You Can’t Please Everybody

We just finished an Open Enrollment for Life Insurance.  It was my first Open Enrollment at Park and all-in-all I thought it went well.  Over 92% of eligible employees completed the enrollment process, around 50% of employees purchased supplemental life insurance, and, most importantly, we did it all online.  Employees logged into our new HR System, they updated their personal information, entered their beneficiaries, and enrolled in the insurance.  I am very pleased with our HR team, the software, the employees – everything really.

I received dozens of compliments from employees about how easy the process was and how employees appreciated the online access.  But what sticks with me more than that are a few negative comments.  Some people felt the process was not simple.  They don’t like the HR System. They had difficulty getting registered. Maybe at the heart of it, they just don’t like change – and there was a lot of it in this process.

One of the challenges was communications.  We are located in 40+ locations coast to coast.  We didn’t want to hold traditional open enrollment meetings because the logistics outweighed the relative simplicity of the benefits (it’s just life insurance) so we relied on the printed word.  We sent a long announcement/instruction email to all employees. Over the two weeks of Open Enrollment we sent three reminder emails to all employees and two more just to those who had not completed the process.  We held three open Q&A sessions to help people both in person and via telephone. (BTW – less than 30 employees attended any one of these sessions.)  Finally, we answered every phone call and email and even went to employee’s offices to assist them with the process.  I’m not sure how much more we could have done.

One thing I learned – and I guess I shouldn’t have been surprised – was that people don’t read.  We probably rejected almost 20% of submissions because employees didn’t read the directions.  Spouse Life and Child life were both limited by the amount of insurance employees purchased for themselves, but lots of employees signed up for these benefits without regard to the rules.  There were several other questions that I answered 5-10 times per day whose answer was clearly included in the emails and/or instructions.

So what are my takeaways?  First – over communicate using multiple media.  Second – give people enough time, but not too much (two weeks was perfect for this type of enrollment).  Third – use technology whenever you can; within one day of completing this enrollment I had all of the information gathered and ready to create payroll deductions and send to the vendor. Last, but not least, don’t let a few negative comments rain on your parade.  You can’t please everybody, so make most of the people happy and learn from the rest.

Have a very happy Thanksgiving!

Do It Right – The First Time

I’ve been doing a lot of auditing lately.  Comparing what is to what should be and then making adjustments. Unfortunately there have been lots of adjustments.  While tedious and frustrating, it’s been a learning process.

The first rule of payroll is: pay people correctly and on time.  If you do that, the rest is pretty easy.  With benefits, the rule is similar: make sure employees are enrolled in the plans they signed up for, and then charge them appropriately.  The other stuff like paying the vendors and making sure you have the right plans, all takes a back seat to the first rule.

The challenge often comes during Open Enrollment.  Lots of employees sign up for lots of things.  Sometimes they don’t understand what they’re doing. Sometimes they change their mind.  Sometimes they make mistakes. It can be a confusing time.  How do you then make sure to follow rule 1 and get everyone enrolled in the plans they asked for and then charge them appropriately?

I’m reminded of the teachings of W. Edwards Deming, the quality control guru who passed away in 1993.  Among other profound things, Deming preached that you can’t “inspect in” quality.  No matter how good you are at auditing and checking and verifying what you’ve done – you’ll miss things.  Plus, your cost of all those audits and checks becomes enormous.  Instead, you have to build quality into the process. 

So, it’s that easy, huh?  Just build the quality into the process.  But we’re dealing with people here, not machines.  And these are often people who aren’t paying a lot of attention.  Sure, they want the benefits, but they also want to get back to work and to do things they understand.  They don’t want to spend hours signing up for health insurance.  So how can you “build quality” into that kind of system?  Here are a few hints (warning: some may be easier said than done).

Provide employees with an easy way to see what they are currently enrolled in as they make their new elections.  That way, if they already have health, dental and vision coverage, they are less likely to forget to enroll in vision this time. If they know how much supplemental life they have, then they have a reference point to choose again.

Over communicate.  If you feel like you’ve already and said something five times, say if five times more. Provide lots of opportunities to ask questions.  Use multiple communication vehicles – some people like to listen while others like to read.  Cover all of the bases.

Give people enough time to make an informed decision, but not too much time.  People don’t like to feel rushed, but if they don’t have a deadline they’ll never get it done.

And finally – don’t count on only building quality into the system.  You’ll still need to check, verify and audit. As soon as your open enrollment closes run reports of what employees signed up for and compare that to what they had before.  When in doubt – ask.  You’re much better off spending “too much” time getting that first billing  cycle correct than finding out 6 months later that someone who completed an enrollment form never actually was enrolled in the benefit.

My moral of the day – pay attention to the process up front – build quality into your open enrollment system – and then audit and verify your results before you move on to other activities.  Doing it right the first time will pay dividends all year long.

Where Does Payroll Report?

Our founding fathers thought it was so crucial that the state not control religion that they wrote the separation into the Constitution.  While we continue to argue about it today – for the most part we draw a bright line between politics and religion.  While many people are not even aware of it, a parallel battle rages in business today.  Should the Payroll Department report to Accounting or to HR?  Let me play both sides of this argument.  (As usual, I’ll try to keep my tongue firmly planted in my cheek.)

Payroll should be in accounting. First and foremost, payroll is a financial function. It is all about writing checks, disbursing cash, and controlling things.  We have to be completely sure that we account for every hour that was worked and ensure that we pay people correctly.  We need to manage the time sheets and control overtime.  Let’s face it; payroll is about accuracy and not about some touchy-feely HR stuff that seems to want to make everybody feel good about everything.

Payroll is about people – employees to be more specific – and who is tied in more closely to people than HR?  We know who comes, who goes, who works for whom, what they do, how well they are performing, and how much they should be paid. We’re the ones who ought to take the next step and make sure they get paid correctly.  Sure, it’s about accuracy, but just because we also organize picnics and run training sessions doesn’t mean we can’t count.  Payroll is paying people, and nobody is better in the “people” business than HR.

So, you’ve heard the arguments, who’s right?  Well, as usual, nobody.  There can be some great synergies when HR and Payroll report to the same person – particularly in small and mid-sized companies.  You’ll get better communication and will be able to share resources.  But, there can also be some downsides and a loss of financial controls.

Regardless of who is the manager, we need to come back to the issue of the separation of church and state.  HR is responsible for who works here – new hires and terminations.  HR (along with the manager) is responsible for establishing the employee’s position, pay rate, and overtime status.  HR needs to manage the benefits and other voluntary deductions. Payroll is responsible for accounting for the hours worked, calculating net pay, withholding all deductions – voluntary and involuntary (taxes and garnishments), and processing the pay checks.  Payroll is responsible for remitting the taxes to the government and filing wage reports.

There needs to be a bright line between HR and Payroll.  HR should not be able to enter hours and payroll should not be able to change a pay rate.  HR should not be responsible for calculating overtime, and payroll should not be involved in determining who is eligible for overtime. To each his own.

In an organization where everyone works together and there is good communication between HR and Payroll, it really shouldn’t matter who Payroll reports to.  Likewise, regardless of the manager, if the two departments don’t work well together, you’re going to have issues.

Remember, the first rule of both HR and Payroll is to pay people timely and correctly.  After that, everything else is easy(er).

A Word About Vacations

Summertime – and the livin’ is easy. Well not as easy as it should be. The economy is still struggling. The unemployment rate is not rebounding like it should be. Gas still costs way too much. Maybe the livin’ isn’t easy at all – but it is still vacation season. Having just returned from my first extended vacation in years, I have a renewed perspective (and that vacation aura) that paid vacations are a wonderful thing.

Does your organization offer paid time off? Most do, according to the DOL. There are no requirements (that I am aware of) in any state or the federal regulations requiring paid vacation time. Similarly, paid vacation time is not required to be treated at “hours worked” for calculating overtime. Given all that, the DOL’s March, 2009 Benefits Survey says that 75% of civilian workers (86% of Full Time workers and 36% of Part Time workers) have access to paid vacation time. Slightly fewer small companies offer vacation – 69% for companies with less than 50 employees.  Elementary and Secondary schools showed the lowest percentage (24%) but that does not account for summers off for most teachers. Hospitals had the highest percentage at 91%.

The number of days off varies widely, but the averages (median) are very consistent – 10 days after 1 year, 15 days after 5 years, and 20 days after 20 years. I was surprised to see no significant variation between union and non-union organizations. Part Time workers tend to get around half (or slightly more) time off of what full time workers get.

So, everybody does it, but why? I can give you three good reasons.

1)  Paid vacations allow employees to decompress – to get away from work, spend time with families and friends, and avoid burn out. Vacations allow employee time for recreation – meaning to re-create. Time to heal one’s self and recharge your batteries.

2)  Paid vacations are (for the most part) a non-incremental cost. If you budget paying Sally $40,000 to do her job, you don’t pay her anymore to take vacation. And (especially for exempt employees) you don’t have to pay someone else to do her job while she’s out. Most likely she’ll work harder before and after the vacation to get ready and then to get caught up. For some jobs you may have to backfill the positions while they’re off, so this reason isn’t universal, but it is very common.

3)  Paid vacations allow you to audit the work of the vacationing employee. If someone is doing something they shouldn’t be doing it will often be exposed with someone else does their work for a few weeks. When I worked in banking years ago, people who handled money were required to take a 2 week vacation every year for that exact purpose.

So, I strongly encourage management to find a way to offer all employees some amount of paid time off. There are lots of strategies to allow employees to accrue or earn that time – different “rules” about how the time can be used – ways to make sure people don’t abuse the system.  Don’t make it too complicated and be prepared to pay employees for any earned but unused balance when they terminate (it’s required in most states).

Enjoy the coming summer – and make sure to take a few days off. I’m sure you deserve it.

Redefining Parenthood – the DOL Way

Last summer the Department of Labor broadened the definition of “parent” – at least as it applies to the Family and Medical Leave Act.  As society continues to evolve, the traditional nuclear family is changing.  More and more children are being raised by step-parents, extended family members, or in relationships that have never been formalized.  In those situations, who is entitled be called a “parent” and take FMLA leave to care for their “child” needs to be clarified. The definition of Parent has two different perspectives under FMLA, describing “Parents” who can take FMLA leave to care for their child, and employees who can take FMLA leave to care for their “Parents.”

The new definition does not change anything related to biological parents or adopted parents. The change is in how the DOL defines “an in loco parentis relationship.”  Here is the formal definition, taken from an FMLA Fact Sheet:

“For FMLA leave purposes, “parent” is defined broadly as a biological, adoptive, step, or foster parent, or an individual who stood in loco parentis to an employee when the employee was a child.”

 Again quoting from the fact sheet

“What does in loco parentis mean under FMLA? In loco parentis is commonly understood to refer to a relationship in which a person has put himself or herself in the situation of a parent by assuming and discharging the obligations of a parent to a child with whom he or she has no legal or biological connection. It exists when an individual intends to take on the role of a parent.”

 Under the FMLA, persons who are in loco parentis include those with day-to-day responsibilities to care for or financially support a child.

So, here is the issue, if your employee is a parent under this definition, they can take FMLA leave to care for a sick child (assuming they meet all of the other qualifications).  Note that second sentence above “day-to-day responsibilities to care for OR financially support a child.”   In some cases simply providing financial support to the child can qualify a person to be a “Parent.”  Also, if your employee had an “in loco parentis” they can take FMLA leave to care for their sick “Parent”.

All of this is good for the employee, the child and the parent.  The broadened definition helps to ensure that family members can get the care they need and that employees’ jobs will be protected while they provide that care.  But it’s not always good for employers.  The broader we cast that net to define the family relationships, the more we’ll have employees take time off work. In an economy where organizations are trying to run as lean and productive as possible, broadening this definition may put more strain on an already weak system.

Here’s one other FMLA wrinkle I want you to be aware of – but this has not changed.  FMLA applies to all employers who have at least 50 employees.  However, an employee is not eligible unless they work at a location in the US where at least 50 employees work within a 75 mile radius.  So, if you have small field offices with under 50 employees, those employees are technically not eligible for FMLA leave. You may choose to extend FMLA rights to all employees, but you may not be legally required to do so.

FMLA is another piece of legislation with good intent that is becoming more unwieldy and difficult to manage.  Employers need to work hard to make sure they are in compliance.

Let’s Have a Party!

I bet you didn’t even know that today is a holiday – it’s not on the Hallmark calendar and the Post Office is open.  Today is National Employee Benefits Day – as proclaimed by the International Foundation of Employee Benefits Plans.  Have a party, eat some cake, and thank your local benefits professional.

Benefits are a challenging area for HR.  They can be expensive, but some are legally required and some are demanded if you want to be competitive in the labor market.  A solid benefit program also should improve employee satisfaction and loyalty, thereby reduce turnover.

Benefits can be expensive.  There are more benefits than ever to manage: Health and welfare benefits (medical, dental, vision and life insurance); Income Continuation Benefits (short and long term disability, unemployment, and workers’ compensation); Retirement Benefits (401k, pensions, and ESOPs), and Employee Assistance Plans.  All of these benefits have a direct cost to the organization that typically ranges from 5-15% of payroll depending on how the organization shares costs with employees. 

Time off benefits (holidays, vacation, sick time, bereavement pay, jury duty, and voting time) are also in the mix and must be administered. While most of these are non-incremental costs (if I was going to pay Susie $30,000 per year to do her job, I don’t have to pay more when she’s on vacation, I just don’t get any work done) they still have a value that typically runs between 10% and 25% of payroll.  Don’t forget payroll taxes, which while not really an “employee benefit” still cost the company 7-10% of payroll.

You can also throw some less traditional benefits into the mix like cancer insurance, long term care, accident protection (aka Aflac),and prepaid legal.  Then add in paid parking, a company cafeteria, discounted bus passes, wellness programs, an onsite medical clinic, and discounts to area venues and health clubs.  Don’t forget tuition reimbursement, adoption assistance, employee discounts on merchandise, and maybe a summer picnic and a winter holiday party.

The role of a benefits manager is often much more diverse than simply coordinating an annual open enrollment meeting. A comprehensive benefit package can easily cost upwards of 35% of payroll and can be both a competitive advantage, and liability.  A good manager should be working constantly to assess the effectiveness of your benefits plans – are they meeting the needs of both the employees and the organization?

So, buy your benefits manager a cake today and have a party – but keep it short because they’ve got a lot of work to do.

Defining Disability

In September, 2008, the President signed into law the ADA Amendments Act (ADAAA) and that law became effective January 1, 2009. Like so many regulations, it wasn’t until earlier this week the final regulations implementing this Act were approved by Congress. From my perspective these changes are great for those with disabilities, but not so much for businesses. The overall tone was to reverse several Supreme Court decisions that narrowed the definitions of who is considered disabled. The EEOC has issued a Fact Sheet on the new regulations. I’m going to take the liberty of quoting from it and commenting on it. The EEOC’s text is in bold text.

The EEOC regulations implement the ADAAA — in particular, Congress’s mandate that the definition of disability be construed broadly. Following the ADAAA, the regulations keep the ADA’s definition of the term “disability” as a physical or mental impairment that substantially limits one or more major life activities. – Examples of “life activity” are caring for oneself, performing manual tasks, walking, seeing, hearing, speaking, breathing, learning, and working.

The regulations implement Congress’s intent to set forth predictable, consistent, and workable standards by adopting “rules of construction.” – Of course these “rules” are not well spelled out and will be open to interpretation ultimately in the courts, so you can expect another Amendment act in 10 years to clarify things again.

These rules of construction are derived directly from the statute and legislative history and include the following:

• The term “substantially limits” requires a lower degree of functional limitation than the standard previously applied by the courts and is to be construed broadly.
• The determination of whether an impairment substantially limits a major life activity requires an individualized assessment.
• With one exception (“ordinary eyeglasses or contact lenses”), the determination of whether an impairment substantially limits a major life activity shall be made without regard to the ameliorative effects of mitigating measures, such as medication or hearing aids.
• An impairment that is episodic or in remission is a disability if it would substantially limit a major life activity when active.
• In keeping with Congress’s direction that the primary focus of the ADA is on whether discrimination occurred, the determination of disability should not require extensive analysis.

Maybe I’m just cynical, but all this sounds to me like it should be pretty easy to claim a “disability” under the ADA. That claim can then be matched for a request for a “reasonable accommodation”.  It does not appear that the regulations do anything to better define what a “reasonable accommodation” is, so that will continue to be an item for discussion and litigation. I expect the number of claims of harassment or discrimination under the ADA to go up substantially over the next few years and they will be much harder to defend against.

To wrap this up and get off my soap box – I’m all in favor of legislation to protect the rights of the disabled – this is a population that has been treated poorly for too long. However, vague one-sided regulations aren’t the way to effectively implement change. From a business perspective, this will be challenge to live with.

UPDATE – 4/1/11 – According to an article in Human Resources Executive, Disablity Discriminaiton cases were up 17% in 2010 over 2009 and experts say the main reason is the change in the defintion of disabilty.  I love being right!

Some Thoughts on Unions

The debacle in Wisconsin got me thinking – which side of that mess should I be on? You know the story – the Governor wanted to remove the collective bargaining rights from government workers – the Democrats ran to Illinois to try to stop him – they failed – now the citizens are trying to recall everyone – what a mess! One side will tell you that they are just trying to give “management” the flexibility they need to control spending. The other side will complain that they are walking on workers’ rights and trying to balance the budget on the backs of the common man. Who’s right? As is usually the case in highly publicized arguments, probably both of them.

Labor unions in the United States have done wonderful things for American workers. It is because of unions – and the force they could apply to both business owners and the government – they can take credit for the 40 hour work week (as opposed to working dawn to dusk), minimum wage, better benefits and safer working environments. As they say – a rising tide lifts all boats – and as unions won concessions from management those same advantages spilled into the non-union workforce. However, some will contend that the unions went too far. Unions are “blamed” for protecting poor performers, causing wages and benefits to rise to an unsustainable level and spending more dues on politics than on the members.

The Bureau of Labor Statistics published a study on union membership in January, 2011. Here is a link to their report, and here are some interesting observations:

• Union membership has declined to approximately 14.7 million workers or just under 12% of the workforce.
• Teachers and Protective Service Workers (aka Police and Firefighters) have the highest percentages of union membership (37% and 34% respectively) while sales and agriculture workers are the lowest at fewer than 4%.
• In terms of industries, public sector workers swamp all other contenders at 36%, with local governments hitting almost 46%. On the flip-side Finance and Food Service have only 1% union membership.
• Unions are strongest in New York (26% of workers) and Hawaii (23.5%) and weakest in North Carolina (4.9%) and Georgia (5.0%).
• Here’s what really surprised me – for all industries, jobs, etc. union members average almost 30% higher average weekly wage than non-union workers and for women, that gap jumps to 34%.

So back to Wisconsin. In Wisconsin, 15.1% of all workers are union members – a sizable chunk of the voter base, but not huge. But, if Wisconsin also has almost 50% of government workers in unions you can see where the conflicts might arise. Perhaps there is some merit to the pretense that those workers are being paid above-market compensation. Perhaps not – I don’t have the statistics to that detail – but it could make for an interesting discussion.

Why did unions become successful, because management was greedy, asked too much of workers and did not reward them sufficiently. What have we learned? Treat employees fairly, give them a safe work environment and pay them a competitive wage. If you do that there is no need for a union – and given my druthers, I’d rather be able to talk to my employees face-to-face rather than through a union rep.

Have a happy St. Patrick’s Day!

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Bereavement Leave – A Sad Fact of Business Life

The question comes up – how much time can I take off to attend the funeral of my (fill in the blank)?  It’s a tough question.  People die – it’s one of the few universal facts of life. Those deaths occasionally affect our employees – sometimes directly, sometimes tangentially.  Assuming you already provide some form of paid time off benefit for your employees, should you provide a separate amount of paid time off for to a death in family?

The answer is probably yes.  According to SHRM, 90% of companies offer some amount of paid bereavement leave.  The most common practice seems to be 3 days for an immediate family member and 1 day for an extended family member.  The definitions between these two get muddled sometimes.  The leave is really intended to provide time to make arrangements, attend the funeral and maybe provide for some out of town travel.  Pretty much this can be almost cut and dried.

But can you really deal with the loss of an immediate family member in 3 days?  If your spouse or child should die on Tuesday, can I expect you back at work the following Monday?  Surely that can’t be practical.

I know, everyone grieves in different ways. Sometimes 3 days is plenty.  If a parent has been living in a care facility for years then maybe you’ve had time to prepare (emotionally and administratively) and only a few days are required.  On the flips side, the unexpected death of a spouse or child can be devastating.  No way is 3 days going to cover it.

Back to the corporate perspective.  As a business person I have to do something.  I recognize the impact a death can have on my employees, but I have a business to run.  I can’t afford to pay someone for 2-3 weeks of time off every time a great-aunt dies.  Some employees seem to lose an aunt or uncle every few weeks.  What am I supposed to do?

Be compassionate.  The 1-3 day leave is sufficient for most situations.  Allow employees to use other forms of PTO if they need more time.  In the case of an unexpected death of a family member allow for unpaid leave.  Give your supervisors some discretion, and know that occasionally you will be taken advantage of.  While bereavement leave is one f the most commonly offered forms of PTO, it is typically one of the least frequently used.

Keep your rules simple, help employees appreciate the value of helping the company be successful, and be compassionate.

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Oh Yeah! Says Who? Well, the Feds do.

In general I’m not a big fan of big government and I’m not a politically active guy, but this time, I need to hand it to the Department of Labor. They have put together a website that is very helpful for businesses – particularly for small and mid-sized ones. The FirstStep Employment Law Advisor is an interactive website that will help you determine which Department of Labor employment laws apply to your organization.

The process starts with questions about the nature and size of your business, if you have unions (or if you actively work to avoid them), what types of benefits you offer, do you have government contracts, etc. Based on your responses, the site tells you about all of the DOL laws that apply to your business. Some are a little arcane (e.g. the Employee Polygraph Protection Act which severely limits the times you might require an employee to take a lie detector test), but others, like the overtime laws and Family and Medical Leave Act are things that could well be pertinent and you need to know if you are required to comply.

There are three options to get advice on – an Employment Law overview, a Recordkeeping and Reporting Overview, and a Poster Advisor. All three utilize the same Q & A process. The Poster Advisor ultimately gives you the posters in PDF format to print and post. Very simple, very cool.

Of course, there is a catch. Many of these laws are still just plain confusing. The Employee Retirement Income Security Act (ERISA) covering benefit plans and the Family and Medical Leave Act (FMLA) granting employees unpaid time off for specific situations, are complex. Even the summaries supplied here may take several readings before you know exactly what applies to whom. But these are much better than trying to dive in to the regulations. They are also better than simply putting your head in the sand and ignoring the legislation completely.

This site only covers laws that are governed by the Department of Labor. They provide links to State offices and to other federal agencies like the Equal Employment Opportunity Commission that also affect your business.

If you’re thinking that your business is too small to be impacted, I’ve listed below some of the federal laws that might pertain to you.  With the Feds, ignorance is no excuse.

Under 10 employees –                                             

• Consumer Credit Protection Act
• Employee Polygraph Protection Act
• Fair Labor Standards Act
• Federal Minimum Wage Act
• Lilly Ledbetter Fair Pay Act of 2009
• Occupational Safety and Health Act
• Portal to Portal Act
• Uniformed Services Employment and Reemployment Act
• Whistleblower Protection Act

11-14 employees

• Employee Retirement Security and Protection Act.

15 – 49 employees

• Title VII of the Civil Rights Act (1964)
• Age Discrimination in Employment Act
• Americans with Disabilities Act
• Equal Pay Act
• Pregnancy Discrimination Act
• The Genetic Information Nondiscrimination Act of 2008

50-99 employees

• Family and Medical Leave Act

100+ employees

• Worker Adjustment and Retraining Notification Act

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