Employers across the U.S. are challenged with the health of their workforce, and in many situations the inability to have their employees at work.
Some employers are able to continue their businesses through remote-work options while others may be forced to close their doors completely due to city or state mandates. And, others are confronted with the need to reduce staff in various capacities.
With the hour-by-hour, location-by-location changes, employers need to know and understand their options for pay practices while retaining their most important and talented employees. It is important to implement options that are cost effective for a company while being attractive for an individual.
Options for Employer Consideration:
- Voluntary Short-Term Leave Plan – Designed to be attractive to those who have other sources of income (e.g., spouse is working, other forms of income, interests in working in other areas, etc.); allows employers to offer employees the opportunity to retain their seniority and benefits and a targeted percentage of normal pay (e.g., 40% - 50%); the option can be tied to points (age + service) or some other objective criteria; the length of the leave can be stated as a particular time (one, three, or six months), open ended, etc.; no unemployment benefits are provided or other severance.
- Voluntary Permanent Leave (or Early Retirement Window) – Designed for employees who are already contemplating retirement within the next 12 – 48 months; the plan could offer continuing medical coverage either through the company plan or an individual coverage health reimbursement account (ICHRA), salary continuation at reduced level for set period (e.g., 50% of pay for 12 months, 30% of pay for 12 months), and/or defined contribution (DC) or defined benefit (DB) sweetener.
- Preferential Layoff Plan – Designed for employees with other sources of income or wishing to start a new business, etc.; under this option, a company offers the choice on a reverse seniority basis to employees to be voluntarily placed on layoff with full-recall rights (applies to hourly or salaried employees); during this period, an employee who takes this option, is provided continuing medical benefits for 12 months (100% paid), COBRA options for an additional 12 months (on some sharing basis).
- Defined Contribution Approach – Under this option, with a stated goal of targeted savings, individuals continue to work in the same capacity, with a defined contribution structure of costs (or equivalent bucket). The employee then chooses how to fill this bucket using a calculator until it is all absorbed. If the current cost for an employee is $75,000, and the company has to save an equivalent of $25,000 per person, an employee then chooses which bucket to fill for $50,000. This can be comprised of benefits (medical/Rx (single, family, etc.), pay, retirement, etc. This does make administration and potential discrimination issues but it can certainly be completed.
- Supplemental Unemployment Benefits – Designed for employers who are interested in providing a severance to employees through a payroll-tax free benefit; this would make employees whole over a time period after initial termination to allow them to adjust as well as provide employers with cash-flow advantages.
Organizations have much on their plates and after tending to the health and well-being of their employees, comes the financial well-being of both the company and their workforce. Recently implemented federal legislation Families First Coronavirus Response Act (FFCRA) and any similar state regulations can impact employer options. Additionally, the recently enacted Coronavirus Aid, Relief and Economic Security (CARES) Act legislation for businesses related to low-interest loans to continue employees on payroll, and changes to unemployment benefit amounts, will make pay decisions challenging for employers.
Elliot Dinkin is president and CEO at Cowden Associates, Inc., specializing in helping corporate clients find the best solutions, both for the enterprise and its employees, with regard to compensation, healthcare benefits, retirement and pension issues, and Taft-Hartley fund consulting.
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