Posts Tagged ‘Employee Benefits’

Understanding PTO Policies, Part 1 – Vacation Pay

Wednesday, August 18th, 2010

As the tight economy continues with no foreseeable end in sight, employers are challenged to find ways to compensate, motivate and reward employees while adding minimal costs to their bottom line.  As health insurance premiums continue to skyrocket, many employers are utilizing  paid time off (PTO) as a recruiting tool to entice qualified applicants to join their company.  PTO policies such as paid vacation, sick,  holiday, and jury duty are common-place within the workforce; however, state regulations restrict how employers may implement such policies.  Non-compliance with these regulations may result in wage and hour lawsuits that can be costly for employers. In the next two posts, we review some important PTO rules and guidelines.

Vacation Pay

The most common form of PTO is vacation pay. According to Salary.com, 86% of employers offer some form of vacation pay. According to the California Chamber over Commerce, of 90% do. However, contrary to popular belief, vacation is not required under any Federal or State statutes. If offered, it is contractual in nature, meaning it becomes an employer policy that must be adhered to. As a result, many states impose restrictions on vacation pay. For example, in California, vacation pay is considered a vested, earned benefit which accrues over time and must be paid out at the time of termination.

“Reasonable Cap”

Vacation pay cannot be forfeited, and a  “use it or lose it” policy may not be enforced. However, employers are entitled to impose a “reasonable cap” to the amount of vacation an employee may accrue. A general guideline would be a vacation accrual equal to double (2x) their annual amount. As an example, if an employee accrues 40 hours of vacation per year, a reasonable cap would be 80 hours. After the employee has earned 80 hours of vacation, their accrual would stop.  The DLSE (the Division of Labor Standards Enforcement)  has determined that an employee must have at least nine months after the accrual of the vacation within which to take  the vacation before a cap is effective.
Accrual Methods

Accrual methods are flexible. Most commonly, vacation days are accrued by the day, week, or pay period. According to the CalChamber, the most common vacation policies are:

• Two weeks after one year
• Three weeks after five years
• Four weeks after eleven years

While some employers enjoy using their vacation policy to show off their corporate creativity, they are cautioned to avoid making policies overly complicated or difficult to track. At best, errors in calculations may occur. At worst, disparate policies may result, leading to potential discrimination violations. Additionally, the vacation accrual rate cannot decrease from one year to the next.

In summary, while vacation pay is a well accepted practice by a vast majority of businesses, it carries a range of obligations and rules that must be adhered to. If you have any questions or concerns about your current vacation policy, or would to create one, please contact one of our Human Resources Consulting experts who can assist you.

In our next post, we will review sick, holiday and personal days off.

Disclaimer

The HIRE Act – More Updates and Information

Tuesday, May 11th, 2010

In attempt to keep our readership up-to-date on the new HIRE Act legislation, we will periodically post new HIRE Act updates on this blog.

On March 18, 2010, the Hiring Incentives to Restore Employment Act (“HIRE Act”) was signed into law by President Obama. The Act provides a wide range of incentives for employers including a tax holiday for hiring “new” workers and a tax credit for retaining such workers. The goal of the plan is to stimulate the economy and bring people back to work.

The key highlights of the “Tax Holiday” are:

  • Relieves a “covered employer” of its obligation to pay its 6.2% match for Social Security on the first $106,800 of wages (potential savings of $6,622)
  • Applies to those workers hired after 2/3/10 but before 1/1/11 on wages paid between 3/19/10 and 12/31/10

While the employer is exempt from the Social Security match, they must still contribute to Medicare, and State and Federal Unemployment Insurance.

Not all employees are covered. Covered employees are those working in the private sector, for both profit and non-profit businesses. Public entities and governmental agencies are excluded. The one public exception is higher education institutions. The Act covers full-time, part-time, seasonal and temporary employees.

Other limitations of the Act are:

  • Coverage does not extend to household employers
  • Employees must have begun work after 2/3/10 and before 1/1/11
  • Employees must have been employed a total of 40 hours or less during the previous 60 days
  • They can not be hired to replace another employee (unless quit or fired for cause)
  • Employer family members are excluded

As an employer, if you are inclined to take advantage of the new Act, keep these important considerations in mind:

  • Don’t just hire to get the credit – the need to fill a particular position continues to be the overriding concern
  • When deciding between various candidates, eligibility for the credit should be a factor, but not the overriding one – hire based on skill and job qualifications
  • Create and retain HIRE specific records for establishing business credit eligibility

For more information, contact a CPEhr Client Services Representative.

Maintaining Employee Benefit & Health Files – What You Need To Know.

Wednesday, April 14th, 2010

In our previous post, we discussed the importance of maintaining accurate employee files. A myriad of state and federal agencies  govern the maintenance of employee files, often with overlapping or contradictory requirements. In this post we will focus on employee benefit and health information.

Employee Benefits Data

The Employee Retirement Income Security Act, or ERISA, governs retirement and other employee benefits, and requires employers to keep records relevant to these benefit plans. For example, employers must keep all records supporting the data in summary plan descriptions, or SPDs. In addition, employers must retain annual reports for all benefits plans, including pension reports. Records should generally be retained for six years under ERISA, although records needed to determine eligibility for benefits should be kept as long as relevant.

The following documents must be kept for SIX years:

  • Cobra notices
  • Summary plan descriptions and earnings
  • Beneficiary designations
  • ERISA

The Family and Medical Leave Act

The Family and Medical Leave Act, or FMLA, allows eligible employees up to 12 weeks of unpaid leave in a 12-month period for qualifying medical and family reasons. FMLA has several recordkeeping requirements. FMLA can present an interesting scenario where we have files crossing over. If an employee requests reasonable accommodations or leave under the FMLA or CFRA regulations, documentation of that request should go in the personnel files. However, anything revealing specifics regarding the need must be kept separate in the employee health records. For example: if an individual has been absent due to an illness for 4 days and is returns to work, it is not uncommon to require a physician’s release. If the doctor’s note simply states “this individual is released to return to work with no restrictions” it can go into the personnel file. If however, it includes any diagnosis or indication of the medical health of the individual, it must go into the medical or health files.

As stated, employee medical or health records must be kept separately and confidentially in compliance with the requirements of the Americans with Disabilities Act for a period of FOUR years. Records may be kept on computer as long as they are available for transcription or copying

  • FMLA/CFRA
  • General documentation of requests go to personnel files
  • Specifics of medical need and reasons for requests including diagnosis should go to employee medical or health file

In our next post on the topic of record keeping, we will cover the complicated scenario of overlapping documentation requirements.

Disclaimer

Enhancing Employee Performance Through Rich Benefit Plans

Wednesday, January 20th, 2010

Even as companies begin hiring again, it will take some time before the workforce is back to pre-recession levels. What this means for the average business is that managers are trying to maximize productivity with a smaller workforce. The inevitable result is a more stressful work environment as both employees and management struggle to find a healthy balance between productivity and the decreased manpower. Employers will be required to find new ways of incentivizing and motivating their workforce to maintain a positive attitude while managing increased workloads.

According to the Bureau of Labor Statistics (BLS), prospective employees value benefits second only to pay when considering a new job. And for good reason – the BLS reports that benefits account for 30% of employers’ total compensation costs. What this means to employers is that they must give serious consideration to providing a range of benefits to maintain a happy and committed workforce.

The challenge, however, is investing the time to research, plan, and roll-out benefit plans. With small employer resources already strapped, finding the manpower to implement a benefit program can prove overwhelming.


PEOs Enhance Performance with Health Insurance and Voluntary Benefits.

Professional Employer Organizations (PEOs) provide small employers the unique opportunity to offer their staff a rich and comprehensive array of employee benefit programs that are typically available to only the largest corporations. These robust offerings include a wide range of major medical plans and voluntary benefit offerings. The PEO provides these benefit packages to hundreds of clients, and has the experience to research and procure these top-rated plans for their clients. When joining a PEO, clients merely select they plans they intend to offer, and the PEO takes over from there. From open enrollment, to addressing employee questions, to administering the monthly billing, all the plan management is the responsibility of the PEO.

Most large PEOs offer the following range of benefits:

  • Multiple health insurance coverages
  • Dental insurance
  • Vision insurance
  • Life insurance
  • Disability and alternative insurance
  • 401 (k) Retirement Plan
  • Pre-tax Cafeteria 125 Plans
  • Flexible Spending Accounts (FSA)
  • Employee Assistance Programs
  • Credit Union and financial services

PEO clients are assigned a benefits manager to address all employee inquiries and to manage any related administrative issues. Clients can literally sit-back, and let the PEO manage the process.

Containing Benefit Costs Through Economies of Scale

While most employers recognize the need to offer rich benefits to their staff, the ever-increasing cost of health insurance is forcing them to think twice before rolling out a new plan. Luckily, in  a PEO relationship, small employers can offer the scope and pricing of their large competitors. By pooling hundreds, and even thousands of businesses, PEOs aggregate health benefit plans, retirement plans, workers’ compensation insurance, and legal expertise. The PEO establishes relationships with large regional insurance companies and can offer better plan selections with lower premiums.

Another benefit of working with a PEO is that it provides the insurance carriers greater stability by offering insurance coverage to employees in a broader employee base. The pooled employees come from different industries and geographic areas which stabilize the premiums over the long-term. This provides the PEO greater negotiating power at renewal, thus typically keeping renewal rates below market averages.

There is little question that in today’s economy, employers must  offer their staff a rich benefit plan to maintain morale and commitment. PEOs have become a serious option for small business looking for ways to roll-out robust plans, quickly and cost effectively.

Creative Insurance Alternatives to Reduce Your Costs – Part II

Friday, July 24th, 2009

Our last post introduced the High Deductible Health Plan (HDHP) and how instituting this plan can ultimately lead to reduced insurance usage, and lower premiums. Coupled with an HSA (Health Savings Account) the HDHP can have an ever greater impact on your bottom line.

What is an HSA?

An HSA, or Health Savings Account, is medical savings account wherein the funds contributed to the account are not subject to federal income tax at the time of deposit. Unlike a flexible spending account (FSA), funds roll over and accumulate year over year if not spent. HSAs are owned by the individual.  The amounts put into an HSA are not only federally taxed exempt (HSA’s in California are NOT tax exempt), but employees are also able to take the money with them when they leave their current employer.

This all may sound a bit complicated, but its not as bad as it seems. The point is that there is a world of options beyond the traditional HMO and PPO plans that most employers offer. If you are looking to reduce your benefit costs, consider alternative options and you will be sure to benefit. Contact CPEhr if you would like to investigate further.

(Contributed by Harry Ogan, CPEhr Benefits Specialist)

If medical premiums are killing you… consider creative alternatives. Part I

Wednesday, July 22nd, 2009

Our last post looked at ways of creating a healthier workplace to reduce the soft costs related to employees’ health insurance. Most employers recognize that an attractive benefit package promotes loyalty as well as generates better productivity amongst the company’s employees.  On the other hand, it also can easily be one of the most expensive costs an employer has to consider. Like most businesses in our tough economy, you are probably looking at ways to cut benefit premiums, pronto.

Creative Insurance Alternatives

As premiums continue to increase, insurance carriers are offering more creative benefit solutions. The strategy is to offer valuable benefit coverages, with premiums affordable to average income earners.

Aetna, one of the nation’s leading insurance companies, has experienced increased growth in its High Deductible Health Plans (HDHP) compatible with a Health Savings Account (HSA). An HDHP plan allows for participants to have the richness of a traditional PPO plan, with lower premiums.  Participants are more cognizant of the cost of their care; in part due to the plan’s higher deductible and also the ability of participants to retain any unused portion of the employer/ employee contribution from their HSA to use for future medical needs.  Furthermore, many participants under this plan take a more proactive approach when it comes to their health.  They are more likely to maintain a healthier lifestyle, seek generic alternatives to brand pharmaceuticals and visit urgent care facilities linked to their plan, lowering their healthcare costs to preserve assets in their HSA.

This creative insurance alternative not only benefits the overall health of employees, but also helps mitigate renewal increases to employers, as many HDHP plans tend to see a decrease in utilization.  As a result, these lower costs allow employers to reward employees participating in the plan (some HDHP plans cost less than a HMO coverage) by increasing their employer contribution towards an HSA account.

We’ll continue to explore this unique health insurance option and discuss Health Savings Accounts (HSAs)  in our next post.