BENEFITS & COMPENSATION
03/12/07
Definition of full-time employment
Is there anything that shows the average number of hours to be eligible for full-time employment status? For example, what is the percentage of companies that consider employees as full-time when they work for 30 hours per week? And what is the percentage when they work 35 hours? Are there any laws around this?
Employers may establish their standard work week hours according to business needs and compliance with the Fair Labor Standards Act (FLSA). However, there is no legal definition for full-time or part-time employment. The Bureau of Labor Statistics (BLS) uses 35 hours per week as the distinction point between full-time and part-time.
The majority of employers define a full-time employee as someone who is scheduled to work between 35 and 40 hours per week. A 30?hour work week is not typically considered full time in most businesses, although some organizations with particular needs, and the ability to be flexible with their employees, may find that a 30-hour work week is a "normal" schedule.
Often welfare and retirement plans will restrict eligibility based on number of working hours and full- or part-time status. Healthcare plans are the most notable instance because individuals look for employment that offers that coverage. The insurance carrier actually determines the eligibility for coverage under the plan based on how many hours are needed to be deemed part-time or full-time and whether or not that particular plan will cover employees in that category. When companies are negotiating the contract with the insurance company they can try to negotiate these terms, but insurers are tending to tighten those requirements.
-- BILL COLEMAN
Stock option administration
I need to set up a stock option process for administration and management for my company that is pre-IPO. We currently have the options ready to be distributed but no process in place. Any suggestions or direction to recommend?
The prudent company establishes a formal stock option plan that governs the terms of the compensation arrangement. Your labor attorney can provide you with a prototype plan document and work with you to assure that your plan is in compliance with your company charter and all relevant regulatory bodies. As always, review all equity related decisions with inside and/or outside counsel.
Here are a few suggestions of administrative tasks to remember:
- Develop a grant strategy (who gets how much, how often, and why)
- Retain paper trail of approval of grants
- Have a unique grant number for each grant to each employee
- Track all key information related to each grant (e.g., date, number of shares, vesting schedule, etc.)
- Retain a copy of each fully executed (signed) grant
- Provide a copy of the stock option plan to each recipient.
Depending on the volume, keep a master spreadsheet listing all grants or purchase third-party stock option administration software to track it (as the company grows, you'll likely have to do this). Be sure to archive your file each week or month and update with vesting, exercises and new grants. Keep your historical files as an audit trail.
--BILL COLEMAN
Overtime for exempt employees
Does the Department of Labor permit employers to compensate exempt salaried employees for overtime on an hourly basis without losing their exempt status? Is this practice permissible? We have chosen to do this to retain good employees.
An employer may choose to pay overtime to FLSA exempt employees. There are no government regulations for this pay practice. The company should, however, document the business case for such a pay practice and establish an internal policy that covers purpose, eligibility, events that trigger overtime pay, etc.
Because the practice is not regulated, employers have flexibility on how they implement an overtime plan for exempt employees. Most organizations don't start exempt overtime pay immediately after 40 hours worked. Many begin after 45 or sometimes 50 hours per week. Also, employers vary on whether they pay time-and-a-half, straight time, special bonuses, or compensatory time off.
Before putting a plan or policy in place, consult with your General Counsel or outside legal advisor to assure that you're not doing something that could create legal problems.
--BILL COLEMAN
Health club reimbursement
What is the average subsidy amount, either as a percent of base salary or actual dollars, paid to employees for health club membership reimbursement in the Boston area?
With an increased focus on managing healthcare costs and enhancing employee productivity, many companies are interested in encouraging healthy behavior of employees. Clearly, an important component of healthy behavior is exercise and physical fitness. A recent survey by Watson Wyatt showed that approximately 58% of large Boston-area employers offer an onsite fitness center as one of their employee benefits. In a similar national study, the fitness center benefit varied greatly by industry. For example, 64% of high technology companies offer a fitness center benefit as compared to 37% of manufacturing companies.
Depending on the specific health benefit plans and options selected by your company, certain local health insurance plans (e.g., Blue Cross/Blue Shield, Harvard Pilgrim, Tufts, etc.) offer its members incentives to join and demonstrate the use of a health club. If your company has contracted for these optional health plan provisions, they are typically offered as a flat-dollar amount. The dollar value of this benefit is generally up to a few hundred dollars per year per plan participant. We recommend that you contact your health plan provider to find out the specific options available to you.
--JEFF ARNOLD
Dealing with vacation time at termination
One of our employees has a current negative balance of vacation time that was taken but never approved. If she leaves the company before the balance can accrue to a zero or positive amount, can that amount be deducted from her last paycheck?
In most cases, a payroll deduction can be made for the value of the "used but not accrued" vacation time. It is a good idea to have this policy well-documented and available to employees in your company's Summary Plan Description (SPD) document. Depending on which states your company operates in, there may be differences in the employment laws that should be considered.
Conversely, in some states, including Massachusetts, you are required to pay out vacation that has been "accrued but not used" in the final paycheck of a terminated employee - see Massachusetts General Laws Chapter 149 Section 148.
Before you make a final determination, we strongly advise that you seek the opinion of your legal counsel to ensure compliance with the applicable state and federal laws.
--JEFF ARNOLD
Recognizing a five-year employee
If we want to recognize an employee who has worked for the company for five years, is an additional week's vacation a typical recognition vehicle? Are there others that may be more common or not as costly?
It is fairly typical for an employee to earn additional vacation time or days in a paid time off (PTO) bank with additional years of service. According to Watson Wyatt's 2005/2006 Benefits COMPARISON database, most employers (64%) offer six to ten days of vacation for employees with one year of service, and 66% of employers offer 11 to 15 days of vacation for employees with five years of service.
Other low-cost ways to recognize employee's service:
- Communicate the service-related benefits you already provide - Depending upon your other benefit plan designs, a five-year employee may gain the advantage of service-related gains (e.g., becoming fully vested in the company's defined benefit pension plan, 401(k) or stock option programs). Often companies can take advantage of these service-based benefits simply by marketing these benefits through an employee communication campaign.
- Use your imagination! - Budget-constrained companies can show their appreciation of an employee's tenure in many ways. For example, low-cost recognition programs may include presenting employees with service award plaques, gift certificates and lunch with the president or other executives.
--JEFF ARNOLD
Paying on a commission-only basis
Is it legal to pay someone on a 100% commission-only basis?
Yes, under certain circumstances. Retail and service establishments can pay employees on a commission-only basis provided they comply with two key provisions of the Fair Labor Standards Act: minimum wage and overtime.
First, within the regular pay period of the employee (weekly, biweekly, monthly, etc.), he or she must receive minimum wage for hours worked. There is some flexibility in terms of the employer's ability to pay the employee to guarantee that. For example, if an employee does not receive enough in commissions to earn minimum wage for the pay period, the employer can advance him or her the difference and then take it from any commission amounts in the next pay period. Or the employer may not pay the full commission in one pay period, and apply the funds to the next pay period so as to guarantee the employee meets the minimum wage standards for that period.
Second, the rules regarding exempt or non-exempt pay apply. If the position is exempt, overtime is not an issue. If the employee's position is non-exempt, then overtime pay need not be paid if the employee's regular rate of pay for that period including commissions is more than one and one half times the appropriate minimum wage.
So while paying someone 100% commission is legal, the record keeping and compliance requirements are somewhat involved. Employers should make sure they have a clear understanding of the wage and hour laws, a clear and understandable plan for handling payment, and a system in place for tracking the same.
Also, keep in mind that this discussion is limited to Federal Law. Various state minimum wage and labor laws may also have an impact, so it is important to research your state's laws and obtain legal counsel before enacting a 100% commission plan.
--PEGGY SHEEDY
with BILL GERKE
Compensation prior to start date
We hired an exempt level employee who has agreed to start after he defends his doctoral dissertation. The department VP has asked this employee to attend a national sales meeting, which is to take place over three days, prior to the start date. Isn't the company obligated to pay him for those three days even though his official start date isn't until a month from now?
Although there do not appear to be clear-cut guidelines on this question, a fair level of compensation would be his weekly salary pro-rated for the number of days attending the sales meeting.
According to the Fair Labor Standards Act, being paid on a "salary basis" means an employee regularly receives a predetermined amount of compensation each pay period on a weekly, or less frequent, basis. The predetermined amount cannot be reduced because of variations in the quality or quantity of the employee's work. An exempt employee must receive the full salary for any week in which the employee performs any work, regardless of the number of days or hours worked.
There are exceptions:
- Deductions from pay are permissible when an exempt employee is absent from work for one or more full days for personal reasons other than sickness or disability (the days not attending the sales meeting could be considered personal).
- Exempt employees do not need to be paid for any work week in which they perform no work (the time between the sales meeting and his start date).
In addition to any regulatory concerns, it would probably make good business sense to compensate the candidate for the time spent at the sales meeting.
--PEGGY SHEEDY
with BILL GERKE
Shifting to a common review date
We are shifting to a common review date next year, which would also be tied to a common pay increase date. Can you offer any suggestions for making this transition and how to fairly treat employees with anniversary dates, and therefore previous increase dates that are all over the calendar year? I am struggling with how to manage this.
Moving to a common review and pay increase policy is a valuable investment - it saves time and money through ease of administration. Transitioning to this approach takes a year.
Generally, employers will pick a point in the year that enables employees to focus on their reviews. As for pay increases employers will attempt to make employees whose anniversary date falls before the common pay increase date whole with lump sum payments for the difference in pay due as a result of the change in the pay increase date. For those scheduled to receive pay increases after the common pay increase date, the value of the annual raise is calculated and pro-rated.
In adopting the common review and pay increase date consider:
- The impact on your budget for the lump sum payments
- The date to draw the line
- Communication to employees.
--PEGGY SHEEDY
with BILL GERKE
Maternity leave for mother of an adoptee
One of our female employees is adopting a child. I understand that, under Massachusetts law, a female employee is entitled to a paid eight-week maternity leave if she gives birth. Is the mother of an adoptee entitled to the same paid benefits as a female who gives birth?
According to Massachusetts law, a female employee is eligible for maternity leave if she meets certain requirements; "completing the probation period set by the employer, working for the same employer for at least three consecutive months as a full-time employee, and providing her employer with a two week notice of her anticipated time of departure and intention to return."
If the employee meets these requirements, the employer must grant eight weeks of job-protected unpaid maternity leave under the Massachusetts Maternity Leave Act (MMLA). The leave is available to a female employee either for the purpose of giving birth or to adopt a child.
Some employees also have access to the Family and Medical Leave Act (FMLA) which provides for up to 12 weeks of job-protected leave from work annually for childbirth; to care for an infant, sick child, spouse, or parent; bond with an adopted child; or because of an employee's own illness. The leave is unpaid and only covers workplaces with 50 or more employees. Under the FMLA, employers can require employees to use accrued sick or vacation time during an FMLA leave, but under Massachusetts law employers can not require employees to use accrued sick or vacation time during maternity leave.
--JUDI CASEY
with JASON DOBBS
Information on the Mass. WorkSharing Program
Do you know of any companies who have used the Massachusetts state program called "WorkSharing?" It's supposed to allow employees to receive employment in lieu of layoffs, but the provisions of the plan seem restrictive. What can you tell me about firms that have used this program and how it works?
WorkSharing is a program designed to help both employers and employees during a temporary economic slowdown. WorkSharing was designed so employers can reduce their employees work hours in lieu of an employee layoff. Employees collect unemployment insurance benefits equal to the reduction in their wages. All workers in the unit, whether defined by the employer as the entire company, department, shift, job function or another definable unit with at least two employees, must share equally in the reduction of hours.
According to the Massachusetts Department of Workforce Development, "Employers must schedule everyone in the affected unit for the same number of hours of work. If anyone in the unit is scheduled to work or does work more than the hours stated in the plan, the whole unit may be disqualified from receiving benefits for that week." Workers who are eligible for unemployment insurance benefits in Massachusetts can receive WorkSharing benefits. All Massachusetts employers are eligible to participate in the program, regardless of size. Currently, there are 39 employers in Massachusetts using the program.
Additional information on the WorkSharing Program is available here from the
Mass. Department of Workforce Development.
--JUDI CASEY
with JASON DOBBS
Typical vacation and paid time off policies
I would like to know if there is a way to see what other Boston area companies offer for vacation, sick and personal days ( as well as holidays) each year. I think our company's policies are somewhat out of date and need to be revamped, but I don't have much to compare them to. Also, what are your thoughts on vacation accrual?
In general, Boston area employers offer their workers 10 paid holidays, 2 weeks vacation, two personal days, and 8 sick days per year. Some companies now offer paid time off (PTO) banks, a bank of hours that employees can use for any type of leave -vacation days, sick leave, personal days, and, in some cases, holidays. Organizations are transitioning to paid-time-off banks to reduce the expense of unscheduled absences and to retain and attract employees.
In Massachusetts, terminated employees are entitled to pay for all accrued and unused vacation. It is important that your policy indicates whether an employee may carry over accrued but unused vacation time from one year to the next.
--JUDI CASEY
with JASON DOBBS
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