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  1. 1. SPECIAL REPORT A supplement to BLR publications Top 10 Best Practices in HR Management For 2009 Prepared for the HR Daily Advisor 30612160
  2. 2. SPECIAL REPORT A supplement to BLR publications Top 10 Best Practices in HR Management For 2009 30610800
  3. 3. Executive Publisher: Robert L. Brady, J.D. Editor in Chief: Margaret A. Carter-Ward Managing Editor: Catherine Moreton Gray, J.D. Legal Editor: Susan E. Prince, J.D. Editor: Elaine V. Quayle Production Supervisor: Isabelle B. Smith Graphic Design: Catherine A. Downie Layout and Production: Sheryl Boutin This publication is designed to provide accurate and authoritative information in regard to the subject matter covered. It is sold with the understanding that the publisher is not engaged in rendering legal, accounting, or other professional services. If legal advice or other expert assistance is required, the services of a competent professional should be sought. (From a Declaration of Principles jointly adopted by a Committee of the American Bar Association and a Committee of Publishers.) © 2006–2009 BUSINESS & LEGAL REPORTS, INC. All rights reserved. This book may not be reproduced in part or in whole by any process without written permission from the publisher. Authorization to photocopy items for internal or personal use or the internal or personal use of specific clients is granted by Business & Legal Reports, Inc., provided that the base fee of U.S. $0.50 per copy, plus U.S. $0.50 per page, is paid directly to Copyright Clearance Center, 222 Rosewood Drive, Danvers, MA 01923, USA. For those organizations that have been granted a photocopy license by CCC, a separate system of payment has been arranged. The fee code for users of the Transactional Reporting Service is 1-55645-317-5/06/$.50+$.50. ISBN 1-55645-317-5 Printed in the United States of America Questions or comments about this publication? Contact: Business & Legal Reports, Inc. 141 Mill Rock Road East P Box 6001 .O. Old Saybrook, CT 06475-6001 860-510-0100 860-510-7224 (fax) Top 10 Best Practices in HR Management for 2009
  4. 4. Table of Contents Introduction . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 #1 Compliance Focus: ADAAA and FMLA . . . . . . . . . . . . . . . . . . . . . . . . . . .1 How the Updated ADA Affects You . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .1 FMLA Changes Are Here . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .3 #2 Layoffs/Reductions in Force . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .7 Worker Adjustment and Retraining Notification (WARN) Act . . . . . . . . . . . . . . . . . .7 Older Workers Benefits Protection Act (OWBPA) . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Preventing Discriminatory Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Outplacement Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Alternatives to Layoffs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .9 Best Practice: Preserving Employee Morale . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .10 Training . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 #3 Health Care in 2009 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .11 2009 Healthcare Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .12 Mental Health Parity Legislation Becomes Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Cutting Healthcare Costs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .13 Best Practice: Improve Employee Benefits Communication . . . . . . . . . . . . . . . . . .15 President Obama’s Future Plans on Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . .16 Best Practice: Cancer Screening Saves Lives, Money . . . . . . . . . . . . . . . . . . . . . . . . .16 Wellness Programs . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 #4 Retirement of Baby Boomers . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .17 Survey: Few Employers Capture Boomer Know-How . . . . . . . . . . . . . . . . . . . . . . . .18 Transitioning into Retirement . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .19 Predicting the Future of Retiree Health Care . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .20 Persuading Older Workers to Stay: Is It the Money that Matters? . . . . . . . . . . . . . . . .20 Succession Planning to Fill the Baby Boomer Gap . . . . . . . . . . . . . . . . . . . . . . . . . .21 Integrating a Multigenerational Workforce . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 #5 Recession Help . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .22 Best Practice: Mandatory Vacations at HP . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .24 Best Practice:Teach Workers Economics 101 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .25 Benefits and Retention Strategies in a Recession . . . . . . . . . . . . . . . . . . . . . . . . . . .25 #6 Immigration . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 No-Match Letters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .27 SSA No-Match Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .28 DHS No-Match Letter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .30 ©Business & Legal Reports, Inc. 30610800
  5. 5. Antidiscrimination Guidance for Employers Following the No-Match Letter Safe Harbor Procedure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 Federal Contractors Must Now Use E-Verify . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .31 #7 Privacy and Identity Theft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 Privacy . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .34 New Federal Privacy Law Barring Genetic Bias . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Employer Procedures for Handling Address Discrepancies on Consumer Reports . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .35 Identity Theft . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .36 Most Workers Trust that Employers Protect Personal Info . . . . . . . . . . . . . . . . . . . . .37 #8 The Green Movement and Corporate Social Responsibility . . . . . . . . .39 Commuter Benefits Bring Financial and Environmental Relief . . . . . . . . . . . . . . . .39 Corporate Social Responsibility and Ethics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .41 #9 HR Metrics . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 What to Measure . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .44 Types of Metrics Available to HR . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .45 Strategic Alignment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 Measuring Your Results . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .47 #10 Communications . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Tools for Better Communicating . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .48 Organizational Success Through Honest, Ethical Communication . . . . . . . . . . . .50 Best Practice: Ethical Culture at All Levels of Organization . . . . . . . . . . . . . . . . . . .51 Conclusion . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .52 Top 10 Best Practices in HR Management for 2009
  6. 6. Introduction The role of Human Resources is changing as fast as technology and the global marketplace. Historically, the HR Department was viewed as administrative over- head. HR processed payroll, handled benefits administration, kept personnel files and other records, managed the hiring process, and provided other administrative support to the business. Those times have changed. The positive result of these changes is that HR professionals have the opportunity to play a more strategic role in the business. The challenge for HR managers is to keep up to date with the latest HR innovations—technological, legal, and otherwise. This special report will discuss the top 10 best practices in HR management for 2009—in other words, how HR managers can anticipate and address some of the most challenging HR issues this year. This report will give you the information you need to know about these current HR challenges and how to most effectively manage them in your workplace. #1 Compliance Focus: ADAAA and FMLA The recent issuance of the ADA Amendments Act of 2008 and new regulations cov- ering the Family and Medical Leave Act (FMLA) can affect your company in 2009. How the Updated ADA Affects You The ADA Amendments Act of 2008 (ADAAA), passed by the House and Senate in September, was signed by President Bush on September 25. The changes enacted by the ADAAA affect the core of the Americans with Disabilities Act (ADA) by expanding the definition of disability. The stated intent of the ADAAA is to restore the ADA’s definition of disability and to ensure that the amended ADA provides a“broad scope of protection.” Since the ADA’s enactment in 1990, the definition of disability has been narrowed through a series of U.S. Supreme Court decisions. The ADA defines a disability as: N A physical or mental impairment that substantially limits one or more major life activities N A record of such an impairment N Being regarded as having such an impairment The Court narrowed the definition with strict interpretations of the terms that determine whether an individual has a disability. The ADAAA expressly rejects the U.S. Supreme Court’s interpretations of the terms“substantially limits”and“major ©Business & Legal Reports, Inc. 30610800 1
  7. 7. life activity.” It also rejects the standard set by the Court that required the considera- tion of the effect of“mitigating measures”in the analysis of a qualifying disability. In addition, the ADAAA broadens the definition of“regarded as having an impair- ment” and allows an episodic impairment to be considered a disability under cer- tain circumstances. The ADAAA expressly seeks to shift the focus from whether individuals have a disability to“whether covered entities have complied with their obligations.” Under the amended ADA, many more employees will be deemed to have a protected disability, and employers will need to make sure they engage in the interactive process and provide reasonable accommodation to qualified individuals. Definition of disability. Under the ADAAA, the definition of disability is to be construed“in favor of broad coverage of individuals under this Act, to the maxi- mum extent permitted by [its] terms.” This will likely result in a sharp increase in the number of individuals found to have a covered disability. Substantially limits a major life activity. In Toyota Motor Manufacturing v. Williams (122 S. Ct. 681 (2002)), the Court held that an impairment must“prevent or severely restrict”an individual in tasks that are of“central importance to most people’s daily lives,” rather than simply restricting the individual’s ability to perform tasks in a particular job. The ADAAA calls this interpretation“an inappropriately high level of limitation”and mandates an interpretation of the term“substantially limits”in a manner consistent with the findings and purposes of the ADAAA (i.e., to reinstate a broad scope of protection under the ADA). The ADAAA also rejects the EEOC’s definition of“substantially limits”as“significantly restricted.” (Note: The ADAAA also gives the EEOC authority to issue binding regulations consistent with the purpose of the amended ADA.) The ADAAA expands the term“major life activity”by adding activities to those already enumerated in EEOC regulations. The new activities include eating, sleep- ing, standing, lifting, bending, reading, concentrating, thinking, and communicat- ing. Significantly, a major life activity also now includes the operation of a major bodily function, including functions of the immune system, normal cell growth, digestive, bowel, bladder, neurological, brain, respiratory, circulatory, endocrine, and reproductive systems. Episodic impairments. Under the ADAAA, an impairment that is episodic or in remission is a disability if the impairment would substantially limit a major life activity when active. Mitigating measures. In Sutton v. United Air Lines (119 S. Ct. 2139 (1999)), the Court held that mitigating measures must be considered in determining whether an individual has a disability. Under the ADAAA, disability determination is made with- out regard to ameliorative effects of mitigating measures including hearing aids, medication, medical supplies, auxiliary aids and services (such as qualified inter- preters for individuals with hearing impairments), reasonable accommodations, and“learned behavioral or adaptive neurological modifications.” It is likely that this last measure is intended to address the Court’s ruling in Albertsons, Inc. v. Kirking- burg (119 S. Ct. 2162 (1999)), where the employee’s brain subconsciously learned to compensate for his monocular vision. That compensation was found by the Court to be a mitigating measure, and using the Sutton analysis, the Court ruled that the employee did not have a disability under the ADA. The ADAAA excludes ordi- nary eyeglasses and contact lenses from the list of mitigating measures. Under the ADAAA, the employers may no longer take into account an individual’s use of 2 Top 10 Best Practices in HR Management for 2009
  8. 8. mitigating measures when considering whether an impairment substantially lim- its a major life activity. “Regarded as.” Sutton also held that“regarded as”means an individual was regarded as being unable to perform a broad range of jobs, not just the job in ques- tion. Under the ADAAA, an individual meets the requirement of being“regarded as” having a disability if he or she has been subjected to an unlawful employment action because of“an actual or perceived physical or mental impairment whether or not the impairment limits or is perceived to limit a major life activity.” In other words, if an employee is fired because he or she is perceived to have an impairment, the employee meets the requirement of being regarded as having a disability under the ADAAA. An impairment that is“transitory and minor”is not covered. A“transitory impairment”has an actual or expected duration of 6 months or less. The threshold issue of whether an individual has an ADA disability will no longer be the focus of most litigation. Instead, it is likely that the focus will be on the indi- vidual’s ability to perform the essential functions of a job and whether the employer has met its obligations to engage in the interactive process and provide a reason- able accommodation. In addition, there will probably be an increase in“regarded as”litigation, with employees claiming an adverse employment action was based on an employer-perceived impairment. FMLA Changes Are Here The U.S. Department of Labor’s (DOL) new regulations covering the FMLA and addressing new military family leave entitlements for employees were designed to clarify the requirements that the FMLA imposes on both employees and employers and to improve the communication between employers and employees. Here are summaries of some of the significant revisions included in the final rules. Serious health condition. While the rule retains the six individual definitions of “serious health condition,” it adds guidance on some regulatory matters. First, it clarifies that if an employee is taking leave involving more than 3 consecutive cal- endar days of incapacity plus two visits to a healthcare provider, the two visits must occur within 30 days of the period of incapacity. The first visit must occur within 7 days of the onset of incapacity. Second, it defines“periodic visits to a healthcare provider”for chronic serious health conditions as at least two visits to a healthcare provider per year. Intermittent leave. The final rule clarifies that employees who take intermittent FMLA leave have a statutory obligation to make a“reasonable effort”to schedule such leave so as not to unduly disrupt the employer’s operations. Employee notice. The final rule states that when an employee becomes aware of a need for FMLA leave less than 30 days in advance, it should be practicable for the employee to provide notice of the need for leave either the same day or the next business day. When the need for leave is not foreseeable, an employee must comply with the employer’s usual and customary notice and procedural require- ments for requesting leave, absent unusual circumstances. Gaps in service. The final rule adds a new paragraph that addresses the require- ment that employees are eligible to take FMLA leave only if they have been employed by the employer for at least 12 months and have at least 1,250 hours of service in the 12-month period preceding the leave. The final rule states that ©Business & Legal Reports, Inc. 30610800 3
  9. 9. although the 12 months of employment need not be consecutive, employment before a continuous break in service of 7 years or more need not be counted. Light duty. Under the final rule, time spent in“light duty”work does not count against an employee’s FMLA leave entitlement, and the employee’s right to job restoration is held in abeyance during the light duty period. If an employee is vol- untarily doing light duty work, he or she is not on FMLA leave. Perfect attendance awards. The final rule changes how perfect attendance awards are treated to allow employers to deny a“perfect attendance”award to an employee who does not have perfect attendance because he or she took FMLA leave—but only if the employer treats employees taking non-FMLA leave in an identical way. Medical certification. In the final rule, DOL adopted a change that allows employers to contact the employee’s healthcare provider directly. An employer may contact the employee’s healthcare provider for two purposes only: clarifica- tion and authentication of the medical certification. The employer may request no additional information beyond that included in the certification form. In response to privacy concerns expressed by employees, DOL added a require- ment to the final rule that specifies the employer’s representative contacting the employee’s healthcare provider must be a human resources professional, a leave administrator, or a management official, but in no case may it be the employee’s direct supervisor. The revision also specifies that the employee is not required to permit his or her healthcare provider to communicate with the employer. However, if the employee denies the employer permission and doesn’t otherwise clarify an unclear certifica- tion, the employer may deny the designation of FMLA leave. However, before mak- ing any contact with the healthcare provider, the employer must first provide the employee an opportunity to resolve any deficiencies in the certification. Fitness-for-duty certification. The final regulation also clarifies that employers may require a fitness-for-duty certification to address an employee’s ability to per- form essential job functions. However, if the employer does have such a require- ment, the employer must provide the employee with a list of those essential job functions no later than the“designation notice”and specify in the designation notice that the fitness-for-duty certification must address the employee’s ability to perform those essential functions. Military caregiver leave. The regulation implements the requirement to expand FMLA protections for family members caring for a covered service member with a serious injury or illness incurred in the line of duty on active duty. These family members are able to take up to 26 workweeks of leave in a 12-month period. Leave for qualifying exigencies for families of National Guard and reserves members. The law allows families of National Guard and Reserve personnel on active duty to take FMLA job-protected leave to manage their affairs—“qualifying exigencies.” The rule defines“qualifying exigencies”as: (1) short-notice deploy- ment, (2) military events and related activities, (3) childcare and school activities, (4) financial and legal arrangements, (5) counseling, (6) rest and recuperation, 4 Top 10 Best Practices in HR Management for 2009
  10. 10. (7) postdeployment activities, and (8) additional activities where the employer and employee agree to the leave. Intermittent leave. As previously mentioned, employees who take intermittent leave for planned medical treatment have an obligation to make a reasonable effort to schedule such treatment so as to not unduly disrupt the employer’s opera- tions. This is a change from the old regulations. The old regulations said that the employee had only to“attempt”to do so. The rules clarify that temporary transfers are allowed for employees taking only planned intermittent leave (the Department declined to expand temporary trans- fers to unplanned, unscheduled, or unforeseeable intermittent leave). The final rule also clarified that accounting for leave need not be in the smallest increments that the employer’s timekeeping system can handle, but rather in the smallest increments the employer accounts for in other types of leave, provided it is not greater than one hour. This is a change from proposed regulations. The new rules prohibit employers from charging employees for the period of time that they are working (e.g., stop working ½ hour before end of shift, cannot be charged for 1 hour of leave). Substitution of paid leave. The rules clarify that an employee’s right to substitute accrued paid leave is limited by the terms and conditions pursuant to which the applicable leave is accrued, as long as those terms are nondiscriminatory. An employer may limit substitution of paid sick, medical, or family leave to those situ- ations for which the employer would normally provide such paid leave (e.g., such policies may restrict the use of paid leave only to the employee’s own health condi- tion or to specific family members). Employers must allow substitution of paid vacation, personal leave, or“paid time off”for any situation covered by the FMLA. In all cases, however, the normal procedural rules subject to which the leave was accrued apply—unless waived by the employer—regardless of the type of paid leave substituted. For example, if an employer’s paid sick leave policy prohibits the use of sick leave in less than full day increments, employees would have no right to use less than a full day of paid sick leave regardless of whether the sick leave was being substituted for unpaid FMLA leave. Similarly, if an employer’s paid personal leave policy requires 2 days’ notice for the use of personal leave, an employee seek- ing to substitute paid personal leave for unpaid FMLA leave would need to provide 2 days’ notice. Employers, of course, may choose to waive such procedural rules and allow an employee’s request to substitute paid leave in these situations, but they are not required to do so. Additionally, employers may choose to waive proce- dural requirements even in the absence of an employee request to do so. Employer notice requirements. The final rule consolidates all employer notice requirements into a“one-stop”section of the regulations to clear up some conflict- ing provisions and time periods. N The new regulations contain a new general notice prototype. If an employer has no handbook or other written materials, it must provide the general notice to new employees when they are hired. N Absent extenuating circumstances, the time frame for an employer to respond to an employee’s request for leave is extended from 2 business days to 5 busi- ness days of the employee’s request for leave or of the employer acquiring knowledge that the leave may be FMLA qualified. ©Business & Legal Reports, Inc. 30610800 5
  11. 11. N A list of essential job functions must be provided with the designation notice if the employer will require that the fitness-for-duty certification addresses the employee’s ability to perform the essential functions of the position. N Only one designation notice is required for each FMLA-qualifying reason per leave year, regardless of whether the leave is taken as a continuous block of leave or on an intermittent or reduced leave schedule basis. N In situations in which the amount of leave to be taken is not known at the des- ignation stage (e.g., when unforeseeable intermittent leave will be needed), the employer is to inform the employee of the number of hours counted against the FMLA leave entitlement only upon employee request and no more often than every 30 days if FMLA leave was taken during that period. N The employer may notify the employee of the hours counted against the FMLA leave entitlement orally and follow up with written notification on a pay stub at the next payday (unless the next payday is in less than 1 week, in which case the notice must be no later than the subsequent payday). Employer failure to provide notice. The updated rule contains technical changes to be consistent with the U.S. Supreme Court’s decision in Ragsdale v. Wolverine World Wide Inc. In light of the Court’s decision in Ragsdale, the Depart- ment stated that an employee isn’t automatically FMLA-eligible just because the employer fails to provide the required eligibility notices to employees or provides incorrect information. The rule clarifies that if an employee suffers individual harm because the employer fails to follow the notification rules, the employer may be liable. Military family and caregiver leave. In January 2008, President Bush signed a law that allows employees to take leave because of any qualifying exigency arising out of the fact that the spouse, son, daughter, or parent of the employee is on active duty (or has been notified of an impending call or order to active duty) in the armed forces in support of a contingency operation. In the new regulations, a qualifying exigency leave is limited to service members called up to duty in National Guard and/or reserves, and certain retired members of service (not regu- lar career service or state). It mimics the leave provision in 10 USC 101(13)(B)’s definition of“active duty.” The rule defines“qualifying exigencies”as: (1) short- notice deployment, (2) military events and related activities, (3) childcare and school activities, (4) financial and legal arrangements, (5) counseling, (6) rest and recuperation, (7) postdeployment activities, and (8) additional activities where the employer and employee agree to the leave. The new law also allows eligible employees to take up to 26 workweeks for leave during a single 12-month period if the employee is the spouse, son, daughter, par- ent, or next of kin caring for a military service member recovering from an injury or illness suffered while on active duty in the armed forces. Under the new regula- tions for military caregiver leave, the term“active duty”includes members of the regular armed forces (not just Guard/reserves)—this differs for exigency leave. Similarly, for caregiver leave, the term“active duty”is more expansive than for exi- gency leave. Whether or not an injury or illness arose from active duty is a determi- nation to be made by the treating healthcare professional as part of certification. 6 Top 10 Best Practices in HR Management for 2009
  12. 12. #2 Layoffs/Reductions in Force A layoff is a termination of employment at the will of the employer. It may be tem- porary or permanent and can occur for a number of reasons, including downsiz- ing, changes in market conditions, or new technology. Worker Adjustment and Retraining Notification (WARN) Act The WARN Act imposes restrictions on the way layoffs are handled. It is designed to give employees advance notice of the layoff in order to find another job, to seek retraining in a new occupation, and to give state dislocated-worker units adequate preparation to assist affected workers. Who must comply with the WARN Act? Employers must comply with the WARN Act if they have: N 100 or more full-time employees, or N 100 or more employees, including part-time employees who regularly work a total of 4,000 hours per week, exclusive of overtime. The Act defines part-time employees as those who work 20 or fewer hours per week and temporary employees as those hired with the understanding that their jobs will end when a specific project ends. Workers on temporary layoff who have a reasonable expectation of recall are counted as employees. An employee has a reasonable expectation of recall when he or she understands, through notification or industry practice, that his or her employment has been temporarily interrupted and that he or she will be recalled to the same or a similar job. In addition, an employer may have several sites of employment under common ownership or control, yet there is only one“employer”for purposes of the Act. 60 days’ notice. The law requires covered employers to give their affected employees 60 days’ notice of a“mass layoff”or a“plant closing”that is expected to last 6 months or longer. Employers must also notify local government officials and their state dislocated-worker unit. When all employees are not terminated on the same date, the date of the first indi- vidual termination within the statutory 30-day or 90-day period triggers the 60-day notice requirement. A worker’s last day of employment is considered the date of that worker’s layoff. The first and each subsequent group of affected employees are entitled to a full 60 days’ notice. The point in time at which the number of employ- ees is to be measured for purposes of determining coverage under the Act is the date on which the first notice is required to be given. Employers must provide different types of information to employees depending upon whether they are unionized. Employers must always notify the state. Notice may be sent by any method designed to ensure receipt at least 60 days before sep- aration, e.g., first-class mail, personal delivery, or insertion of a notice into pay envelopes. ©Business & Legal Reports, Inc. 30610800 7
  13. 13. Union employees. If employees are unionized, only the chief elected union representative must be given notice. The notice must contain: N The name and address of the employment site where the plant closing or mass layoff will occur, and the name and telephone number of a company official to contact for further information; N A statement as to whether the planned action is expected to be permanent or temporary and whether the entire plant is to be closed; N The expected date of the first separation and the anticipated schedule for making separations; and N The job titles of positions to be affected and the names of workers currently holding these jobs. Nonunion employees. Employees who may reasonably be expected to experi- ence an employment loss and who are not represented by a union must be noti- fied individually in writing. While part-time employees are not counted in determining if a plant closing or mass layoff had occurred, these workers must get a notice if they will experience an employment loss. The notice must include: N A statement as to whether the planned action is expected to be permanent or temporary and whether the entire plant is to be closed; N The expected date when the plant closing or mass layoff will begin and the expected date when the individual employee will be separated; N An indication of whether bumping rights exist; and N The name and telephone number of a company official to contact for further information. State notification. Employers must always notify the state dislocated-worker unit and the chief elected official of the local government unit within which the clos- ing or layoff will occur. The notice must include: N The name and address of the employment site where the plant closing or mass layoff will occur; N The name and telephone number of a company official to contact for further information; N The nature of the planned action including whether it is a plant closing or a mass layoff, and whether it is expected to be permanent or temporary; N The expected date of the first separation and the anticipated schedule for mak- ing separations; N The job titles of positions to be affected and the number of employees in each job classification; N An indication of whether bumping rights exist; and N The name of each union representing affected employees and the name and address of the chief elected officer of each union. 8 Top 10 Best Practices in HR Management for 2009
  14. 14. Older Workers Benefits Protection Act (OWBPA) OWBPA, a 1990 amendment to the Age Discrimination in Employment Act (ADEA), prohibits age-based distinctions in the structure and administration of employee benefit plans, severance packages, and separation agreements includ- ing in cases of layoffs. The law protects individuals over the age of 40. Preventing Discriminatory Layoffs Employers should always avoid unlawful discrimination when considering layoffs. Each layoff decision should be made according to objective, business-related crite- ria and be well-documented. Layoffs following seniority are generally not discrimi- natory under the federal Civil Rights Act. Outplacement Services As a matter of goodwill, some companies provide outplacement services to laid- off employees. Outplacement counseling is designed to help terminated employ- ees prepare themselves for a new job or a new career, to lend assistance in providing outside resources, to receive training, and to help employees cope with the stress of leaving the company. Outplacement services include assistance in rewriting résumés, job placements, career counseling, conducting employee skill surveys, and providing pre-layoff employment service registration. Larger organizations may hire outplacement services to assist employees, whereas smaller organizations may hire a single counselor or use existing resources to assist employees. Employers should con- sider providing outplacement services if employees have been working at the same company for a long period of time and may not have the tools necessary to successfully find another job. Alternatives to Layoffs There are alternatives to layoffs that employers can consider: Work sharing. Work sharing allows employees to share the work that remains after some jobs are lost due to adverse economic conditions. Under a work-shar- ing arrangement, employees may work a reduced week or work every other week. Their hourly pay remains the same, but reflects the reduced hours. In some states, the unemployment compensation laws allow employees to collect partial unem- ployment benefits during a work-sharing period. Reduced pay. A reduction in pay works best if it is shared by all employees, including management. It may be acceptable to employees if their unemployment benefits during a period of layoff would be less than the reduced pay. Early retirement. Some employers reduce their workforce by offering attractive incentives to employees who are about to reach retirement age. The advantage of retirement incentives is that they allow employers to cut costs without requiring employees to leave their jobs involuntarily. However, the employer may lose some employees it would prefer to keep. ©Business & Legal Reports, Inc. 30610800 9
  15. 15. Best Practice: Preserving Employee Morale There’s no escaping that the country is officially in a recession, and unfortunately for many businesses, that means having to lay off employees. No one enjoys the prospect of having to tell employees that the company is going to have to let them go, but it is important to stay well focused at a time like this and make certain that you handle the situation the best way you can. “This is such a tough job for managers to deal with,” says Patricia Berg, general manager for the Career Management Services division of Personnel Decisions International (PDI). Clear heads, however, need to prevail when laying people off, says Berg. “You need to take time to plan the layoff carefully and to meet with and prepare your managers for the process. It’s smart to hire a good outplacement serv- ice or career transition firm to help you through the process, and get them involved early on.” Berg and PDI have suggestions for handling the process well. The first is to pro- vide notification training for your managers because this is such a difficult talk. You also need to allow adequate time to prepare for all the necessary contingen- cies, such as: N Giving as much warning as possible for mass layoffs, N Conducting a threat assessment to ensure the safety and security of all employees, and N Having information prepared in advance to give to employees regarding their severance, benefits, outplacement, or other information that will be important to them. Berg suggests that after you have put together your plan of action, the next step is to talk with employees. “You want your meetings to be one-on-one as much as possible, though that doesn’t always work,” she notes. The best idea is to sit down face-to-face, in a private office, with the individual and a Human Resources profes- sional. Acknowledge the employee’s contributions to the company, and thank the employee for those contributions. If possible, have your outplacement company or career transition firm on-site to meet with employees. Explain to the employees the logistics of leaving the com- pany, and make certain that you have clarified the separation date to make sure the news sinks in. Explain to employees the type of services you have available for them, including any outplacement services that are appropriate for the level of the employee. You should also provide references for them, if applicable. A few other general pieces of advice from Berg include: N Inform employees at the beginning of the workday, rather than at the end of the day. N Treat people with respect. N Use good listening skills and acknowledge employees’ reactions. “Survivors.” “You need to be as aware of the people remaining as you are about the people you are letting go,” says Berg. Employers“need to make sure they get information to the survivors about how they are supporting their colleagues who have departed. Then they need to stay very close to these employees in the weeks 10 Top 10 Best Practices in HR Management for 2009
  16. 16. that ensue in terms of focusing on the redistribution of work and redefining roles and responsibilities. They also need to be there to answer questions and to absorb some of the emotional impact the employees are feeling.” The survivors are wondering if there will be another round of layoffs and will their jobs be the next ones cut. Berg points out that“managers need to be prepared to deal with those questions without making any guarantees. Being there to answer questions, support the employees, and absorb some of the emotional impact really helps the survivors work through the process as well.” Training The Workforce Investment Act of 1998 (WIA) reformed the federal job training sys- tem by consolidating about 70 federal programs into an integrated whole. The reformed system is intended to be customer-focused in order to help workers access the tools they need to manage their careers and to help employers find skilled workers. While WIA is a federal program, it will differ in how it is imple- mented by each state. The cornerstone of the WIA is the“One-Stop”service delivery system, which is designed to make information about and access to a wide array of job training, education, and employment services available for workers and employers at a sin- gle neighborhood location. “Core services”are provided at each One-Stop location and include: N Intake and orientation to the One-Stop approach N An eligibility determination N Initial assessment of skills and abilities N Access to job vacancy listings and job search and placement assistance N Information on providers of vocational rehabilitation activities and access to eligible training providers N Information on filing for unemployment insurance and availability of supportive services Through the One-Stop approach, employers have a single point of contact to pro- vide information about current and future skills their workers need to possess and to list job openings. #3 Health Care in 2009 The American economy is in trouble, and many people can’t afford health care. Employers are worried about their ability to compete on the global market when health care is costing them so much. Even before the fall, when some major banks failed or were bought and the stock market experienced dramatic downswings, a majority of American workers expressed concern about their financial situations and economic futures, according to the Rockefeller Foundation/TIME survey, Campaign for American Workers Survey. ©Business & Legal Reports, Inc. 30610800 11
  17. 17. Some survey results. When comparing survey results from 2008 to 2007, sev- eral categories illustrated increased problems for workers who participated in the survey: N 25% did not go to a doctor because of cost (18% in 2007). N 23% went without health insurance (20% in 2007). N 23% did not fill a medical prescription because of the cost (17% in 2007). For Generation Y (survey respondents between the ages of 19 and 29), the future seems even more problematic. Of this group, 49 percent said that America was a better place to live in the 1990s, and 56 percent were worried about their own per- sonal economic security. Also, 79 percent agreed that America was a lot less secure or somewhat less secure today than 10 years ago. “Americans want to work hard and improve their financial situations; 80 percent believe they are responsible for their own financial security,” according to the exec- utive summary. Some solutions that survey respondents thought would help them secure their economic future include: N The government and employers providing basic necessities such as healthcare or retirement programs (70%) N New policies and programs that will create jobs (82%) N Initiatives to provide more access to family health care (77%) N Support to make it easier for people to work such as more paid family leave (68%) and government-funded child care (66%) 2009 Healthcare Trends In the words of Samuel H. Fleet, president and CEO of AmWINS Group Benefits, in an article that he wrote for BLR, the country’s job-based system for health insurance is too entrenched to disappear. The healthcare industry generates about $2 trillion— that’s trillion, with a“T”—in economic activity annually, which means it has a strong interest in preserving the status quo. That means employers will be forced to continue down the path of using consumer-directed strategies and cost-sharing plans to escape the expensive, anticompetitive burden that health benefits have become. Expect continued pressure on healthcare providers to make their charges more trans- parent so that consumers can make choices based on real-cost comparisons. In addi- tion, Medicare’s recent decision to force hospitals to absorb the cost of opportunistic infections, caused by pathogens at the hospital that compromise an unhealthy immune system, should raise consumer awareness of quality-of-care issues. The bottom line is that one-size-fits-all healthcare plans are a luxury of the past. Employer-provided health benefits will continue to become more customized as companies struggle to balance the competitive advantage of offering employees good, affordable health care with the increasing drag on their bottom line. Now, more than ever before, benefits professionals will have to become careful, discriminating shoppers who can sort through sales pitches to identify partners who can deliver value-enhanced offerings. What should you look for? Here are a few ideas: 12 Top 10 Best Practices in HR Management for 2009
  18. 18. N Deep discounts don’t add up to much if the underlying prices are inflated. Look beyond the promises of large insurers and examine the track record of third-party administrators who are eager for your business. Expect—in fact, demand—a partnership that focuses on synergies that drive down cost while simultaneously improving patient care by reducing the inappropriate and often wasteful use of resources. N Focus on proactive measures that rein in medical costs, rather than relying solely on controlling premium costs. Eighty percent of the average premium goes toward paying claims, providing a large target for money-saving strategies. Explore behavior management, such as wellness incentives and educating employees about the impact of their choices. N Demand accountability for claims management. Pharmaceutical and medical billing audits can reveal patterns of mistakes and process flaws that can be addressed to lower costs without affecting the quality of care. Mental Health Parity Legislation Becomes Law Insurance companies must cover mental and physical illnesses equally under a provision included in the so-called“bailout”legislation signed into law by Presi- dent Bush (Emergency Economic Stabilization Act, HR 1424). The provision is the culmination of years of effort by legislators to expand on the 1996 Mental Health Parity Act, says Sen. Pete Domenici (R-New Mexico), who co-authored the 1996 Act and was a lead sponsor of the current parity legislation. “No longer will we allow mental health to be treated as a stepchild in the healthcare system,” Domenici said. “If you have insurance, then your mental-health care must be equal to the benefits you get for any other disease.” The new law expands parity to include: N Deductibles, N Copayments, N Out-of-pocket expenses, N Co-insurance, N Covered hospital stays, and N Covered out-patient visits. Companies with fewer than 50 employees are exempt. Cutting Healthcare Costs Knowing that healthcare costs will not decrease in coming years, the challenge for employers becomes learning how to keep the increases to manageable levels. There are a variety of strategies for cutting program costs. Among these are making changes in the areas of plan design, financing, purchasing, vendor management, care management, pharmacy, and retiree medical management. Consider the fol- lowing specific steps in cutting program costs: ©Business & Legal Reports, Inc. 30610800 13
  19. 19. HSAs. Many companies are implementing health savings accounts (HSAs), which are a cost-effective way to co-fund health care. HSAs are designed to help individu- als save for future qualified medical and retiree health expenses on a tax-free basis. Network management. Also recommended are high-performance networks where experts analyze cost and practice patterns, weeding out from the network specialists who cost much more than others. These are specialists who tend to order more tests and require more doctor visits than others. By removing them, the total cost of health care for employers decreases. Surcharges. Another strategy for cost-cutting is introducing“dependent sur- charges.” These are charges levied by companies to cover employees’ working spouses who could be covered under their own plan. The surcharge creates an incentive for the spouse to switch to his or her own plan. Volume discounts. Joining a coalition of employers that leverages volume to pur- chase health coverage on a group basis can also help employers reduce costs. Vol- ume purchasing power when negotiating with community providers leads to lower overall costs. Consumer-driven health care. In order to curb rising healthcare costs, more employers are implementing consumer-driven healthcare plans (CDHPs). Dozens of concepts can hide under the trendy title of consumer-driven healthcare plans, from smoking-cessation, weight-loss programs, and health club memberships to three-tier pharmacy plans. But here’s a definition offered by the Washington, D.C.- based National Business Group on Health:“Most plans include cost-sharing provi- sions, high deductibles, a health reimbursement account or health savings account (HSA), and tools and resources to help workers become more educated healthcare consumers.” BLR asked Steve Kraus, principal-in-charge of Deloitte Consulting’s Human Capi- tal practice and leader of the study, for his reaction to that definition. He gener- ally agreed with it, stressing that plans vary widely from employer to employer. The core principle, Kraus says, is“enabling employees to understand the true cost of healthcare services and the options available to them for receiving care while requiring [them] to take on increased financial responsibility for managing their health care.” These are the basic features, Deloitte Consulting’s Steve Kraus reports, for each par- ticipant in a consumer-driven healthcare plan. N A fixed annual allowance to cover“wellness benefits”preventive care such as physical exams and health screenings. N Enrollment in a high-deductible medical plan, such as a $1,500 deductible with coverage by a preferred-provider organization. N In larger companies, those with at least 1,000 employees, an employer-funded health reimbursement account (HRA), say of $1,000, for use in covering the deductible. N In smaller companies, an HSA that acts like a 401(k)-type retirement plan. Employees save their own money, which may be fully or partially matched by the employer. 14 Top 10 Best Practices in HR Management for 2009
  20. 20. N With either HRAs or HSAs, the employee pays $500 of his or her own money for the rest of the deductible. In theory, participants are more likely to ask a healthcare provider whether a test or treatment is really necessary or whether it can be obtained less expensively. N Unspent funds in both HRAs and HSAs can be rolled over from year to year. These are other features that either the insurer or the employer may add: N Third-party-provided pharmacy benefit management N Disease management, usually by nurse practitioners, for such chronic condi- tions as asthma, diabetes, heart disease, or cancer N Wellness benefits, such as a gym on the premises, and weight-loss and smoking-cessation programs N Behavioral health benefits that especially target depression Use a variety of methods. Not surprisingly, the experts maintain that no single method will reduce costs dramatically. Rather, implementing a variety of methods can help employers save money over the long term. Best Practice: Improve Employee Benefits Communication Ninety percent of employers that offer a consumer-directed health plan (CDHP) cited employee communication as their greatest challenge in introducing the CDHP and during the plan’s first year, according to a study conducted by Watson Wyatt Worldwide and the RAND Corporation. The study included 42 large employ- ers that offer a CDHP to their workers. The study found that employers agree that getting employees to enroll in these plans can be difficult when they also have more traditional health plan options. Employers were most likely to achieve high levels of CDHP enrollment when they devoted additional time and resources to communication, forced employees to make an active choice at open enrollment, and offered financial incentives in ways that enhanced the appeal of the CDHP according to the study. , Another challenge that employers face when offering a CDHP is providing workers with information they need to help make good decisions about healthcare cost and quality, according to the study. The study found that employers are generally pleased with Web-based, out-of-pocket cost calculators for employees. However, they find that specific resources needed to help workers evaluate the cost and quality of care from specific providers are often lacking. Just 2 percent rated cost information about healthcare providers as excellent, and 5 percent rated it as good. Only 10 percent rated information on the quality of care as good, and none rated it as excellent. “Provider cost and quality tools that help employees make smart, cost-effective decisions need to be part of the con- sumer-directed health plan package,” says Melinda Beeuwkes Buntin of the RAND Corporation. “Better information tools would promote employee engagement and help workers select the health plan that is best for them.” ©Business & Legal Reports, Inc. 30610800 15
  21. 21. President Obama’s Future Plans on Health Care President Obama proposes a healthcare plan that would require employers to offer healthcare insurance to employees or pay a percentage of payroll to support a public healthcare plan. Small employers would be exempt. President Obama would also give a tax credit to small businesses to encourage them to offer health- care insurance. All children would be required to have healthcare insurance, and the new presi- dent’s plan calls for subsidies for people who are unable to afford insurance. Presi- dent Obama also has a plan that he says will reduce healthcare costs, including a change to allow Americans to purchase less expensive prescription drugs from other countries. Best Practice: Cancer Screening Saves Lives, Money C-Change, a national cancer coalition of key leaders from the government, busi- ness, and nonprofit sectors, recently launched an initiative designed to encourage employers to add cancer prevention and screenings to their health insurance poli- cies and programs. Its white paper, “Making the Business Case for Cancer Preven- tion and Early Detection,” is available in its entirety at MakingTheBusinessCase. With more than half of Americans covered by health insurance provided through employer plans, the costs associated with cancer have a direct impact on business’ bottom lines. Cancer is the second leading cause of death in the United States, after heart disease. Proper screenings can prevent cancer and improve outcomes where cancer is found. As such, screenings lead to lower costs and, of course, bet- ter outcomes for individuals, families, and businesses. C-Change says there are four prevention areas that can have the most impact: tobacco-cessation programs, breast cancer screening, colorectal cancer screen- ing, and cervical cancer screening. A study by America’s Health Insurance Plans and the Kaiser Permanente Center for Health Research found that investing in tobacco-cessation programs reaps immediate results. “By investing 18 cents to 79 cents per member, per month, an employer can gener- ate a cumulative savings of $1.70 to $2.20 per member per month after 5 years,” says C-Change. Death rates are reduced by about 16 percent in women over the age of 40 who have mammograms every 1 to 2 years. And the U.S. Department of Health and Human Services says that the death rate from colorectal cancer can be reduced by at least 30 percent with regular screening for the disease. Educating employees about when and why they should quit smoking or be screened for cancer is important, and there are simple, low-cost ways to do that. Invite a mobile screening unit, such as a mammography van, to come to the work- place. Send reminder cards around employees’ birthdays to encourage them to get screened. Include notices in newsletters, on the company intranet, and in break rooms about when and why employees should be screened. Offering time off to take advantage of cancer screenings can also encourage early detection. 16 Top 10 Best Practices in HR Management for 2009
  22. 22. Wellness Programs There is little question that employers can have a positive impact on employee behavior. Done well, employer-sponsored wellness programs have been successful in helping employees make better choices. Some such activities are full-blown pro- grams. Others are small, finite activities that are part of overall HR and safety. Well- ness programs include: N Exercise and fitness N Smoking cessation N Blood pressure management N Weight management N Stress management N Cholesterol management N Nutrition Studies of the wellness plans of 200 companies completed by the American Journal of Health Promotion conclude that the return on investment (ROI) for employee wellness programs can be as high as 348 percent in 3 to 6 years. This figure certainly suggests taking a closer look at instituting a wellness program if you don’t already have one in place at your company. When wellness programs are not successful, it’s often because there’s a lack of sen- ior management support and/or the original planning wasn’t as comprehensive as it should have been. Senior leadership must communicate the importance of the wellness initiative to employees up front. They should also participate in the pro- gram once it is up and running to set an example for other staff. #4 Retirement of Baby Boomers Are you prepared for the retirement of lots of your older workers? Never mind whether you can find warm bodies to replace them (and even that may be tough), but how will you fill the knowledge gaps left by their departures? There’s been much talk about phased or delayed retirement programs, but two topic experts provide a fresh perspective on surviving the brain drain. Misconceptions on both sides. Alan Bernstein and John Trauth, co-authors of Your Retirement Your Way (McGraw-Hill, 2006), since publishing their book, have shifted their focus to include both older employees and their employers. On the lecture circuit, they explain their recommendations, based on a good deal of research, for hanging onto the much-needed knowledge and talent of older work- ers. Employers, they say, have these wrong impressions about older workers: N Older workers can’t handle the physical demands of their jobs. In today’s service and knowledge economy, most employees can do most of the jobs they’ve always done. ©Business & Legal Reports, Inc. 30610800 17
  23. 23. N Older workers are just coasting to retirement. In fact, they can be just as—or more—productive than younger workers. Their work tends to be more accurate and their decisions more thoughtful. N Older workers get hurt more often and heal more slowly. Instead, they’re less reckless than younger workers and subject only to repetitive strain, which can be eased. N Older workers can’t or won’t learn new skills. Instead, they do learn differently but continue to enjoy chances to learn something new. N Older workers are short-timers, so not worth the investment. The truth is that they are more loyal, have lower turnover, and have positive work values. Bernstein and Trauth think they have an effective answer to the looming talent crunch in which employers won’t be able to find enough workers with the right kinds of skills to fill needed positions. Here are elements of their program, MORe (Mutually Optimized Renewal), “a new retirement paradigm”for retaining older workers. The first step is to prepare a 5-year plan of business objectives for change and growth, including the employee skills that will be needed to get from here to there. Next, assume that all workers aged 59 or over now will retire before the end of the 5 years. Do any have skill sets and/or institutional knowledge that will be essential to keep? The answer is likely yes, and Human Resources should approach those people to discuss their retirement needs and wishes. Bernstein and Trauth see real problems with the phased retirement programs some large employers have used:There’s low enrollment, too-brief tenure, and failed mentoring processes. The authors believe the reasons are that older employees are burned out from doing their current jobs, they’ve not thought enough about what they want out of work and life in the future, and they haven’t been properly trained for mentorship. What should happen, Bernstein and Trauth advocate, is that chosen older workers take a 1- to 6-month sabbatical to assess their needs and wishes. That renewal break should be accompanied by completing a reliable per- sonality profile that reveals the kinds of work they like best and what job aspects lead to stress. Based on those activities, the worker and the employer together structure a new, part-time job tailored to the worker’s personality and interests. The other part of the bargain is the one or more mentoring relationships that will aid the organization in transferring the older worker’s skills and knowledge to future leaders in the firm. Not only should the potential mentor be thoroughly trained in how to carry out the responsibility but the personalities and interests of potential mentees should be carefully assessed to find the right match or matches for the mentor. Survey: Few Employers Capture Boomer Know-How Only one quarter of large organizations are making an effort to transfer knowledge from retiring Baby Boomers to other employees, according to a survey of 2,046 Human Resources executives by Novations Group, a global consulting and train- ing firm based in Boston. 18 Top 10 Best Practices in HR Management for 2009
  24. 24. The survey found that just 4 percent of respondents said they have created a for- mal process to pass on know-how, while 23 percent report doing so informally. Twenty-nine percent of respondents said that while they currently have no process for transferring knowledge from retiring Baby Boomers to other employees, they plan on developing one. Forty-four percent of employers said they have no process and have no plans to develop one. Transitioning into Retirement According to a recent survey by AXA Equitable Life Insurance Company, there is a disconnect between how you view the next step in the retirement process and how employees view it. In fact, they’re waiting for you to help them with the transi- tion into retirement.According to Bill McDermott, executive vice president at AXA (, “71 percent of the employees we surveyed said they believe it is their employer’s responsibility to prepare them for retirement. “People have three critical decisions to get ready for retirement,” says McDermott. “The first is to save; the second is to invest, and the third is the distribution—how you’re going to live off of your savings.” Most companies are doing well at helping employees with the first two by providing a plan, encouraging saving, educating about investments, and even matching contributions. But when it comes time to think about the third decision, many companies are lacking. How to help employees near retirement prepare. There are several things near-retirees need to think about during the last few years of their working life. You can access tools through organizations such as AARP the company that provides , your retirement plan administration, or via the Internet. Many are low- or no-cost. AARP recommends that people start by thinking about how they want their retire- ment to look. The organization’s self-assessment tool, Retirement Roadmap, is available online ( and leads people through a variety of questions in a dozen categories designed to guide the process. The answers help the employee think through possibilities and learn how much money those possibili- ties might take. AARP also suggests starting early to determine how much money to expect from Social Security and from the corporate plans. You can make that easier by providing benefit statements regularly. How to invest retirement funds. One of the critical decisions employees must make when retiring is how to invest their retirement nest egg so it will last their life- time. HR can take steps in the right direction without having everything figured out at once. N Assess how you are doing in preparing employees to live off their retirement savings; N Contact your retirement administrator and ask if it can provide a speaker for a brown-bag lunch for employees over age 50; N Make sure employee benefit statements are provided regularly; and N Ask employees what they need from you. ©Business & Legal Reports, Inc. 30610800 19
  25. 25. Predicting the Future of Retiree Health Care Educating employees may be the most important thing you can do to help them plan for retirement health costs, says Robert Schmidt of Milliman. He expects that an unmarried employee retiring at age 60, with an initial insurance premium cost of $227 per month (subsidized by a generous employer) and assuming an opti- mistic health cost trend of 8 percent per year, can expect to need $205,000 for the purchase of health insurance if he or she lives to age 85. That’s a present value of $95,000 using a 5 percent discount rate. Of course, for married people, or those retiring from an employer that doesn’t sub- sidize part of the cost of coverage, the amount would be substantially more. That means retirement savings are more important than ever before. “Plan to just chop off $100,000 of your retirement savings to pay for health care,” Schmidt advises. Not only do employees and retirees need education about the cost of health insur- ance, they also need to be on board with wellness and disease management initia- tives, says Schmidt. In a recent survey, Kaiser and Hewitt asked companies sponsoring retiree health benefits about their future plans. In the Kaiser/Hewitt Survey on Retiree Health Benefits, the highest percentage of respondents pointed to changes in their plan designs that will mean increased costs to retirees. For example, 80 percent said they will likely increase retiree premium contributions; 40 percent will increase cost-sharing requirements; 36 percent are likely to increase drug co-pays or coin- surance; and 30 percent will increase out-of-pocket limits. Fortunately for retirees, just 2 percent said they are likely to terminate all subsidized health benefits for current retirees. Robert Schmidt believes early retirees are more likely to maintain some form of employer-sponsored benefits. “I’m seeing a trend,” he says. “If companies are going to provide retiree health care, they’re providing it to early retirees, and letting post- 65 retirees go on their own. There are so many more options for them now.” Persuading Older Workers to Stay: Is It the Money that Matters? The Employee Benefit Research Institute (EBRI) asked workers who had retired in 2003 or later about company policies, practices, and incentives that would have encouraged them to delay retirement. The 4,981 respondents worked in the aero- space and defense industries and at the time of the survey, were between the ages of 55 and 65. Most (79 percent) were men, and 83 percent were married when they retired. Just ask. Nearly two-thirds said they would have seriously considered an offer from their employer asking them to stay on. You need me? Almost half (48 percent) of the retirees said that if they had felt truly needed for an assignment, that would have been extremely or very effective in encouraging them to delay retirement. Money please. However, money does enter the equation. Half of the respondents who had a defined benefit pension plan said that if they had been able to receive a full pension and still work part time, it would have been effective in getting them 20 Top 10 Best Practices in HR Management for 2009
  26. 26. to delay retirement. A partial pension had the same effect for 44 percent of respon- dents. EBRI points out, however, that this would require a change in federal law. Other compensation-related incentives may be almost as compelling, without requiring legal changes. One-third of the retirees said that a pay increase would have been an effective way to get them to stay, with 56 percent ranking it among the top two incentives. And nearly half (46 percent) said that they would be encouraged to continue working part time if the company continued to subsidize their health insurance benefits at the same level as full-time workers. Communicate early. If you’d like to encourage workers to stay with you a little longer, start your efforts early. According to the EBRI survey, the timing of the offer is important. Almost two-thirds (63 percent) of the survey respondents said that the offer would have been much more effective if they had known about it in the 2 years before they communicated their intention to retire. Succession Planning to Fill the Baby Boomer Gap Employers rightly fear the aging of the workforce and the significant“brain drain” many companies will experience as Baby Boomers begin to retire. Companies must plan not only for staffing needs at the top of the company, but must also iden- tify and plan for future human capital needs at all levels—planning for the future growth and success of the company. If the company is not prepared and has not invested in its key employees, when the need to fill a position arises, the company will likely find itself paying top dollar to attract talent from outside the organiza- tion in a fierce competition with other public and private employers. Study the demographics. Early in the process, it is important to analyze the cur- rent workforce. Is brain drain going to present a significant problem for the com- pany, and if so, when and in what areas or jobs? Knowing when and where there will be key vacancies or a need to replace accumulated skills and knowledge will help focus on future needs, as well as current vacancies when new employees are recruited and hired. Link strategic goals with human capital needs. Identify the talent, skills, and experience the company will need over the next 5 to 10 years in order to achieve goals and continue to be successful. This will include the knowledge, skills, abili- ties, experience, education, core competencies, and even personality traits that will be needed to fill top management positions and other positions that will be essential to the company’s long-term success. Senior management must play a role. Human Resources managers need to involve senior managers in the planning process so that succession planning and the development of employees are adopted as strategic goals. Senior management will be more likely to participate in the process if it is linked to the long-term strate- gic goals of the company. Succession planning as a retention strategy. In a highly competitive labor mar- ket such as the one predicted over the next 10 years, a working succession plan can have a significant impact on staff retention. Employees who feel the company is making an investment in their development and career planning are more likely to be committed to the organization long term. ©Business & Legal Reports, Inc. 30610800 21
  27. 27. Measuring success. One way to keep the focus on succession planning and developing employees is to track and measure the success of the plan at the department and company level. One way to do this is through the use of metrics and another is to make sure managers are evaluated on how well they implement the plan. Suggestions include: N Measuring the total number of open positions identified as key positions in the succession plan that were filled by high-potential employees. N Using 360-degree reviews for evaluating the mentoring process by having the mentor evaluate the employee and vice versa. Integrating a Multigenerational Workforce As your“Radio Babies”(approximate ages 62 to 77) and Baby Boomers (roughly ages 43 to 61) retire or begin to phase out, Generation X (ages 30 to 42, give or take) simply can’t fill all the workforce gaps:That cohort is too small. So, despite problems your older staffers may think they’ve had in adjusting to Gen X, you’d bet- ter get ready to hire Gen Ys. They’re the biggest cohort since the Boomers, and you’re going to need them. How do you cope? In order to increase the amount of workplace interaction among employees of dif- ferent ages, consider taking some of the following action steps: N Establish a series of mentor relationships that pair older workers with younger ones; encourage pairs to meet at least monthly for a year or more to work on career goals set by the younger workers. N Create focus groups of mixed generations to brainstorm ideas about achieving company objectives. N In populating ongoing project teams, strive for age diversity as well as diversity of levels, race, and gender in addition to appropriate functional and depart- mental representation. N Make it easy for older workers to obtain either in-house or external training in new technologies or methodologies. Pair older workers with younger workers who may have more experience with new technologies. #5 Recession Help Across the nation, employers find it nearly impossible to ignore dropping revenues and profits. A recent study by consulting firm Hay Group found that more than 30 percent of respondents are freezing or planning to freeze base salaries, with half that number doing so for all employees. And some 20 percent will either freeze workforce size or conduct layoffs in the near future. Respondents also reported they will change training and development programs (28 percent), change health- care benefit plans (27 percent), or change retirement savings plans (20 percent). Furthermore, another survey done by Career Protection predicts a 37 percent increase in layoffs this year compared to last, making this year’s forecast the worst 22 Top 10 Best Practices in HR Management for 2009
  28. 28. in 5 years. Survey respondents were nearly 1,400 corporate executives nationwide. And DOL reported that the U.S. economy scuttled 80,000 jobs last March, boosting the unemployment rate to 5.1 percent from 4.8 percent. BLR subscribers have told us they’re considering such moves as suspending their company’s 401(k) match and whether they should warn employees that layoffs may be necessary. There’s a big contradiction here. The same Hay Group respondents who said they were considering layoffs and benefit reductions also said that their number 1 concern about the recession was how to retain and motivate their top performers. Clearly, then, employers have conflicting needs: they feel pressure both to cut costs, with human capital usually being the biggest drain on expenses, and also to hang onto the talent they really need. Manny Avramidis, senior vice president of Human Resources for the American Management Association (AMA), advises organizations to cope with the possibility or the reality of recession in several ways. Avramidis points out that a rising rate of unemployment doesn’t necessarily mitigate the war for talent; many available workers lack the skills that employers seek. After all, you’re not just looking for warm bodies. And, companies tend to be leaner than in past recessions because of outsourcing, global mergers and acquisitions, and layoffs they may have con- ducted in the early 2000s. “Companies should approach this downturn by continu- ing to invest in human capital,” says Avramidis. The first step in preparedness is a vibrant and accurate performance assessment process that identifies where every employee stands in terms of the organization’s goals, the employee’s contributions, and where he or she may need to improve. That process will inform both front-line supervisors and HR pros about the key players in the company, as well as who’s in line for important positions in terms of succession planning. Avramidis has been through at least one other recession, the one that began in 2001, in his tenure with AMA. He firmly believes that layoffs should be“resisted” because talent is so scarce that if a firm downsizes, it may not be able to rally when the recovery comes. The foundation of his approach to this recession is communication. “Be transparent,” he advises. Not only do employees need their individual feedback from the company’s performance management system but they also need to know virtually everything that top management knows about the organization’s ongoing results. Armed with that information, employees need to be engaged in developing strate- gies for the corporate response. Are there less profitable product lines that should be dropped, or should marketing efforts at least be cut back for them? Do workers have ideas about redundant processes or other kinds of activities that could be eliminated to save money? Given detailed and up-to-date information on their employer’s financial results, employees will be more prepared for news of layoffs should they be necessary. However, Avramidis suggests that employers go further by explaining beforehand exactly what will happen if layoffs are conducted. Are they expected to be tempo- rary or permanent? Will outplacement services and/or severance packages be provided to those laid off? What services will be available for those not laid-off— the survivors? ©Business & Legal Reports, Inc. 30610800 23
  29. 29. In addition, Avramidis recommends that the first candidates for layoff be chosen based on where they work in the organization. That is, target first the employees in less-profitable lines of business or activities the company may eliminate. Even then, don’t let a top performer go simply because he or she is in the wrong line of business. Then, if a second layer of jobs may need to be cut, shift the focus to where employees stand in terms of their performance. In order to resist layoffs, should employers take such preliminary measures as freezing salaries and/or reducing such benefits as healthcare coverage or retire- ment plans? Avramidis is reluctant to endorse such moves, because they penalize all employees the same way rather than differentiating among them based on their performance and their organizational roles. “Don’t force out your best people because they can no longer afford to stay with you,” he cautions. Only an employer that has developed significant credibility and employee loyalty may be able to get away with such across-the-board penalties, Avramidis believes. “Do your best to protect your most valuable human capital,” he concludes. Best Practice: Mandatory Vacations at HP Companies caught between a need to cut costs and a desire to avoid layoffs are turning increasingly to forced vacations, according to the Christian Science Monitor. These employers reduce their employees’ work hours by asking them to take vaca- tions that are either paid or unpaid, depending on the company’s financial circumstances. “I’m advising companies that it’s an excellent idea,” says Bruce Katcher, president of The Discovery Group, a Boston-based consulting firm. “The advantage for the organization is that you still keep people around for when busi- ness turns around. And you’re telling employees that you still want them to be a vital part of your organization, that you’re committed to them.” Work slowdowns and subsequent cuts in employees’ workweeks are nothing new in the manufacturing sector. Yet experts tell the Monitor that this recession marks the first time a wide variety of businesses, both large and small and from many dif- ferent sectors of the economy, have used employees’ time as a cost-cutting tool. Hewlett Packard (HP) asked its employees last April to voluntarily take an addi- tional 6 days of paid vacation time off before the end of the fiscal year in October. In June, it asked them to voluntarily forfeit some earned vacation time, take a small pay cut, or do a combination of the two through the end of the fiscal year. And in December, HP closed all of its offices for a week at Christmas, which included 3 days off with no pay. HP tells the Monitor that 95 percent of its workforce joined in the June cost-cutting measure, saving the firm $130 million. The other measures also saved an undis- closed sum of money on two fronts. First, closing saved HP the cost of keeping offices open. Second, asking employees to take paid vacation time—instead of rolling it into another year—helped in accounting terms because paid vacation is a funded liability that carries over from year to year on the company’s books. Experts say the key to successful implementation of a time-off cost-cutting meas- ure is in how it’s communicated to workers. The plan needs to be presented clearly, in advance, with assurances that the company is committed to its staff. 24 Top 10 Best Practices in HR Management for 2009
  30. 30. Best Practice: Teach Workers Economics 101 Amid all the bad economic news, some companies are giving their workers crash courses in basic economics and personal finance, so they will understand the tough decisions managers must make these days. One such employer, the Outokumpu American Brass factory in Buffalo, New York, is showing that giving employees the big picture can bolster their morale and even produce bigger profits, according to The New York Times. The factory was almost shut down in 1984 because of flagging sales and labor unrest. Local investors bought the plant and quickly turned it around. However, in 1990, they sold it to Outokumpu Oyj, a Finnish mining and metals conglomerate. Outokumpu had given the local investors a healthy profit, and it knew that it would have to raise workers’ productivity over the long haul to make the invest- ment pay off. One way to do that:Teach workers the economic and financial basics of the company’s markets. When company-hired instructors from Cornell University’s School of Industrial and Labor Relations arrived, they found a high level of hostility toward Outokumpu. The workers“saw it as us against them, a takeover by this evil foreign company,” recalls Lou Jean Fleron, the school’s director. However, the Cornell instructors per- sisted and ended up teaching on everything from the impact of technology on the workplace and the dynamics of international competition to the intricacies of cor- porate income statements and the factors that influence the pricing of commodi- ties. Before long, workers were seeing connections between the classroom discussions and their working conditions. After learning about manufacturing costs in other countries, for instance, they came away with a more sophisticated understanding of how their own wages were set. Benefits and Retention Strategies in a Recession The impact of current economic conditions is being felt in the workplace. In a breakout session at the 21st Annual Benefits Forum & Expo held in National Har- bor, Maryland, HR and benefits professionals were given some valuable tips for retaining and engaging their workers during tough economic times. In the face of slow growth, that some organizations would take measures such as a reduction-in-force (RIF) is understandable, explains George Lane, principal at Mercer, and an RIF will have a near-term impact on the bottom-line. However, you must be careful not to lose valuable people that“you’ll need when you start up again,” he explains. According to Mercer’s 2008“Report on Human Capital Management for Slow Growth Times,” employers should: N Be looking for new ways to generate sustainable reductions in benefit costs using innovative strategies that do not adversely affect perceived value; N Implement creative, highly-targeted strategies to recruit and retain the optimal workforce for long-term success; and N Communicate often and honestly to employees to bolster flagging engagement and productivity. ©Business & Legal Reports, Inc. 30610800 25
  31. 31. Lane asserts that you should be doing these three things all of the time, but a recession underscores the importance of such actions. Maia Lucier, director of compensation and benefits for Dimension Data, a global specialist IT services and solutions provider, explained how her company has added no- and low-cost ways to beef up its benefits in creative ways while continu- ing to strive to attract and retain talent against the backdrop of a troubled econ- omy. Lucier emphasized the importance of frequent and effective communication to employees when it comes to their benefits, noting that the extent to which employees value and understand their benefits package impacts job satisfaction and loyalty to the organization. With this in mind, Dimension Data has leveraged its relationship with a financial advisor from its 401(k) plan, asking him to participate in new monthly“Think Financial Wellness”conference calls for employees. These 30-minute conference calls were created to address economic uncertainties for employees and consist of the following: N A 10-minute recap of recent economic developments (in plain English), N A 10-minute interpretation of“what does this mean for me,” including retire- ment and personal financial planning implications, and N 10 minutes of Q&A. Dimension Data is also providing health expense communications for employees, such as an“around the office”feature in its monthly newsletter. This feature pro- vides a profile of an employee and might explain, for example, how he or she saved money by using mail order drugs. Showing how a specific employee utilized a benefit program that saved him or her money is much more effective than just explaining the benefit, Lucier has found. The company has also created“What you should know as a Dimension Data employee”webcasts which communicate to employees by promoting learning and development opportunities, showing them how they can utilize their benefits to the fullest extent, and communicating Dimension Data’s 401(k) investment review process and due diligence (something more employees ask questions about dur- ing tough times). Lucier also avidly supports the use of total compensation statements. She says that by providing detailed information regarding the value of their benefits, you may be able to hold onto valuable employees who would otherwise be tempted to take a job elsewhere for a small base salary increase. Finally, in terms of communication, Dimension Data has a“Leading Talent”pro- gram for its line managers. Dimension Data wants their managers to have the abil- ity to manage the relationship between the employee and the company. In this program, managers are taught how they can help attract, engage, develop, and retain talent for high performance. They are also educated about company bene- fits so that they can communicate benefits value to employees. 26 Top 10 Best Practices in HR Management for 2009
  32. 32. #6 Immigration Immigration was a hot topic in the recent presidential primaries and national elec- tion, and complying with immigration laws continues to be a challenge in Human Resources management. No-Match Letters The Immigration Reform and Control Act of 1986 (IRCA) makes it illegal for an employer to knowingly hire or to continue to employ an individual who is or may become an unauthorized alien. On August 15, 2007, the Department of Homeland Security (DHS) issued regulations that defined the term“knowing”to mean having actual or constructive knowledge. In a no-match letter, the Social Security Admin- istration (SSA) or DHS informs an employer that the name and Social Security Number (SSN) reported for an employee or the immigrant status or employment authorization documents do not match their records. A“no match”does not mean that an individual is undocumented, but it could, in certain circumstances, consti- tute constructive knowledge that an individual is undocumented. DHS regulations set out steps that an employer may take after receiving a no-match letter from DHS or SSA. If these steps are followed, an employer may avoid being considered as having constructive knowledge that a particular individual is an unauthorized alien based on a no-match letter from one of these agencies. Regulations on hold. A federal district court judge has barred SSA from sending no-match letters on the grounds that DHS exceeded its authority in issuing the reg- ulations. The bar will last at least until there is a full trial on the question or the order is reversed by a higher court. On November 23, 2007, DHS filed a motion asking the judge to suspend this case so that it could rewrite the regulation to address the court’s concerns, including conducting a survey of the impact of the regulation on small business. Regulations reproposed. In response to the lawsuit and the court order, DHS has issued a supplemental proposed rule that leaves the August 15, 2007, regula- tions intact. The preamble to the supplemental proposed rule includes an analysis of DHS’s authority to issue the regulation and an analysis of the impact of the regu- lation on small business intended to address the court’s concerns. The preamble does clarify that the obligation of an employer to provide prompt notice to an affected employee after the employer has completed its internal record checks and has been unable to resolve the mismatch will ordinarily be satisfied if the employer contacts the employee within 5 business days after completing its inter- nal records review. In addition, DHS has made it clear that the regulation does not have application to no-match letters that reference employees hired before November 6, 1986, because the statutory bar against continuing to employ unau- thorized workers does not apply to such employees. The Suspended/Reproposed No-Match Letter Regulations The status of the no-match letter regulations will likely be resolved by a final court ruling either barring DHS from implementing the reproposed regulation or that the reproposed regulations do address the court’s concerns and may go ©Business & Legal Reports, Inc. 30610800 27
  33. 33. into effect. The following is an analysis of the reproposed regulation that DHS plans to implement. Safe harbor. The DHS regulations provide that by taking“reasonable steps”after receiving a no-match letter, the no-match letter may not serve as the basis for find- ing that the employer has constructive knowledge that an individual is working illegally. The DHS regulations set out the specific steps that, if taken, are automati- cally deemed to be such reasonable steps and provide the protection of a“safe harbor”from liability for violating IRCA based on a no-match letter. Note: Employers may come upon information that an SSN might be invalid in other ways—for instance, if two or more newly hired employees have the same or consecutive numbers. In such situations, employers should also follow the safe- harbor procedure. However, knowledge that an employee is unauthorized must not be inferred from an employee’s foreign appearance or accent. Procedures for Avoiding Liability To qualify for the safe harbor, an employer must follow the procedures set out in DHS regulations. The procedures, while similar, vary somewhat depending on whether the no-match letter came from SSA or DHS. SSA No-Match Letter After receiving a no-match letter from SSA, employers should do the following: Step 1—SSA No-Match Letter N Check the employer’s records immediately to see whether the discrepancy was caused by a typographical, transcription, or similar clerical error in the employer’s records or in the employer’s communication to the SSA. N If there are no typographical, transcription, or similar clerical errors, move on to Step 2 immediately. Warning: Time is critical because if the employee confirms that the records are incorrect, the deadline to correct them is 30 days from receipt of the no-match letter. If there is a typographical, transcription, or similar clerical error: 1. Correct the records; 2. Inform the SSA; 3. Verify with the SSA that the discrepancy has been resolved; 4. Make a record of the manner, date, and time of the verification (this includes documentation of telephone conversations, correspondence, computer-gener- ated printouts, e-mails, and Social Security Number Verification System screen shots); and 5. Store the record with the employee’s Form I-9. In the safe harbor. If these five steps are completed within 30 days of receipt of the no-match letter, the employer qualifies for the safe harbor. 28 Top 10 Best Practices in HR Management for 2009