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Verbal Notice Not Enough for COBRA

Recently, an employee was forced to retire because of emphysema. A company representative came by and gave him general information about his termination and about his COBRA rights. But the company did not give the employee a confirmation letter describing his COBRA rights in detail.


Then, the company notified the employee that he had failed to elect COBRA coverage, and his COBRA rights were effectively terminated. When the employee was later hospitalized, he had no insurance.


An appeals court (Smith v. Rogers Galvanizing Co., CA 10, No. 96-5168) ruled that the employer did not sufficiently inform the employee about the 60-day notice period regarding continuing coverage under COBRA. It also failed to provide the employee with sufficient information about individual and family coverage, including premium amounts.


It’s a good reminder to make sure you are up to snuff on the COBRA requirements.


Source: You and the Law, National Institute of Business Management, 1750 Old Meadow Rd, Suite 302, McLean, VA 22102, November 1998. 800/543-2055. Cost: $187/year.

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Employment At Will—What Does It Mean

Employment at Will is a concept often misunderstood.


Employment at Will means an employer has the right to fire (or discipline or promote) an employee for a good reason, a bad reason, or no reason at all, so long as it is not an illegal reason.


What are illegal reasons? It depends on the federal and state law, but here are some:


  • Breach of a contract (express, implied, written or oral, depending on your state’s law);
  • Violation of a discrimination statute (federal, state or local) based on race, color, sex, national origin, religion, age, disability, veterans’ status, disabled veterans’ status, union affiliation, and other reasons.
  • Because of the employee’s lawful off-duty contact, lawful expression of first amendment rights, lawful on-duty conduct; and/or in retaliation for exercising any of these rights.

Check your local statutes to be sure. In addition, do not forget that many states require employers to give employees written notice of termination and a statement of the reasons for the termination.


Source: Epstein, Becker & Green, November 10, 1998, New York

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Top 10 Situations that Cause Costly Employment Problems For Companies

These are the things that will increase your risk of a lawsuit.


  1. Have no established “zero tolerance” policy regarding sexual harassment, violence in the workplace, and employment discrimination (according to state and federal legislation).
  2. Have not regularly distributed the “Zero tolerance” to all employees.
  3. Have not trained all employees on these policies.
  4. Have no routine way of training new hires and current employees on these policies.
  5. Have no written grievance/complaint procedure that has been distributed, enforced and explained to all employees with assurance for no retaliation if complaints are filed.
  6. Ignore initial complaints or “grumblings” from employees without giving the complaint thorough consideration and appropriate investigation.
  7. Ignore high absenteeism, tardiness, accident, turnover or other high-risk behavior that is especially accumulated within one department and spread among different employees in that department.
  8. Don’t offer employee assistance programs and train supervisors, team leaders and managers about making mandatory referrals when necessary.
  9. Don’t implement employment or drug testing in valid, reliable, secure, and confidential ways with the assistance of trained professionals in the related field (e.g. drug testing specialist, industrial psychologist.)
  10. Have a double standard of behaviors for top level managers even if all of the above steps are in place.

Source: Camille Caiozzo, Ph.D., President of Resource HR, Inc, November 1998. Caiozzo, is a Management Psychologist with over 20 years experience consulting on workplace behavioral issues.

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Background Checks and Federal Law

Do you do background checks on prospective employees?


If so, don’t forget that you must comply with the Federal Fair Credit Reporting Act (FCRA) and any similar state laws. The FCRA requires an employer to obtain a written authorization—on a sheet of paper separate from the application—and provide appropriate notices to the applicant. If the employer makes a decision to reject the applicant because of what is on the report, then the employer must provide a notice to the applicant prior to taking the adverse action and provide a separate notice after taking the action. The notice must provide the applicant with information on how to obtain a copy of the report. An employer that fails to comply with the FCRA could be liable for civil penalties.


Check with your state labor department for more information.


Source: Epstein, Becker & Green, November 10, 1998, New York.

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Era of Affordable Health Care Costs May Be Coming to an End

We’re in a precarious environment here. Providing quality health care benefits while maintaining a rein on health care costs has proven to be as delicate as heart surgery. And it will take the unwavering patience and skill of a physician to provide good, affordable care in the altered setting of the coming decade.

Scalpel in hand, the managed care industry has cut costs with amazing dispatch, allowing employers to enjoy a flatline of expenditures for several years. Although the savings has sometimes slashed muscle as well as diseased tissue, for many benefits providers, it was like taking a deep breath after years of double-digit inflation in health care services. Indeed, there was only five percent average annual growth from 1993 to 1996.

But that era may be coming to an end.

The Health Care Financing Administration in the U.S. Department of Health and Human Services projects health care costs will double by the year 2007 — from $1 trillion in 1996 to $2.1 trillion.

“The managed care industry, in economic terms, really is at a crisis point,” says Tom Beauregard, principal at Hewitt Associates LLC, based in Lincolnshire, Illinois. “We are seeing a definite up-tick — as high as 10 percent depending on the delivery system — and there’s a lot of evidence that these increases will continue for the next several years. 1999 is a wake-up call for employers who are realizing that managed care strategies will require some refinement.”

As evidence, Hewitt points to the following changes in premium costs from 1997 to 1998: HMOs increased 1.8 percent, indemnity programs increased 9 percent, POSs increased 1.5 percent and PPOs increased 4.1 percent. Projections for 1999 (based on current negotiations): HMOs at more than 8 percent, indemnity programs at more than 10 percent, POSs at more than 8 percent and PPOs at more than 9 percent.

The 1997 annual progress report by New York City-based William M. Mercer, Inc. (entitled “Mercer/Foster Higgins National Survey of Employer-sponsored Health Plans”) suggests that most organizations are budgeting an average of 7 percent increase, and other studies put it even higher.

Managed care has backfired with high costs and poor quality.
There are several reasons for these increases. Currently, managed care represents about 85 percent of American employees who are covered by health benefits. Almost 50 percent are fully insured through an HMO or employee-insured arrangement. Most people agree that managed care revolutionized the health care delivery system in the United States, making it more efficient by slicing away duplication of services, erecting price ceilings and discouraging unnecessary procedures.

The dollar savings for Corporate America from this revolution finally have been achieved. While managed care reduced waste and duplication of services, its zealousness in cost-cutting has its own negative effects. In order to have a 50 percent market share, many HMOs practiced competitive measures to sign up employers and their employees. Consequently, many lost money in an effort to compete. Now, they must recover those losses, as well as anticipate higher medical costs in general.

Furthermore, there will be increases in costs for prescription drugs — rising as much as 10 percent each year. More patients are taking prescriptions as a way to cut hospital and doctor visits, and more, expensive new drugs are being introduced daily to aging boomers. Most patients in HMOs do not pay for drugs.

In addition, managed care will have to respond to more federal and state regulations as a direct result of media and consumer groups who have remained dogged in their pursuit of treatment quality and patient care.

Horror stories from patients and doctors regarding poor treatment and lack of access to treatment may be overemphasized by the media, but exist nonetheless, and consumers are adamant in their desire for greater quality and greater choice. As the Mercer study points out, the greatest growth over the past five years has been in PPO and POS plans, not HMOs, and the nature of these plans means they’re not as likely to strictly control costs.

“The shocker is that the last two or three years had very small increases. Everyone is concerned about what this is about,” says Blaine Bos, principal with William M. Mercer, Inc. “Is this a one-year phenomenon or are we now looking at another trend?”

And that’s what has people concerned. “We moved head-fast in terms of both our employees and our purchasing strategies toward managed care because we believed it was a long-term solution, and not a silver bullet. If it’s just another silver bullet, where do we find the next silver bullet? It wouldn’t be a good long-term strategy. Or do we need to be looking elsewhere for a long-term health care-management strategy?”

Treat concerns by questioning strategy and priorities.
The fear about health care cost inflation should compel us to examine our company’s health care strategy — to include cost, quality of care, access and customer service. HR is in a perfect position to look at this patient and do a thorough examination about the company’s health care management benefits. Employers are interested in providing an important benefit to employees on a tax-deductible basis when costs are manageable. HR can actually affect change.

Explains Bos: “Health plan providers are reactive to the purchasers’ demands. In other words, as purchasers rethink their strategies, health plans will react in order to survive, or they will cease to exist. Already, the effective plans are truly managing care.”

Thus, this crisis point may require intensive care from HR if quality and access — as well as cost — are important. Look at the available data. Employers are able to clearly differentiate between plans. Specifically, there’s clinical-quality data, administrative-effectiveness information, employee-satisfaction rankings. In addition to industry and government sources, Hewitt’s Health Value Initiative is a collection of very specific financial information from 300 employers.

With those basic sets of information, HR can step back and ask, how should we be contracting? What are our priorities? Is the company a low-margin business? If so, the focus may be trained on the financial element. If the company is attempting to retain employees in a high-turnover environment, other issues would be most important. Those are employers who might want to focus more on employee satisfaction than on financial efficiency.

“If you can come to a priority stage and derive how you want to be contracting to the managed-care plan, and make that link to your broader business strategy, then you can identify the plan that best feeds your organization’s needs,” says Beauregard. “The bottom line of the financial data on these plans is to give the employer a great way to differentiate. For a lot of employers, this is the first time they’re going through a specific priority process.”

This era of disequilibrium may prove to aid long-term health. As HR practitioners who have tremendous influence, if not complete control, over these decisions, the benefits and positive prognosis can be enormous. Managing costs has become a possibility over the past several years. Now, the challenge, doctor, is to manage these costs while maintaining care.

Workforce, Workforce, December 1998, Vol. 77, No. 12, pp.127-128.

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Five Steps to Choosing the Right HR Software Package

Anyone who has made the shift will tell you that the benefits of automating human resources functions are significant. Good human resources software can eliminate hours of time spent tracking performance reviews, vacation accruals, benefits, compensation, applications and other items.


In addition, automated reporting cuts staff hours even further. It provides management with the timely, accurate reports it needs to operate efficiently, and makes HR a vital, visible part of the organization. But remember, any software program simply automates and accelerates your current processes—it cannot fix problems within the HR department.


Finding the right software package and the right company to help you through the conversion process is a critical step toward easing into automation. Laying out a systematic game plan that leads you through the process is a good idea. The ideal plan would contain the following steps:


  • Determine the needs, requirements, and desires of your company—including budget parameters.
  • Research the available software packages within your price range and request demo software on each package.
  • Test the software against your company’s requirements.
  • Ask questions about the package, support, implementation and pricing.
  • Make a decision .

With the plan formulated, it’s fairly easy to walk through each step. The guiding principle as you go should be “Ask plenty of questions.”


Determine what your company needs.
The rule here is “know your company.” Because you are looking for a solution to specific issues, you need to clarify those issues at the start. The more you understand about the company’s current needs, growth rate and strategic plan, the better able you will be to match a software program to those needs.


The first thing to consider is company size and growth rate. That may include considering such future need as COBRA and affirmative action tracking that your company may not be doing currently. In addition, some industries have high turnover rates that make easy data entry and reporting capabilities key.


Most importantly, find out what other software your company is using for payroll and other internal functions to ensure anything you purchase will interface easily with existing programs. Also, know your company’s database and multi-user requirements.


By talking with others in the human resource department and company management, you can put together a comprehensive list of needs in order of priority. The category of “nonnegotiables” may include budget concerns, compatibility with existing software, and certain critical functions. When you begin your search, you should immediately disregard those programs that do not meet those basic criteria.


Make certain that you are realistic about your needs and budget. There are HR software programs that can run your budget into the six-figure range. Certainly, in that range you can expect greater functionality and customization. But before you spend that kind of money, make sure that’s what you really need.


Research the kinds of software that are available.
The second step is to find out what’s available. Laila Allen, an HR professional who has helped companies automate their human resource function, prefers using a three-pronged approach.


“I start by looking at recent HR publications to determine what issues are being discussed and who is advertising products that seem to meet my needs. I also ask other colleagues the plusses and minuses of the programs they use. Last, I search the Internet for other product offerings. When I have compiled a list of potential products, I begin contacting all the prospective companies to request software demos.”


This is a time when you should weed out any products that do not meet your nonnegotiable requirements for price, function or compatibility.


Take the software on a test drive.
Testing the various products is probably the most important part of the process. Generally, you should test for six things: actual ability to integrate with current software, ease of learning, simplicity of data entry, function performance, flexibility and reporting capabilities.


If you have a critical need, such as providing on-the-fly custom reports to management, be sure to test that section of the software most thoroughly. In addition, you should spend some time trying to create custom reports and personalize the system to make sure it will conform easily to your real-world needs.


Another area to look at is flexibility. If your company is growing, it’s critical to assess how easily and how far a program can expand. The last thing you want to do is complete the conversion process and have to start over again in a couple of years to shift to a larger, more powerful program.


Finally, it’s very smart to test the software company’s support to see how well the products are supported. Sometimes it takes a little finesse to get past the salesperson and into the help desk. According to Allen, “Sometimes I was able to call them directly; other times I had to go through the salesperson. In those cases, I always looked for technical questions that the salesperson would gladly refer to technical support. Talking to the help desk is very valuable, since that’s the group you’ll be dealing with after the sale.”


You’ll find that most programs won’t make it past the questions of price, function or compatibility with current software. Others will be thrown out if you receive bad reports from other users. These filters will allow you to narrow the search down to just a few options.


As you test each product, make a checklist of the key plus and minus points for each program. Always shoot for the best price-to-performance ratio, which will vary depending on your company’s needs.


Some basic grading areas include price, ability to integrate with current software, user interface, any unusually good features, any strong negatives, technical support quality, modules and upgrades available, year 2000 compliance and length of time expected to implement the program.


Ask questions.
Verify your findings by talking with each of the references supplied by the companies and with your own network of HR professionals. When possible, ask the references if you can speak with the person responsible for actually implementing the program. That will quickly reveal a depth of information about the program that you might otherwise find out the hard way. This process may also give you some good ideas of preparatory steps to take and pitfalls to avoid.


When you ask questions of the software salesperson, look for areas of potential concern they might reveal. For example, Allen found that when she asked about future enhancements to the program, salespeople often told her what was missing from the current package.


You should also ask questions of the technical support or help desk staff if the opportunity presents itself. Questions such as “What is the most common problem people run into during implementation?” or “What functions of the program do people most often ask you about?” can uncover potential concerns.


Pricing is another area that may require some probing. Because every company that purchases HR software is different, each program meets a different range of needs. Software companies typically meet these varying needs by creating software modules that can be mixed and matched to approximate a custom solution.


In addition, technical support is sometimes included with the package and sometimes offered at an extra charge after a certain amount of time. Avoid pricing tiers based on employee counts, as rapid growth will put you back into the CFO’s office asking for more money. Because of those variables, it sometimes takes a little detective work to get a true understanding of the programs’ initial and recurring costs.


Though often presented as a tedious and difficult process, implementation is frequently simple. Remember, you are simply automating something that already exists, not recreating the department.


Finally, there’s the question of implementation. Some companies provide onsite support throughout implementation and training, while others offer training classes, and still others provide little more than a phone number to call. Of course, the more attention that is available, the easier it will be to make the transition. On the other hand, each level of implementation support will likely reflect on the real price of implementation.


Though often presented as a tedious and difficult process, implementation is frequently very simple. Remember, you are simply automating something that already exists, not recreating the department. As a rule, the better organized a department is, the easier and faster it is to automate.


Make a decision.
After going through each of the above steps, the decision may actually be the easiest step. Because each preceding step narrows the field, it often comes down to no more than one or two software packages that provide what you need.


Take the short way home.
While this five-step process may seem time-consuming, you may find that it will save you time during the conversion process for several reasons:


  • None of the five steps is very time-consuming.
  • By working with the demo software packages, you can make great strides in learning about the program you ultimately select, as well as gain a general knowledge of HR software.
  • You will establish a relationship with the company you later choose, including establishing a rapport with the technical support staff.
  • As you speak with references and other HR professionals, you will learn a great deal about how to smooth the implementation process and will be able to use their tips to cut time out of your process.
  • You will know what implementation help you can expect from the software company and make those arrangements early.

“My initial worry about the implementation process was short lived,” said Allen. “Thankfully, all the research and testing added up to a relatively fast and easy conversion.”


It’s interesting to note that a little over two years later, Allen moved to another company that was experiencing exceptional growth and needed to automate. After all she had learned in the software-buying process the first time around, it would have been easy to simply choose the same software program she had selected before and convert quickly.


But two years is an eternity in the high-tech world, so she decided to go through the process once more to make sure her earlier choice was still the best. In the end, she did once again choose the same software, but she felt the exercise was valid and worthwhile.


Workforce Extra, December 1998, pp. 10-11.

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Defined Benefit vs. Defined Contribution

Two of the most common terms used in describing retirement plans are “Defined Benefit” (often thought of as traditional pensions) and “Defined Contribution” (often thought of as 401k) plans. This chart should help you compare the two.


Comparison of Traditional Defined Benefit with Traditional Defined Contribution Plans

 

Defined Benefit

Defined Contribution

Strategic Business Considerations

Employees Attracted and/or Most Benefited

Longer-tenure and/ or older employees

Shorter-tenure and/or younger employees

Job Tenure Patterns Encouraged

Longer-tenure because employees receive greatest benefit accruals at end of long-time service. May lock people into jobs they would otherwise leave.

Although employees receive benefits based on salary, not tenure, may encourage employees to change jobs in order to receive access to lump-sum distribution from retirement accounts.

Influence on Retirement Patterns

Can be designed to encourage early retirement; may financially penalize workers for working additional years beyond the NRA.* May pressure workers who would not otherwise retire to do so.

Cannot be designed to encourage early retirement but instead rewards employees for working additional years.*

Cost/Funding Flexibility Concerns


  1. Cost variability/risk*
  2. Annual funding flexibility
  3. Termination benefits
  4. Plan termination
  5. Administrative costs

a. Employer assumes investment and possibly pre-retirement inflation risk* and therefore annual plan costs are less predictable. While costs might be higher than anticipated, pension costs in a booming stock market may be zero because investment returns on past contributions.

a. Employer assumes none of the investment risk* on retirement fund assets. As a result, annual costs are more predictable although the employer cannot take advantage of high stock market or other investment returns on retirement plans assets.

b. However, there tends to be more flexibility as to when employer may meet these costs contributions in defined benefit plans

b. However, money purchase and some types of profit sharing plans have less flexibility in when those costs are to be paid. In addition, defined contribution accounts can be designed to entail no employer contributions at all, unlike defined benefit plans.

c. Termination benefits are usually small for employees with less job tenure

c. Termination benefits equal account balances, when vested, based on both salary and years of plan participation. Tend to be larger than those for defined benefit plans, cet. par.

d. Can be very costly if plan is underfunded.

d. Not applicable, becausedefined contribution plans are by definition never underfunded

e. Managing a large pool of funds is less expensive than managing individual accounts,* but may be more expensive because of the provision of annuities (which can be relatively complex to administer) and the need for professional actuarial and investment advice to ensure compliance with regulations.

e. While actuarial services are not required to the extent necessary for defined benefit plans, the provision of participant investment education and the cost of administering many individual funds for loans, hardship, and/or retirement benefits may make defined contribution plans more expensive. Generally, however defined contribution plans are less expensive to administer, especially for smaller employers.

Administrative Complexity

more

Less

Integration with Social Security Benefits*

Employers fulfill a specific retirement income objective (e.g., to replace 60 percent of preretirement income with Social Security and pension benefits), and therefore Social Security integration is accomplished more efficiently under defined benefit plans.*

Integration can be accomplished, but the process focuses on disparity in contributions and does not attempt to target a specific replacement ratio

Providing Substantial Benefits Over a Short Time Period

Employees can be grandfathered into a new defined benefit system so as to provide special benefits that are not possible under a defined contribution approach (e.g., the quick accumulation of benefits to participants who have not participated in the system for a substantial period of time).

Unless grandfathered into a defined benefit plan, shorter tenure workers leave service with more substantial benefits under a defined contribution arrangement.

Collective Bargaining

Unions prefer defined benefit plans.

Less favored as primary plans by union leaders.

Flexible Benefit Retirement Plan Provision

Defined benefit plans cannot be part of a flexible benefit package.

Some types of defined contribution plans (401(k) and profit sharing) may be included in a flexible benefit package.

Company Identity/ Linking Benefits with Company Performance

Investment of pension assets in company stock is prohibited beyond 10 percent of assets.

Employer contributions may be in the form of employer stock so as to tie company performance to retirement funds. In addition, profit-sharing defined contribution plans tie employee productivity to retirement security.

More Philosophically-Oriented Considerations

Paternalistic View


  1. responsibility given to participants
  2. investment risk given to participants*
  3. inflation risk given to participants*
  4. opportunities given to participants
  5. benefit provided at retirement
  6. automatic enrollment?

a. Generally do not require employee contributions. Employer says, “Don’t worry about your retirement plan. We’ll take care of your retirement plan.”

a. Employees usually help fund their own retirement accounts. Employer says, “We’ll help you help yourself.” Participant-directed accounts encourage financial literacy and awareness of savings.

b. Employer absorbs investment risk in exchange for investment control.*

b. Employees absorb investment risk in exchange for potential investment rewards .*

c. COLAs may be provided and are often done so for public plans. Employer may share responsibility for inflation after retirement if ad hoc COLAs are used in private plans.* Employer assumes preretirement risk if defined benefit formula is based on final averages.

c. No room in plan design for COLA adjustments. Employees assume risk for inflation both prior to and after retirement.*

d. No preretirement access to accounts is usually provided.

d. Preretirement access to accounts is often provided.

e. Benefits are usually paid in the form of life annuities.

e. Benefits are usually paid in the form of lump-sum distributions, with which the employee may spend as they please.

f. enrollment is automatic

f. enrollment is usually not automatic

Investment Horizons and Expected Impact on Investment Income *

A defined benefit plan allows the burden of retirement security (including the attendant investment risk) to be spread over a long period of time. In theory, defined benefit plans may be expected to hold a larger percentage of more risky (and higher yielding) investments since their relevant investment horizon spans several decades if the plan is assumed to be an ongoing operation.

A defined contribution plan usually requires employees to invest for their retirement on an individual basis. This may cause them to increase their asset allocation in less risky (and lower yielding) investments to mitigate the impact of market downturns near retirement age.*

Tax Advantages

In defined benefit plans, only employer contributions are given tax-favored status.

In defined contribution plans, both employer and employee contributions may be given tax-favored status.

Approach to Informational Parity

Dedicated governance: investment expertise means that those buying and selling pension investment services have informational parity.

Employers sometimes offer participant education to increase informational parity between investors and investment services.

* Fundamental features of defined benefit and defined contribution plans that cannot be modified without changing the plan into another type.


1—Normal retirement age


2—Fundamental features of DB and DC plans that cannot be modified without changing the plan into another type


3—Exception in state and local plans


4—Cost of living adjustments


SOURCE: Employee Benefits Research Institute, Special Report and Issue Brief Number 190, Washington, D.C.

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Stories Communicate Red Robin’s Culture

How storytelling has become part of Red Robin International’s culture is a story in itself. It goes something like this: While President and CEO Michael Snyder was watching his son ride a horse eight years ago, his son dismounted and unbridled the animal, setting it free to run powerfully and gracefully across the field. The event inspired Snyder, who — after taking over the company in 1996 — introduced the “Unbridled Philosophy” to the Englewood, Colorado-based restaurant chain.

Now, stories of unbridled passion surface everywhere — in internal newsletters, advertisements and recruitment flyers. Stories of unbridled acts are even told at every meeting, large or small. “Management understands what we’re about, but when they try to cascade that down, that’s where the challenge has always been,” says Doug Watson, company spokesperson. The stories have helped. “They’re emotional, heart-warming stories of people going over and above the call of duty.”

Such as the story about the Tacoma, Washington, Red Robin manager who drove a group of teenagers to their homecoming dance after their chaperone’s car wouldn’t start. Or one about the Bakersfield, California, team member who assisted a gentlemen who was out of breath by seating him, bringing him water and retrieving his oxygen tank from his car.

“The campaign has been really successful,” says Watson. Turnover is way below industry average, he says, and the company is in growth mode. Red Robin has 130 stores in 16 states and Canada, and has letters of intent on 44 locations around the country. Snyder admits in the Rocky Mountain News, however, that this goal may not be met. He says: “We’ll grow, but we’ll always grow with grace and dignity and live within our values.”

Workforce, December 1998, Vol. 77, No. 12, p. 41.

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Workers’ Ideas For Improving Alternative Work Situations

For 16 years, Victoria Dienes slaved away in the circulation department of a daily newspaper outside of Cleveland. She survived two to three deadlines a day and was often on-call around the clock. Despite her devotion, Dienes was passed over twice for promotions she felt she had earned.

After a lot of soul searching, 44-year-old Dienes left the newspaper, enrolled in night school and now is pursuing a bachelor’s degree in accounting. She pays the bills by working full-time as a temporary employee. “I started temping 18 months ago as a way to find another full-time position,” she says. “But I soon discovered that temp work gives me more flexibility than a normal job. I often set my own hours so when finals come around, I can easily take two weeks off to study.” The situation is so ideal that Dienes plans to continue temping until she gets her degree two to three years from now.

Dienes is one of a growing number of workers who has consciously chosen an alternative work arrangement because it meets lifestyle needs. While a lot has been written about the advantages of flexible and contingent work arrangements, most of it is from the employer’s perspective. But the benefits of temporary employment, job sharing, part-time work, telecommuting and independent contractors aren’t just one-sided. Employers are able to reap the rewards of these flexible work situations because they also work well for employees.

To learn why people choose alternative work situations, Workforce talked to an independent contractor, a full-time temporary employee, a telecommuter and a job-sharer. We wanted to know why employees choose these work arrangements, what the personal and professional rewards are, and what’s challenging about these positions. Most importantly, we wanted to know what advice they have for HR about how to make alternative work situations even more effective.

What we discovered is that all of these workers like their arrangements and want to continue working the same way for years to come. What does this mean for HR? Obviously, people who like their work are likely to be more productive workers. For this reason, companies that don’t offer alternative work arrangements would do well to consider them. But even if you do offer the kind of work situations that meet employee needs, there may be ways to improve them.

So read on. While these workers believe HR does a pretty good job managing alternative work arrangements, they do offer several suggestions for improvement. And to make sure their suggestions hit the mark, we ran their suggestions by the experts. See if you’re doing the right things in the right ways.

Independent contractor feels like a valued contributor.
According to the United States Department of Labor, 6.7 percent of the U.S. workforce — or 8.5 million Americans — now classify themselves as independent contractors. An overwhelming majority of these individuals (84 percent) prefer these arrangements to regular full-time employment.

Independent contractors allow companies to manage workload demands and acquire specialized skills at rates typically 20 to 30 percent lower than the cost of full-time employees. In addition to saving on salaries, companies also save on payroll taxes, unemployment insurance, worker’s compensation insurance, benefits, office space and equipment.

In the last couple of years, Millie Reith has vacationed in Japan (where her family lives), in New York (where her husband’s family lives) and in colorful locales such as Italy and Washington’s San Juan Islands. In between trips, she has also managed to take several weeks off to move an elderly aunt out of her apartment and into a convalescent home. Unlike many employees, Reith didn’t stress out about how to get the time off work for travel and family business. She simply fits it into her schedule.

As a freelance graphic artist, Reith produces computer graphics on assignment for companies like Disney Studios, Virgin Interactive and Acura Motors. Her assignments typically last two to three weeks, and unlike many freelancers, she works onsite using the client’s computer equipment. Whenever she needs time off, she simply turns down an assignment.

Reith began working as an independent contractor in 1993 when she was laid off from a job. Just months away from getting married, she decided to freelance because it would give her more time to plan her wedding and take a honeymoon. As it turned out, she liked the flexibility and variety so much that she can’t imagine ever again working for one company full time. “My husband gets five weeks of vacation a year and we both like to travel,” Reith explains. Her job flexibility helps them have time to travel worldwide.

But in addition to the tremendous personal benefits, Reith says being an independent contractor has helped her grow professionally. “With contract work, the goals are very specific,” she says. “I always know what I’m working toward, so I’m never bored.” Meanwhile, she continues to develop her computer skills and has learned about many different industries.

Despite the advantages, there are challenges to working as an independent contractor that Reith says HR managers can help alleviate. Her advice to HR about managing independent contractors is:

  • Be prepared. Have equipment set up, programs loaded, resources on hand and so on. Also, introduce the freelancer to people who can answer questions.
  • Show independent contractors you appreciate them. Like all employees, they want to feel like valued contributors.
  • Pay on time. “It’s hard to wait 60 or 90 days after a job for payment.”
  • Make sure freelancers are clear on policies regarding hourly pay, overtime, mileage and expenses.
“Overall, the companies I’ve worked for have made me feel like an important part of their team,” Reith says. “I wouldn’t be hired if they didn’t really need me.”

An Expert’s Opinion on the Independent Contractor’s Suggestions
Donna M. Dell, vice president and director of human resources for ABM Industries Inc. in San Francisco comments: “Reith’s suggestions make complete sense. It’s particularly important for independent contractors to understand the policies, practices and procedures of the company they are working for, beyond just those that apply to the contractor’s professional relationship with the company. HR cannot expect independent contractors to be valuable contributors without clear direction to that end.

“Because independent contractors indirectly represent the company through their efforts, HR should:

  • “See to it that the contractor spends a little time learning about the corporate culture, as well as the product or project he or she is working on.
  • “Provide a cooperative and supportive work environment.
  • “Check with legal counsel to make sure they’re within legal guidelines for use of independent contractors.”

Full-time temp likes flexibility, but wants to be “one of the gang.”
In the last 10 years, the temporary workforce has swelled from 1 million people to more than 2.7 million workers, or almost 2 percent of the workforce. In fact, according to a study by the National Association of Temporary and Staffing Services based in Alexandria, Virginia, between 1996 and 1997 the payroll for temporary help swelled by almost 20 percent.

While temporary assignments can last anywhere from one day to over a year, the average duration is 10 weeks. Like independent contractors, temporary employees allow companies to manage workload without incurring the expense — or obligation — of hiring a full-time employee.

Last year, Glen McIntosh spent months looking for work, only to have door after door slammed in his face. “I’m not a young buck anymore,” he says. “I know companies aren’t supposed to discriminate, but I found it difficult to find work because of my age.”

Desperate for a job, McIntosh decided to try temporary work. Within a week of contacting the San Diego office of Accountemps, a nationwide temporary-staffing firm, he was placed on assignment. He has worked steadily ever since for companies as diverse as a high-tech firm to a chain of clothing stores. His specialty? Collections. “I’m the one who tries to get you to make your payments,” he admits.

It’s not work many people aspire to, but McIntosh loves it — and not because he likes wrestling money away from people. He likes temporary work because it offers a boatload of advantages over traditional employment.

First, there’s the variety. “My assignments typically last just two to three months and every place is different. This is good because I get bored easily.”

Second, he likes the flexibility. “If I need time off, I just ask for it.” He uses this time to restore old cars, to load up the motor home and head out with his wife, and to take care of his handicapped 33-year-old son who lives at home.

Third, he appreciates the fact that if he doesn’t like something about an assignment — like the hours, the commute or the “jerk” who hired him — he can ask to be reassigned.

Finally, he finds it refreshing that when companies hire him through Accountemps, they only care about his ability to do a job. “There are no barriers with respect to age,” he says.

For all these reasons, what started out merely as a way for McIntosh to find work has turned into a permanent employment preference. “I’ll be retiring in eight years, and I can no longer imagine dragging myself back and forth to the same old place every day,” he explains.

Despite the advantages of temporary work, McIntosh has had difficulties. The hardest is when he’s treated like “just a temp. When everyone is feasting on pizza down the hall and I’m not invited … well, that doesn’t feel very good.” It’s also tough when he isn’t notified that an assignment has ended until after it’s over. “This makes it hard to plan ahead,” he says.

For HR people looking to improve their relationships with temporary workers, McIntosh suggests:

  • Treat temps like a valued part of the team.
  • Give the employee — or the agency — as much notice as possible about when a job will be ending.
  • Make sure you’re prepared. Have office space, computer, phone and other necessary resources ready. “I once worked for a company for just five hours,” McIntosh says. “I was sent home because they couldn’t get it together.”
  • Ask the temp for suggestions about ways you can improve the work. Because McIntosh has performed collections work for many companies, he knows what processes are and aren’t effective. “Yet nobody asks for my input,” he says.
Finally, McIntosh suggests: “Try us old guys. You’ll like us.”

An Expert’s Opinion on the Temp’s Suggestions
Richard A. Wahlquist, executive vice president of National Association of Temporary and Staffing Services in Alexandria, Virginia says: “McIntosh is one of a growing number of employees who have chosen temporary work as a lifestyle that offers variety and flexibility. This lifestyle choice has been made possible, in part, because most staffing firms offer comprehensive benefit plans that include vacation and holiday pay, health and other insurance programs, and pension and retirement provisions such as 401(k).

“McIntosh is right that HR executives must be prepared for the temporary workers they’ve requested. I urge companies to work closely with their staffing firms to determine the job description, necessary qualifications and assignment duration for each position.

“To get the most from temporary help, HR managers should also:

  • “Communicate with employees who will be working with the temp about why the temp was hired and for how long.
  • “Make sure the temp is introduced to others, especially the receptionist.
  • “Have all the necessary resources available.
  • “Thoroughly explain the parameters of the job.
“Also, while HR might be tempted to offer permanent jobs to temporary workers, they shouldn’t without first discussing it with the staffing firm who’s the temp’s employer of record.”

Telecommuter’s routine doesn’t change working at home, but her productivity does.
Depending on which study you read, between 20 and 58 percent of employers now offer telecommuting arrangements to their employees. In fact, current estimates put the number of U.S. telecommuters at 12 million. These situations allow companies to save money on central office space and support services while also boosting productivity, raising employee satisfaction and reducing sick time usage. Have any doubt? Check out these statistics:

  • A telecommuting project completed by the city of Los Angeles reduced sick time by an average of five days per year per employee.
  • A telecommuting project at Merrill Lynch raised employee satisfaction by 30 percent.
  • IBM estimates that telecommuters have saved the company $75 million in real estate costs.
Betsy Englesson gets up every morning at 5 am, takes her dogs for a run, showers, puts on her makeup and heads to the office. Because she works at home as a telecommuter, her commute takes all of 10 seconds. By 7:30 am, she’s hard at work.

As global account manager for Oracle Corp. in Berwyn, Pennsylvania, Englesson’s boss and direct report are in California, her co-workers are a team of people in Germany and she has one colleague in Philadelphia. Telecommuting makes perfect sense for her because most of her meetings take place over the phone or online. Why does she bother with makeup and showers and alarms when she works at home? “It’s how I get into the work mindset,” she explains.

Englesson started telecommuting 3 and a half years ago when she worked for a Philadelphia-based marketing firm. Working from home three to four days a week, Englesson saw her productivity level skyrocket. But at the same time, her stress level dropped because she no longer had to worry about getting to work on snow-slicked streets and she could ignore tiresome office politics.

One of the reasons she took the job at Oracle several months ago was because she could continue telecommuting. Although she does have an office onsite, she only uses it for client meetings.

“I’m very disciplined and structured, so telecommuting works well for me,” Englesson says. “I’m thankful for the ability to put my head down and get work done without having to listen to all the psychodrama in the office.” Englesson also likes being able to work with her two collies and her husband, a lawyer who also works at home. “We have lunch together all the time,” she admits.

This isn’t to say there aren’t any challenges. Like many full-time telecommuters, Englesson fights feelings of isolation. Regularly scheduled phone meetings with her co-workers help. But she also struggles with equipment issues. When her computer breaks down, she has to hire someone to come to her house to help. “I can’t just walk into the office next door for assistance,” she says.

While Englesson’s experience has been overwhelmingly positive, she does have two key suggestions for HR managers about how to improve their company’s telecommuting situations:

  • First, empower the telecommuter to make necessary job decisions. “If you’re a micromanager, forget it,” says Englesson.
  • Second, maintain communication on a consistent basis. Regular telephone or in-person meetings are essential for the telecommuter to feel connected to work back at the office.
Does Englesson think telecommuting is something more companies should consider? “Absolutely,” she says. “With the talent pool being what it is, if you find somebody good for a job, why hassle the person about where he or she is working?”

An Expert’s Comments on the Telecommuter’s Suggestions
Jack Nilles, president of JALA International Inc., a Los Angeles-based management consulting firm specializing in telework development, suggests: “This is a good example of successful telecommuting, and the results are typical of many telecommuting situations. Our cost-benefit analyses of a wide variety of telework situations show that employers can expect annual net benefits ranging between $6,000 and $12,000 per telecommuter once the startup costs have been recovered. But it’s important to note that not every prospective telecommuter-telemanager pair is a good risk for home-based telecommuting. Englesson’s first recommendation — to empower telecommuters — is vital.

“Here are a few employer must do’s for successful telecommuting:

  • “Develop a program plan before telecommuting starts. It should list the bottom-line objectives and performance measures and include any operating rules and regulations.
  • “Select employee-supervisor pairs based on their work attitudes and ability to communicate effectively with each other.
  • “Ensure that telecommuters have adequate technological support.
  • “Train the prospective telecommuters and telemanagers on results rather than process-oriented management techniques.
  • “Help supervisors and telecommuters be proactive about maintaining communication with each other and with colleagues and clients.
“When companies take the time to give the telecommuters and their supervisors the tools for success, the productivity of both parties rises.”

Job sharer finds communication and managerial support are the biggest challenges.
According to a 1997 survey of work/ family benefits by Hewitt Associates in Lincolnshire, Illinois, 37 percent of employers offer job-sharing arrangements to their employees. These situations have been shown to help companies retain valuable employees, increase productivity, reduce burnout and increase employee motivation, commitment and loyalty. Furthermore, with two people sharing one job, there’s better job continuity if an employee is sick or on vacation.

Marcia Leander first got the idea to job share two years ago when her two children started kindergarten and nursery school. You’d think when children finally hit school age it might make a working mother’s life easier, but it didn’t. “It’s important for me to stay on top of my kids’ schoolwork and be able to pick out their outfits for picture day,” Leander says. “But working full-time, that was practically impossible and I desperately wanted some sanity in my home life.”

As a professional woman with years of experience, Leander never considered not working. “I like the rewards and sense of accomplishment,” she explains. Nor did she want a part-time position simply to fill her time. That’s why two years ago, she and Lois Judge, another professional working mother, approached their employer, UNUM Life Insurance Co., about sharing a job. After presenting a proposal to management, the two were hired for an open position and now share the title: “manager of organizational development for information technology.” Together, they manage a staff of four and are responsible for recruiting and retaining the company’s staff of IT professionals.

These days, Judge works all day Monday and Tuesday, Leander works all day Thursday and Friday, and the two overlap from 8 am to 3 pm on Wednesday. The personal benefits are exactly what they hoped for — more time at home. They’ve reaped rewards professionally, as well. “The best benefit is there’s always someone there who understands my work and who can commiserate if something goes wrong,” Leander says.

Additionally, the company benefits because the position is rarely left uncovered due to vacation or illness, and because two people bring their ideas and creativity to a job instead of just one.

After two years of job-sharing, Leander and Judge have learned what it takes to make the arrangement work. For the job sharers themselves, communication is key. “We talk virtually every day of the week,” Leander says. But they have some advice for HR professionals who may be considering letting employees job share:

  • Communicate the benefit of job-sharing to management. “Here, company officers were supportive, but directors and managers weren’t as open to job shares,” explains Leander. “I think HR has a role to play in helping the company overall become more comfortable with the idea.”
  • Provide adequate space and resources. Even though Leander and Judge share a job, it’s difficult for them — especially on days they are both in the office — to share a desk and computer. They agree that an office with two desks and two computers would be very helpful.
  • Make communication-skills training available. “I didn’t know how hard the communication part was going to be,” Leander says. “We share a tight space, we’re jointly responsible for projects and we don’t always have the same idea about how work should be done.”
The two have worked hard learning how to negotiate, be flexible and give the other person credit. With the right support, Leander believes job sharing can work well for more companies.

An Expert’s Comments on the Job Sharer’s Suggestions
Barney Olmsted, co-director, San Francisco-based New Ways to Work, comments: “Job sharing has been slowly gaining acceptance as a way to work part-time in a full-time position, but it’s still a new idea. At New Ways to Work, we’ve always believed that any job can be shared, but not every employee can share a job. It takes work, trust and communication, not only between partners, but also with co-workers, supervisors and clients. It’s particularly important to continually communicate about individual responsibilities and current schedules.

“As the UNUM sharers point out, support from management and HR is vital. The managerial support can be strengthened by doing some benchmarking and looking at how managers in other companies feel about job sharing after they have tried it. Most give it an A+.

“A company that wants to encourage the option of sharing a job should:

  • “Set up a process — such as intranet postings — for finding partners.“Change HR policies to support flexible work arrangements.
  • “Control staffing costs by using a full-time equivalency compensation system.
  • “Make benefits available on a pro-rated basis.
  • “Compile guidelines for managers and employees about how to assess whether a flexible work arrangement is appropriate for their situation.”

As Leander says: “People who want these situations have a vested interest in making them work.” It makes sense that people who like their work situations will do all they can to make the situations work for the company.

But if this argument doesn’t convince your company to offer more alternative work situations, how about this one: With the unemployment rate as low as it presently is, companies everywhere are scrambling for motivated, productive workers. If you don’t offer employees arrangements that meet their needs, chances are they’ll find other companies that will.

Workforce, December 1998, Vol. 77, No. 12, pp.42-49.

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iThe Leading Edge-i-Be an HR Advocate

As vice president of human resources for VF Corp., the world’s largest publicly held clothing manufacturer of such labels as Wrangler&#174, Jantzen&#174 and Vanity Fair&#174, Susan Larson Williams heads the entire HR function for the firm’s U.S. and international operations. Williams had worked as an attorney for Blue Bell Inc., specializing in employment and labor law when VF acquired the organization in 1986. Williams went on to hold several key HR positions at some of VF’s divisions before being elected to her current position two years ago. Here, Williams describes her transition from law into HR, and how she leads her HR team with a sense of diplomacy and team cohesiveness.

How would you describe your leadership style?
I have a very diplomatic leadership style, meaning I try to listen closely to different perspectives and ideas, and build consensus with regard to HR decision making. And if that’s not possible, I’ll make the tough decisions. But I believe that leading by consensus and with diplomacy, you really get the support of the people who are involved and they feel like they own part of it.

What’s your vision of a good HR leader?
To be a good leader in any area, but particularly in HR, you have to be trustworthy and respect the confidentiality of everyone — from senior people to lower-level people. And a leader should be a positive, enthusiastic individual because there are a lot of issues that can drag you down day to day in our quickly changing world. So I think an HR leader needs to be more positive than your average leader, and be able to maintain that optimism for the future — especially when you’re downsizing or closing plants or things like that which negatively impact people.

Do you think you measure up to your ideal?
I think I have a good aptitude for prioritizing the HR issues, involved with moving production offshore, closing plants, change and growth issues. I’m also able to hire and retain the right people for key positions in a new, skill-set type of world. As a leader, they look to me to set the HR organization’s priorities.

How do you set priorities for your HR group?
I’ve committed to my HR group that I’m going to be a human resources organization advocate companywide. I think the importance of the HR organization is often underestimated in companies. The senior HR person should be an advocate for the whole organization, meaning the person will promote the accomplishments of the organization. I sit on the company’s senior decision-making committee. So there’s support there, but I always make sure I’m an advocate presenting to them with people throughout the organization.

How do you cultivate yourself as a good leader?
Every six to eight weeks, our senior HR leadership group meets at different sites throughout the company. We make sure we’re away from phones and faxes and all that, and we spend two days just prioritizing HR issues. One of my big questions a year and a half ago was how could we be more strategic — not just talking about merit increases, comp. stuff and basic benefits, but seeing how we could support the changes that are going on here. We set the dates together and it gives us six times a year to focus on senior HR leadership issues.

When did you decide you needed more focus on HR leadership issues?
We started these meetings in April 1997. I had been in this position about a year, and was struggling with the fact that the HR group didn’t report to me directly. [Most of the HR leaders in each of VF’s divisions report to leaders at their own locations — although Williams is responsible for the overall HR organization and direction.] And although many of us have worked together for years and I can be a leader and drive decisions, I wanted VF as an organization to know that there’s this senior team of HR people that leads HR decisions.

It has been really great. We set up task forces to work on the issues we identify. Senior managers will say, “Will you present this to the HR council?” They like the fact that the senior HR people are in agreement on all these issues and that we apply programs throughout the company. Previously, there was a lack of coordination in the HR organization at the higher level, and I just felt like it was needed.

Can you describe a leadership challenge you’ve had that strengthened an area you didn’t realize you were weak in?
I think it’s learning to delegate. If you’re an achiever and a leader, you’re used to driving things and making things happen. But sometimes in team environments, things don’t happen as fast as I’d like to see them happen. I think sometimes I can be impatient. Knowing that, I just watch for it to make sure it doesn’t come through. Sometimes I’ll just do things to get them done. So maybe I could be a better delegator. It has been a weakness in this senior position because I can’t do everything, but sometimes I try to.

Can you describe any leadership challenges you’ve had?
What’s a huge challenge in both positive and negative ways has been the movement of our production offshore. The signal that sends to domestic employees, having to close domestic plants, isn’t easy. Conversely, having to start a plant in Mexico literally from the ground up was a huge HR challenge, and it was a time when HR was looked upon as being the experts. Yet we had only domestic-based HR people initially. So it was a gap in our skill set to have international experience. Having pressure on the organization to downsize in one area and then grow in the other hasn’t been easy in a lot of ways.

What have you learned from those experiences?
It may be a common thing, but just be prepared for change and realize that change is here to stay — no matter what that is.

What do you think is important for HR people to think about with regard to HR leadership?
Lately, I’ve been comparing the HR leader of 10 years ago to the HR leader now. Going back 10 years, you see an entirely different kind of HR leadership. That’s positive for the HR organization because I think employees today are more demanding, and therefore, it’s given HR an opportunity to get closer to employees and be recognized by senior management as having a key role. Whereas 10 years ago, HR leadership was just kind of a paper-pusher role, but the new HR leader today has to be much stronger in leadership. I don’t think a senior HR person had to really lead 10 years ago. So maybe HR leadership in the past was kind of a misnomer. I feel like senior HR people really have to lead today. And that’s a challenge I thoroughly embrace.

Workforce, December 1998, Vol. 77, No. 12, pp.21-24.