IBM Alters 401(k) Policy to Match Employee Contributions Annually Rather Than Each Pay Period

Friday, December 28, 2012

On December 7, 2012 IBM announced that it will no longer match its employee’s 401(k) contributions each pay period, rather it will only match contributions of employees who remain employed through the end of the each Plan Year. This clearly represents an effort on IBM’s part to save money since two things will take place: 1. Employees who terminate prior to year end will forfeit contributions they would have received had they remained through December 15th and 2. IBM will have use of these funds to invest until they are required to match contributions for those who do remain through year end. The point to remember is that the only reason that IBM has a 401(k) plan, or any benefit plan for that matter, is to attract, retain, and motivate its workers.

To what degree with this move impact the “attractiveness” of IBM to potential employees? Top talent always has a choice of where they work and for whom. For those employees who merely want to work for IBM because it is IBM, a 401(k) has little incentive power for them. In an organization as large as IBM, the loss of a few applicants may be of little consequence, unless of course those applicants hold the keys to some new technology which now goes to Dell.

Most benefit plans are designed to “retain” employees by meeting some level of needs (health care) and by building affinity between the employer and the worker. Workers enrolled in multiple employer sponsored benefit plans are more likely to remain with that employer. Long term IBM employees have much to lose by jumping ship after 10, 15 or 20 years; however that attraction may not hold for younger IBM employees with less than 5 years. Once again, top talent has legs and it can walk.

What about the “motivational” factor in this action by IBM? Employee’s like to grouse, if not about their 401(k) match, it will be something else, like the food in the lunchroom, parking or their manager. That is true, but when complaints turn into unproductive and lost production time or workers are distracted from the task at hand, the bottom line will suffer. Who or what is going to be motivating those IBM employees to put out extra effort when it is needed?

One aspect is that some employees will work thru the end of the year, get their contributions, and exit immediately after the first of the year. So IBM may see a spike in turnover near the beginning of each year. This activity is best likened to a Fixed-interval of reinforcement schedule found in operant conditioning. The unintended consequence for IBM may be the same level of turnover but within the first few months of the year. In addition, employees, who hang on until year end just to get the match, may not be the productive employees IBM will want to have.

Organizational Leadership: A Crisis in Still Life

Friday, December 21, 2012

My fantasy is to teach a course on organizational leadership theory, starting with a display of the hundreds of scholarly and popular books that have been written on the subject, each purporting to be the ultimate authority on the subject. Nevertheless, organizational leadership is essential to both the success – and its lack – the failure of every organization: public, private, for profit, and not-for profit.

The 2012 Kelly Global Workforce Index (KGWI), conducted by Kelly Services, Inc. recently looked at a number of workplace issues including organizational leadership styles in a survey of some 168,000 workers in the Americas, EMEA, and APAC regions. The survey was conducted by the RDA Group at the request of Kelly Services.

The third installment of  the survey titled, “The Leadership Disconnect”, attempted to determine how satisfied global workers are with their organizational leadership. Not so surprisingly, most workers are not satisfied with the leadership style of their own leaders.

Several of the key global findings include:
● Workers not listening to the messages from leadership.

● Workers questioning core principles of their organization.

● Less than half are satisfied with their organizations’ leadership style.

● Significant gap in leadership style practiced vs. what is desired by workers.

● Less than half indicate they are NOT inspired by current leaders to do their best.

● A little more than 60% believe in what their organizations are trying to accomplish.

The study suggests a number of ways for both organizations and workers to address this management gap.

For employers:

1. How are you evaluating your leadership development efforts?  Are you considering how best to lead a multigenerational/cultural workforce?

2. Are you grooming leaders who are solely focused on growing the business from the bottom line?  It may be time to also teach them how to grow the business from the front line.

3. How are you revising your leadership development efforts to deal with the increase in the virtual workforce?

4. Are your leaders just too busy to lead?

5. Has the move to more matrix organizations contributed to the disconnect between workers and leaders

6. How can you encourage more group collaboration and more decision making authority?

For workers:

1. How do you cope when your manager doesn’t speak your language?

2. What are the ways of earning more responsibility on the job?

3. How can you improve your leadership skills?

4. How can you fuel your own individual inspiration?

What can be gleaned from The 2012 Kelly Global Workforce Index?

● Each generational cohort requires different managerial and communications skills.

● Acquiring the right talent is still the best way to improve the bottom line.

● Leading the digital worker is not the same as leading the physical worker.

● Leaders must lead, not do.

● Managers, there is no room for “us vs. them” thinking.

● Managers must incorporate workers into the leadership process.

● Workers must learn the language of their leaders.

● Worker must seek ways to grow their own responsibilities.

● Workers need to lead from the bottom.

● Workers must own their own inspiration.

Millennial Employees in the Workplace

Friday, December 14, 2012

In 2011 PricewaterhouseCoopers (PwC) reported on its survey of 4,364 university graduates in 75 countries releasing a study on Millennial employees at work in its analysis titled “Millennials at work: Reshaping the workplace 2011”. PwC perceives that Millennials are expected to be an influential cohort of employees. It is believed that Millennials who process the correct talents and skills will be in extraordinary demand for those talent and skill sets. Millennials are expected to command both significant remuneration and direct how, where, and when they will work. Lastly, PwC envisions Millennials may very well be a challenge to manage for many of their employers.

According to Pew Research, Millennial employees are those born between 1977 and 1992 and are now entering the workplace. So what is significant about this generation? For one thing, they have grown up in a digital domain online real-time world encompassing an explosion of PC’s, Internet, WiFi, Cell and Smart Phones, laptops, tablets, and a propensity for 24-7 connectivity.

Pew Research notes, the Millennial generation is:

     • The most ethnically/racially diverse group in the nation's history.

     • The most politically progressive group in modern history.

     • The first cohort to regard digital behaviors as commonplace.

     • The least religiously observant cohort.

     • They are inclined toward trust in institutions.

Why are Millennial employees important to employers? They are the second largest segment of the population after Baby Boomers, 30% vs. 34% respectively. Generation X comes in a distant third at 19%. So as Boomers reach age 65 at a rate of 10,000 per day, many vacated jobs will be filled with Millennial cohorts. And since we know that many Boomers are planning to work beyond their normal retirement age, this could be a source of conflict in the workplace employers will have to address.

Michael A. Olguin, writing for Inc 5000 on April 13, 2012, identified five motivational characteristics of the Millennial worker:

“1. Reinforce the positives

Millennials need constant affirmation and positive reinforcement in order to feel like they are doing a good job.

2. Recognize that each person is different ...

Like any group, not all millennials are the same. Therefore, it's important to not implement a "one size fits all" approach to managing them.

3. Be flexible

Millennials by nature don't really like rules. They grew up in an environment where parents asked their opinions, allowed them to make decisions, and rarely pushed something on them that they didn't like.

4. Allow as much ownership as possible

The best way to handle a Millennial's feelings of entitlement is to provide them with a lot of responsibility.

5. Don't be vague

Millennials are not good at interpreting what you meant and rarely succeed when put into a situation to "wing it" themselves. Though they want responsibility and authority, they are uncomfortable without having some sort of framework for the task at hand. “

Managing Multigenerational Workforces

Friday, December 07, 2012

Writing for the Tampa Bay Times on November 21, 2011, Marie Stempinski noted several attributes identified with Baby Boomers, Generation X, and Generation X (Millennial) which have a direct impact upon workforce dynamics. In her Times article, Stempinski focuses on the uniqueness of each generation as well as their interplay.

• Baby Boomers (1946 - 1964), many are remaining in the
   workforce due to financial reasons, because want to work,
   and they actually like what they are doing. Many may
   continue to work into their 70’s and possible beyond.
   Boomers are frequently the most loyal and knowledgeable
   employees in an organization’s labor force.

• Generation X, (1965 - 1976), they are often middle managers,
   hard workers, unique, want to learn new technology. Sometimes
   they can be distrustful and skeptical about the future. They are
   seeking a work-life balance.

• Generation Y (Millennials) (1977 - 1992), they challenge the
   status quo, they are team orientated, they want their input
   and their technology abilities to be recognized and compensated.
   They often distrust large organizations. They expect to make
   numerous job changes in their life in an effort to find a work-life
   balance.

The challenge for organizations is to integrate these three generations into a functioning, yet diverse labor force, making the optimum use of each groups’ skill sets.

In a 2007 publication by AARP, “Leading a Multigenerational Workforce”, prepared by Susan A. Murphy, PhD, of Claire Raines Associates, the author explores the impact of the developing multigenerational workforce. Murphy notes in the opening pages of the study that it is possible for 20 year olds to be working next to 70 year olds. Throughout her analysis, the differences, commonalities, assets, liabilities, myths, and realities of four generations are explored. The study identifies six guiding principles for managing a multigenerational workforce successfully:

1. Open a dialog around generational issues with the workforce.

2. Ask workers about their requirements and preferences.

3. Propose options, alternatives, and offer suggestions.

4. As a manager, style should be tailored to individual workers.

5. Build on the interplay of the strengths of each generation.

6. Practice a diverse set of viewpoints.

Why the concern ourselves with managing a multigenerational workforce? The simple answer is the ongoing demand for talent. Most organizations have a huge investment in its labor force. That investment is comprised of knowledge, skills, and abilities. Regardless of which generational segment is discussed, the demand and competition for top talent is not going to let up. While the workplace has seen astronomical advancements in technology, someone has to conceive, design, build, deploy, and maintain that technology. The current workforce has increasingly moved from an analog world into a digital domain and along the way acquired the talent to make today’s work environment the most productive in history. Attracting, retaining, and motivating an organization’s multigenerational talent may well make the difference between the success or failure of an establishment.

Why Are Many Workers Missing Out on Their Employer’s Defined Contribution Matching Monies?

Friday, November 30, 2012

PLANSPONSOR's annual 2012 Defined Contribution Survey, “Looking to the Stars” reports that upwards of 27% of eligible employees do not participate in their employer’s defined contribution plan and a third do not receive the full employer matching monies available to them.  As part of an organization’s total reward system, defined contribution plans such as 401(k), 403(b), and 457 constitute a significant financial and organizational commitment by an employer to its workforce.  For over a quarter of eligible employees to fail to take full advantage of such benefits certainly has a personal financial impact on the employee’s future retirement plans.  However, let’s not lose sight of why employers have implemented such plans, competition to attract, retain, and motivate the talent which drives their enterprise.

I have stood up in front of large and small groups of employees in an effort to communicate the value of defined contribution plans.  I have emphasized the dual concepts of employee self-control and direction.  I have used phases like, “It’s Free Money”, referring to the employer’s match.  I have used examples of starting out with small contribution percentages and upping that contribution rate over time.  I have displayed the charts and graphs which tells the story of how money grows over time.  I have explained how Social Security was never meant to be a stand-alone retirement system.  I have discussed the roles of public and employer sponsored plans, and private savings.  Yet contribution and participation rates generally remain low.

Low contribution and participation rates are concerns for employers, governments, regulatory agencies, and employee advocacy groups.  Governments and regulatory agencies have responded with automatic enrollment safe harbors, employers have responded by taking up those features, and advocacy groups have lobbied for more communications and disclosures.  The Profit Sharing/401(k) Council of America  is now reporting that as many as 54% of employers have adopted automatic enrollment.

Brigitte C. Madrian, Aetna Professor of Public Policy at the Harvard John F. Kennedy School of Government, argued in a July 2012 paper that a defined contribution plan’s matching threshold was a greater contributor to participation and contribution percentages than a higher matching rate.  Madrian also maintains that non-financial features such as “automatic enrollment, simplification, planning aids, reminders, and commitment features” produce higher rates of participation and contribution than financial incentives, and at lower costs.

At least when comes to defined contribution plan participation and contribution, Economic Man turns out to be his own worst enemy in his efforts to save for retirement.  So, if increased financial rewards will not persuade a quarter of eligible employees to take full advantage of their defined contribution plan, how do we proceed?  Targeted communications focused on segments of the workforce and product branding.  As we would segment and target any consumer market in an effort to promote a “brand” product, consider the same approach for workers.  As with most things today, one size does not fit all.  The same is true for marketing and branding employee benefits, including defined contribution savings plans.  Thus, the old adage holds true: communicate, Communicate, COMMUNICATE!

Why Are An Increasing Number of Employers Moving to Market-Based Salary Structures?

Friday, November 23, 2012

An October 2012 joint report by WorldatWork and Deloitte Consulting LLP identified that market based pay systems now make up to 64% of all salary structure practices worldwide. Compared to other systems such as traditional and broadband, the prevalence of market-based salary structures is now 3 and 5 times greater than traditional and broadband systems respectively.

I cut my compensation teeth on writing job descriptions, conducting salary surveys, evaluating jobs, and building merit matrixes and pay structures. As a cornerstone for an organization’s total-rewards strategy and philosophy, employee compensation is an essential component in attracting, retaining, and motivating a talented, effective, and efficient workforce. So, why are more employers moving from traditional job pricing methods to market based salary structures?

• Organizations must react with a sense of haste in response to changes in

  competitor practices and market segment pressures if they wish to avoid

  market share erosion.
• Employers need a system which is scalable, tunable, adaptable, responsive,

  and aligns the organization to local, regional, national, and global talent demands.

• Companies want a system which directly relates job knowledge, skills,

  abilities, and performance to their current and immediate needs.

• Entrepreneurial enterprises want to reward value added results to the 
  organization, and not just check off another step increase within a pay range.
• Market based salary structures are creditable with employees as opposed

  to a point-factor and other systems which may often be perceived as rigid and

  out-of-date.

• Organizations want a process which relates ever changing “project” based

  jobs to the market place.

• Employers want a practice which provides for external and internal equity that
  moves towards gender neutrality.
• Market based salary structures addresses the four P's of marketing:

     o Price the job according its external market value to the organization,

     o Promotion of the employer brand in attracting, retaining, and motivating talent,

     o Place the job relative to its internal organizational value,

     And

     o Product, define the “job” as a commodity in the delivery of goods and services.

It should not go without saying, market based salary structures do require human and informational technology resources. Certainly in these times of minimum HR staffs, many organizations rely on an alphabet of small to large consulting firms to perform job pricing tasks. Most enterprise and cloud based HR payroll and information systems are capable of supporting both employee and job level market based pay data.

The selection of job evaluation and pricing practice methods is a function of the organization’s overall business nature, needs, strategy, and philosophy. Small local employers may already be practicing market based pay; they just do not call it that. Large international organizations may have little choice but to move to market based pay practices, if they have not already done so. It clearly says something, with over 60% of employers worldwide having moved to market based salary structures.

Employees Remain Worried About Employer Sponsored Benefits

Friday, November 16, 2012

Results from Gallup’s 2012 annual Work and Education poll indicate that employees remain worried about the continued availability of their employer sponsored benefits.  The annual poll, based on a random telephone sample of 1,012 employed adults in all 50 states and the District of Columbia was conducted between August 9th and 12th and posed several questions on how worried respondents were concerning their compensation, benefits, and continued employment. When the surveyor asked if they were worried their benefits would be reduced, 40% said, “yes”. What is revealing about this statistic is that in the same poll taken in 1997, the “yes” response rate was 34%, a difference of only 6 percentage points. Considering the reported total sample margin of error is ±4 percentage points at the 95% confidence level, employees’ level of “worry” today is not that much higher than it was in 1997.

              Source: Gallup’s 2012 annual Work and Education poll

Employer sponsored benefits are expensive, the U.S. Bureau of Labor Statistics estimates that total private employer provided benefits represents over 29% of an employee’s total compensation. The largest component of this at 8% is “Legally Required” benefits which include: Social Security, Medicare, unemployment insurance, and workers’ compensation. The second largest component, as if we did not know, is “Health Benefits” at 7%. It is fairly easy to understand how employees have concerns over benefit reductions since benefits represent such a large proportion of the employer’s costs.

While the last several years have focused center stage on a national debate on health care, many employers have struggled with funding their retirement and savings plans, both defined benefit (DB) and defined contribution (DC) plans. During the recession, as investment returns declined and remained low, employers and employees alike saw the performance of their DB and DC plans suffer. Since employers are mandated to maintain a certain funding level for their DB plans they had little choice but to deposit additional monies into those plans. However, many employees, faced with a declining 401(k) balance and reduced hours, furloughing of employer match or outright job loss, lacked the ability to invest more to offset low returns.

Over the last three decades, defined benefit (DB) plans have been largely replaced by defined contribution (DC) plans and hybrid plans, placing the majority of retirement responsibility on the employee. Witnessing the continued erosion of DB plans must be a contributing factor to employees’ angst related to the potential loss of benefits. The trend from DB pension plans is also mirrored in the movement of employers to “consumer driven”, i.e., high deductible health care plans. In both cases, shifting from DB to DC pension and health care plans places an increased burden of risks on the individual employee. While this may seem unfair, it is the employee who has the most to win, and yes lose in a defined contribution scenario. Key to the employee winning is the power of financial management knowledge, gained either on their own or with the help of the employer.

Employee Performance is Suffering Due to Prolonged Stress in the Workplace

Friday, November 09, 2012

The results of an employee workplace StressPulse survey conducted and reported by the ComPsych Corp., on October 29, 2012 found:

     • Stress Levels - 63% Have high levels of stress

     • Work Priorities - 59% See basic responsibilities most important

     • Causes of Stress - 39% Cite workload

     • Impact Upon Productivity - 41% Lose 15 – 30 min/day

     • Impact Upon Attendance - 55% Miss 1 to 2 days/year

     • Impact Upon Effectiveness - 46% Come to work 1 to 4 days/year too stressed to be effective

     • Common Reasons for Absences - 46% Cite stress and personal relationship issues

     • Coping Strategies - 53% Take frequent “stress breaks”

The StressPulse survey was conducted from Sept. 3 to Oct. 1, 2012, receiving responses from 1,880 employees nationwide.

It is important to note that results from this survey are based on “employee” responses. And it is also important to note similar surveys have been conducted by ComPsych in the past decade, 2011, 2010, … ect. I will not attempt to test and verify the survey’s longitudinal reliability and validity or its construction design based on employee responses. I will leave it to the reader to judge the survey’s veracity.

Workplace stress, like the Perfect Storm, is a combination of several experiences coming together over time which in turn magnifies each event beyond its normal parameters. While we may think of stress as a psychological response, it has its foundation in our fight-or-flight reaction of early humans to threats. Continual elevation of  stress levels result in increased heart rate, elevation of blood pressure, and a boosting of energy supplies. Over time, repeated and prolonged exposure to stressful situations has the potential do real damage to our psychological and physiological systems.

While a certain degree of stress may focus an employee’s attention on meeting a looming deadline, prolonged work-related stress may act to undermine an employee’s overall performance. Such that an employer’s best workers may become their least productive. Employees faced with increased workload, staff reductions, low or nonexistent pay increases, cut-backs in benefits, little or no promotional opportunities, and a constant demand to do more with less frequently will result in employee burn out.

Employers have attempted to deal with workplace stress and its productivity impact for many years. Organizations have added Employee Assistance Programs, redesigned workstations to reduce ergonomic factors, introduced health and safety programs, rolled out wellness plans, management training programs, onsite fitness centers, and work-life balance programs. Global organizations have come recognize the importance of managing workplace stress to the extent that Buck Consultants and Wolf Kirsten International Health Consulting presented support of the grow in stress at the WorldatWork 2010 Total Rewards Conference and Exhibition in Dallas. The published results are downloadable at: Stress in the Workplace, 2010 WorldatWork Conference Survey.

Organizations may not be able to eliminate all stress from an employee’s workplace. Competitive and economic pressures will continue to drive business decisions as organizations struggle to react to market forces. The workplace is but one of several sources of stress and as such employers have limited abilities to address stress outside the employment setting. However, both employers and employees have a great deal to lose if stress goes unmanaged in financial, competitive, and economic terms.

Increased Pay vs. the Increased Value of Benefits

Friday, November 02, 2012

Many years ago, employee benefits were often referred to as “fringe” benefits, this moniker was attributed to the relative minor role of benefits compared to direct pay. Until the last several decades, employee benefits played a relatively small, although important role in the human resource management scheme of employers. The overwhelming focus was on employee cash compensation. Until the 1970’s, expansive and inclusive benefit programs were generally relegated to very large private and public organizations as well as unionized employers.

However, as a new generation of workers began to enter the workforce, they demanded and employers responded with expanded programs including dental and vision care, EAP’s, savings programs, additional time off, … etc. Employees wanted flexibility, employers saw tools to attract, retain, and motivate workers. Employers saw benefit programs as a relatively inexpensive way to differentiate themselves from other organizations. Nevertheless, economic and competitive forces being what they are; many companies’ benefit programs began to look very similar to each other.

In an October 19, 2012 article in USA TODAY, Dennis Cauchon quoted analysis from the Bureau of Economic Analysis', reporting that 2011 workers’ total compensation rose 19.7% on the basis of employer-paid benefits. This increase is in direct opposition to direct pay which reportedly rose 1.4% in 2011. Workers have become accustomed to annual pay increases in the 1%-3% range during the most recent recession.

The concepts of total rewards, total compensation, and total remuneration emerged out of an effort by employers to help employees appreciate the complete value associated with employment with a given organization. It certainly includes both direct pay and traditional benefits such as health care and retirement as well as non-monetary accolades. But, it also includes the value connected with working for well respected employers; employment with organizations which the employee perceives adds value to society, career development and advancement opportunities, and the employee’s ability to achieve a work-life balance with an organization.

Cauchon points out that the BEA analysis identifies: health insurance, retirement benefits and employer Social Security and Medicare contributions as the three largest expenditures for organizations. This is hardly a surprise to anyone, since we are in the midst of a national debate over health care, retirement benefits, entitlement system funding for an aging population. Nor is this debate unique to this nation; virtually every industrialized nation has or is dealing with the same issues of how to provide for their public and private social welfare systems.

Whether an employee perceives enriched benefit programs have more or less value than direct cash compensation is relative to the employee’s personal situation. That is why many benefit programs provide greater value based on an employee’s marital status, years of service, and number of covered dependents. A retirement program which projects a post-employment income replacement of 70% may have very little value to a 21 year old as opposed to an employee 5 years away from retirement. Furthermore, employers with rigid total reward may find it difficult to attract and retain the desired talent if for no other reason than competitors provide a higher degree of flexibility.

2014 Pay or Play: Safe Harbor Rule Full-Time Employee Determination Part 2

Friday, October 26, 2012

The Patient Protection and Affordable Care Act (PPACA) will require employers with more than 50 full time employees to offer those employees "affordable" and "minimum essential" benefits or face a penalty.

The PPACA defines a full time employee as an employee who “averages” 30 hours per week of employment. Internal Revenue Service Notice 2012-58 provides employers with a “voluntary” Safe Harbor rule for full-time employee determination by defining permissible “measurement”, “stability”, and “administrative” periods. Employers would be permitted to devise their own methodologies, provided those methodologies are compliant with the law and regulations. Organizations should consult with their legal counsel on all such matters.

Where this Safe Harbor rule (IRS Notice 2012-58) may prove to be helpful to employers is in addressing those employees who have an unpredictable work schedule which varies greatly from one time period to another. It may prove difficult for an employer to “reasonablely” expect the employee to average 30 hours when the demands of the job fluctuates week to week and/or day to day. Consider retail, food service, and other service sector jobs where customer demand differs by day of week or even hour of day.

Ongoing Employees: Safe Harbor

Employers would be allowed to use the Safe Harbor method associated with the “standard measurement” and “stability” periods chosen by the employer and described in IRS Notices 2011-36 and 2012-17. An “ongoing employee” is an employee who has been employed for at least one standard measurement period. Employers determine the ongoing employee’s full-time status by looking back at a standard measurement period between 3 and 12 months, as selected by the employer.

Once the employer has determines that an employee has averaged 30 hours per week during the standard measurement period, the employer treats the employee as a full-time employee during a subsequent “stability period”, regardless of the employee’s number of hours of service during the stability period, so long as they remain an employee. For an employee who has been determined to be full-time during the standard measurement period, the stability period would be a period between 6 months but not less than the standard measurement period.

Employers are allowed to use measurement and stability periods of differing lengths and/or starting/ending dates for the following categories of:

• collectively and non-collectively bargained employees;

• salaried and hourly employees;

• employees of different entities;

And

• employees located in different States.

Since employers may need time between the measurement and stability periods to determine eligibility and for communications and enrollment processes, employers may provide for an “administrative period”. However, this administrative period may not exceed 90 days. In order to prevent gaps in coverage the administrative period must overlap the prior stability period. This would allow ongoing employees who are eligible for coverage to maintain that coverage without a break.

While organizational requirements, demands, and philosophies differ from employer to employer, it will be essential that companies plan for measuring and tracking of ongoing employees whose work schedules may result in their hours fluctuating above and below 30 plus hours per week during their employment.

2014 Pay or Play: Safe Harbor Rule Full-Time Employee Determination Part 1

Friday, October 19, 2012

Under the Patient Protection and Affordable Care Act (PPACA), effective January 1, 2014 employers with more than 50 full time employees will be required to provide "affordable" health care with "minimum essential" benefits to all full time employees or pay a penalty. At issue will be defining who is and who is not a “full time” employee. As a benchmark, the PPACA defines a full time employee as an employee who “averages” 30 hours per week of employment.

Clearly there are ongoing employees who routinely work 30 plus hours every week and have been doing so for years. In addition, there are new employees who upon hire are “reasonable” expected to, work 30 plus hours per week. Even with “salaried” employees, there are generally “expectations” as to some minimum number of hours of work expected.

Where employers are likely to experience issues is tracking those employees whose hours vary widely due to production, staffing, and other factors, i.e., so called “variable hour” employees. For example, a number of organizations within health care often employ “per diem” workers who may accept or decline assignments at will. Attempting to pro-actively determine the likelihood that such workers will or will not average 30 hours may be extremely difficult.

In an attempt to minimize the administrative effort of organizations, the Treasury Department and Internal Revenue Service recently released Notice 2012-58 providing employers with a Safe Harbor rule for full-time employee determination. Notice 2012-58 clarifies and expands on earlier provisions of Notices 2011-36, 2011-73, and 2012-17. Basically, an employer would look back between 3 to 12 consecutive calendar months; this would be the organization’s “measurement period”. If the employee averaged 30 hours per week during the measurement period, they would be considered a full time employee during the forthcoming “stability period”. The stability period is a period of time not less than six months. During this stability period, the employee would be eligible to participate in the employer’s health care plan. In order to allow organizations additional time to identify and communicate with employees now eligible to enroll, the organization has a maximum 90 day “administrative period” to complete the enrollment process.

Employees who are considered full-time must be offered affordable and minimum essential health care via an employer’s plan, otherwise, the employer is subject to a financial penalty. However, there is no mandate that employees must enroll in their employer’s plan. They may choose to enroll in a spouse’s plan, a private individual plan or forego health care enroll entirely. Provided that an employer with more than 50 full time employees offers its full time employees "affordable" and "minimum essential" health care coverage, the employer is relieved of their obligation under PPACA for the current measurement, stability, and administrative periods only.

The guidance around determining an employee’s full time status relative to the “pay or play” rules is complex, therefore, it is highly recommended that employers begin the process of discussing these issues with their legal counsel to determine the most prudent actions needed to fully comply with their obligations under PPACA and any ensuing directives from the Treasury Department, Internal Revenue Service, and/or Health and Human Services.

2012 Health Increase Rates Increase by 4 Percent

Friday, October 12, 2012

The Kaiser Family Foundation and Health Research; Educational Trust 2012 Kaiser/HRET Employer Health Benefits Survey indicates a 4% increase in the cost of family health insurance. The survey of some 2,121 firms, representing various organizations by employee size, regional location, and business sector, found that average annual premiums in 2012 for single and family coverage are $5,615 (3%) and $15,745 (4%), respectively. The study reports that since 1999, premiums have increased from $2,196 to $5,616 for single and from $5,791 to $15,745 for family coverage; in a period of 14 years. Increasing by a multiple of 2.56 and 2.72 times for single and family coverage respectively since 1999.

An interesting finding is the percentage of employees who when offered health care actually enroll has declined slightly from 66% to 64% since 1999. In the face of increased emphases on health care benefits during the last decade, this seems to be a contradiction in terms. The employee’s portion of the premium cost may be one possible factor.

While employee cost may contribute to an employee’s enrollment decision, the Kaiser report indicates that most employees are paying between 17% and 20% of single premiums, regardless or company size or union affiliation. Strangely, small firms, those under 200 employees, have a lower employee premium cost percentage than their larger counterparts. This may be in part due to the fact that smaller firms are often at a competitive disadvantage in the range and scope of benefits offered to workers.

Where smaller firms are significantly different in the area of cost is with family coverage. On the average, employees of smaller firms surveyed are paying 35% vs. 25% for larger firms. A strong indication that smaller firms are willing to address cost issues with singe coverage but may not be willing to extend the same treatment for family coverage.

As most casual observers can attest to, deductibles have been on the increase. According to the Kaiser report, the percentage of firms with a $1,000 deductible has risen from 16% to 49% for small firms and from 6% to 26% for large firms, since 2006. Obviously, a higher deductible translates into lower costs for the plan and more for the employee. Not so obvious is the impact on consumption, while some would argue that deductibles restrict access to care, others point out that deductibles help to educate the employee to the real cost of care. Without a deductible, an office visit covered only by a $20-$35 co-pay screens the employee from the true cost of $150-$250.

Since 1988, the mix of health care plans offered has undergone dramatic shifts. Once accounting for over 70% of the market space, Conventional plans have eroded to less that 1%. HMO’s have waxed and waned from 16% in 1998 back to 16% in 2012. Similarly, POS plans saw modest growth from 1988 until 2001 and have been on the decline ever since. High deductible health plans hit the radar in 2006 at 4% and have grown to 19% in 2012. PPO plans have replaced Conventional plans as the mainstay of the market at 56%, reaching a current peak of 61% in 2006.

Clearly, the message from the Kaiser Family Foundation and Health Research Educational Trust 2012 Kaiser/HRET Employer Health Benefits Survey is, health cost continues to increase and that many of the efforts of everyone have done little to mitigate that fact.

Annual Open Enrollment Communications

Friday, October 05, 2012

A recent report by The Guardian Life Insurance Company of America (Guardian), found that employers believe their benefits communications are ineffective and most employees agree.

Guardian’s study illustrated five key points:

1. Employers must balance benefits cost management with meeting employee needs.

2. Multiple-channel communications are preferred by employees.

3. Self-service tools for enrollment are gaining in importance.

4. Communications in preferred channels tend to increase confidence and satisfaction benefit decisions.

5. Greater confidence & satisfaction are linked to greater appreciation and loyalty.

There is nothing unique about Guardian Life’s finding. Any good communications program of yesteryear or today is founded on delivering the right message to the right audience, at the right time, using the right media, and at the right cost. Today’s self service, technology-based benefits enrollments often take advantage of every communications channel available. And this technology is not cheap. Hiring professional grade writers, designers, printers, (yes, we still print) as well as providing the technology platform capable of supporting various web-enabled devices requires significant technology and organizational resources. A common complaint from senior management is that thousands of dollars are spent on open enrollment communications materials but only a small minority of employees actually change their benefit elections. Or, an equally common remark is that no one ever reads the materials anyway, i.e., anecdotally.

One thing to remember, open enrollment is about more than merely enrolling in benefits for the upcoming year. It is an opportunity to send as well as reinforce the organization’s messages around its culture, values, and engagement. And guess what, those warm and fussy issues help organizations attract and retain talent. And depending on what culture, values, and engagement messages are sent determines what kind of talent the organization will attract and retain. Believe it or not, even today, most employees, just like customers, have a choice of where they work. It may not be an easy choice, or a readily available choice, nevertheless they have a choice. And by the way, do you want an employee who has no choice and is working for you because you were their last choice, their last resort?

Open enrollment is often about a new round of benefit cost increases, especially health care. Unfortunately that is generally the case. And the organization’s message has to address such issues and how the organization frames unpleasant information will influence how the workforce perceives the organization and its management. Honestly is still the best policy. By that I mean be upfront, open, and transparent. Whether the preferred communications channel is high or low tech, most audiences know when they are being respected and when they are being mislead. If it is an issue with sales, cost, materials, competition or customer service, your workers know what is happening within your organization. The relationship you have with your employees is the same kind of relationship you have with others. If that relationship is not built on trust, the best benefits and the best communications plan will not get you very far.

Court Concludes That Pharmaceutical Sales Reps Are FLSA Exempt

Friday, September 28, 2012

The U.S. Supreme Court recently found that pharmaceutical sales representatives are in fact "outside salesmen" for the purposes of the Federal Fair Labor Standards Act (FLSA) and are therefore, exempt from its overtime provisions. While this decision certainly brings relief to SmithKline Beecham and other pharmaceutical manufacturers, it is also important to note that the decision struck a blow to the Department of Labor (DOL). The DOL had argued that “[a]n employee does not make a ‘sale’ . . . unless he actually transfers title to the property at issue.” In the case of pharmaceutical sales, “property title” transfer does not occur between the pharmaceutical sales representative and the physician or for that matter between pharmaceutical sales representative and the end consumer. Had the Court “deferred” to the DOL interpretation, the FLSA status of pharmaceutical sales representatives might have come out different. Referring to pharmaceutical sales representatives, whose average salary was $70,000, the Court remarked, “hardly the kind of employees that the FLSA was intended to protect.”  See Christopher v. SmithKline Beecham Corp. (No. 11-204, U.S. June 18, 2012).

While such decisions by the Supreme Court may seem removed and distant from your specific business, assuming that you are not pharmaceutical manufacturer or a pharmaceutical sales representative. Nevertheless, if your business involves “outside” sales the decision does bring a degree of clarity to what a “sale” is and is not. Had the Court agreed with the sales representatives who brought the action and deferred to DOL’s argument of title transfer, many organizations would be looking at significant labor cost increases. Although the Court sided with the employer, that action does not lessen the broad scope and depth of Federal Fair Labor Standards Act on the workplace. Misclassification of workers as exempt when in fact they are non-exempt is still an ongoing and troublesome aspect of human resource management.

In general, employees are either exempt from FLSA standards or they are “non-exempt”. The three most common exemptions to FLSA overtime and minimum wage standards are summarized below:

Executive Exemption:

• Employee must be compensated on salary basis at a rate not less than $455/week

• Employee’s duty must be managing the enterprise, department or subdivision

• Employee must direct the work of oyhers

• Employee must have the authority to hire or fire other employees

Administrative Exemptions:

• Employee must be compensated on salary basis at a rate not less than $455/week
• Employee’s primary duty must be the performance of office work

• Employee’s primary duty includes the exercise of discretion and judgment

Professional Exemption:

• Employee must be compensated on salary basis at a rate not less than $455/week

• Employee’s primary duty must require advanced knowledge

When misclassified workers are identify, better if by the organization, rather the DOL, it would be prudent to take actions to correct the situation as soon as possible. The financial risk is significant; base wages, penalties, fines, legal cost, lost productivity, distraction, and decline in worker morale are equally significant.

Is the Cubical Going The Way of the Typewriter?

Friday, September 21, 2012

A number of years ago, a large insurance company I worked for experimented with a revolutionary work environment. Remote terminals were installed in claim’s processors homes. Each morning, a box of claims was dropped off at each processor’s home and picked up the following morning after being processed during the intervening 24 hours. Over a period of several months, this pilot effort was analyzed to determine how productive home processors were compared to their corporate office counterparts. At the conclusion of the pilot it was determined that claim’s processors working from home were significantly more productive than their cubical-bound co-workers. More claims were processed, with fewer errors, in less time. Absenteeism was almost nonexistent, employee engagement was up, and turnover was down. Yet claims processing supervisors felt the pilot was a failure. Why? Supervisors were at a loss as to how to manage someone they could not physical see. Entrenched in the traditional modus operandi of managing; supervisors perceived that they had lost control.

Telework, telecommuting, working-from-home, working-remotely or whatever you want to call it has been made feasible by the increasing and powerful remote and mobile technologies of the Internet, cellular and wireless communications, and telecommunications. Organizations such as the Telework Coalition and the Telework Exchange work to foster the value of telecommuting and its impact on the “…economy, environment, [and] energy usage,…” 2011 studies by WorldatWork’s Telework Advisory Group has tracked a steady upward trend in telework since 2001 until a significant decline occurred in 2008 when the economy began to turn south. WorldatWork’s studies point to telework as one more tool to attract, motivate, and retain valuable talent and balance work-life issues.

The Telework Research Network is a consulting and research organization to private and public employers in the US, Canada, and the UK and argues the business case for telework and workplace flexibility. Their position is that telework makes business sense on the basis of:

• Cost savings and increased productivity.

• Reduction of under-employment and talent shortages.

• Recruitment and retention of the top talent.

• Work-life balance and quality of life issues.

• Phased retirement for Baby Boomers.

• Greater self control for Gen Y’ers.

• Workplace accommodation for disabled workers.

• Address special needs of rural residents and military families.

• Reduction of traffic congestion and the gap in transportation supply and demand.

• Reduction in transportation infrastructure costs.

• Improvement in environmental issues.

• Risk reduction associated with natural and man-made disasters or pandemics.

The Telework Enhancement Act of 2010 mandates Federal agencies to develop and maintain telework policies to ensure that the government can continue to operate and allow employees to work from home or remote sites. While the law applies to governmental agencies only, private employers may find it helpful to appropriate applicable policies developed by agencies such as U. S. Department of Justice or The National Council on Federal Labor-Management Relations.

As a means to attract, motivate, and retain valuable talent, and balance work-life issues, telework fits well into the parallel concepts of flex-work and “hoteling”. In an effort to separate themselves from their competitors in the never ending search for top talent, organizations must apply any tool which provides them with an advantage. Even being able to offer an opportunity of one, two or three days of telework has the potential to significantly improve the completeness of an employer in the talent wars.