Author: William CEBS

Perhaps you have general policies in place that address some of thehigh-profile areas of privacy–employee monitoring, searches, random drugtesting, even protection of medical information (can you say HIPAA?). But mostlikely you are or will be dealing with some sort of employee self-service,through which employees are able to make changes to their own personalinformation or make benefit elections.

    In many cases, this information is stored on your HRMS, but could betransmitted at some point to outside parties such as insurance carriers,employee self-service providers, or external auditors. How can you ensure theprivacy of this information?

    Here are a few steps you can take:

    1) Evaluate your outside contacts. These can include any of the following:

• Health insurance carriers and administrators (includes flexible spendingaccounts, COBRA, workers’ compensation, long-term disability, etc.)

  
  

• Outside employee self-service providers

  
  

• External compensation consultants or survey firms

  
  

• Payroll providers

  
  

• Corporate auditors or other governmental agencies

  
  

    Once you’ve identified the potential places where employee information maybe available outside the organization, begin dialogue with these vendors on howthey protect the privacy of the data. Develop specific, written agreements onhow this information will be protected and the terms under which the informationwill be used. This not only helps protect your information but also determinesthe integrity of your vendor.

    2) Evaluate your inside contacts. Some examples would be:

• Human resources staff, especially field-office staff that may be in manylocations

  
  

• Finance and accounting analysts

  
  

• Information technology analysts, especially those with access to the HRMS

  
  

• Internal security personnel

  
  

• Payroll staff

  
  

    Once you’ve identified these individuals, again review whether they need tohave access to potentially private employee information and, if so, remind themof their duty to protect the confidentiality of the data. This could includetraining seminars or a policy that explicitly indicates the need for maintainingthe privacy of employee information and the consequences of not complying.

    3) Develop a corporate employee information protection policy. This is notunlike the policies that you’ve been seeing from every bank, credit cardissuer, or other service company that states how your personal information willor will not be used and, primarily, shared with other organizations.

    However, in the employee information area, the focus is on protecting theprivacy of the information and stating how it will be protected; you won’t besharing the information for “marketing” purposes. Evaluate the places whereyou collect employee information and have a statement at each of those “collectionpoints” that simply states that this information will be kept confidential andwill be used only for employment, benefits, or law-related issues.

    As with all such things, have your new policies and procedures reviewed bylegal counsel before putting them out to your employees. And keep in mind thatan employee information privacy policy is not required, but rather is anemployee-relations booster that puts a good face on your HR efforts. It’s goodfor business and can help employees feel better about the company.

 

SAMPLE EMPLOYEE INFORMATION PRIVACY POLICY

    The language and wording in this policy is only an example of some of theitems that can be included. Additional items may be added or removed accordingto your own corporate situation and workforce. Please review any policydeveloped from this sample with legal counsel before distribution.

    The XYZ Corporation, in the course of its business practice and, in somecases, as required by law, collects, uses, and maintains personal andconfidential information about each employee. This information is used for manypurposes, including:

• Compliance with federal, state, or local laws

  
  

• Determination of eligibility for employment

  
  

• Determination of eligibility for employee benefits

  
  

• Communication with employees regarding the company

  
  

• Other company-sponsored programs (not employment-related) that rely onfactors such as age, gender, geographic location, etc. (e.g.,retirement-planning seminars)

  
  

    We respect the privacy of our employees and the confidentiality of personalinformation. At no time will confidential information be knowingly shared ordisseminated to unauthorized parties. To attain this standard, XYZ Corporationhas committed significant resources to ensuring the safety and confidentialityof our employees’ personal information. This is done through:

    [LIST WAYS IN WHICH YOU PROTECT INFORMATION–MAY INCLUDE SPECIFIC SECURITYMEASURES ON YOUR HRMS, EMPLOYEE TRAINING REGARDING CONFIDENTIALITY, ON-SITESECURITY PERSONNEL AROUND EMPLOYEE INFORMATION, ETC.]

    [If you have some sort of employee self-service (e.g., Web site, interactivevoice-response system, or intranet), include the following:

    We also have electronic technologies that enable us to efficiently manage ouremployees’ information. Examples of these include [list examples here]. Wehave protected our systems from unwanted access through the following securitymeasures:

    [LIST EXAMPLES OF DATA-ENTRY SECURITY SUCH AS ENCRYPTION, FIREWALLS,ID/PASSWORD COMBINATIONS, ETC.]

 

WHEN WE SHARE INFORMATION

    As part of our commitment to your privacy, certain policies have beenestablished to protect your information when it is shared inside and outside thecompany. Employees of XYZ Corporation that are authorized to have access toemployee information have received specific instruction in issues of informationconfidentiality, and their actions are covered under Policy X in the XYZCorporation Employee Handbook.

    It is also necessary for information to be shared with outside organizationssuch as health-plan providers, governmental agencies, and other third-partyvendors. In cases where confidential information might be shared, specificwritten agreements regarding confidentiality are enacted and monitored with anyoutside organization.

    In all other cases in which information might be shared with individuals ororganizations that may not have specific policies or agreements in place, XYZCorporation will obtain permission from any affected employee prior to releasingthe information, unless the law prescribes otherwise.

This is intended to provide useful information on the topic covered, butshould not be construed as legal advice or a legal opinion.

Workforce Online, December 2002 — Register Now!

By now, you’ve seen or read that helping your employees understand and manage their personal finances through employer-sponsored financial planning is one of the hottest perks around. The prevalence of this benefit is certainly growing, with both employees and employee benefit professionals.

In the annual Top Five Benefit Priorities survey conducted by the International Society of Certified Employee Benefit Specialists (ISCEBS), for each of the last three years, “Providing Financial/Investment Planning Tools” and “Increased Investment Education” have been near or at the top of the list for both employers and employees. Why is this happening and why should employers be considering this benefit?

• Sins of the past. With the stock market handing out 15-20% average returns year after year for much of the 90’s, who could blame people for gaining expectations that couldn’t be sustained? The result was that people who came to expect that money placed in certain “lottery stocks” (high-tech IPOs) would be the quick road to early retirement. Then came the cruel slap of the tech meltdown and there has never been a greater need for financial handholding.

  
  

• The rise of the 401(k). With employer-sponsored retirement plans becoming a staple of a benefit program, it also has become a larger part of an employee’s overall financial picture. Managing this part is a much bigger job today.

  
  

  In a recently released survey by ISCEBS entitled “New Kid on the Block: Financial Planning as an Employee Benefit“, 81% of the benefit professionals surveyed felt that employees lacked the most financial awareness in the area of how they allocate their 401(k) money to the correct investments. Over the past two years, this has led to situations such as a 55-year-old employee within three years of retirement who lost a large part of his retirement nest egg because it was invested totally in small company stocks.

  
  

• Many more options. Many employers take the stance that financial planning is an issue that employees should handle and is of no business to the employer. Add to that the perception of many people that financial planning is a costly adventure and you have a lot of people who don’t have a clue about personal financial management. In reality, financial planning services can be offered through many vehicles, some at no cost to employer or employee.

  
  

• People respond to it. In a 2000 study done by Virginia Tech, 75 percent of employees surveyed felt that they were making better financial decisions in the workplace due to the financial planning programs that were sponsored by their employer. This sense of control over financial decisions leads to increased morale, better productivity and bottom line results.

  
  

Financial planning in the workplace has grown substantially over the past 10 years. What started as retirement plan vendors sitting down with employees to help select investment options has grown into other areas such as estate planning, saving for college, and managing credit-card debt. How are employers providing these services?

• Traditional financial planners
  Many financial planners are packaging their consulting services for employers to help provide “group” services for employers who need it. Depending on the consultant, the cost can be as little as zero, with the consultant counting on fees and commissions from products sold. Other consultants will charge the employer a flat fee per month or per employee for a menu of services in exchange for not presenting products to employees.

  
  

  Some of the planning services would include estate planning, investment selection education for the company retirement plan and advice on making smart decisions in employee benefit utilization (e.g., what health plan makes the best economic sense?).

  
  

• Financial planning software
  Much of the planning software for employers is focused on tools for retirement plans only, although they are slowly integrating other areas of personal finance into their programs. Pricing varies widely amongst these products, however some deals can be found since, according to the ISCEBS survey, 69% of benefits professionals don’t use these services yet and only 25% of those not using the services are considering it. Employers who wish to provide modeling software for employees to calculate everything from the impact of a 401(k) contribution on their paycheck to how much that nest egg will be at retirement need only look to their retirement plan vendor to find it.

  
  

  For corporations that are looking for Web-based solutions, several companies have formed alliances to develop both standalone and Web-based software programs to help employees figure out their financial futures. Some of the names of these products are mPower, Morningstar ClearFuture, and Financial Engine’s Investment Advisor. Pricing varies widely amongst these products.

  
  

  There are also many personal financial software products, such as Quicken and Microsoft Money that provide personal financial planning modules within their programs. Employers can provide this software to employees to use at home.

  
  

• Voucher Programs
  If you are not interested in aligning yourself with a specific financial planner, another idea is to provide a certain level of reimbursement for employees who choose to use their own financial advisor. This option is probably better suited to a smaller company due to the paperwork involved with verifying eligible expenses for reimbursement. But it gives the employee more discretion in choosing someone with whom they are comfortable sharing their personal data.

  
  

  Benefit Planning Tip: For companies that provide flex credit benefit programs (i.e. they give employees benefit dollars to spend as they wish on their benefits), this voucher type of program would fit well into a “work/life benefit” part of the flex program. For example, you could provide $500 benefit dollars to each employee to be used once during their work career with you, and these dollars could be used for work/life benefits, such as the purchase of a computer, financial planning services, or membership dues for a health club.

  
  

Selecting the right method for you
Here are a few tips for determining how to go about providing financial planning services for your employees:

1. Ask your employees. One of the great injustices that HR folks tend to commit is the “I know what my employees want” line. That’s true if you ask them, but many times employers make assumptions about what employees know based on the kind of work they do. Conduct surveys or focus groups with your employees to determine whether financial planning is something they need. You most likely will be surprised at where your needs are coming from.

   
   

2. How do you communicate? Much of how your corporate culture communicates to employees will determine the type of approach you’ll use. If you have a rather technologically savvy or geographically diverse population, then Web-based software may work well. If you have a lot of employees who typically need their hand held through their benefits enrollment process, then a sit-down consultant may be the way to go. According to the ISCEBS survey, most benefit professionals feel that their employees either lack the fundamental knowledge of finances or don’t feel they need to develop a financial plan. Getting a pulse of your employees in this regard will go a long way towards your decisions.

   
   

3. Evaluate, evaluate, evaluate. With each method, there are areas to look at to determine that you are getting your money’s worth. With personal consultants, look for individuals that are held to an ethical and professional standard, such as a Certified Financial Planner (CFP).

   
   

   You can go to the CFP Web site for leads on professionals in your area with this designation. For software, look for packages that are flexible enough to handle as many different situations as possible — if you have 100 employees, you have 100 different scenarios. And with any program, try it out on a few employees to start and collect feedback before turning the program loose on your whole workplace.

   
   

4. Determine liability upfront. Often, the fact that an employer pays for a certain service may lead many employees to feel that it is responsible for bad or misleading advice. Take some time to determine the scope of the financial planning services and where liability lies for the advice and the subsequent decisions that are made. Reputable financial advisors will be all over this when making their presentation to you, so be wary if it isn’t included.

   
   

If you are in a tough recruiting environment or are just trying to differentiate yourself and your benefit program from your competitors, ancillary services such as financial planning can make a huge difference for only a little expense. It can also boost morale, develop more productive employees and help set your company as an employer of choice.

One of the dirty words that is often associated with employee benefits is “entitlement.”It’s frequently used when you’re talking about a benefit that’s beenaround for a long time, to the extent that employees begin to expect it. You canalways spot such a benefit when you try to change it.

One benefit that is often referred to as an entitlement is sick days andother paid-time-off plans. Many corporate benefit plans have separate vacationand sick day “banks,” and then a separate long-term disability plan to takecare of lengthy illnesses. For example, a common program would give an employeeanywhere from one to three weeks of vacation pay, six to eight paid holidays,and six sick days each year. Depending on the company, the vacation and sickdays can either be rolled over each year or be subject to a “use it or lose it”rule.

Each provides a quandary. If employees can roll over sick time, they may endup accumulating a large bank of it, perhaps on the order of several months. Forsome people, this is a great protection against serious illness. For others, it’san excuse to “get sick” when they aren’t actually very sick.

On the other hand, if you have a “use it or lose it” rule, it creates thetemptation for the employee to use the sick days as a matter of entitlement,regardless of an actual illness (what could be called a “sniffle day”). Asit gets later in the year, and employees have several sick days left, they’lloften find a reason to use them even if they don’t need to. In either case,the company is paying far more for time-off benefits than necessary.

Integrated plans go further
You may have heard of the terms “integrated disability programs” and “24-hourcoverage.” These terms get at the concept of providing continuity andefficiency in designing time-off programs that include the full spectrum ofbenefits affecting employees when they are away from work — vacation, short-termand long-term sicknesses, and even workers’ compensation.

A more accurate term would be “integrated time-off plans,” since not alltime off is the result of disability. A larger number of employers have moved topaid-time-off (PTO) programs, which bring together vacation and sick days in anattempt to lure employees with more vacation time in exchange for those “sniffledays.” But integrated time-off plans go further.

For the employee, the main benefit of integrated time-off plans is continuityof income. As you look at your time-off programs, you may be able to identifyinstances in which employees have gaps in their income because of illness. Onesuch example is pregnancy. If you have a program in which an employee gets twoweeks of vacation and has six sick days each year, under a standardmaternity-leave policy, you will have at least three weeks when the employee hasno paycheck coming in, and that assumes she didn’t use a couple of sick daysduring the pregnancy.

For the employer, the main objective is keeping an employee healthy and atwork. Again, if employees know that their sick days will be lost at year-end,they may be tempted to find ways to use them. As you will see in the nextsection, the design of a good integrated time-off plan will create incentivesfor an employee to either get or stay healthy and at work.

Moving to an integrated design
The design of an integrated time-off plan can have many facets, depending onyour particular corporate culture and structure. This article presents anexample of one of many ways to set up such a plan, which is based in general ona plan that was set up for a large health system in Ohio. You most likely willhave to tweak it a little or a lot, depending on your circumstances. That said,the bread and butter of this program is made up of the following:

• PTO (Paid Time Off): One bank that consists of vacation, sick, and evenholiday time (if you are in an industry in which not all employees have aholiday off, such as hospitals).

• Short-Term Disability (STD) Plan: A plan that pays a certain percentage ofpay after an initial waiting period (e.g., seven days). The length of time thatthe plan pays is generally based on the waiting period for the long-termdisability plan. This benefit can be either insured or self-insured.

• Long-Term Disability (LTD) Plan: Much the same as the STD plan, except thewaiting period is usually around 90 days and the payout can extend up to age 65.Generally, this is bought as an insured product because of the potential lengthof benefit payouts.

• Return-to-Work (or Light Duty) Program: Designed to transition an employeeeither in or out of work on the basis of physician-prescribed limitations. Theemployer designs specific jobs for light-duty work.

To illustrate how an integrated time-off plan program might work, let’sassume the following:

1. Days 1-3 of any illness come from the PTO bank (100 percent of pay)
2. Days 4-90 of any illness come from the STD plan (75 percent of pay)
3. Days 90 or more of any illness come from the LTD plan, if employee isenrolled (66 percent of pay)

Susan is 35 weeks pregnant and has been ordered by her doctor to reduce herstress. She doesn’t have to stop working, but will need to find less strenuouswork. Her employer decides to put her on a light-duty job for three weeks, atwhich time Susan delivers her baby. She did not use any PTO or STD time while onlight duty. She plans to take six weeks of maternity leave. The first three daysof leave are paid at 100 percent, days 4 through 45 are paid at 75 percent, andat the end of her maternity leave, she works one week of light duty because ofsome lingering effects of the delivery.

As you can see from this example, the employee doesn’t have a day when sheis without some sort of pay, and the employer is able to retain at least someproductivity from her during her medically restricted time before and after thedelivery.

Analyzing your time off
The first step in moving to an integrated time-off plan is to do a detailedanalysis of how your time off is currently being used. In the example of thehealth system above, average sick-day usage was close to five days per year.However, because the plan was to help control the use of sick days (and savemoney), only an average of three days were added to the existingvacation/holiday bank to create the PTO bank. If you really feel as if your sicktime is being overutilized, you can even cut that number by a day.

If you use the blueprint in the example design above, this will alsodetermine the waiting period for the STD component. Self-insuring the STD willgive you the most flexibility in designing exactly when the benefits will kickin, since most insured products have specific requirements.

Another important part of the design process is determining any transitionissues from the old plan to the new, especially if you have accumulated sickbanks for current employees. For the health system in our example, they frozeany additions to the sick bank and then allowed employees limited access to thebanks to receive 100 percent of pay. Another option would be to convert sickdays to PTO time. The advantage is that this creates a clean break from the oldto the new plan and the need to track sick-time banks into the future; thedownside is that the PTO time will have to be paid out upon termination,whereas, in most cases, sick time is not. Regardless of the option, a transitionplan is a must.

You need a staff
Unless you are specifically qualified to perform case-management functionswithin your company, it probably makes sense to outsource some or all of theclaims processing for your integrated time-off plan.

If you already have an in-house employee health department that manages suchareas as health, safety, pre-employment physicals, and drug testing (our examplecompany did), you may have a good foundation with the addition of a case manageror two to self-manage your integrated time-off plan. It is helpful in thedo-it-yourself shop to cover, at a minimum, the following functions:

• Claims intake: A person who evaluates each illness/injury that may extendinto STD territory and beyond and coordinates payroll and/or insurer payments.

• Case Manager: A person who follows each person that gets into the STD partof the program and coordinates the appropriate care for the individual (e.g.,sets up light duty, authorizes STD payments, initiates LTD applications).

• Program Assistant: An administrative assistant who handles all of thepaperwork and letters that are required by insurers, payroll, workers’compensation, etc. Also serves as receptionist if you provide walk-in servicesor have a toll-free number to collect employee or manager reports of extendedillness.

In the end, you will have to evaluate the cost of staffing and equipment topull off the in-house administration versus the cost of using externaladministrators. Often, the decision will come down to what your corporateculture will accept: talking with a fellow employee or with an unknown name atanother company.

Sell the program
As mentioned earlier, you find out how much employees value a benefit whenyou start tinkering with it. Changing paid time off is no different. Here is alist of things you are most likely to hear and how to address them:

• “The program is a ‘take-away’ — I don’t have as many sick days as Idid before.” This gets at the heart of why you are offering the program. Whilein total you may not be giving as many vacation and sick days, the importantpoint to drive home is that if employees strive to remain healthy, then theywill have more elective vacation days to use throughout the year. This willspeak most loudly to the occasional “sniffle day” users.

• “This program encourages me to come to work when I’m sick.” This isa tough question because the downside of PTO banks is that employees give up apotential vacation day to use a sick day. The best answer to this question is toencourage employees to stay home if they feel they could give coworkers theillness. Even though it costs the employee a PTO day, it may save many more PTOdays (and company productivity) in the long run.

• “I know best how I feel and when I should come back to work.” You willhear this when trying to encourage someone to return to work through either thelight-duty program or an evaluation as a part of case management. The simplemessage is: We’re paying you to work here, even for time that you aren’tworking; we have a right to determine your physical readiness to work. Rememberthat you are trying to change people’s thinking from “entitlement to sickbenefits” to “utilizing sick benefits to be a more productive employee.”

Moving to an integrated time-off plan philosophy has as much to do withaffecting culture as affecting the bottom line, and the latter is not successfulwithout the former. As with any other change in corporate culture, it’simportant to get managers involved and sold on the program before going public.These HR “champions” can go a long way toward making the program successful.

Workforce Online, April 2002 — Register Now!

One of the hardest jobs in managing employees is making sure they’re happy.Although there are many aspects to creating happy employees, a fair andcompetitive wage is still the number one yardstick in measuring satisfaction.After all, how many people do you know that work only because they love the workthey do?

How do you make sure you are paying your employees fairly? The answer’senough to fill a textbook. You should always be “selling your story” to youremployees not only in terms of pay, but also work environment, benefits,prospects for advancement, and the other so-called fringe benefits. But thefirst place that dissatisfied employees look is the marketplace, and if you wantto stay ahead of the curve, you should look there too.

First, a word about collecting market pay data. There are so many ways tocompare your pay against the market — published pay surveys from consultingfirms, online Web survey companies, association groups, and even the Departmentof Labor. For common, homogeneous jobs, these surveys work great. But forspecialized jobs, especially managerial and above, large amounts of reliabledata are hard to come by. That’s why there’s no more certain way to collectthe right data than through a custom survey. It’s not difficult to do as longas you have your ducks in a row.

Pros and Cons
Customized surveys have several advantages:

• They can be targeted directly at the companies with the closest match foryour position.

• You can collect current salary data, rather than data that was collected12 months ago.

• You can specify exactly the information you want to collect, rather thanporing over general salary surveys.

They also have some distinct disadvantages:

• They can be costly to administer in terms of time and money. However,those costs need to be compared to purchasing survey services, which can beexpensive also.

• They can come under more legal scrutiny with regard to pay discrimination(i.e., several companies collude on wage rates, or “price fixing”).

• Developing a good survey instrument is challenging.

Once you’ve determined the information you want to collect, organizing itin an orderly fashion is not too hard. Some of the most typical pay surveyquestions ask for the following information:

• Minimum, midpoint, and maximums of a company’s pay range for theposition.

• Current rate of pay.

• Number of people in the position (that will help you find the average).

• Average length of service of a person in the position.

• Availability and amount of bonus payments.

How to create a good survey instrument
Most custom surveys start with these basic elements:

• Job Title: sounds simple, but as you’ll see in a minute, it’s veryimportant.

• Benchmark Job Duty Features: The most important element. These are theessential job duties that, along with the job title, will guide your surveyparticipants in selecting the position within their company to report.Generally, keep the list short; only three to four maximum. As a rule of thumb,use the duties that take up at least 50 percent of their time. You don’t wantto include duties such as planning the annual company picnic (unless it’s anessential duty).

• Match Strength: For each position, include an indicator that therespondent can use to gauge how close of a match their position is to yours –generally a one to ten scale. If it’s a low match, such as a one or two, youmay want to exclude the data. If it’s higher, but not strong (five or six) youcan adjust the data in relation to strength of match.

• Pay Data: As mentioned above, you want to gather enough information toanswer your questions, without asking for too much. Not all companies have thesame compensation system, so you’ll want to keep your data fields as generalas possible.

The overriding theme of a good survey is “simple.” If you want goodresponses, you need to make it very straightforward for the respondent and notoverly burdensome. Therefore, don’t send out a survey for 20 positions, askfor eight different pay sources, and ask for it back in a week. Compensationanalysts will turn their nose up at you every time.

The survey process
As it goes with most things, garbage in, garbage out. The root of any goodcustom survey is a well-designed job description. That sounds logical enough,but it’s surprising how many companies have not done a good job analysis. Ifyou have put together a tight job description, then picking the benchmarkfeatures should be easy. Again, you want to make it simple for the HR person onthe other end to find the match in their organization.

Once you’re ready to send out your survey, there are a few time-honoredtips to keep in mind:

• If your survey is somewhat involved, pretest it on a colleague orcoworker. Unclear syntax or directions can be cleaned up before “going live.”

• Call candidate respondents ahead of time to get their OKs onparticipating. You may need to play salesperson a little. Be upfront about thedetails of the survey and what will be expected.

• Be reasonable — but firm — on response time. Never use phrases such as”at your earliest convenience” or “ASAP,” but state clearly the responsedate. Keep in mind that certain times of the year are worse than others,particularly in the Fall when budgeting and pay adjustments for many companiesare being planned.

• Have multiple options available for respondents to give you information.Depending on the size of the survey, a simple phone call will do. Some are finewith paper surveys, but many might like to get a spreadsheet and to send it backvia e-mail (NOTE: the convenience of spreadsheets sent via e-mail is attractive,but take some time to work out security measures, such as encryption and virusprotection, so that respondents are comfortable with receiving and sending paydata).

• Check in a couple of times with respondents to make sure the survey isunderstandable and also to remind them of the survey deadline.

The other important thing to do, even before you decide you need to survey,is develop a network of survey respondents. Local chapters of human resourcesorganizations, such as SHRM, are good places to start. If it is difficult tofind respondents in your local area, look at cities within a reasonable distancefrom your location and realize that you may need to adjust your data forcost-of-living. If certain individual respondents are hard to come by, thenperhaps industry associations will have pay survey data that can be used.

The results are in
Now that you’ve received your data, it’s time to analyze it and matchagainst your data. Allow enough time in your survey process to be able to goback to your respondents to clarify any confusing information that they sent.Then get to work on compiling the information so that you can report back toyour respondents with the summary data.

You should take no longer than two weeks to finish up your analysis of thesurvey data and report back to respondents.

As with anything done well, organization is key to a successful effort.Whether short or long, you can conduct a successful survey as long as you giveyourself and your respondents enough time.

Workforce Online, April 2002 — Register Now!

Many professionals in the employee-benefits field groused that for the lastcouple of years, there wasn’t much to talk about from Washington in regard toemployee benefits, especially retirement plans. Well, on June 7th, they shutup.

With the slash of a pen, President Bush signed intolaw the Economic Growth and Tax Relief Reconciliation Act of 2001 (EGTRRA).While many of us have identified this act with refunds and lower tax rates,there were many items in the bill that affect employers and the benefits theyoffer their employees.

While there are a number of procedural issues for theIRS to hammer out for employers, many of the provisions are intended to providelong-awaited simplification for retirement plans and an increased commitmentto help employees save more for retirement. Here are 10 of the more importantprovisions of the bill and how they can affect you:

1. Increase in contribution maximum to 401(k) plans.
   Beginning in 2002, the maximum amount that can be contributed will be $11,000,up from $10,500 in 2001. It will be increased by $1,000 each year until2006, after which it will increase with inflation.

   
   

   The increase in the annual amount is not terribly significant, but whenit is coupled with other provisions of the law (see number 2), employersthat have to run a test to make sure they are not allowing higher-paid employeesto put significantly more into the plan than lower-paid employees (commonlyreferred to as the Average Deferral Percentage test) will find it easierto pass. It may also allow higher-paid employees to put more money intothe 401(k) plan than in years past.

2. Increase in the total amount of compensation that is considered forcalculating the amount allowed to be contributed under certain retirementplans (e.g., profit sharing, 401(k), money purchase pension).
   Many plans, especially profit-sharing plans, state their contributions asa certain percentage of employees’ compensation. This compensation amounthas been limited in the recent past and for 2001 is $170,000. Beginningin 2002, this amount will be increased to $200,000 and will be indexed withinflation in subsequent years.

   
   

   As indicated above, the increase in the allowable compensation may makeit easier for employers to pass the Average Deferral Percentage test, sincethe test looks at the amount contributed to the 401(k) plan divided by theallowable compensation. With the denominator increasing, the total percentagewill most likely decrease, making it easier for higher-paid employees tocontribute more to their plan without going over the permitted boundaries.

3. Tax credits for low-income employees who contribute to 401(k)-type plans.
   Beginning in 2002, employees with incomes of up to $30,000 and who are marriedand filing jointly can deduct 50 percent of their contributions to a 401(k)plan (including 403(b), IRAs, and 457 plans), up to a maximum of $1,000.The deductible amount is decreased with incomes between $30,000 and $50,000.The income limitations are less for head of household and single taxpayers.

   
   

   While employers will not have to do anything to their retirement plan design,this is a wonderful tool to get the harder-sell lower-paid employees toparticipate in your 401(k) plan. It is worth highlighting as a part of yourretirement-plan communications.

4. Catch-up contributions for older employees.
   Beginning in 2002, employers can allow employees age 50 or older to makeadditional “catch-up” contributions if they have otherwise metthe maximum contribution amounts under the plans. For 401(k) plans, theamount starts out at $1,000 for 2002 and increases by $1,000 each year until2006, after which it adjusts with inflation.

   
   

   The nice thing for employers is that these “catch-up” contributionsare not subject to any of the required discrimination tests. However, issuessuch as increased cost, especially for matching contributions that may haveto be made on the contributions and increased administration with trackingthe separate contributions, will have to be considered.

   
   

   NOTE: Some argue whether it is financially feasible for older individualsto continue to contribute to tax-deferred 401(k) plans versus making contributionsto a taxable investment account. The issues surround the tax rate that individualspay on their tax-deferred investments in retirement versus the long-termcapital gains rate that can be achieved on taxable investments, which canbe as low as 20 percent. While this is an individual tax decision, it maybe another point for an employer to consider when deciding whether to includethe “catch-up” provision as part of its plan.

5. Faster vesting for matching contributions.
   Beginning in 2002, employers will have to apply a faster vesting scheduleto matching contributions, either fully 100 percent vested after three yearsor gradual vesting within six years.

   
   

   This rule applies only to matching contributions after January 1, 2002,so some increased administration will be necessary to track pre-EGTRRA andpost-EGTRRA contributions. Unless financially difficult, a change to 100percent vesting on all contributions may be the way to go, for both administrativeease and employee morale.

6. Distributions from retirement plans can be rolled over to any plan.
   For distributions after January 1, 2002, amounts can generally be rolledover to any other qualified plan. For example, if an employee has moneyin a 401(k) plan and goes to work for a nonprofit employer that has a 403(b)plan, the employee can roll over the money from the 401(k) to the 403(b)plan as long as the new employer permits rollover contributions. This movementbetween non-IRA plans is not currently allowed.

7. Maximum tax-deductible amount that employers can make to a retirementplan is increased to 25 percent.
   Some employers wish to make the maximum contribution allowed to certainprofit-sharing plans but have been limited to being able to put only 15percent into any one plan. Employers that wanted to put more away had toset up two plans, a profit-sharing plan with a contribution of 15 percentand a money purchase pension plan with a contribution of 10 percent. Nowwith this increased limit, employers can merge these two plans and saveon the administrative costs of the second plan.

8. Increase in the maximum allowed child/dependent tax credit.
   Beginning in 2003, the amount of eligible child-care expenses for considerationof the credit will increase to $3,000 for one child and $6,000 for two children.The maximum credit percentage is increased to 35 percent (up from 30 percent).

   
   

   For employers that sponsor a pre-tax dependent care reimbursement plan,this provision is what determines whether a lower-paid employee choosesto participate in the reimbursement plan or take the federal tax credit(you can’t do both). Since the amount will be increased, more individualsmay choose not to participate in the reimbursement plan. Employers willalso have to communicate the change in the tax law (but not until 2003),so that employees can make an informed choice of whether or not to participatein the reimbursement account.

9. Tax break for educational assistance extends to graduate coursework.
   Beginning in 2002, up to $5,250 of employer-provided educational assistancecan be offered to employees tax-free for both undergraduate and graduatecoursework. The exclusion of graduate coursework had been made in 1997.

   
   

   The government had never made this tax break permanent, and it constantlyhad to be renewed, the last time excluding assistance for graduate coursework.This provision will now be permanently extended for all undergraduate courseworkand graduate coursework that begins after December 31, 2001.

10. Tax break on costs for new start-up plans for small employers.
    For employers with fewer than 100 employees that haven’t yet started a retirementplan for their employees, there will now be a financial incentive to doso. The IRS will provide a 50 percent tax credit on the first $1,000 ofannual administrative and educational start-up costs, assuming that theemployer is paying those expenses from its own pocket. This tax credit willbe allowed for the first three years that the plan operates. Again, theIRS is trying to encourage savings, and administrative costs are one ofthe biggest barriers to small companies starting retirement plans.

While some of these provisions may not apply to everyemployer, those that operate a retirement plan of any kind should carefullyreview their plan documents and these changes to see if any revisions shouldbe made. Many of the provisions listed above still require some guidance fromthe IRS, which is promised by the end of the year. But this shouldn’t keep HRfolks from strategizing about how these provisions can impact their employeesas well as the bottom line.

From scalability to stand-alone system,here are the definitions that you were afraid to ask about.

1. ASP	20. Opendesign/architecture
2. Batch Processing	21. Operating system
3. Boolean Search	22. PAF
4. Client/Server	23. Passive EventProcessing
5. Data warehousing	24. Perpetual/Rental license
6. DistributedWorkforce	25. Proprietarydesign/architecture
7. E-mail client	26. PTO
8. Enterprise systems	27. Real-time
9. Firewall	28. Requisition
10. FoxPro	29. RFP/RFB
11. HRMS	30. Scalability
12. Import/Export	31. Scanning
13. Intelligent Search	32. Stand-alone system
14. IVR	33. UNIX
15. Intranet	34. User Interface
16. Kiosk	35. Utility
17. MIME	36. Wizard
18. Modules	37. WorkforceAnalytics
19. OCR	38. WorkforceManagement

Application ServiceProvider (ASP)

Term given to companies that designand manage software-based services for companies from a central locationrather than provide software of other solutions for the company to manage ontheir own.

Batch Processing

Executing a series ofnon-interactive jobs all at once. Usually, jobs are stored up during workinghours and then processed at a set time, normally during the night. This ishow many older HRMS systems processed information, and it is being replacedby systems that provide real-time processing.

Boolean Search

Boolean searching is based on asystem of symbolic logic developed by George Boole, a 19th-century Englishmathematician. Most keyword-searchable computer databases support Booleansearches. Boolean search techniques can be used to perform accurate searcheswithout producing many irrelevant documents.

When you perform a Boolean search,you search the computer database for the keywords that best describe yourtopic. The power of Boolean searching is based on combinations of keywordswith connecting terms called operators. The three basic operators are theterms AND, OR, and NOT.

 

Client/Server

A type of network setup that iscomposed of 1) main computers (servers) that control file storage (fileserver), printer control (print server), and network traffic and 2)individual computers or work stations (clients) that allow users to runprograms that use the server’s resources. A client/server setup is generallyvisualized as a computer in the center, with individual PCs branching off itin wagon-wheel fashion.

Data warehousing

The process of collecting andstoring data in an organized manner so that it can be accessed for analyzingat a later time. Companies will often collect vast amounts of data onbusiness operations and then design flexible database programs to access thedata in any form required. This is often used by finance anddecision-support departments to model the impact of organizationalinitiatives.

Distributed Workforce

A buzzword used to describe anorganization that has employees spread among many geographic or divisionallocations.

E-mail client

A software application that allowsusers to send, receive, and organize e-mails from either an individual PC ora network work station. Some popular e-mail clients are Lotus Notes,Microsoft Outlook, and Group Wise.

Enterprise systems

Large computer applications thathandle multiple operations for a company or business unit. An example islarge human resource information systems, such as PeopleSoft, that have theability to handle general human resources information, payroll processing,and corporate financial and accounting management.

Firewall

A type of system, either hardware-or software-based, that prevents unauthorized access to a computer network,usually a corporate intranet.

FoxPro

A database program developed byMicrosoft that many professional software developers use to build programs.Its counterpart, Microsoft Access, is considered the “everydayuser’s” database application.

Human ResourceManagement Systems (HRMS)

Also known as Human ResourceInformation Systems (HRIS). Software-based systems that manageall or part of the human resource function for an organization. Typicalparts include employment demographics, benefits/compensation management,training, payroll, and reporting.

Import/Export

The function within a softwareprogram that allows it to read and use data from another system orapplication (import) or format its own data for use by another applicationor system (export). For example, an applicant tracking system may produce areport that shows applicants and their itemized hiring costs. This reportcould be exported to a spreadsheet program, such as Microsoft Excel, forfurther analysis that would not be possible in the applicant trackingsystem. Likewise, résumés can be scanned, and the information importedinto the applicant tracking system.

Intelligent Search

Also known as intelligent agents. Automated searches of programs or,more recently, the Internet that are established under certain parameters bythe user. For example, a person can tell the intelligent search program tolook for all instances of the word “programmer” at a certain Website and to perform this search every eight hours. This relieves the personof doing this search manually each time.

Interactive Voice Response(IVR)

A type of service, usuallyassociated with a telephone, that allows a user to listen to a menu ofchoices regarding some type of process, and then perform an action bypressing the keys on the phone keypad. A common example is a voice messagesystem; however, in the human resource arena, IVR is used widely forcollecting benefits enrollments.

Intranet

Also known as a company network. A private network inside a companyor organization that uses the same kinds of software that you would find onthe public Internet, but that is only for internal use. As the Internet hasbecome more popular, many of the tools used there are also being used inprivate networks; for example, many companies have Web servers that areavailable only to employees.

Kiosk

A booth or independent structurethat performs a computer-related function. The most common type of kiosk isan automated teller machine (ATM). However, many companies are turning tokiosks to be able to communicate with their employees and collectinformation from them from remote locations. In applicant tracking, kiosksare being used to collect online applications for jobs.

MultipurposeInternet Mail Extensions (MIME)

A specification for formatting non-ASCIImessages (messages containing special formatting, such as italics or textcolor) so that they can be accurately sent over the Internet. Many e-mailclients now support MIME, which enables them to send and receive graphics,audio, and video files via the Internet mail system.

Module

Any subset of functions within anapplication that pertains to a specific objective. In the HRMS environment,many applications are module based, meaning that along with the basedemographic module, you can also purchase other modules that you may need(e.g., benefits module, training module, attendance module). This allowsmaximum flexibility in building the system for your needs.

Optical CharacterRecognition (OCR)

Relatively new technology that canread paper text and manipulate it for viewing and editing in aword-processing program. It saves extraordinary amounts of time in retypingdata into other formats, such as databases.

Open design/architecture

Software or hardware that has theability to be modified by any user, including the programmer. This hasbecome a more popular design for today’s software in that it allows thirdparties to develop companion software (i.e., add-ons) to improve theoriginal product. This allows maximum flexibility for buyers to tailorproducts to their specific needs.

Operating System

The “engine” that drivesthe personal computer and provides the basic framework on which the computeroperates and software programs can be run. Popular examples in business areMicrosoft Windows, OS/2, Linux, and UNIX.

Personnel ActionForm (PAF)

A type of form associated with olderHRMS applications that shows summary data information on an employee (e.g.,address, pay, emergency contact). Users make manual edits to the form andsubmit it to the HR department for processing.

Passive Event Processing

A type of processing thatautomatically executes once a predetermined event or set of events (i.e.,rules) occurs. For example, an HRMS sends out an e-mail to a manager on anemployee’s anniversary date to request that a performance evaluation becompleted. This requires up-front programming but no ongoing interaction bya system administrator.

Perpetual license/Rental license

An alternative way of purchasingsoftware or a service. Under a perpetual agreement, a buyer would pay alarger amount at the setup of the system, with a fixed monthly”lease” amount over a long period, say five years.

Under a rental license, the buyerpays less at setup and a higher monthly fee, generally for a shorter amountof time, say 24 months.

These purchase agreements areanalogous to buying versus leasing a car and provide additional options forfinancing.

 

Proprietary design/architecture

Generally refers to a software orhardware design that can be modified only by the original designer orprogrammer. Many vendors develop proprietary designs so that outside partiescannot copy or duplicate them. It also allows them full control, andpricing, over modifications made to the product.

Paid Time Off (PTO)

A common type of paid-leave programthat combines all types of paid days off (vacation, sick, holiday) into onebank of time. This approach allows flexibility for the employee in how daysare used and better budgeting control for the employer, who only has tomonitor one bank of time.

Real-time

Input into a system that affectsexisting data immediately, as opposed to a batch-processed system thatcollects all data inputs and then processes them at a later time. Forexample, if an HR person wants to change an employee’s address, then theentry is made into the system and the address is changed immediately. Thisis a common buzzword that indicates that data can be accessed or editedimmediately.

Requisition

A formal request by a hiring managerto fill an open position in the company. Generally, a requisition willinclude the title of the position, the required knowledge, skills, andabilities, salary information, and any other information that is pertinentto the performance of the job (e.g., location, restrictions).

Request forProposal/Request for Bid (RFP/RFB)

A document that is normally preparedby a buyer of a system or service that provides necessary information for aseller/vendor to make a formal bid or proposal for product/service. Thedocument normally includes an overview of the company, the specific needsthat should be met by the system or service, technical information regardingthe company’s current environment, and the time line for the seller torespond.

Scalability

The ability of a software program orpiece of hardware to adapt to an increased amount of demands. For example,if you have only one location but think you might expand to other locationsin the future, you will want to purchase an applicant tracking system thatcan handle your one location now and then expand to handle your multiplelocations later.

Scanning

Computer industry buzzword thatrefers to taking a paper format and putting it directly into a format forviewing and/or editing on a computer. This usually is used in connectionwith optical character recognition (OCR).

Stand-alone system

Any machine or system that does notrequire another system to operate. The term is most frequently used inreference to a personal computer that is not part of a network and has itsown file storage, printer control, and e-mail/Internet connection (i.e.,modem). When comparing certain software products, vendors will price theproduct for a “stand-alone” version and a “network”version.

UNIX (pronouncedyoo-niks)

One of the leading operating systemsfor companies with networks and work stations rather than separate personalcomputers.

User Interface

The part of a software program orWeb-based application that the user actually sees and uses. This is normallydesigned to be easy to use and aesthetically pleasing.

Utility

A program that performs a very specifictask on a computer. For example, antivirus software is considered a utilitybecause its sole function is to monitor for computer viruses.

Wizard

A utility or sub-program within alarger software program that helps to perform a certain task. For example, in anapplicant tracking system, a “requisition wizard” would lead a personthrough each of the steps of producing a requisition.

Workforce Analytics

A newer function within HRMSapplications that evaluates organizational data and uses it to make humanresource-related decisions. Common analytics are cost-per-hire, turnover rate,and total compensation costs.

Workforce Management

Also known as Workforce Planning. The organizational objective ofaligning the right people with the right job at the right time. Manyorganizations have sophisticated models that manage recruitment, training,performance evaluation, and career planning in a way that maximizesproductivity.

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Applicant tracking systems collect a lot of data.Fortunately, the systems are able to make meaningful sense of this data throughtheir reporting functions, which cover a wide range of measures, from requiredreporting such as EEO-1 to financial reporting such as average cost per hire.What differentiates vendors is the flexibility allowed in the reportingfunction.

    On one end of the spectrum, some vendors provide a seriesof often-used reports that are hard-coded into the system. Such simple reportingkeeps overall system development and purchase costs relatively low. While thismeets the need of most users, there are companies that require more robust andflexible reporting. For these serious metric-minds, there are products thatallow customizable reporting by the user.

    These range from vendor-patented report writers within theindividual products, to adaptations of common report writers like CrystalReports. For further slicing, data can even be exported directly to programssuch as Microsoft Excel or Access. Obviously, this flexibility comes atincreased cost, but for those companies that take measurements seriously, iswell worth it.

    The ultimate goal of the reporting systems is to provide away of measuring the applicant tracking system’s effectiveness. In the end,the product should be able to tell you where you stand in getting the righttalent in the right amount of time for the least amount of money. Here are somecommon reports, and why they’re important to you.

 

1. Cost-Per-HireReport

What is it and why is it measured?
   As human resource departments search for every inch of costcontainment in their operations, increasing importance has been placed on theuse of metrics, or measures of performance. These can range from overalldepartment performance to average number of calls in the HR service center. Inthe recruitment arena, metrics are plentiful, with one of the more common onesbeing cost-per-hire. Many institutions and consultants, such as the SaratogaInstitute, have put forth widely accepted methods for determining cost-per-hire.The Saratoga Institute defines cost-per-hire as: 

Advertising Cost + Agency Fees + Employee Referral Bonuses+ Applicant/Staff Travel Costs + Relocation Costs + Recruiter Pay/Benefits + 10percent of the total of these elements, to account for miscellaneous costs(divided by) number of hires 

    Depending on a company’s ability to gather data, thereare even non-financial costs that can be factored in to this equation, such asthe time it takes to actually fill a position, the number of interviews inrelation to the number of hires, and even overall turnover. Regardless of thefactors used, the purpose of the cost-per-hire measure is to provide a benchmarkto use for budgeting and controlling costs. More specifically, it can even beused as a means for evaluating new programs, such as incentive options or hiringbonuses, where it is critical to assess the savings versus the other financialspending. 

How an applicant tracking system (ATS) does it
   Although cost-per-hire is an important measure for manycompanies, many applicant tracking systems do not offer this type of reportingon a standard basis. The reason? Every company has its own definition of whatgoes into cost-per-hire.  However,since many companies do want to capture this information, most vendors leave acertain number of user-defined fields in their applications that are programmedwhen the system is set up. 

    Once the fields are programmed, vendors can collectcost data from either manual input from HR staff, financial systems, or HRMS/payroll.With less expensive off-the-shelf software programs, companies will have to relyon the vendor’s definition of cost-per-hire, which in most cases will be apretty close number.

Practical uses
   Other than the more financial aspects of evaluatingrecruiting costs, cost-per-hire metrics can also help you evaluate your HRstaff. While many companies review recruiter performance on such measures as thetime it takes to fill an open job, additional standards can be set forcost-efficient hiring. By providing quick, dependable cost data, recruiters cansee where money is being spent and be held more accountable for controllingthose costs where necessary. Over time, benchmarks can be established and builtdirectly into performance goals for the upcoming review period.

 

2. EEO-1/VETS 100 Reports 

What’s required
   Within the context of the employment process, employersmust ensure that they are in compliance with all federal and state employmentlaws. As an outgrowth of the requirement to hire without regard to race, color,gender, national origin, or religion, employers with more than 100 employees arealso required to file annually an Employer Information Report (EEO-1), alsoknown as Standard Form 100. This report not only shows female and minorityrepresentation in the workforce, but also breaks down the workforce into ninedifferent job groupings, such as Professional, Sales Workers, Office, andClerical.

    Federal contractors have an additional requirement underthe Vietnam Era Veterans Readjustment Assistance Act of 1974 to show that theyare taking reasonable action in employing disabled Vietnam veterans or those whoserved in Vietnam. This is done through the VETS 100 report. 

How an applicant tracking system does it
   In general, ATS applications today provide the minimumlevel of reporting necessary to meet the compliance requirements of theDepartment of Labor. While information for the EEO-1 and VETS 100 is often notcollected until the applicant is hired and entered into the HRMS, most ATSapplications provide for and collect this reporting, with the expectation that alarge percentage of the information required by the HRMS can be downloadeddirectly at the end of the hiring process, thereby eliminating manual entry.

    General job group data required by EEO-1 is gathered bymost ATS applications during the job creation stage, when the hiring manager orHR staff identifies the position title, its requirements, location, the hiringmanager, and so on. Once the hiring decision has been made, the race and genderinformation is collected and can be entered into the ATS or HRMS, depending onwhere reporting will come from. 

EEO-1 in action
   Many of the more robust, Web-based ATS applications canmanage the entire hiring process, allowing managers a great deal of control inthe hiring process. In point-and-click fashion, hiring managers develop theirown requisitions, search applicant files, send letters/e-mails to applicants,and so on. Once the hiring decision has been made, HR staff can contact theapplicant with a letter of acceptance along with a request/e-mail asking forpertinent information, including EEO-1/VETS 100 information. 

    In its purest form,the hiring process can be an entirely paperless exchange, from the hiringmanager requesting the job to a newly hired applicant walking in the door. Whenannual reporting comes around, employers can either tap into their ATS for therequired reporting or run it from their HRMS that contains the information.

 

3. Hire-by-Source Report 

What is it and why is it measured?
   Gone are the days when you post a job, maybe put an ad inthe paper, review a bunch of résumés, and then start interviewing. Intoday’s tight labor market, especially for hard-to-hire areas such asinformation technology, human resource departments have to use anever-increasing number of avenues to find their talent, such as: 

• Job boards on the Internet(e.g., Monster.com)

• Recruitment agencies

• Print, radio, TV, and Internetadvertising

• Your own employees

• Career fairs 

    Many of these options are not cheap, especially radio andTV advertising. Job boards will charge a fee for each posted job, andrecruitment agencies can charge a hefty percentage, depending on the talentbeing sought. So how do companies get their hands on the most effectiveadvertising for a job? Use a “hire-by-source” or “media effectiveness”measure. Assuming that you know the cost for each recruitment source, it’ssimply a matter of counting up applicants and where they came from. Over aperiod of time, a company can figure out where it’s getting the most bang forits buck, and eliminate or restructure those avenues that aren’t paying off.  

How an applicant tracking system does it
   The hire-by-source reporting function shows the ultimateadvantage of automated applicant tracking. For the larger companies that receivethousands of résumés and walk-in applications, it would take months to go backand identify the sources for applicants. Even the most basic applicant trackingsystems provide a method for attaching the original source directly to theapplicant. A simple database query of these fields can tell you in a jiffy howeach of your sources compares. 

    Some systems will even allow a company toautomatically determine the best approach for posting a job on the basis of pastsuccesses for certain job titles. For example, if a company has had a lot ofsuccess in hiring programmers from a certain agency, the next time that positioncomes open, the job can be posted directly to that agency without any input fromthe recruiter. 

Practical example
   In addition to showing a company where its job-postingdollar is going, hire-by-source reporting can help determine the effectivenessof new programs. For instance, an HR manager has read an article aboutestablishing an employee referral bonus program, in which employees get moneyfor bringing a friend or colleague to an open position. 

    In order to make theprogram work, the HR manager has to determine just where her recruiting dollarsare going and how well her sources are doing. By running a hire-by-sourcereport, she determines that she has hired only two employees in the last yearthat have come through TV ads. She notes that she has spent $20,000 on those TVads, and promptly cuts the ads in favor of paying the money to loyal employees.She has been able to quickly assess the effectiveness of her hiring avenues andmake strategic decisions based on the data.

 

4. Requisition Report 

What is requisition management?
   When a manager has to fill a position, most companies havea formal process in place to get the ball rolling. Generally, it involves theopening of a requisition, or request for labor help that gets forwarded to theHR department. Included in the requisition are a number of items, such as jobtitle, responsibilities, required skills and abilities, salary grade, and anyother minimum requirements. Once this form has been approved by thepowers-that-be, it is then posted to both internal andexternal sites for applicant gathering. 

    The second half ofthe process involves the application collection and interviewing stages,ultimately resulting in a new hire somewhere down the road. Once the positionsare filled, the requisition is then closed. 

How an applicant tracking system does it
   Given that requisition management is the foundation ofapplicant tracking systems, most programs provide a wide assortment of reportsfor this area. The most common reports view the status of open requisitions,which can be sorted by recruiter, job title, location, or time-left-open. Butalso within the scope of requisition management is the applicant side of theprocess. For this area, there are reports that look at: 

• How long a résumé has been on file

• The number of applicants for a specific requisition,and whether they have been interviewed, denied, or transferred to anotherrequisition

• Data that is required for an applicant, such as EEOinformation or references

• Lists of people within the company who should be “inthe loop” for the filling of certain requisitions 

    Most of these reports are available only to recruitingstaff; however, more progressive companies are putting these view capabilitiesin the hands of hiring managers to offer full accountability for the entireprocess. 

How these reports can make an impact
   The bread and butter of applicant tracking systems is theirability to carefully organize all of an employer’s jobs (which could bethousands) and all of the applicants for these jobs (which could be tens ofthousands) into a user-friendly database. Given the large task of meeting suchhiring demand with, more often than not, limited recruiting resources, HRdepartments have to prioritize their hiring. That’s where the different typesof requisition reporting come in handy. 

    An HR manager can quickly determine theoldest requisitions and move them to the top of the pile. Or he can react to animmediate need for a mission-critical project by scanning the applicant pool forthe exact skills and abilities required. The speed and flexibility offered bythis type of dynamic reporting can pay huge dividends if a company can reach theright candidates even a couple of hours earlier.

Workforce, February 2001, Vol80, No 2, p. 65-67  SubscribeNow!

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The starting point for an applicant tracking system is the creation of theactual job.

For most established companies, this is done through a job requisition, ormore simply, a request for a person to do a job. In its most basic form, thehiring manager for a department will create the requisition that will list thejob requirements and the knowledge, skills and abilities necessary to completethe job. This ultimately is massaged into a job posting that is communicated toboth internal and external job seekers.

Today’s applicant tracking systems put a lot of emphasis on makingrequisition management a paperless process. Although every vendor has a slightlydifferent method for posting a job, they generally focus on establishing templates,or predefined job descriptions and requisitions that can be easily modified tocreate a job. Then, it is simply a matter of clicking on a few drop-down boxeshere and filling in a few free-form boxes there, and you have a job posting.

Once this information has been created, it may go through a human resourcesreview, or may simply get automatically posted to the appropriate sources (e.g.,job boards, internal/external website, etc.). Some systems even provide separateinternal and external posting language for certain often-filled jobs, allowing amore “marketing” style description for the external and more nuts andbolts for the internal.

Throughout the life of the requisition, job applicants, resumes, notes oninterviews and other data can be attached in database fashion to the requisitionnumber. This is especially helpful for companies who have many locations and acentral HR office to keep current on their job postings.

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Many companies today are in a daily battle over one of the most scarce laborforces in the past 40 years. These same companies are looking for any edge ingetting the right talent in their door.

For many companies, the answer lies in applicant tracking systems.With the aid of today’s computer and Internet technologies, these systems putcompanies in the fast lane when matching a company’s job posting with theright candidate. So how do these systems work? Proceed.

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If you’ve just put in a new HR information system, it’s hard to think about what you will need to do to update your system. But like any computer software program, your HRIS is out-of-date as soon as you put it in. So what updating is important and when? How much should be budgeted for maintenance of a system and what factors impact these costs?

First of all, don’t ask your HRIS vendor for customized programming until you’ve determined that what you’re asking for isn’t going to be on the next release of the software. Check with the users group to see if there are other companies looking for similar programming; this is where the vendors get 90% of their ideas for software enhancements and if other companies need it, you’ll probably see it on your next update.

Updates to the software generally fall into two categories: minor and major. Minor updates generally are included as part of your original purchase agreement and come within a short period after implementation. Major upgrades will involve some cost on your part, and can be as much as 20% of the cost of your original system software, depending on the types of updates available.

Don’t automatically jump to the next update unless necessary, but keep in mind that for most vendors, you can’t skip more than two or three updates without doing another full implementation.

You should also budget annually for equipment upgrades such as workstations (especially if it was too much to bite off in the original implementation), data storage, interactive media (e.g., voice response, web-based data entry) and third-party vendor networking.

Link to listings of HRMS articles and vendors.