Variable compensation may be a great way to satisfy demand for higher pay while addressing  senior management’s need to improve productivity and keep base salaries under control.

But there are some major pitfalls.  Here are two proven ways to avoid the most common legal and return on investment risks.

Non-exempt employees

Beware when you use variable comp as a pay-for-performance strategy for hourly employees. Reason –  It’s easy to inadvertently run afoul of the Fair Labor Standards Act (FLSA) overtime rules.

Under FLSA, you must recalculate employees’ hourly wages to include all variable pay (like individual or departmental bonuses) when figuring overtime compensation.

Failure to do so could cost your organization more in penalties and back-wage payments than the variable comp plan saved on the front end.

So it’s a good idea to double-check with Payroll to be certain the department knows to make OT adjustments after hourly employees receive bonuses.

Reward the right things

In order to make the criteria for bonuses easier for staff members to understand and management to measure, many firms prefer using strictly objective measurements. Example –  the plan may pay out based on how much money staff members save their department in a year.

But what happens if employees cut corners – on safety, service, quality, etc. – to reach the goal?

At some firms, employees are still rewarded with additional pay, even though their actions potentially did more harm than good to the bottom line. for best results –

• set behavioral criteria for bonuses as well as economic ones, and

• consider using a mix of firm-wide, departmental and individual economic performance measures.

Shopping for health plans through a broker is a fact of life for the vast majority of companies. But how well is your broker meeting your needs?

And how can you work together better to minimize costs while getting maximum bang for your organization’s benefits buck?

What’s New in Benefits and Compensation conducted an exclusive survey of 195 subscribers to find out how they view their company’s relationship with their brokers. Here is what they said –

Half see room for improvement

The good news –  Almost half of your colleagues rate their relationship with their current broker as “excellent.” But that means the other half see some room for improvement.

Thirty-nine percent of respondents rated their broker relationship as satisfactory and said they were at least “reasonably happy.” the remaining 11 percent noted “unpleasant surprises” while 4 percent are actively considering a switch.

Tools for making buying decisions

Of course, the No. 1 reason any organization works through a broker is to find the best deals on health benefits. But many of your coworkers pointed to several areas where their brokers could help make their lives a little easier.

First and foremost, your colleagues say they’d love for their brokers to provide user-friendly – but thorough – return on investment data they are able to use to benchmark different plans.

It’s worth discussing with your broker how much arm-twisting the broker can do with medical plan carriers to get key data in your hands. Two specific areas of data benefits pros say they’d like help from brokers –

• obtaining and sharing claims cost data to compare to premiums, and

• benchmarking your typical plan costs against those of similar-sized firms in the region.

Unfortunately, claims cost data is often hard to pry loose from insurers, at least for smaller businesss’ plans.

Reason –  Without this data, it’s tougher to judge if your premium rate adjustment at renewal time is fair. Fewer than half of respondents (46.3%) say they’ve ever discussed such information with their brokers.

Obtaining benchmarking data on similar-sized plans assists you see how comparably your costs and plan designs stack up in your area. Roughly 43 percent of respondents say they’re armed with at least some of this info when it comes time to decide whether to stay with the existing plan.

Earlier renewals

It’s worth talking with your broker about ways to push for the earliest possible renewals – and strategies for making sure your carrier doesn’t hit you with any unpleasant surprises.

One notorious game insurance corporations play with companys’ plans is to wait until the last moment to reveal the new premiums at renewal. That way, there’s less time for negotiation – or to shop around with the insurer’s competitors.

About 28% of respondents report getting their renewals about 30 days before the rate kicks in. Different brokers use different benchmarks for securing renewals. A minority of respondents (19.5%) have seen them as early as 90 days ahead.

Taking work off HR/Benefits’ plate

The benefits brokerage marketplace is highly competitive. Some brokers attempt to set themselves apart by offering customers so-called value-added services.

Among your peers, the most popular services are those which relieve the company’s HR/ benefits manager of time-consuming tasks. Some examples –

• investigating  plan documents

• auditing (and, if needed, reconciling) carrier bills for errors

• monitoring plans for compliance (HIPAA, COBRA, etc.)

• offering tech support for a benefits intranet and/or employee self-service software, and/or

• assisting with worker education.

Which costs your organization more –  workers who miss work or ones who show up physically but take a mental PTO day?

For most businesss, it’s the latter. So why do even savvy senior level managers and finance directors (we’re not just talking about the bean-counters) worry about absenteeism while downplaying so-called presenteeism as a drain on company productivity, not to mention the compensation and benefits budget?

In some cases, C-levels and supervisors seem to think that admitting that presenteeism even exists at the firm is akin to saying, “We’re a poorly run organization.” In reality, presenteeism exists in every workplace.

Virtually every worker, manager, supervisor and executive who’s ever tried to “tough it out” at work when he or she’s been sick has been a presentee on those days.

So has anybody who’s ever been distracted at work by non-work issues – whether it’s spending the day trying to resolve an individual financial matter, checking on a sick child at home or constantly checking for scoring updates from a sporting event.

In short, unless we’re to believe that every staff member is productive every single day, no business in the world is immune from presenteeism.

Some organizations that don’t bury their heads in the sand about presenteeism still don’t track it. Why? Generally, there’s a belief that chronic presentees eventually get rooted out of the corporation.

And short of watching over every other employee’s shoulder throughout the workday, it’s too difficult (and even counterproductive) to attempt to estimate the cost to the organization.

Here are some strategies that firms have used to not only measure the cost but also reduce the problem.

Creating a cost estimate

When your organization is like most,  executive management worries endlessly about health benefit costs without realizing undetected presenteeism is just as expensive, but easier to control.

Consider these facts from a recent CSG study –  Almost 10% of the typical annually pay and benefits

budget is spent on non-productive (but treatable) staff members.

Add in employees who call out at the last second and the percentage rises to 17%, according to SHRM.

But how do you estimate the actual dollars-and-cents cost to your firm?

Let’s assume you’ve 50 workers, who make an typical $40,000 a year. Over the in the year, the typical worker is non-productive 2.5 % of the time, due to assorted personal issues or minor illnesses that serve as distractions.

In this instance, presenteeism costs your organization $50,000 a year. When you have a 5% presenteeism rate, the figure shoots up to $100,000.

While it’s impossible to entirely stamp out presenteeism, even small reductions in presenteeism add up to big bucks in controlling compensation and benefit costs.

The next step, of course, is doing something about the issue. Broadly speaking, the process typically works in three phases –

• review current policies and procedures for things that accidentally increase presenteeism

• get supervisors and employees involved on the front end, and

• stress the importance of work-life programs to  upper-level management and supervisors.

Let’s look at each area to see how they work in real-life practice.

Unintentional effects

Three common ways many firms try to cut absenteeism often increase presenteeism –

1. Over-stressing attendance in employee’s annual reviews

2. Having supervisors check up on staff members who take sick days to verify they are really ill, and/or

3. Disciplining employees for last-moment sick callouts.

From a practical and cost standpoint, the best solution might  be to switch from separate vacation and sick-day benefits to a single compensated time off (PTO) bank.

When folks have no-questions-asked control over their off days, they’re sometimes more likely to use a PTO day when they’re sick.  Of course, you know that PTO carries some risks of its own.

Early detection

Fewer than one organization in 10 gets both managers and staff members involved in the process of spotting and eliminating presenteeism.

That’s too bad, says consultant Mary Beth Chalk, because it can been done pretty easily.

Ask a sampling of workers to rate how energetic and productive they normally feel at work, on a percentage scale. Have supervisors estimate their staff as well. Then split the difference.

The result is a pretty good barometer of your organization’s current and future presenteeism risk.

Work-life balance

Anything you are able to do to promote work-life programs at your firm can have a positive effect on the bottom line. Proven ideas include –

• rewarding supervisors who support flexible work arrangements

• sending sick workers home

• cover on-site flu shots, and

• actively promote your existing Worker Assistance Program.

Any benefits HR/manager can adopt these ways to make workers feel more appreciated.

The common thread –  using your own communication skills as a powerful tool for improveing morale.

1. Put in face time

When time permits, managers may want to put in some “face time” with workers. This in and of itself is a kind of staff member recognition. Example –  There’s a lot of value in simply walking around the building, chatting with workers.  Ask workers about the personal items they display at their workstations.

In the short-term, folks will notice and appreciate your interest.  Long-term, this may inspire ideas for rewards and incentive programs. the same technique works at  firms with multiple locations.  Make a site visit to get a feel for the morale. This is much cheaper – and often more effective – than designing a formal benefits survey.

2. Send ‘em customized stuff

Looking for a simple way to show workers that HR/Benefits cares? Create a template from which you can send customized “Welcome” letters to new hires or “Happy Anniversary” notes for employees’ company anniversaries.

3. Target overlooked employees

Most firms have staff members (e.g. part-timers) who aren’t eligible for the 401(k), health plan and other company-sponsored benefits.  Small gifts help firms connect with these often-overlooked staff members.

Example –  on the first day of spring, send them a packet of flower seeds and attached a note from Benefits. Burston-Marsteller Worldwide has used this simple, low-cost idea and gotten good results.

Looking for recognition ideas that get results?  Here are two keys to success –

The most common characteristics of high-ROI recognition programs – regardless of their monentary value – are their spontaneity and perceived value by employees themselves.

In reality, the cost of some of most effective spot awards and bonuses often amount to less than 1 percent of base pay – and the awards don’t even have to be given in cash.

Less sense of entitlement

Part of the problem with traditional end-of-year or quarterly bonuses (apart from the fact that they cost corporations an typical of 10% of base pay) is that workers expect to receive them for reaching certain goals.

Sometimes staff members simply expect it no matter what. for  instance, at many firms, an annual holiday bonus is viewed as an entitlement and individuals  inevitably grumble that it’s not high enough. on the flip side, with spontaneous awards and bonuses, staff members are often pleasantly surprised.

Benefits consultant Ken Stahlmann spells out four keys to making the latter kind of awards work, even if they’re lower in cost –

1. Creativity is crucial

The most effective programs generally give out awards weekly or monthly. to avoid over-stretching the budget – and avoid a ho-hum attitude setting in – creativity is a must.

One way that never gets old –  combining time off with a second, non-cash award. Example –  One firm gives a half-day off in combo with movie passes once a month.

Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to people ‘s personal needs or interests. Two examples –

• one firm with many foreign-born, low-wage employees awards a $20 pre-paid phone card after 90 days of service, and a $100 card for outstanding work, and

• another business with a lot of sports nuts took a few top-performers to a ball game. Managers said it was the best $200 they’ve ever spent as for creating ongoing enthusiasm.

3. Add structure

The awards may seem spur of the moment, but top programs have a fixed budget and structure set before anything is handed out. Example –  One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise.

By letting individuals  bank points for additional valuable rewards, the company saw a solid jump in retention.

Other organizations prefer to let employees reward each other. for  instance, a small health care provider keeps a “goodies box” on-site – paid for in petty cash and stocked by employees themselves.

When someone spots a colleague going the extra mile, he or she pulls out a prize and awards it.

The program is a enormous hit –  It’s immediate and personal, yet structured.

4. Don’t let good intentions backfire

Most spot awards go over well. But keep these four issues in mind –

• For most cash or cash-value awards, there are tax implications (just as with traditional bonuses)

• Awards need to be spread around or else resentment can creep in

• Make sure honorees don’t mind being the center of attention (some firms have accidentally alienated people  they tried to reward), and

• Be sure the reward is something individuals  actually want. One firm that awarded a VIP parking space next to the CEO found no one used it. No one wanted the CEO knowing what time he or she came and left.

Looking for ways to improve morale, productivity and retention? Spot awards may  be the way to go.

They’re the most popular recognition incentives among workers, a recent published study  shows. the best part –  the incentives ordinarily amount to less than 1 percent of base pay. That also can makes this choice attractive to C-levels.  And the awards don’t even have to be given in cash.

Spontaneity grabs ‘em

Traditional end-of-year or quarterly bonuses cost employers an average of 10 percent of base pay yet often have a lower payoff in morale and retention.

Reason –  Employees appreciate them less because they expect to receive them for reaching certain objectives. By their nature spot awards are spontaneous and compensated out immediately. Honorees are pleasantly surprised and see the organization values their work.

Here are four keys to successful spot bonus programs, according to benefits consultant Ken Stahlmann –

1. Creativity is crucial

The most effective programs generally give out awards weekly or monthly. to avoid over-stretching the budget – and avoid a ho-hum attitude establishing in – creativity is a must.

One way that never gets old –  combining time off with a second, non-cash award.

Example –  One firm gives a half-day off in combo with movie passes once a month. Another, at weekly staff meetings, holds a random drawing for a dinner gift certificate, plus permission to leave work early once.

2. Make it personal

Rewards have more lasting impact when they’re geared to individuals ‘s personal needs or interests. Two examples –

• one firm with many foreign-born, low-wage employees awards a $20 pre-compensated phone card after 90 days of service, and a $100 card for outstanding work, and

• another firm with a lot of sports nuts took several top-performers to a ball game. Managers said it was the best $200 they’ve ever spent as for creating ongoing enthusiasm.

3. Add structure

The awards might seem spur of the moment, but the most effective programs have a fixed budget and structure set before anything is handed out.

Example –  One retail firm awards “points” for good work. Folks can then trade in their points for store merchandise. By letting individuals  bank points for additional valuable rewards, the business saw a solid jump in retention.

Other organizations prefer to let employees reward each other. for example, a small healthcare provider keeps a “goodies box” onsite – compensated for in petty cash and stocked by employees themselves.

When someone spots a colleague going the additional mile, he or she pulls out a prize and awards it.

The program is a immense hit –  It’s immediate and personal, yet structured.

4. Don’t let good intentions backfire

Most spot awards go over well. But keep these issues in mind –

• For most cash or cash-value awards, there are tax implications (just as with traditional bonuses)

• Awards need to be spread around or else resentment can creep in

• Be sure honorees don’t mind being the center of attention (some firms have accidentally alienated people  they tried to reward), and

• Be sure the reward is something people  actually want. One firm that awarded a VIP parking space next to the Chief Executive Officer (CEO) found no one used it. No one wanted the Chief Executive Officer (CEO) knowing what time he or she came and left.

In the last few years, there’s been a lot of publicity about the fast-growing crime of identity theft. More than half happen in the workplace. Benefits and compensation files are the most vulnerable targets.

The scariest part –  Victims of benefits-related ID theft often make out worse than those who fall prey to the more common variety. the bad guys are ahead of investigators after such thefts occur, and are often very good at covering their tracks.

Additionally, because benefits ID-theft is a relatively new kind of crime, there’s no well-established system for victims, plan sponsors and providers to set things straight after the fact.

401(k) accounts a prime target

Not surprisingly, employees’ 401(k) accounts have become the primary target for benefits thieves.  An alarming MSNBC news report showed just how easy it can be for thieves to tap into an employee’s 401(k) accounts –  When an web-based account gets hacked into or account paperwork falls into the wrong hands, it takes only several mouse clicks to wipe out the victim’s retirement savings.

With typical credit-card or bank account fraud, victims need only call their card issuer or bank, report the crime and refuse to pay for an item. But 401(k) theft is much, much harder to resolve.

Three immense obstacles –

1. Money in 401(k) accounts is not federally insured, like a bank account.

2. 401(k) accounts rarely – when ever – come with automatic identity theft protection from the provider, like credit cards.

3. Even when the theft is successfully resolved, the situation becomes an ERISA nightmare for plan sponsors, because your company also has to account for the way the theft affected the growth of the employee’s account before the money was restored.

A lot of EAPS fall into a common – and dangerous – category –  Management thinks the program is great, but employees think it’s a waste. But it doesn’t have to be that way if you have an EAP or are considering one.

Seventy-three percent of all firms (59 percent of small employers) have an EAP. But how well does the typical employee assistance program (EAP) work? Not as well as we’d hope. A Mid America Coalition on Health Care study found –

• just 50% of 6,400 employees surveyed said they’d use the employee assistance program (EAP) if they felt overwhelmed by personal issues, and

• one-third said they didn’t even know how to access its resources.

The good news –  Firms like yours have seen dramatic improvements in three relatively simple steps

1. Employee attitude surveys

The best beginning place –  Take the pulse of your staff members with a short, confidential attitude survey.

Objectives –  Ask workers when they know how to use the EAP’s resources. Then test workers’ knowledge and opinions of depression and other personal issues that might affect their workplace performance and/or safety. In the final section, find out how workers would handle a serious personal issue.

In other words, find out where your people  would likely turn for help. Would staff members seek out the EAP? Would they prefer to discuss the issue with their family physician? A mental health expert?

The Mid America Coalition’s survey remains an excellent design model from which to craft a recent survey for your own workers.

2. Promote EAP through education

Your survey data ought to help you pinpoint areas where employees need more education about your EAP. Some awareness-boosting techniques that have gotten results –

• Lunch-and-learn sessions. Possible topics include dealing with personal-finance stress, caring for elderly parents, understanding depression or dealing with a dependent who has potential mental health issues.

• Worker newsletter. If you have a benefits newsletter, spotlight the EAP from time to time. Some corporations without newsletters have done e-mail campaigns or targeted mailings instead.

• Workplace posters spotlighting EAP. the ones that work best are often posters designed around a specific theme (e.g., anxiety about personal debt) rather than a general “need help?” message. In addition to posters, you may want to distribute wallet cards with employee assistance program (EAP) contact info.

Need help finding educational material? There’s lots of free EAP-related  pamphlets and FAQs here. Do not forget –  When doing employee assistance program (EAP) education, constantly remind employees that the program is strictly confidential.

3. Make sure to work with supervisors

For legal reasons, supervisors need to tread carefully when they suspect an staff member has a mental health issue.

What you don’t want –  supervisors taking disciplinary actions without consulting HR or playing amateur psychologist and “diagnosing” the employee’s problems. Here is a PDF of some proven tips and talking points for doing supervisor-specific EAP education.

Medical Insurance Portability and Accountability Act (HIPAA) compliance –  Beware non-discrimination issues

HIPAA’s non-discrimination rules impact both mental health benefits and general health plans. Under current interpretations, health plans can no longer have benefits exclusions that deny benefits for injuries resulting directly or indirectly from pre-existing mental health issues.

That’s true even when the psychological condition wasn’t diagnosed until after the injury and even when the injury was self-inflicted. Example –  Suppose an worker gets hurt in a workplace accident he or she caused. After the fact, the worker is diagnosed with a mood disorder that previously escaped detection by the employee’s doctor.

Under current regs, health insurance portability and accountability act (HIPAA)-covered plans can’t deny benefits. This puts corporations in a bind. Mental health issues like depression, anxiety or bipolar disorder are among the health conditions that’re most likely to go undiagnosed or underdiagnosed.

That’s why, in most organizations, having a strong employee assistance program is one of your best compliance tools.

For many staff members, telecommuting and flex-time are highly desired work-life benefits. But a growing number of organizations are reluctant to offer these programs.

Demand for these benefits remains high.  One study found that 87 percent of job applicants are familiar with the idea behind telecommuting and flex-time, and the majority express a desire to have at least periodic access to such programs.

Environmental interest groups have pushed the feds for years to develop incentives for corporations to encourage telecommuting. the pressure has risen as gas prices have continued to soar.

Nonetheless, flex-time programs have leveled off in some sectors, and there’s been a decrease in telecommuting.

Today, about half of all organizations where telecommuting is feasible permit employees to work from home on a case-by-case basis. But the percentage of employers offering full-time telecommuting has dropped in recent years.  Nowadays, only about 20 percent to 25 percent of employers offer the benefit year-round.

Even some national businesss that are well-known for their telecommuting programs have scaled back. AT&T, for example, recently asked several thousand home-based staff members to come back into the office.

Hewlett-Packard and Intel have done the same thing.  and the federal government lately noted a 7.3% drop in telecommuting workers. Why the cutbacks?

Worker Assistance Program – Pros and cons

Offering workers telecommuting or flex-time could be a good recruiting and morale-improveing tool, as well as a way to retain workers who need to relocate, would otherwise have a need to quit or take leave or commute long distances to work.

But the programs aren’t without their drawbacks. Some of the primary reasons corporations give for scaling back or eliminating them –

• Company culture – It’s easier to build a sense of organizational stability and a personal connection between employees, coworkers and supervisors when people  interact face-to-face on a daily basis.

• Security – One of the hidden costs of authorizing staff members to telecommute (or else come in early or stay late) is keeping sensistive information safe. Some the cutbacks are being driven by companies’ IT departments.

Namely, managers have raised concerns about stolen laptops, identity theft or other crimes driven by hackers gaining access to information via workers’ home Internet connections.

• Productivity – A lot of supervisors find it easier to ensure high productivity when everyone is working under one roof at the same time.  There’s also a widespread view that most workers get things done faster and more accurately when they’re not distracted by things at home.

The bottom line on the bottom line

Work-life programs like flex-time and telecommuting remain a useful benefit to offer workers, and a lot of businesses still provide these benefits for economic reasons.

But once the potential hidden costs are weighed, it’s often better for the bottom line to limit the scope of these programs.

Organizations that are thinking about beginning a telecommuting program should look closely at job descriptions and telecommuting candidates. Some positions are poorly suited for remote work, and some employees are more up to the challenge than others.

But unless the organization creates objective criteria for authorizing or denying flex/telecommuting requests, such programs can actually damage morale.

The last thing any business wants is to open supervisors(and the company) up to accustations of favoritism or discrimination because of seemingly random decisions on which employees in their department can and can’t flex their schedules or work from home.

In the near future, the federal government may offer help to businesss looking to start a health promotion program. the help would take the form of tax breaks to offset program costs.

A current U.S.  Senate bill would give corporations a substantial tax break for beginning health promotion programs. Dubbed the Healthful Workforce Act, it calls for an corporation tax credit of up to $200 per staff member enrolled in a newly created health promotion program.

For larger firms, there is the $200 credit for the first 200 workers and up to $100 per worker thereafter. to qualify for the full credit, your health promotion program would’ve to feature –

• health risk (assessment|appraisal}s

• staff member education drives (e.g., targeted mailings, web-based tools)

• behavior modification programs (e.g., tobacco use cessation, weight control, health Coaches), and

• “meaningful” participation incentives (e.g., lower co-pays).

Licensed businesss would be able to claim the tax credit for up to 10 years after beginning a health promotion program.

The bill has enjoyed bipartisan support, but like many things in Washington, the parties disagree over how to fund the cost of the tax credit.  As a result, it has been bogged down in committee.

When and when the bill is ratified, employers could claim the federal tax credit the following year.

In the meantime, whether or not your organization already has a formal health promotion program, there are proven ways to make wellness part of the business culture. Best of all, they don’t have to cost an extra cent.

Health Promotion town meetings

It’s often said that successful health promotion programs start at the top of the organization. Reason –  Workers select up fast on whether management practices what it preaches when it comes to wellness.

If the people  in management are smokers, obese or simply reluctant to talk about health issues, it’s a tough sell to get employees engaged in taking control of their health.

That’s the idea behind the wellness town meeting.

Once a week (or once a month), everyone in the business attends a short meeting to discuss their own recent efforts to get healthier.

Managers normally go first, to break the ice about discussing some potentially sensitive issues like dieting or quitting smoking.

In most organizations, the meetings are arranged to encourage casual, free-flowing conversation.

One key –  Individuals  speak from where they’re seated, rather than standing up front, with all eyes staring at them.

Some organizations take a more formal approach, which can also work.  For example, at Old National Bank in Indiana, folks file into an auditorium to face their worst enemy, the scale.

Each week, everyone at the firm – from seasoned managers to the newest hires – comes in to get weighed. the only one who sees the number on the scale is the person getting weighed. Even so, the program has inspired a lot of folks to lose weight. for more on the firm’s program, click here.

Free tests and screenings

While there’s no substitute for having workers undergo extensive health risk (assessment|appraisal}s, it’s also wise to home in on screening for common conditions that aren’t necessarily lifestyle related.

Example –  skin cancer. It’s not just sun worshippers who are at risk of the most common (and in its early stages, treatable) form of cancer. Heredity plays a part. So does luck.

Fortunately, companys can get their workers screened for free. Through the American Academy of Dermatology’s National Melanoma and Skin Cancer Screening program, volunteer physicians perform skin cancer screenings at no cost.

Similarly, other medical associations and public health agencies offer free or nominal-cost screenings for a selection of other common conditions.