Category: Benefits

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When Ebola Impacts Your Workplace

If you employ people at Cleveland Hopkins Airport, Frontier Airlines in Cleveland, or Kent State University, congratulations, you’re among the first non-healthcare employers to have a potential Ebola exposure. Now, what do you do?

First things first, don’t panic. Instead, take a deep breath … and think.

Employers must consider what they should do in the event that an employee is potentially exposed to the virus, or otherwise has been in a high risk area. The definition of “high risk area” is very much in flux. Two week ago, it was Western Africa. Last week, the definition expanded to a Dallas hospital. Now, it’s Cleveland’s airport, a local university, and a couple of our local hospitals.

So, what do you do?

1. Have an action plan for disease prevention. This plan could include action items such as travel restriction to high risk areas, and providing information and training to employees, along with protective gear or hand sanitizer.

2. Have a response plan for specific employees who are suspected to, or actually do, pose a risk to others because of a viral exposure. Because of the Americans with Disabilities Act, employers have certain limits on their ability to ask medically-related questions, even when dealing with something as critical as Ebola.

  • Questions about travel are not disability-related. Therefore, the ADA places no limits on an employer’s ability to inquire about an employee’s travel to gauge potential exposure and risks.

  • Questions about diseases or exposure thereto are, however, disability-related. The ADA  does permit an employer to request medical information when the employer has  a reasonable belief that an employee will pose a “direct threat” because of  a medical condition. A potential exposure to Ebola could constitute a direct threat, though employers must be careful to avoid unlawful stereotypes or generalizations, as opposed to acting on actual, objective evidence.

  • The Centers for Disease Control has published monitoring guidelines for individuals who have traveled to a country experiencing an Ebola outbreak, or otherwise have been potentially exposed to the disease. These guidelines depend on exposure levels and visible symptoms.

    • Individuals who exhibit symptoms consistent with Ebola, or who develop Ebola-like symptoms at work, should seek medical evaluation, regardless of any known exposure, and should limit activities and contact with others until medically cleared.

    • Asymptomatic individuals who have had no known exposure should self-monitor for symptoms for a 21-day period (the known incubation period for the disease). During that time the CDC recommends that an individual “may continue normal activities, including work.” 

    • Asymptomatic individuals who report possible contact with an infected individual should stay home until medically cleared to return to work. While an employer is not required to pay the employee for this time off, under the circumstances it would be an appropriate gesture. By way of example, both the Cleveland Clinic and MetroHealth are paying the 13 nurses who flew from Dallas for their quarantined time off.

There is a big difference between vigilance and panic. The key for employers in dealing with Ebola is to understand the former while not falling susceptible to the latter.

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Do Personality Tests Pass the ADA-Compliance Test?

The ABA Journal (hat tip: Overlawyered) is reporting that the EEOC is investigating whether several well-known companies are violating the ADA by using pre-employment personality tests to screen applicants.

I cautioned employers about this issue three years ago. This is what I said:

Despite the apparent prevalence of these types of tests, there is very little guidance available on their legality. Karraker v. Rent-A-Center (7th Cir. 2005) is the seminal case. As Karraker points out, the legality of a personality test by an employer hinges on whether it qualifies as a “medical examination” protected under the ADA. 

The Karraker court concluded that the ADA covered the MMPI personality test as a protected medical exam. In reaching its decision, the court drew a key distinction between psychological tests that are designed to identify a mental disorder or impairment (medical examinations), and psychological tests that measure personality traits such as honesty, preferences, and habits (not medical examinations). Because the MMPI revealed, in part, potential medical diagnoses such as paranoid personality disorder, the court concluded that it was a protected medical examination. Other personality tests may not dictate the same result, depending on the types of results provided.

Merely because something is a “medical examination” does not mean its use is illegal under the ADA. It merely means that the ADA places certain limits on its use:

  Personality Test
Is A Medical Exam		 Personality Test
Is Not A Medical Exam
Prior to an offer of employment: Personality tests are prohibited. No limits on the use of personality tests.
After an applicant is given a conditional job offer, but before s/he starts work: Personality tests are permitted, regardless of whether they are related to the job, as long as the employer does so for all entering employees in the same job category. No limits on the use of personality tests.
After employment begins: Personality tests are permitted only if they are job-related and consistent with business necessity. No limits on the use of personality tests.

What does all this mean? The use of personality tests raises complex legal and business issues, even more so now that this issue is on the EEOC’s radar. If you are considering using personality tests to screen applicants or current employees, tread carefully and not without the input of your employment counsel.

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A Benefit Evolution

Health care remains employees’ most valued benefit, but few give their health plans much thought except when they’re choosing one during annual enrollment. However, that is changing as employers make significant changes to their plans and employees dig deeper into their pockets to pay for them.

With the steady climb of health care costs and the increase in medical debt for employees, health benefits are critical to recruiting and retention and job satisfaction. More than half of employees recently surveyed by insurer Aflac Inc. said that they would likely take a job with lower pay but better benefits, and three-fourths believe that benefits are “extremely or very important” to job satisfaction.

And yet most employees seldom use their health benefits or understand why they value them, according to Tom Sondergeld, senior director of benefits and well-being at Walgreen Co.

“It’s amazing that something employees spend about 20 minutes a year thinking about is so highly valued,” he said. “There is a very interesting dynamic being created around health care benefits right now. People don’t leave because the benefits are bad, but they will come and stay if they are good.”

Health care benefits give employees a sense of financial and emotional security, Sondergeld said. So tampering with them is likely to trigger an outcry. Sondergeld would know. He helped lead the Deerfield, Illinois-based drugstore chain’s highly publicized move from traditional health benefit plans to a private exchange two years ago.

With 160,000 employees nationwide, Walgreen’s move to join Aon Hewitt’s private exchange was widely viewed as a major turning point in employer-provided health care. But not all of the publicity was positive.

“The press was going crazy saying that we were pushing employees out to Obamacare and people were bringing us newspapers saying, ‘Look what you’re doing to us,’ ” he said. “It was a huge fight, and we had to get out in front of it with HR and managers and really fight hard to gain the trust back.”

Evolution of Benefits

Health benefits are evolving rapidly as more employers adopt high-deductible health plans, scale back on plan choices, change coverage levels or drop coverage for part-time employees. And employees are being asked to pay a greater share of the costs and take more responsibility for their health care choices.

"People don’t leave because the benefits are bad, but they will come and stay if they are good.”

—Tom Sondergeld, Walgreen Co.

Many employers are easing workers into these changes in order to give them time to learn about new offerings and to ease the financial pinch that some employees will feel, said Julie Stone, a senior consultant with Towers Watson & Co.

“We’re seeing planning now in stages, so by the time employers get to 2018, they will have redesigned their plans,” she said. That is the year that the excise tax, also called the “Cadillac tax,” on costlier health plans takes effect and it’s a target date for employers who are making changes to avoid the penalty.

Much is being asked of employees these days, and that concerns Cheryl Larson, vice president of the Midwest Business Group on Health.

“What is the saturation point for the consumer?” Larson said. “This cost-shifting trend is going to backlash in terms of health outcomes, out-of-pocket costs and productivity. There’s a huge issue of people in high-deductible plans not going to get preventive care because they don’t know that it’s covered at 100 percent. Everyone is talking about consumerism, but the bigger story is helping people navigate the health care system and understanding their benefits.”

 In fact, 80 percent of employees say that a well-communicated benefits plan would make them less likely to leave their jobs, according to the “2014 Aflac WorkForces Report,” compared with 44 percent in 2012.

The need for greater clarity around benefits led Glassdoor, the online career community website, to launch a benefits-comparison site in August that lets potential hires know exactly what kind of benefits and perks a company offers before taking the job. It also allows companies to tout their perks and benefits and respond to questions from users.

“Companies are now looking for new ways to highlight aspects of their culture, and benefits are one of the ways that highlight how an employer values its employees,” said Will Staney, head of global recruiting for Glassdoor. “Before employees couldn’t really see what a company offered, and employers didn’t have a way to communicate that on a granular level.”

What Do Your Employees Want? Just Ask
Benefits manager Andreas Pyper listens carefully to employees during open-enrollment meetings. What he hears most is concern over how they will pay unexpected medical costs, like those associated with heart attacks and broken bones. Last year accident and long-term-care insurance topped their wish lists and the year before it was critical illness.

Employees crossed critical-illness insurance off their lists — it was added to the 2014 benefits package. And this fall employees will be able to purchase personal accident insurance for 2015 to help pay for expenses not fully covered by their health plan.

For Pyper, employee wellness and benefits manager of Santa Barbara County in California, adding these plans was an easy fix. They cost employers little or nothing to provide and can make a difference to employees who are struggling to pay their medical bills, he said. Personal insurance plans, like accident or critical care, allow workers to buy coverage through their employers at a lower rate than they could get on their own.

However, long-term-care insurance, with its exorbitant premiums and tough approval process, is not a realistic possibility, Pyper said.

“There’s a huge gap in the market, but until someone figures out a way to make long-term-care insurance affordable, that’s not a benefit we’ll be offering,” he said.

County leaders are paying close attention these days to what employees want in their benefits to help attract talented workers. Cash-strapped governments, especially in California, are finding it hard to compete with private employers for quality candidates. Offering good benefits is one way to stand out, and voluntary benefits can help make packages more attractive at little or no cost, Pyper said.

Traditional voluntary benefits include dental, group term life insurance and short-term disability, but unique benefits like pet insurance, critical-illness plans and auto or home insurance are getting more attention from employers.

“We want to be an employer of choice, but we have no bonuses to offer or performance pay,” he said. “One way we can compete is by offering benefits that our employees want.”
—Rita Pyrillis
 

The Sausalito, California-based company is known for its database of employee-written company reviews.

“Employers are figuring out that benefits and perks and the subtleties of working in a place are becoming really important in selling the full package of what a company offers,” he said. According to Aflac, 59 percent of employees are likely to accept a lower salary in exchange for better benefits, but Staney said most employees don’t find out what those benefits are until they’ve accepted the job, and recruiters normally don’t know what their competitors are offering.

 “In the past, when employers talked about benefits, it was usually in the interview phase or employees found out about the benefits at orientation,” Staney said. “Knowing this stuff when going in to negotiate a compensation package can help both sides.”

The benefits comparison site is another tool that employers can use to better educate themselves about their benefits, Staney said. Users can click on a company profile and browse a checklist that includes health and wellness plans, financial and retirement benefits, work-life programs, vacation and time off, perks and discounts, and professional support programs. They also can read employee comments and see what benefits employees are talking about most. For example, at Hewlett-Packard Co., the health insurance, 401(k) plan and vacation and paid time off are the most talked about benefits.

“Employees value health benefits almost as much as pay. That hasn’t changed. But whether or not employers will continue to offer health benefits for the foreseeable future is where it gets murky."

—Brian Marcotte, National Business Group on Health

Benefits and perks are especially important to younger workers, according to Staney. “I think millennials are pushing this transition toward transparency around benefits, beyond salary, bonuses and stock options,” he said. When employees’ children turn 26, “they drop off of their parents’ insurance and they’re on their own. They are coming out into a job market where you’re not getting great salary increases, so employers are getting more creative with benefits and perks to attract them. They really care about getting as much information as they can.”

While employee benefits are becoming more complex, employers and employees continue to see their value as a recruiting and retention tool.

“Employees value health benefits almost as much as pay,” said Brian Marcotte, president and CEO of the National Business Group on Health. “That hasn’t changed. But whether or not employers will continue to offer health benefits for the foreseeable future is where it gets murky. There is a lack of confidence in their ability to control health care costs, and there’s only so much that they can do. The long-term question of the value proposition around benefits is going to take several years to prove out.”

He recommends that employers carefully examine the needs of their workforce and what kinds of benefits that they value most and plan their rewards strategy accordingly.

What Employees Want

For employees of Santa Barbara County in California, accident insurance and long-term-care insurance are the most-requested benefit plans, according to Andreas Pyper, the county’s benefits manager. Critical illness insurance also ranked high on employees’ wish lists, so the county introduced them this year.

During an open-enrollment meeting last year, Pyper said an employee told him that he was struggling to pay the bills for his son’s broken arm and his daughter’s treatment for a rare genetic disorder. His family used to be covered by an accident policy through his wife’s job but she no longer worked there, Pyper said.

“He said, ‘$1,800 for a broken arm may not sound like much, but given all the other expenses, it [accident insurance] was a lifesaver,” Pyper said. “So I did some research. It doesn’t cost anything, which means that we’re not spending any taxpayer money, and that’s important to us.”

Accident insurance covers a wide range of incidents and injuries; like other voluntary benefit plans, workers pay the full cost but at a lower rate than they could get on their own. However, costs for long-term-care insurance are extremely expensive, so it’s unlikely that the county will be offering that anytime soon, he said.

Offering employees the benefits they value is especially critical to recruiting and retention in the public sector, which must compete for talent with private employers who can offer more lucrative compensation packages, Pyper said.

But there is little doubt that for the vast majority of employers benefits are an important recruiting tool, and health care is the benefit that’s most important to employees. 

“Employers have been offering health benefits for 70 years as a way to recruit and retain workers, and that hasn’t’ changed,” said Paul Fronstin, director of health and research at the Employee Benefits Research Institute. “Today we may be on the verge of change, but just about every employer offers health benefits. However, that doesn’t mean what they are offering hasn’t changed.”

And those changes will no doubt affect future workers who will face a different benefits landscape, said Towers Watson’s Stone.

“How will they approach the workforce in their lifetime?” she said. “There will be no pensions, and the value of their health care benefits will not be as high as those of older workers. Are they more likely to freelance, to work part-time? What will they value? And how will we attract and engage this next generation? And how does health care fit into that?”

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Need ACA Help? Go Ask ‘Grandma’

What does a child do when Dad says no and Mom says yes? Talk to Grandma, of course.

That’s exactly the situation being played out with regard to the legality of premium tax subsidies for individuals enrolling in one of the 36 states where federally facilitated health care exchanges operate. In July, the U.S. Court of Appeals for the D.C. Circuit (aka “Dad”) ruled 2-1 in Halbig v. Burwell that premium tax subsidies were not available to health care purchasers in the 36 states that chose not to adopt a state-run health care exchange under the Affordable Care Act. According to the ruling, premium tax subsidies were not available to health care purchasers in states that had federally facilitated exchanges.

To make matters more interesting, two hours later the U.S. Court of Appeals for the 4th Circuit (aka “Mom”) in Virginia issued the exact opposite ruling on the same issue. 

The ACA had required that all states adopt a health care exchange. However, in another section of the act, it provided that if a state did not establish an exchange, the federal government would do it for them on their behalf (a federally facilitated exchange). The key provision under dispute in Halbig v. Burwell was that premium tax subsidies were only available to purchasers in exchanges established by a state. This seeming conflict in the language of the act itself was resolved in May 2013 by the U.S. Internal Revenue Service in its notice that subsidies would be available on both state-established and federally facilitated exchanges.

Halbig challenged the IRS interpretation of the two conflicting provisions (“a state shall be required to establish” and “the federal government shall establish an [e]xchange if a state does not do so”) and lost initially at the U.S. District Court of D.C. The appeals court overturned the lower court’s decision.

If Halbig were upheld, this would have a tremendous impact on employers. The 4980H (e.g. employer responsibility/mandate) penalties (both [a] and [b]) would disappear, virtually gutting the employer responsibility provisions of the ACA, at least in those 36 states. Setting aside the employer responsibility/mandate, it may also affect an employer’s decision on whether to offer health coverage to its employees.

Employers with low-wage, full-time employees have been examining whether it is more beneficial for both the employer and employees to not offer coverage because of the available premium tax subsidies. However, if the subsidies are not available, the coverage becomes significantly more expensive for employees on the exchange vs. through a traditional employer plan. The final decision on this issue may be a long time coming, but employers exploring this option should be aware of the potential future impact.

While some initial media reports called the appeals court’s ruling “a death blow to the ACA” and worse, it is far more likely that the Obama administration will appeal the decision first to the entire D.C. Court of Appeals en banc, and then likely the U.S. Supreme Court (aka “Grandma”) will have its say. By court rules, the decision of the D.C. Court of Appeals is stayed pending the administration asking for a rehearing en banc, which it most certainly will do. There are also two more circuit courts considering the same issue.

So here’s the thing: If the court chooses to rehear the case en banc and overturns the July ruling, and the other two circuits concur with the 4th Circuit, then the Supreme Court never gets the case since all the circuits would be in agreement (unless of course it just chooses to take it on its own). And while it’s possible the Supreme Court may get the case in the 2014-15 term, it’s more likely to be in 2015-16, if at all.

What should employers do? Continue to plan as if the D.C. Circuit ruling wasn’t made. In other words, the subsidies remain legal. By the rules mentioned above, it technically isn’t. It could be many months before we know anything more definitive. Continue to evaluate the role of benefits as part of your total rewards and HR strategies to recruit and retain employees, and stay tuned for more developments.

Gary B. Kushner, right, is the president and CEO of Kushner & Co., a benefits consulting firm. Ben Cohen is the practice leader, health and welfare benefits, for Kushner & Co., a benefits consulting firm. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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The Wrong Way to Engage in the ADA Interactive Process

Upon attempting to return from a medical leave of absence, an employee requests the following accommodations: an ergonomic chair, adjusted lighting in her office, and a part-time schedule for the next eight days. Instead of providing the accommodations, or even discussing their availability, the employer refuses to permit the employee to return to work, instead telling her not to return until it was with no restrictions or accommodations. The company later fires the employee (seven days after she filed an Equal Employment Opportunity Commission charge challenging the failure-to-accommodate), telling her that she failed to engage in the interactive process.

These are the facts of the latest Americans with Disabilities Act lawsuit filed by the EEOC. If the facts, as the EEOC alleges, are true, this case seems like a slam dunk for the agency.

Once an employer becomes aware of the need for a reasonable accommodation, the ADA obligates it to engage in an interactive process with the employee to identify and implement appropriate reasonable accommodations. That process requires communication and good-faith exploration of possible accommodations. An employer cannot dismiss, without discussion, accommodations proposed or requested by the employee. The employee might not be entitled to a requested or preferred accommodation, but he or she is entitled to a good-faith exploration of their possibility.

In this case, it appears that the employer did the exact opposite of what the ADA requires of it, and, to make matters worse, blamed the employee for the breakdown of the interactive process when later firing her on the heals of her EEOC charge. 

This employer is going to learn an expensive lesson about the reasonable accommodation process. Perhaps you can learn something from its apparent mistakes.

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Don’t Try to Regulate Employee Off-Duty Alcohol Consumption

We know it’s legal to fire an employee for drinking on the job, but what about an employee who drinks off the job? Can an employer legally terminate an employee who tests positive for off-the-job alcohol consumption?

Twenty-nine states have laws that prohibit employers from taking an adverse action against an employee based on their lawful off-duty activities. In these states, the answer is easy — no, you cannot fire an employee for off-duty drinking, unless, of course, the employee is drunk or impaired at work, at which point all bets are off. 

Ohio, however, is not one of these states. Does this mean that in Ohio you can legally fire an employee who drinks away from work?

Recently, the Equal Employment Opportunity Commission took up this issue in an Informal Discussion Letter. The EEOC was asked, “Is lawful for an employer to require employees who are alcoholics or perceived to be alcoholics to permanently abstain from drinking alcohol on and off the job as a condition of continued employment?”

The employer in question, a nuclear power plant operator, imposed random, for cause, and follow-up alcohol testing of all employees, and fired any employee after a second confirmed positive alcohol test at work, regardless of where the employee consumed the alcohol. Further, the employer required employees who are alcoholics or are perceived to be alcoholics to permanently abstain from drinking, regardless of whether they have tested positive for or been under the influence of alcohol at work.
 
The EEOC concluded that the policy “imposed a qualification standard that would result in termination of any employee who is an alcoholic or who is perceived to be an alcoholic and who does not abstain permanently from drinking alcohol on and off the job.” Because the Americans with Disabilities Act protects alcoholism as a disability, the policy discriminates on the basis of that disability. Thus, the policy was illegal under the ADA.
 
Employers do not have to go as far as the employer in this case to protect safety and other legitimate interests. This employer (a nuclear power plant operator) has as great an interest as any employer in ensuring that its employees are not impaired on the job. 
 
Tailor you work rule to on-the-job performance. Test randomly and test for cause. If an employee tests positive, you know that employee was under the influence at work, a terminable offense. There is no need to regulate employees’ off-duty lives by requiring abstinence.
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Benefits and Compensation Orientation Guide

When Doug David joined Rosetta Stone Inc. in 2013 as the director of sales compensation and operations, he discovered the previous director had built an elaborate and extremely complex variable compensation program that was entirely contained on Microsoft Excel spreadsheets. “It was very sophisticated,” David said. “But no one else knew how to read it.”

That lack of transparency wasn’t just an issue for David. The sales team had no way to track their compensation in real time, so it didn’t really offer them any tangible incentives. They never had any sense of whether they were close to their targets or what they needed to do to push to the next level, he said. “Once a month, he just sent the spreadsheet to the sales team to validate their numbers, and they didn’t see it again until the next month.”

He also found that the spreadsheet model failed to meet Sarbanes-Oxley Act requirements for audits, which put the global language training software company at risk for compliance issues.

That’s a mistake a lot of companies make, said Scott Olsen, U.S. leader of HR service for PricewaterhouseCoopers. “Governance isn’t sexy, but it’s an important part of comp and benefits programs,” he said. When companies don’t implement effective governance, they put themselves at risk.

So one of David’s first tasks at Rosetta Stone was to get rid of the spreadsheets and implement new incentive compensation sales management software, called Xactly. Having a software-based system gave the sales team much clearer insight into their goals, and it gave David the flexibility to make changes and create multiple plans for different roles, regions and product categories. “It made my job easier, and it’s much more flexible for our users,” he said.

Creating transparency, oversight and flexibility is critical for every compensation and benefits program, said Elissa Tucker, research program manager of the American Productivity & Quality Center, or APQC. “You can have the best plan in place, but if it is not motivating employees, it’s not working.”

HR’s Toughest Task

Building an effective compensation and benefits program isn’t easy. In fact, many industry experts say it is one of the most challenging things HR has to implement.

“One of the biggest issues is that it is both complicated and high-stakes,” said John Bremen, managing director of talent and rewards at Towers Watson & Co. He noted that, in most companies, compensation and benefits represent the largest single annual expenditure. “A typical company with 20,000 employees will spend $2 [billion] to $3 billion per year on comp and benefits. That’s huge.”

ROADBLOCKS

Don’t Overthink It.Sometimes a bonus plan can be too complicated, or lack of communication can cause employees to think an otherwise competitive program is unfair, the APQC’s Elissa Tucker said. “Identifying those pain points by talking to employees will give you a road map for change.”

Don’t Overdo It. The goal of incentives is to motivate people, but if you try to offer incentives for too many behaviors or outcomes, people can’t prioritize. “The magic number for incentives is three,” said Xactly Corp. CEO Christopher Cabrera. “After that, the level of performance can go down because the incentive program becomes too complicated.”

What’s Your Vendor Plan? The technologies and vendors you choose will depend on your size, global footprint, plan design and existing systems. Some companies work with multiple vendors to administer different aspects of their compensation and benefits programs, though that adds complexity, said Towers Watson’s John Bremen. “If you can find one vendor to manage as much as possible, it will likely provide the best cost advantage and eliminate the need for you to be your own general contractor.”

And with the growth of pay-for-performance and variable incentives, finding the right balance of cost, motivation and legal compliance can feel like an insurmountable task.

“It used to be that the workforce was homegrown and you could have one comp and benefits program for everyone,” Bremen said. “Now, with the global workforce, different generations of workers and different types of employees, you need to be much more tailored to accommodate a diverse audience.”

Yet, many companies fail to employ the rigor and differentiation these programs require to effectively motivate all of their employees. Instead they leave compensation and benefits decisions up to gut feelings, and how much money is in the bank when someone is hired. That is not only a poor use of funds, but also it puts the company at risk for compliance failures, financial losses, litigation and unhappy employees, Tucker said. That’s not only wasteful, but also it can be a disincentive for employees who feel underpaid and undervalued.

What High-Performing Organizations Do

The most effective organizations have clearly defined job families and individual positions, and they employ pay-for-performance, differentiated incentives and career management strategies that are tied directly to productivity goals and business performance, Bremen said. It can be a complicated program to build and manage, but the payoff is clear.

Towers Watson’s 2013-14 Talent Management and Rewards survey shows organizations that have an integrated approach to total rewards strategy are five times more likely to report that employees are highly engaged and twice as likely to report achieving financial performance compared with their peers.

Unfortunately, Bremen said, differentiating is not as widely practiced as it should be, especially for employees with critical skill sets. As a result, the positive effect of incentive programs on employees is disappointingly low.

A 2013 report from Mercer shows similar results. While 9 in 10 organizations said they have a “pay-for-performance philosophy,” just 4 in 10 actually track and measure alignment between performance ratings and compensation decisions.

Pay-for-performance programs can be very motivational, but only if they are managed effectively, said Lori Holsinger, a Mercer analyst. You need to decide what pay for performance means for your organization, what performance will receive merit increases, and how you will reward employees. Otherwise, it won’t be effective, she said.  “It requires a lot of work, and you have to be diligent.”

Case Study: Makeover at Acme

In 2011, Acme Scenic & Display in Portland, Oregon, was coming off a three-year pay freeze. Bruce Farnsworth, the company’s chief operating officer, wanted to implement a new round of raises, but the company had no formal method for offering employees incentives through salary or benefits programs. “It had always been a haphazard process,” he said. So he attended a workshop on how to use external industry data and internal employee information to create a formal compensation and benefits framework, and he started rebuilding his program.

He spent eight months creating job classes and categories; he then wrote a job description for every position. He used PayScale Inc., a salary profile database company, to find equivalent jobs in related industries, and set three-tiered salary ranges based on those numbers. “It forced us to do grading and identify equivalencies in jobs,” he said.

He rolled the program out in 2012, and saw immediate results.

Having a formal structure for raises allowed Farnsworth to predict his compensation and benefits budget more accurately based on the time and percentage of anticipated salary increases for employees. He also let all employees know how the new program worked, and where they fell in the pay range, so there was consistency across the organization.

“That communication piece was so important,” Farnsworth said. It helped dispel arguments from some employees that they were being underpaid, and it let everyone see where they were in their salary range and what they needed to do to improve. “People can now see their growth over time, and what they can accomplish if they push themselves.”

PLAN

Get a Number. The first step to building a balanced compensation and benefits program is understanding your budget and workforce management goals for the year. “Think about what you have to work with and what you want to achieve,” said Elissa Tucker of the APQC.

Don’t Work in Isolation. Whether you are creating a new program or updating the one you have, involve finance and legal from the outset to ensure the structure and administration of the program is both legal and affordable, said Scott Olsen of PricewaterhouseCoopers. “They are going to get involved eventually, and if you wait until the end, it can lead to a lot of unnecessary rework.”

Gather Internal Data About Your Current Program. Benefits usage data, employee satisfaction surveys, exit interviews and focus group discussions are all useful places to find out whether employees value your compensation and benefits programs, and what they would like to see changed. You should also ask whether they think the program is easy to use, fair and if there is enough communication about the plan.

Review External Research. To ensure your compensation and benefits program is competitive, study market data and compensation surveys for your industry, region and key job titles. “Review reports at least yearly to identify new trends,” Tucker said. “And more often for hard-to-fill roles.”

Build a Career Framework. Having clearly defined jobs and job families for every department will give you a foundation to fairly compensate and promote employees, said Mercer’s Holsinger. Each job should include a job scope, required experience and expected performance or outcomes. Then create levels within each job and job family to determine what level of compensation an employee should receive. “This creates consistency and fairness across the organization.”

Choose an Incentive Program and Stick to It. Whether you offer pay-for-performance, bonuses or other incremental incentive programs, they have to be consistent, and employees need to understand how they work. Otherwise it can cause strife and dissatisfaction among employees.

Think Global. Remember to factor in cost of living, compensation trends and global employment laws for overseas employees, said Rosetta Stone’s David. Many countries have employment laws related to paid time off, percentage of income that can come from bonuses and requirements for profit-sharing — all of which can affect the legality and competitiveness of your offering. “Do the research because there are a lot of variables to consider,” he said.

How to Lower Costs and Increase Value.

If you take the time to find out what employees want most from a compensation and benefits program, you can generate more value for fewer dollars. And if you don’t, the opposite can happen, said Scott Olsen of PricewaterhouseCoopers. For example, studies show most people are willing to trade an annual bonus for 75 cents on the dollar in salary.

DO

Divvy It Up. Based on your budget, goals, research and career framework, define salary ranges, bonuses and benefits for each job category and job level.

Offer Incentives. One of the most effective tools for motivating employees is an annual incentive program, according to a Towers Watson report. This can help employers re-energize top performers while managing costs. “Differentiating pivotal workforce segments enables employers to lower base pay increases, incentive payouts for low performers …  and re-allocate full and appropriate compensation to high performers.”

Crossroad

The Stock-Option Dilemma. Stock options can be a valuable incentive or a waste of money depending on how you present them. If all employees are granted stocks, they will take them regardless of whether they value them, said Scott Olsen of PricewaterhouseCoopers. If you offer limited shares in exchange for salary, the employees who value stock options will take advantage of the program, and those who don’t won’t — but they will still appreciate having the option. “One program costs more and has less value, while the other costs less and has more value.”

Take Advantage of Technology. A 2013 Mercer study shows that more than half of respondents use some form of compensation technology. “Technology can afford key benefits, such as ready access to accurate data and actionable insight to all stakeholders,” the report said. Compensation and benefit software can also provide ease of use to HR and managers as they hire new employees or promote from within, and support more efficient audits for internal and external governance processes.

Ideally your compensation and benefits technology will be integrated with your existing human resources information system, Olsen said.

Communicate. “Communication is a huge piece of the comp and benefits program, but it often gets forgotten,” Tucker said. That can put all of your hard work to waste.

HR needs to communicate frequently and consistently with employees about how the compensation and benefits program works, how it compares to market standards and what they can do to take advantage of it. “Consistency of message is key,” Olsen said. When employees understand the value and can see how their behavior affects their incentives, it becomes more motivating.

REVIEW

Summarize Results for Leadership. The C-suite doesn’t need to get deeply involved with compensation and benefits administration unless there are problems or big changes afoot, Olsen said. Instead, tie compensation and benefits reporting to broader workforce management meetings, sharing results in conjunction with performance management outcomes, employee satisfaction surveys and future workforce planning initiatives.

Review Internal and Market Data. At least once a year, re-evaluate your program based on employee feedback, satisfaction surveys, turnover rates and external market research to ensure your program remains competitive and it is driving the right behavior. “A program may look great on paper, but you have to monitor it in the field to see how people respond,” Tucker said.

Leave It Alone. Don’t make changes unless something is actually broken. When you constantly tweak your program, people become suspicious and assume they are getting the short end of the stick, Olsen said. If you must make adjustments, change one element at a time, and map its effects on the entire program before you implement it. “You’ve got to look through a broad lens, because a lot of codependencies exist.”

Plan, Do, Review

Plan

• Determine your budget and what business strategies you would like to offer incentives in for benefits and compensation.

• Gather internal and external research on what employees want and what’s competitive for your industry.

• Build a career framework that clearly lays out how different jobs and levels of experience will be compensated to create consistency in your compensation program.

Do

• Use technology to gain transparency, ease of use and compliance.

• Limit the number of outcomes for which you offer incentives to maximize performance.

• Communicate with employees about the program and how it works. Let them know how they can take advantage of it, and what they can do to improve their performance.

Review

• Revisit internal and external data about the program to identify any pain points and ensure your offerings are still competitive.

• Tie compensation and benefits reporting to broader workforce planning reports.

• Don’t make changes to the program unless they are absolutely necessary.

Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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Perks at Work

Employees at Camden Property Trust get lots of perks, including discounted rent on apartments owned by the real estate company and furnished vacation suites at its properties in popular U.S. vacation destinations for a mere $20 a night. Also, a Camden scholarship program for children of employees attending two- or four-year colleges has paid out $1 million during the past seven years.

'We’re not all Googles. We don’t need to be Google.'

—Margaret Plummer, Camden Property Trust

Of everything the company offers though, a favorite of employees at Camden’s Houston headquarters costs absolutely nothing: wearing jeans on Fridays.

“We have special jeans-theme days,” said Margaret Plummer, vice president of employee development for the company that reported $800 million in revenue in 2013. “Before July 4, it was red, white and blue. This Friday is a sports theme where you wear something from your favorite team.”

In highly competitive fields like technology and finance, employees are treated to expensive perks such as free meals, private commuter buses and team-building trips to exotic locales.

But perks don’t have to cost a lot to make employees happy.

In fact, human resources and employee development directors from a wide range of industries say they get by just fine offering perks that cost little or nothing — if the extras are things employees value or help reinforce the company’s mission or corporate culture.

“We’re not all Googles. We don’t need to be Google,” Plummer said.

What Makes a Perk a Perk?

Companies offer perks — short for perquisites — to reinforce their workplace culture, but also to attract and retain workers. Perks are defined as goods, services or opportunities that aren’t part of salary or wages but have value. Some perks are taxable — tickets to a ballgame for example — while other less-tangible extras are not.

Perks play a key role in helping Genentech Inc. attract talent, said Lisa Slater, a spokeswoman for the 12,300-person South San Francisco, California-based company and Roche Group subsidiary. Recruiters play up Genentech’s child-care centers, on-site concierge and commuter shuttle service. “Our aim is to help every employee do their best work,” Slater said. “We feel this differentiates us from our competitors.”

Quirky Perks

Perks are not created equal, but some are more — let’s say unusual — than others.

Companies that depend on perks to attract or retain employees believe in tailoring what they offer to fit their culture. The more unique the culture, the quirkier the perks. Here are some companies with perks specifically suited to their business:

Nestle Purina PetCare Co.: The maker of pet products espouses supporting pet owners and walks the walk by letting employees bring their pets to work. At Nestle Purina’s 1,800-person St. Louis headquarters, “We have more than 100 dogs every day,” said Wendy Henke, the company’s human resources manager. Cats come to work, too, but have to be on a leash, and even then they tend to wander. “We had a cat on a leash climb up a tree,” she said.

Oculus VR Inc.: The Irvine, California, virtual reality startup that was acquired by Facebook Inc. for $2 billion in March pays employees’ toll-road fees. On the job, Oculus staff can play with the latest 3-D printers, motion capture hardware and robots, and everyone gets free Oculus hardware.

Navy Federal Credit Union: To better manage their finances, employees of this 11,000-person Vienna, Virginia, credit union can sign up for free budget counseling and a debt management program. The company also hosts an annual financial expo and runs an online game that shows employees how much they need to save for retirement.

SmartPak Equine:Because so many of the Plymouth, Massachusetts-based horse supply retailer’s 350 employees bring dogs to work, the company schedules monthly visits from a mobile dog groomer. SmartPak also provides on-site dry cleaning drop off and pick up, mobile car detailing and subsidized gym memberships. The company gives employees paid time off for annual physicals, and is in the process of adding an on-site smoking cessation program and on-site eye exams. “We hear people say they don’t want to use vacation time for appointments, so we offer a half day on us to take care of yourself,” said Jennifer Burt, SmartPak’s human resources director.

Costco Wholesale Corp.: The discount retailer came in No. 2 on Glassdoor Inc.’s 2014 list of top 25 U.S. companies for compensation and benefits, in part because of generous perks, according to an online anonymous survey by the jobs website. “They have a college retention program so you can get your job back as soon as you get back from school each summer or break,” one anonymous reviewer wrote on the site. All Costco employees get free Costco memberships, and retail location workers who clock in on Sundays make time and a half. During holidays, Costco keeps stores open late so workers can shop after hours, “and not have to fight the parking lot,” writes another anonymous Glassdoor reviewer.

—Michelle V. Rafter

More than a quarter of employees in a 2013 CareerBuilder survey agreed that some perks are an effective way of getting them to stay in a job. Asked what one perk would make their workplace better, 18 percent picked the same freebie Camden employees like — “ability to wear jeans” — third only to half-day Fridays (40 percent) and on-site fitness centers (20 percent), according to the survey.

Lenny Sanicola, a senior practice leader at WorldatWork who tracks compensation and benefits trends, said perks such as free concierge services that disappeared during the recession are back. They’re rejoining perks like financial wellness seminars and health and wellness programs that never left. He also sees more companies offering perks of paid and unpaid sabbaticals, and paid time off for community service. “It’s not new. It’s been out there, but we’re seeing more organizations offering it,” he said.

Companies generally distinguish perks from benefits such as health care coverage, but some straddle the line. Companies may identify yoga classes at an on-site workout facility, offer flu shots at a company-run medical clinic or pass out free Fitbits as part of a wellness program, even though those offerings veer into benefits territory. Perks are also different from structured rewards and recognition programs that compensate employees for hiring anniversaries, reaching specific goals or other job-related accomplishments.

Because some perks fall into a gray area and others might not cost anything, companies don’t always track what they spend as rigorously as they do budgets for benefits, rewards and recognition and other forms of compensation.

SmartPak Equine, a Plymouth, Massachusetts, online retailer of nutritional supplements for horses and other equestrian gear, doesn’t track what it spends on perks, though the company surveys employees for feedback and asks for suggestions. “We accept it as an expense, and it’s the right thing to do for employees,” said Jennifer Burt, the company’s human resources director.

Gone to the Dogs

Small perks can have a big impact.

SmartPak spends nothing to let its 350 employees bring their dogs to work. An average day can see upward of 30 hounds lounging behind doggy gates inside their owners’ office pods. “We’re in an industrial park; there’s a dead-end street, so there’s an opportunity for employees to walk their dogs during the day. We’re lucky enough that the property also has a field,” Burt said.

The specialty retailer is a magnet for horse lovers, and supports employees who own, train or show horses by giving them use of free samples, as well as discounts on its merchandise, plus other goodies. “They’re coming to us to combine their lifestyle passion with work, so it’s what we can do to make them feel engaged in their passion,” she said.

Companies in ultracompetitive industries pour on the perks to find and retain people with sought-after skills. Google employees don’t just get a free cup of coffee, a barista makes it for them, along with free breakfast, lunch, dinner and snacks. Employees at some locations can sign up to get produce boxes delivered to them at the office. Employees in the company’s headquarters can recognize each other for doing well on a project with credits that can be exchanged for a one-hour massage (on campus, of course).

Some perks are so generous they’ve become barriers between employees and the communities they work and live in. Nowhere has that been more apparent than in the San Francisco Bay Area where, during the past year, protesters have physically stopped or damaged the air-conditioned private buses that shuttle employees of Apple Inc., Google Inc. and Genentech and other tech companies throughout San Francisco and Silicon Valley an hour to the south. Protesters argue that the buses are contributing to rent increases, evictions, air pollution and other problems that decrease quality of life for the area’s nontech residents.

Genentech responded in part by adding signs to its commuter shuttles that explain how many cars they displace from streets every day. To show it’s a good neighbor, Genentech also offers opportunities for employees to volunteer. One is the 3-year-old Genentech Gives Back Week, which in 2013 raised $215,000 for 129 nonprofits. “Employees view the ability to give back as a perk since they are proud to be associated with a company that does so much for the community,” said Genentech’s Slater.

Real Perks at Virtual Companies

Virtual companies, with no physical office for a pingpong table or Friday happy hours, must take a different approach to perks.

Buffer, a San Francisco-based social media startup with several dozen employees around the world and no headquarters, gives every new hire Jawbone’s UP electronic fitness wristband monitor to track daily activities and how much they sleep. Employees also get a Kindle Paperwhite e-reader and three e-books of their choice. To encourage conversation, employees share their UP results with each other through iPhone and Android apps, and their reading on the company’s Facebook page and on a Buffer book board on Pinterest. Three times a year, Buffer takes everyone but new hires still in training on an all-expenses-paid retreat somewhere exotic, such as South Africa or Thailand.

Part of the company’s mission is promoting self-improvement, and fitness monitors and book discussions help with that, said Buffer co-founder Leo Widrich in a video on the company’s blog. Trips let employees who don’t see each other in the office bond. “Once you return home … the conversations you have with team members are enhanced,” writes Buffer chief executive Joel Gascoigne in a blog post about the all-hands trips. “You know the tone of somebody’s voice and the way they approach problems and discussions. You read their emails differently.”

Pet products-maker Nestle Purina PetCare Co. extends its business of supporting pet owners to the perks it offers employees. They can bring pets to work if the animals meet certain criteria. Workers also get up to $200 toward buying or adopting a pet, as well as discounts on pet food at company stores at its St. Louis headquarters and 19 other U.S. offices and factories.

Nestle Purina offers other perks as well. On-site company stores sell a variety of Nestle and non-Nestle products, including frozen food and other staples so employees can grab something on the way out of work and not have to stop at the grocery store before heading home. “I wish they would have bread, and then I wouldn’t have to go to the store at all,” said Wendy Henke, the company’s HR manager.

Giving Employees VIP Treatment

When Camden Property Trust’s co-founders started the business, they vowed to treat their employees better than they had been treated at the previous real estate company they worked for, starting with perks, Plummer said.

To that end, Camden offers 20 percent rent discounts to full-time employees (and 10 percent to part-timers), and extends the same offer to employees’ children or parents — a perk that, at any given time, 600 to 800 Camden workers or their family members are using, Plummer said.

The company reserves several furnished apartments in complexes in 16 major metro areas, including a unit in Orlando, Florida, a mile from Disney World. The $20 nightly fee, access to a kitchen, laundry facilities and pool make a vacation more affordable even for low-wage employees in maintenance or landscaping, she said. “Our philosophy is we want you to use your vacation,” Plummer said. “You work hard serving people; you need the time to relax and spend time with the family, and we’ll give you space to do it.”

Inexpensive vacation rentals, jeans days, e-books, shuttle buses and other perks — free or otherwise — are great as far as they go, said WorldatWork’s Sanicola. But ultimately, they won’t keep employees happy if a company is deficient in other areas.

If employees don’t have the tools to do their job properly, don’t understand what’s expected of them or don’t understand what the company’s all about, “all the free meals in the world won’t help,” he said.

Michelle V. Rafter is a Workforce contributing editor. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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The Untapped Talent Pool of People With Disabilities

Recently, Dana Marlowe’s technology consultancy was managing a software project at a Fortune 500 company, when the client told her he was so impressed with her project manager that he wanted to hire him on the spot. That’s not surprising in a world where great tech talent is hard to come by, but it may be surprising to hear that this particular project manager is both deaf and legally blind.

“He’s a brilliant guy, and why wouldn’t they want to hire someone who is brilliant?” said Marlowe, who is principal partner of Accessibility Partners, a Washington, D.C.-based firm that helps organizations ensure their information technology products and services are accessible for people with disabilities. She prioritizes hiring workers with disabilities with the goal that at least 75 percent of the workforce has a disability.

Having workers with disabilities on her team is about more than doing the right thing, she said. “Employing people with disabilities just makes good business sense.”

The unemployment rate among disabled workers is double the average population, according to the U.S. Labor Department’s Office of Disability Employment Policy, or ODEP. Yet many of these workers are highly educated, deeply talented, and very loyal, Marlowe said. “People who overcome challenges on a daily basis can handle whatever workplace issues you throw at them.”

In an economy where companies are facing serious talent shortages, workers with disabilities offer a great value proposition. They not only bring expertise and experience to the table, they help organizations create a more inclusive workplace culture, said Kathy Martinez, head of the ODEP. “Diversification breeds innovation,” she added.

That’s important today as older workers are opting to stay in the workforce longer and could develop a disability while employed. “If you train a person for 30 years and they lose their vision due to diabetes, you would make accommodations so they can keep working,” she said.

Yet a lot of companies shy away from hiring candidates with disabilities in part because they aren’t sure what “accommodations” those employees will need to do the job. Employers imagine they will have to buy expensive equipment or adapt their office space, but the reality is quite different, Martinez said. According to an ongoing study by the Job Accommodation Network, 58 percent of accommodations don’t cost the company any money, while the rest typically cost about $500.

“Accommodations are really just productivity tools,” she said. Many solutions are as simple as lowering a desk or buying an extra piece of software like a screen reader for the blind, or an amplified phone receiver for someone hard of hearing. “It’s not going to be as expensive as you think.”

The other obstacle that hiring managers face is the discomfort that comes with not knowing how to discuss the disability, or what questions they are allowed to ask. But most of the concerns are answered in the Americans with Disabilities Act. For example, according to the ADA, an employer cannot make any pre-employment inquiry about a disability or the nature or severity of a disability. An employer may, however, ask questions about a candidate’s ability to perform specific job functions and may, with certain limitations, ask an individual with a disability to describe or demonstrate how that person would perform these functions.

“People with disabilities usually know what they need to do the job, so just ask them,” Martinez said.

Even if hiring someone with a disability requires a little discomfort or a small investment in new technology, it’s worth it for the value they bring to the organization, Marlowe said. “This is a huge, untapped talent pool, and companies would be foolish to ignore them.”

Sarah Fister Gale is a writer based in the Chicago area. Comment below or email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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Ammunition for Immunization

It's the dog days of summer — those hot and humid weeks of August are when you want to stay inside and keep cool. This month, help your employees by letting them know that some of the best air-conditioned places around are doctor’s offices and pharmacies. Hint, hint.

While it’s already known for the heat, the U.S. Department of Health and Human Services would like August to be known for health as well. This month is National Immunization Awareness Month, and employers committed to employee health and wellness — that’s all of them, right? — should feel compelled to participate given recent statistics around immunization and illness.

The whooping cough outbreak that occurred in California in 2010 was traced earlier this year to children who hadn’t received the pertussis vaccine to prevent the disease. It was the nation’s worst in more than 50 years.

Nationwide, more cases of whooping cough occurred in geographic areas of clustered unvaccinated children, leading to 9,120 instances of the disease and 10 deaths.

Further, although measles was declared eradicated in the United States in 2000, there have been recent outbreaks in California, New York and Texas, and the disease is on track to infect three times as many people as in 2009. The spike is being traced back to unvaccinated individuals traveling abroad, getting infected, then bringing the disease back home to their U.S. communities.

Everyone loves a deal; staying healthy at no cost is one of the best deals around.

While there were just 189 cases of measles nationwide last year, health experts are concerned since the disease is so highly contagious and cases are rising rapidly. In California alone, there were four measles cases all of last year. By March 2014, there were already 49 across the state.

It’s not just childhood immunizations that are going uncompleted. Health experts emphasize that an annual flu shot is the best and easiest way to prevent the disease and its spread. However, yearly federal statistics show that only about a third of U.S. adults get a flu shot — a percentage that’s held steady for more than five years — while influenza and its related complications cause tens of thousands of deaths each year.

Employers can play a key role in communication and education about the importance of immunization, and have a ready-made promotion vehicle this month. Visit health finder.gov, keywords “national immunization awareness month” for free materials, resources and campaign ideas to spread awareness instead of illness among your workforce.

Then, here are a few other ideas to effectively communicate with employees about getting vaccinated:

Tell them it’s free! Under the Affordable Care Act, preventive care, including immunizations, must be covered 100 percent with no copays or cost-sharing. Everyone loves a deal; staying healthy at no cost is one of the best deals around. Lead with that message, and you’ll be off to a solid start.

Make it easy. I’m not certain, but my strong suspicion is that flu vaccination rates among adults are so low because we’re busy, and we view taking an hour to go get a flu shot as inconvenient and no fun. Combat inertia and excuses by offering on-site flu-shot clinics during the workday, if possible. If not, provide employees with a list of nearby pharmacies or physicians where they can get immunized.

Stay sensitive to health concerns and cultural convictions. It’s important to remember that parents have their children’s best interests at heart, and don’t take lightly the decision not to vaccinate their kids. There’s general consensus in the health community that childhood vaccines don’t pose long-term risk. However, parents who don’t vaccinate their children feel compelled to do so for cultural or religious reasons, or because they have genuine concerns about the effects on their child’s health. Employers have to respect those concerns and beliefs, and make sure any immunization campaign is positive and proactive — not prescriptive and pushy.

Employers remain a trusted and reliable source of information. I encourage you to use that influence toward addressing a national issue this month.

Kelley M. Butler is the editorial director at Benz Communications, an HR/benefits communication strategy firm. Before joining Benz, Butler spent 11 years at Employee Benefit News, including seven as editor-in-chief. To comment, email editors@workforce.com.