Benefits & Compensation
12/10/07
Flexible schedule for parent
How do you handle an exempt employee who needs to leave work early (2 to 3 hours) every week, sometimes twice a week, to take her daughter to counseling? Under Massachusetts law, can you dock an exempt employee's pay, or make them use vacation time? This has been going on for more than a year now. Any advice you can offer would be appreciated.
This situation seems to be a perfect opportunity for a flexible schedule. Of course, the first priority is always meeting business goals and getting the work done. Assuming the employee is one that you want to keep, isn't taking her daughter to counseling once or twice a week stressful enough? By docking her pay or requiring that she take vacation time, are you sending the message that she is an important part of the team? Let's assume that she is taking 4-6 hours each week to take her daughter for counseling. What if she came in an hour early and left an hour late on the days that she is not taking her daughter to counseling? Or perhaps, if possible, she could work from 7-9 pm on the evenings that she leaves work early. My suggestion would be to figure out a creative way to get the work done and show the employee that you are willing to support her during this difficult time. It's a win-win for everyone, and perhaps the precedent to get the organization thinking about how to retain valued employees by embracing a flexible work culture.
-- JUDI CASEY
Bereavement leave
Is it true that a company should provide for bereavement leave for its employees? Are there any standard policies and procedures? We want to be understanding but have a business to run. What is your advice?
Most employers are not legally required to provide bereavement leave. However, given today's war for talent and the high cost of recruitment, most employers see the benefit of supporting employees who experience the death of a loved one. Also, it's hard to imagine that an employee would be productive immediately following the death of a parent, child or other close relative. And supporting employees during life's challenges is one way to engender loyalty and commitment.
If you develop a bereavement leave policy, it is important that the policy be available to all employees and be enforced consistently. Make sure the policy is in writing. Things to consider include: who constitutes immediate family, whether the employee will be paid for time taken, how much time will be available, and if documentation is needed. Most employers offer 3-5 days, and some offer one day off for a close non-family member. If employees need a longer leave than available from the bereavement policy, they can always apply for a leave of absence (FMLA or otherwise).
As a small business, it may be difficult to run the operations without a valued employee. Perhaps cross-training every employee to perform additional functions could be one way to promote coverage for unexpected emergencies.
-- JUDI CASEY
Sick time, vacation policy, and PTO banks
What is the best practice for granting sick time, calendar year or anniversary date? Clearly the "use it or lose it" strategy is best practice, but I'm curious as to time period. I also understand that you have to pay unused accrued vacation time in Massachusetts, but do you have to pay unused sick days if they are separate from the vacation bank? Finally, after firing an employee in Massachusetts does the employer have to pay unused vacation time and, if so, what is the deadline for paying it?
Sick days are tricky, as no one plans to be sick, while others may use sick days as vacation time. It is better practice to assume that people will only use sick time when they are truly sick. In which case, people can have sick days for each calendar year and accrue them over time. You do not need to pay unused sick days.
As to whether you should use a calendar year or anniversary date, it is administratively easier to have every employee on the same calendar (e.g., using the calendar year) as opposed to individualized calendars (e.g., using the anniversary date) when calculating sick days or vacation days.
Accrued vacation in Massachusetts is viewed as regular pay/wages and should be paid out in accordance with the last paycheck, regardless of whether an employee leaves voluntarily. Because accrued vacation is seen as pay/wages, use it or lose it is the best way to go in Massachusetts. Otherwise, employers may have to pay a lot of vacation money to departing employees. Plus, unless there's a sophisticated way to track vacation time over years, there's room for error.
Many organizations have implemented "Paid Time Off (PTO) banks" instead of tracking both sick and vacation time. The PTO banks provide a specific number of days that employees can take for any reason - sick, personal, vacation, and sometimes holidays. The advantage of PTO banks is that employees take charge of their own time and can use it in ways that best meet their needs. Also, employers are not in the position of monitoring who is taking what kind of a day off for whatever reason. However for business coverage, it is helpful to require that employees give some advance notice about when they will be taking off, unless they are unexpectedly sick. Typically, employees are able to carry over a limited number of days from one year to the next.
-- JUDI CASEY
Salary levels for nonprofits
I am looking to organize our company's salary levels and scales and to check them against national salary levels for mid-size (75 employees) social sector nonprofits. Can you point me to some surveys where I might be able to access such information?
This is actually a trickier request than it first appears. The data for nonprofits is a bit less prevalent than data regarding for profit companies. There are, of course, a number of sources for the data, but this is clearly a caveat emptor situation.
First of all, this will cost you some money, but it shouldn't be too much (certainly less than $1,000). Before you buy anything, however, make sure it has exactly what you're looking for. Some surveys will have an industry cut for nonprofits. This data can be good, but sometimes as part of larger surveys the number of nonprofits may be small or predominantly one sub-industry (e.g., healthcare), and therefore less useful for you. Some possible sources include: Abbott, Langer & Associates; American Society of Association Executives; and PRM Consulting. In addition, the larger HR consultancies, like Mercer and WatsonWyatt, will probably have the broader, multi-industry surveys.
The flip side of industry specificity is that we find that it's good to be knowledgeable about practices throughout your recruiting market. For example, if you find that you are recruiting executives from larger nonprofits as well as staff from local employers of various industries, then you might want to look at different market data points for those levels within your organization. Having this kind of broad access to different data sets is expensive and cumbersome if you need to purchase many surveys to access it. That's where services like Salary.com and ERI are particularly cost-effective-especially for smaller employers.
Finally, you might want to check with nonprofit groups and publications like The Chronicle of Philanthropy, The Council on Foundations, and WorldatWork. They may have surveys on specific nonprofit-only jobs and may also be able to direct you to the best surveys for your specific needs.
If you decide to use a specific survey source, you may be required to participate (i.e., give your current pay data) to receive the survey results. If that's the case and you need the survey data faster, many survey providers will allow you to buy the survey if you'll commit to participating soon thereafter.
-- BILL COLEMAN
Paying expatriated employees
A principal of our firm is working in Europe. The company pays all his appropriate business expenses, but his pay is in US dollars and he is finding that his purchasing power for personal expenses is decreasing as the Euro strengthens against the dollar. Has anyone else faced this situation, and if so, what remedies have they used or considered?
The answer to this question depends on the length of stay of the executive in the foreign country. For shorter stays away from the home country, employers typically pay expatriated employees in the currency of the country from which they originated (US dollars in this case). In addition, the employer will typically "make whole" or adjust for differences in cost of living. As a result, currency fluctuations are unlikely to be substantial in a short period of time, so employers don't usually adjust pay levels to offset fluctuations that are unfavorable to the employee.
On the other hand, employees who are expatriated for longer-term stays are typically paid in the local currency. In this situation, currency fluctuation is not an issue that the employer would take into account when determining the employee's pay.
A hybrid approach some companies use is to provide a pay supplement - perhaps on a quarterly basis - to adjust for housing, education, entertainment, etc. This is effectively the "make whole" payment discussed above. I would recommend paying these supplements in the local currency - in this case, the Euro. By doing so, the expat employee is exposed only to the normal inflationary forces that affect everyone and not to the currency fluctuations that affect only the few.
One less typical example I've seen is that some more aggressive organizations allow their expats to elect the currency in which they are paid. In fact, in one case, it could have been the currency of any country in which the bank had operations-yes, of course, it's a bank that did this. I suspect this approach only works if you have a team of lawyers, bankers and administrators designing and controlling the program.
Also keep in mind, if you have just one or two people in this situation, you can make the rules as you need them. If, however, there are more-or may be more in the future-it's worth thinking through the ramifications of any possible solution. If you are making a broad policy, also think about the reverse situation. That is, what about expats going from an economy with a strong currency to one with a weaker currency? Most will consider the exchange rate a windfall, but if the expat ends up being paid in that weaker currency, it gets more and more financially difficult for him/her to return home.
-- BILL COLEMAN
Merit increases
In planning my company's 2008 merit increases, I'd like to know what others are doing this year. My company has been in business for 8 years, is privately held and develops software. We want to ensure that we are being competitive while being financially responsible. I would appreciate any data you could provide to use in our executive staff meeting for planning purposes.
Merit increases to base salary need to be just that. An exemplary performer with a salary placement near the lower end of the market range is underpaid and needs a larger share of the budget to penetrate deeper within the range. Conversely, an average employee with a salary in the upper end of the range requires no pay increase because they are already paid at a premium. Merit budgets have rested between 3.4% - 3.8% for the past decade as employers have attempted to keep the growth in fixed salary expenses low. These employers have also been expanding participation in incentive plans that align employees with business success and enable employers to reward employees only when they can afford to. Incentive plan participation is a good way for employers to link pay to performance and to fund additional compensation based on the company's performance.
Specific to your question, we recently completed our 2007-2008 National Salary Budget Survey and published it in early October. In it, we found that companies report they are planning total increases of 4.5% for Executives, 4.1% for Other Managers, 4.1% for Exempt (non-management) employees, and 4.0% for Non-Exempt employees. Of course these numbers will vary depending on the size, industry and location of an individual employer-as well as that employer's financial situation.
We have found, however, that CEOs of smaller private companies look at these overall numbers and then aim for increases a couple of percentage points higher (assuming they can afford them). The reason is that they use this opportunity to differentiate themselves from the run-of-the-mill companies. It thus becomes another way smaller companies can attract and retain employees.
-- BILL COLEMAN
Employer contribution to retirement plans
My company does not currently contribute to employee retirement plans and we are hoping to start employer contribution soon. Can you provide information on typical employer contribution ranges in mid-sized firms in Massachusetts and nationally? Do most companies contribute as a percentage of an employee's salary?
Most mid-sized employers sponsor defined contribution retirement savings programs for their employees. These plans allow employees to save a portion of their salary for retirement in a tax advantaged way. In the case of commercial, for-profit companies, these plans are typically known as 401(k) plans, named for the IRS tax code that created them. While employers are not required to offer these plans to employees, those employers that do sponsor a 401(k) plan typically provide some level of contribution that matches the savings of the participating employee. Based on a recent Watson Wyatt study of the Boston area as well as national statistics, this matching contribution is typically in the range of 3-6% of an employee's pay.
Some companies also offer a defined benefit plan, often referred to as a "traditional pension." These plans define the amount that an employee will receive upon retirement, usually based on a formula -- for example, 1% of an employee's final average salary times the number of years the employee worked at the company. Legislation and tax code mandate that the employer must provide the necessary level of funding required to pay these benefit obligations.
We strongly suggest that you seek input from your legal and tax advisors before implementing a company sponsored defined contribution or defined benefit retirement plan.
-- JEFF ARNOLD
Use of incentives to avoid salary differential
Am I allowed to pay a salary differential for employees who are willing to learn English? I own a landscaping company and the summer help is mostly Brazilian. I want to encourage them to learn English. If I went forward with a plan, any ideas on how this could be monitored?
To avoid potential issues of pay discrimination as well as increased fixed cost by implementing a salary differential, you may want to consider providing some form of incentive to the employees to learn English. The incentive structure can be flexible and could range from simple tuition reimbursement -- where you pay for your employee's English class -- to a one-time bonus bonus payment for employees who complete an English class and/or demonstrate a proficiency in the language.
-- JEFF ARNOLD
Benefits, compensation for part-time employees
Our company does not currently offer any benefits (PTO, STD, LTD, health, dental, etc.) for employees who work fewer than 40 hours per week and are classified as part-time. We have over fifty such employees, some of whom consistently work over 20 hours per week. Are we required to offer these employees any benefits? We also have an employee who was hired to work 20 hours a week and is paid an annual salary. She has consistently worked over 20 hours per week but she is now leaving the company. The original plan was to use her additional hours accrued as comp time. However, now that she is leaving, she is unable to use those hours that way. Is she entitled to be paid for this time?
Under a law passed in April of 2006, all residents of Massachusetts were required to obtain health insurance by July 1, 2007. The law also made new demands on employers to make a "fair and reasonable" contribution to the cost of employees' health insurance or pay a fair-share contribution to the state (approximately $295 per FTE). The law applies to employers with 11 or more full time employees (FTEs). To be considered an FTE, an employee must work at least 35 hours per week. In addition, the law mandates that employers offer Section 125 "cafeteria plans." You can find an article describing the new law at the Watson Wyatt website or a summary at the Mass.gov website.
To resolve the question regarding the compensatory time off, I suggest that the employee refer to their original written offer letter, employment contract or other documents provided by the employer which describe the compensation and paid time off arrangement. It may also be advisable for the employee to consult a legal advisor on this matter.
-- JEFF ARNOLD
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