practice.
The time and effort required to recruit, onboard, and train new staff is often underrated. It can take months to integrate a new employee properly. This time and energy could have been used to improve your household.
Employees have two years to file unpaid overtime claims in many states. This means that even after they leave your employment, they can change their mind. An NDA will also likely be void if there’s been illegal activity.
Maybe the BIGGEST REASON for HNW families to pay attention: Being accused in the public eye of unfair wages, unpaid overtime, no lunch breaks, and toxic workplace treatment can damage your reputation. We’ve all seen countless stories of how this plays out in the media; just Google “Celebrities sued by their employees” to rethink this strategy.
How can this be prevented?
Track time, approve all overtime hours, and be willing to “pay up” as needed.
Make conscious decisions about who and when you ask for extra hours.You're understaffed if you constantly need your staff to work overtime. Hire more people! Instead of pushing the boundaries of your current team, could you support them by getting additional help? This will benefit you as much as it will benefit them.
If 24/7 service is justified, split this workload among three staff members. Rotate this daunting responsibility. Remember, your staff are humans, not robots—they need sleep, too. Better-rested staff will help you get a better quality of service.
4. Make sure your staff feels heard, appreciated, and fairly compensated. Ask them! Check with your team regularly (weekly). Schedule performance and salary reviews, and stick to these appointments. Tell them, “Thank You.” And make sure they feel supported to provide their best service with tools, training, and teamwork.
Here’s a textbook example:
I have an estate manager-client who decided to negotiate an hourly salary in her latest position. She willingly and regularly works overtime when she’s able and feels fully compensated and in control of her options.
The extra time she spends at work affords her additional compensation that she can choose to use for her housekeeping services, online grocery shopping, and food delivery services for the nights she works late. She’s now on track to end her year with more than double her 40-hour-per-week compensation.
She regularly offers her employers less expensive alternatives to completing their requests (i.e., courier services, her assistant, or online shopping options vs. running around town for purchases). Still, they often opt for her service because they trust she’ll do it right the first time. In the end, she feels well-compensated and valued.
Her employer is happy too.
They approve all of her overtime on their time tracking app and have the option to assign a task to her or dedicate them to outside resources.
There’s your win-win relationship!
What does this all come down to?
Before your household staff gets one more paycheck, look closely at all sides of this equation.
While you decide whether it’s worth taking the legal and PR risk, let us help you create a personnel plan to outline their employment details. The How To Manage A Mansion™ Personnel Management Module will help you create documents to outline every aspect of required and assumed duties for anyone on your team.
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