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Benefits and Compensation

Posted by Bianca Strzelczyk  December 8, 2008 09:23 AM

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Q. I work as an office manager and part of my duties is to handle payroll/HR functions. My company does not offer any sick days to their employees and we all are told this at the time we are hired. Recently, an employee approached me about a problem with this policy. Upon return from a recent vacation, he discovered we took away vacation days when he had been out sick. We do not dock pay when employees are sick or late, but I am directed to use vacation time toward sick days. Can my company do this? I am just following direction from my boss but want to know if this is OK?

A. There are no state or federal laws mandating that employers grant sick leave to their employees. In fact, more than 59 million American workers do not have access to paid sick days, and nearly 86 million workers do not have paid sick days to care for sick children, according to the Institute for Women's Policy Research.

Your company indicates at hiring that there are no sick days. Does your firm also inform newly-hired employees how their time will be charged when they are sick? If not, it might make sense to provide clarification that sick time used will be charged to vacation time, and to further detail how situations will be managed where vacation time has been fully utilized. Then, employees would be aware that not only is there no paid sick time, but they would be losing wages for sick days. In Massachusetts, where vacation is considered wages, an employer is able to use vacation time (wages) or dock pay (also wages) from an employee's paycheck. Either way, the employee loses wages for days she is absent due to sickness.

One downside of this policy is that it may encourage employees to come to work sick, since they can not afford to lose income. In these cases, employees infect their co-workers, stay sick longer, and in the cases of those serving the public such as hospital or child care workers, can create a public health problem. Would you want your waitress to be serving you when he is ill since he can't afford to lose a day's pay? Or have your project manager distribute a critical report when she has the flu. Of course, these issues are paramount for low wage workers as 80 percent don't have any paid sick days. When these workers must stay home due to illness, they not only lose income to meet daily expenses, but may risk their jobs or have to return to welfare. For more information on paid sick leave, please visit:

1. Sloan Work and Family Research's Paid Sick Leave topic page
2. Sloan Foundation's Opportunities for Policy Leadership on Paid Sick Days
3. Sloan Work and Family Research's Paid Sick Leave, an interview with Sherry Leiwant

— Julie Schwartz Weber and Judi Casey

Q. Our current vacation policy is based on the employee's anniversary date, but we are thinking about switching to annual. Is one method more advantageous than the other?
If we did switch, what and when would be the best way to convert the time?

A. I am assuming that your current vacation policy gives employees an annual lump sum award for their vacation benefits on their anniversary date. Switching to an annual date, could be helpful from both an administrative and accounting perspective. Instead of calculating days for each employee on their anniversary date, there would be one date used to tabulate vacation time each year. Also from a managerial perspective, this change could help managers to create work plans based upon a uniform date.

As far as which date, it depends on the type of business and the reasons for switching to an annual system. Most commonly, businesses choose the beginning of the calendar year or the company's fiscal year.

If you do decide to change to an annual date, make sure to inform your employees in advance about this change, including the reasons why you are shifting to this new plan. Moreover, your company will need to develop a fair method for implementing this plan, including prorating each employee's time for the first year based on their prior year anniversary award.

— Julie Schwartz Weber and Judi Casey

Q. I work in the benefits department for my company. We are a large firm located in Massachusetts with more than 1,000 employees. We have just been asked to evaluate our benefits program and make suggestions on were we can cut programs to save money. Can you offer any recommendations on a. the best approach for this task, and b. which programs you believe are least likely to impact the majority of our employees? We offer a wide range of benefits, from education reimbursement, free coffee and snacks in the break-room, high 401K matching, wellness programs, emergency childcare assistance, etc.

A.Many companies are in a similar situation and are reviewing benefits,compensation and other HR programs for cost savings. When rationalizing and cutting costs in these programs, it is important to minimize the adverse effect on employee engagement and motivation. You do not want to alienate your top-performing employees who will be the ones to help your company navigate these tough economic times. These top performers will also be highly sought-after by competitors that may look to take advantage of dissatisfaction.

With this in mind, we suggest that you review your benefit programs to see which programs are most valued by your employees. This information can be gathered through an employee survey, focus groups or discussions with key business managers and top performers. Next,analyze the cost of each of your benefit programs. This analysis will allow you to prioritize which benefits should be eliminated or scaled back — focusing on higher cost programs that are the least valued by employees.

Watson Wyatt recently completed a survey of approximately 250 large employers on the effect of the economic crisis on HR programs. Here are the survey results.

Jeff Arnold

Q. Do you know where someone can find information about what the government standards are for part time employees working full time hours and not offering them full time benefits? Are there any set number of times an employer can work a part time employee full time hours and not offer them full time benefits? We are a non-profit and rely on many of our part time employees to work long hours.

A. If your company offers Group Benefits, the Department of Labor (DOL) is a good resource for such questions. Specifically, the section on Health Plans & Benefits provides helpful information and links.

In addition, this page under the DOL's eLaws section is also especially useful.

eLaws offers a capability called the eLaw Advisor for a variety of Pay and Benefits issues. eLaw Advisor asks a series of questions and provides a response tailored to your specific answers. You may find the eLaws Health Benefit Advisor to be most applicable to your current situation.

In addition, under the recent Massachusetts Law, all residents of Massachusetts are required to obtain health insurance. The law requires employers to make a "fair and reasonable" contribution to the cost of employees' health insurance or pay a fair-share contribution to the state. The law applies to employers with 11 or more full time employees (FTEs). To be considered an FTE, an employee must work at least 35 hours per week. Links to a summary of the law and related regulations and technical updates can be found on the Commonwealth Connector website.

As always, we also recommend that you confer with your legal counsel on matters such as this.

Jeff Arnold

Q.We usually give end of year bonuses but this year we can not match what we did last year. How do we communicate that we did not have as good a year as the past one and we want to be conservative with bonuses this year because of the economy. Our employees work hard and we do not want to impact morale, but we can not be as generous as we have been in the past. How can we convey that we appreciate their work but need to cut back this year?

A. This is all about messaging and communication. Your employees should be aware of the economy and should be able to understand how that affects your business (as well as most other businesses). You have actually articulated the case pretty well in your question but it is good to think about a longer list of points you want to make to help your employees understand. In other words, one of the keys for success here is to not just tell them "what" but also tell them "why."

Here are some points you might find helpful:

  • Employees are reading and hearing about a weakened economy every day, with companies having layoffs, and some even going out of business.
  • Focus on education. Explain the basic theory of incentives. Incentives are larger in when company performance is strong and smaller when company performance is weak. Annual bonuses go up and they go down. That's how your reward good performance (both employee and company performance) and that's also how you manage your expenses to track with the business.
  • Your best bet is open communication. Let them know what you've told us - you didn't have as good a year and the economy is weak. You appreciate the hard work, but can't be as generous as you have in the past. You may want to add that if you all work together, when the economy turns around, we can possibly have bonuses in future years that were even bigger than last year's.
  • Make sure your managers fully understand the situation and the company's position because they will most likely have the most detailed conversations with the individual employees.
  • Remember, your best employees are the ones most likely to be able to get good jobs - in any economy. Keep an eye on your strong performers and find creative ways to reward them for their critical contributions. You might want to consider a better-than-normal award for this select group of key contributors. And sometimes it's as easy as telling them how much you value them.
  • If you make broad-based cuts but still give hefty rewards to your executives, you'll have less understanding from the rest of your employees.
  • While you may not be able to show your employees that you appreciate them with money, it shouldn't stop you from letting you know you value their work. Employee recognition can be done in many ways. You may want to consider additional time off or stock in lieu of cash.

Don't be scared of communicating with the employees - they're going to find out soon enough. This year in particular, you may have a more receptive employee population than you think.

Bill Coleman

Q.Our salaried employees currently fill out weekly time cards. They are required to note if they take a sick, personal, or vacation day. My question is what should they write on regular workdays, 8 hours, or what they actually work, even if it is more than 8 hours or less than 8 hours. Also, if they work more than 5 days should they write that down too. We also have a no comp time policy but encourage employees to adjust their schedule within a week if they know they will be working more hours.

A.This is a great question and opens the door to a lot of debate within the HR community. The only answer we can give to this (or any related question) is to have you talk with your labor lawyer. There are a number of nuances here that could alter the interpretation under the Fair Labor Standards Act (FLSA) or other labor laws. For example, let me start by reminding the readers that although in casual use, many people use the term "salaried" to mean "exempt" (from FLSA), the two are not synonymous. For the purposes of this question, let's use "exempt" instead of "salaried" to keep it clear.

Acknowledging all that, let's briefly discuss some of the key issues.

There are many good reasons to track work time including tracking who is working on what, anticipating staffing needs, building cost models, avoiding employee burnout, etc. There are also good reasons to track time off - most states require employers to pay accrued vacation time to departing employees, it behooves employers to require careful tracking of vacation and other PTO (paid time off) use.

In addition, some companies use those time records to control expenses in the event of an employee misclassification. As you probably know, the "white collar exemptions" are not scientific and require the exercise of a considerable amount of judgment. If an employer has misclassified an employee as exempt, when the mistake is corrected, the employee becomes retroactively eligible for overtime. In the absence of concrete time records, courts have routinely applied a presumption that the employee's own stated work hours are accurate. If you find yourself in such a situation and the employee inflates his/her actual work hours, the cost to your organization could be very large. Requiring exempt employees to keep accurate time records provides some level of insurance in the event of a misclassification.

Some believe that asking employees to charge exactly 8 hours per regular work day worked - and no changes for longer or shorter days and no time tracked on weekends - is the safest practice. Others criticize this approach by claiming that it serves no real business purpose because the numbers don't mean anything. The naysayers also proffer that this practice may not provide any support in the misclassification situation discussed above because the company has created a set of rules that specifically undermines the validity of the claim that the employee didn't work overtime.

This question also raises a few other noteworthy points:

  • Simply requiring exempt employees to track their work time has no bearing on their FLSA status.
  • Except in very limited circumstances, compensatory time is impermissible with respect to non-exempt employees - and any agreement providing such is typically void.

Finally, remember: get your lawyer's advice for your organization's specific situation.

Bill Coleman

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About NEHRA - The Voice of HR Featuring articles and resources for Human Resources / HR professional and hiring managers from the Northeast Human Resources Association (NEHRA).

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