12: Designing Indirect Pay Plans

The Changing Times for Sick Time

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In the multitude of challenges facing employers in the midst of the COVID-19 pandemic comes the recognition that there is no ‘normal’ anymore. Existing business practices, such as the demand for a medical note from a doctor to justify an employee’s illness, are just not sustainable. When the public health authorities require that citizens stay at home and self-isolate if they have any symptoms of illness, the formality of requesting a doctor’s note seems ridiculous. As Human Resources professionals, we need to support and implement the changes for improved compensation practices.

Letting go of the old ways does not come quickly enough for some employers. The Tim Hortons fast-food chain made the news again for their unfortunate choices in compensation practices related to sick leave. As noted in this article, employees of the franchise continued to be required to provide a medical note to justify taking an unpaid sick leave day. After taking five days of unpaid sick leave, the employee would be fired. Needless to say, there was significant negative backlash when this practice hit the news and social media outlets.

It seems that the negative reaction pushed this particular employer into changing their sick leave and compensation practices. Five days after the first news article, the Tim Hortons franchise also announced a commitment of $40 million “to support employees” who are affected by COVID-19. As noted in this article, the company will pay employees who have the virus or are quarantined “up to 14 days.” The clear message from this updated policy was one of public safety, support, and recognition of the need for change in these unprecedented times.

Unfortunately, the journey on this new road did not last very long until once again, one of the franchise stores in Alberta hit the negative news cycle with this post. Fortunately, the note from the franchise owner was removed. The commitment to Tim Hortons’s new policy, including the removal of the requirement for sick notes, was re-posted in the public domain.

Change is hard. Forced change is even harder. These examples show how important it is to leave the old road behind us. Once this crisis is over, we must make the choice to stay on the new road as it leads to a safer, more sustainable future for us all.

Discussion Questions:

  1. In your opinion, how can a fast-food franchise implement improved compensation practices related to attendance management?
  2. Do you think the practice of termination after five unpaid sick days is fair? Explain your rationale.
  3. What types of HR-related supports should be in place for any fast-food franchise owner?

Pension Plan Dilemmas

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Mention the words “pension planning” to most people and the typical response is one of underwhelmed excitement. Before your own eyes glaze over at the thought of reading the rest of this blog post, imagine yourself in the future, having completed a successful career and entering into retirement. Do you see yourself as financially secure or are you in financial peril?

One hopes that the vision you have for yourself is that of financial security. The means to achieve that security are dependent on the fiscal planning decisions you make now, or that are made for you by your employer through the enrolment of employees in a pension plan.

As we know from our compensation studies, defined pension plans come in two categories.

The first is the defined benefit plan. This program provides for “retirement income based on a proportion of the employee’s pay” upon retirement. This means that an employee would receive a set amount of income, once they retire, based on a calculation of earnings that the employer has invested on their behalf. The employer is responsible for managing the investment.

The second is the defined contribution plan. This approach provides for “retirement income based on the accrued value of employer and employee contributions to the plan.” This means that both the employee and the employer pay into the plan on a set percentage. The employee can decide how the funds are invested. The income upon retirement is subject to strict regulations, and the amount the employee receives is dependent on the overall value of the fund.

Which one is better? There are conflicting evaluations for both types of plans.

A critique of the defined benefit pension plan is provided here. As noted by the author, defined benefit plans seem to be increasing in risk, based on numerous and evolving factors. This type of plan appears to be on the decline as an effective tool for ensuring financial security in retirement.

The risks that come from defined contribution plans are explored here. This author identifies the risks that may be in place should the employee not know how to invest or access the funds accrued on their behalf once they do retire. Defined contribution plans continue to be implemented as a preferred option for both employers and employees though, compared to the defined benefit plan option.

In either case, it is important that employees know what their options are well before the thought of retirement becomes a reality and, with it, the need for realizing a financially sound future.

Discussion Questions:

  1. In your opinion, should Canadian companies continue to offer defined pension plans for retirement security to employees? Explain your rationale.
  2. If you had to choose between a defined contribution plan and a defined benefit plan for yourself, which one would you choose? Explain your rationale.
  3. What other types of retirement planning alternatives could an employer provide instead of defined benefit plans?

A.I. in Employee Health Benefits

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All HR professionals are aware of Artificial Intelligence (A.I.) and its ever-growing influence on today’s modern organizations. Many organizations have used A.I. and its abilities in their recruiting programs, yet few have thought about A.I., and its predictive powers of data for designing and maintaining employee health benefits programs. Now, however, cutting-edge organizations are starting to do just that.

A.I. for health benefits is still very new; nevertheless, it is starting to become more pervasive in health benefits programs. We are all familiar with benefits chatbots that help employees with the more administrative aspects of navigating benefits, or how to submit a claim, but very soon A.I. and predictive data analytics are going to move way beyond that, and organizations have to prepare for the advantages and challenges that come along with great technological leaps.

Sam Barrett, in the article “How artificial intelligence is influencing the world of employee benefits,” discusses some of these new technological interventions, and the employee benefits considerations that go with them. For example, in the future, the predictive data power of A.I. may be used in benefits programs to help employees make healthier lifestyle choices for themselves, along with customizing recommendations for change to an employee’s benefits plan.

This could be very beneficial for the employee, because they’ll have a flexible health benefits plan designed just for them. What the results of this will be, is hard to know—it could increase the cost of the plan drastically, or, if employees’ lifestyles become healthier, there could be an overall cost reduction.

With every new technological advancement, there should always be consideration for possible problems as well. In this case, the biggest problem could come from breaches in security meant to protect private and sensitive employee data.

LifeLabs is a Canadian medical laboratory, which just suffered a cyber-attack, where 15 million patients’ health records were compromised. When an organization’s records are moved onto a digital platform, to be handled by A.I., how can an HR department guarantee that their employees’ private data will be kept confidential? This is a primary concern that must be addressed before any HR department plans to implement an A.I. system for benefits programs.

Additionally, there are even more difficult questions that need to be addressed before venturing down the path of A.I. for benefits:

  • Who owns the employee health benefits data? Is it the company, the employee, or the benefits provider?
  • What happens if the A.I. systems decide that an employee is not entitled to life insurance benefits, because their healthy lifestyle score is too low?

Depending on how organizations answer these questions, there may be a turning point to if and when A.I. and predictive data analysis are accepted in the workplace for usage in employee benefits programs.

Discussion Questions:

  1. Identify the advantages and disadvantages of the employee, the employer, and the benefits provider owning the employees’ health benefits data.
  2. Determine who you feel should own and control the employees’ health benefits data —the employee, the employer, or the benefits provider. Defend your position.

Sick of Sick Notes

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Everybody gets sick. Think about the last time you were sick. Perhaps you had a nasty cold or the flu which included fever, body chills, sweating, aches, pains, coughing, and a number of emissions from various body parts. Perhaps you were so sick that you could not go to work and you needed to stay home to rest and recover.

Instead of staying at home in bed, however, you had to go to your doctor’s office. Unable to get a same-day appointment with your doctor, you then had to go to your local walk-in clinic or to the hospital and wait for service in an already busy health-care space. You had to do all of this not because you needed treatment, but because your employer needed a note from a doctor verifying that you were actually ill and not able to go to work.

It seems a ridiculous scenario.

Unfortunately, it is one that plays out every day in workplaces and health-care settings across the country. Rather than focusing on priority patients who need urgent medical care and assistance, the employer requirement for doctor’s notes from employees, who are legitimately ill, clogs up an already overloaded health care system for no apparent purpose.

Why does this happen? A recent article published by Maclean’s magazine explores this question and provides some not very comforting responses.

Click here to read the Maclean’s article.

A more practical and responsible approach to dealing with employee illness and absence can be found through the design and implementation of a comprehensive attendance management program (AMP). An AMP forms part of an overall compensation strategy. It provides for both indirect and direct pay options that acknowledge the need for employees to be absent from work and promotes attendance at work in a proactive manner.

The AMP provides context and content for a reasonable workplace approach to the management of employee attendance and absenteeism. For example, instead of focusing on the requirement for sick notes from employees for every absence due to illness from work, an AMP would provide a layered approach, defining when, how and for what purpose sick notes are required. Most AMP’s outline the requirement for verification of absences from employees in the case of ‘patterned absenteeism’, rather than the single incident focus as noted in our sick note scenario.

‘The 5 Key Elements of an Attendance Management Program (AMP)’ provides us with a legal insight into the components of this type of program along with a rationale for implementing it in the workplace.

Click here to read about the insights for an AMP.

With clear compliance requirements, a good AMP lets us let go of the need for unnecessary sick notes. It gives us time and a plan that moves towards a healthy, wellness-focused approach in supporting employee attendance at work.

Discussion Questions:

  1. As an HR practitioner, what will you include in an Attendance Management Program regarding timing and requests for sick notes from employees? Explain your rationale.
  2. What types of employee sick-time costings would you include in the design of and budgeting for an indirect pay plan?
  3. Instead forcing employees to use ‘sick days’ for non-illness related absences, what other types of paid or unpaid leaves from work would you put into place for employees through an Attendance Management Program?

Compensating for Eldercare

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It is an undeniable truth that we all get a little bit older each and every day.

As we move along the aging path, so do our parents, at what seems to be an increasingly rapid rate. One day your parent is the way you have always perceived them to be – healthy, active, and independent. In the blink of an eye, that parent is suddenly not healthy, inactive and increasing dependent on others to get through the day. That other is usually a family member (you) who has to take on the role of caregiver to look after the physical and mental health of their aging parent.

While this is not a new trend for the Canadian workforce, the number of adult children who have taken on eldercare responsibilities continues to increase. According to a recent article published in The Globe & Mail, approximately thirty-five percent of Canada’s workforce have primary care responsibilities for one or both parents. There is no doubt that this percentage has a direct impact on organizational and employee productivity for those who have to take time off from work to care for their parents.

Click here to read the article.

While there are organizations that can offer a flexible work schedule or the ability for employees to work from home, many companies do not have a benefits strategy dedicated to workers with eldercare responsibilities. As noted in the article, eligible employees may be able access compassionate care benefits through federal employment insurance plans. The eligibility requirements, however may not be applicable in all cases. Most employees with eldercare responsibilities have to take time off from work without pay to attend medical appointments, emergency calls as well as attending to the day-to-day needs of their aging parent. From a compensation perspective, organizations should be looking at lost productivity costs balanced against the provision of both monetary and non-monetary eldercare benefits in order to reduce those losses.

This is a real compensation challenge for Canadian workplaces. With every challenge comes an opportunity to improve the situation. Hopefully effective compensation planning can provide increasing support to employees who have to care for parents who have spent their lives caring for them.

Discussion Questions:

  1. What would you include in an eldercare plan as part of a compensation strategy?
  2. If you had to take time away from work right now to care for an aging parent, what would you have to do? How would your pay and benefits be impacted?
  3. The article states that thirty-five percent of Canada’s workforce has eldercare responsibilities. How is this number reflected in your current (or most recent) work environment? What percentage of your current workforce has eldercare responsibilities?