Compensation Planning

Benefits Fraud – It’s a Fact

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Stefan Malloch/Shutterstock

Q: What happens when compensation monitoring goes awry?

A: Benefits fraud

B: Costly consequences

C: Negative public disclosure

D: All of the above and more

If this was a multiple choice question, the answer is D: All of the above and more.

A real-life example for this response comes from the Baycrest Centre in Toronto. In July 2019, the centre announced that 150 employees were terminated from the organization (resigned or let go) as a result of their participation in a long-term benefits fraud scheme. Allegedly, these health-care employees had defrauded their benefits plan of millions of dollars over the past eight years.

Click here to read about the allegations of benefits fraud at the Baycrest Centre.  

Unfortunately, benefits fraud is not something unique to one particular organization or sector. In 2016, the Toronto Transit Commission (TTC) hit the media headlines with a very similar and significant employee benefits fraud problem.

Click here to read about the TTC’s benefits fraud investigation.

In fact, the benefits industry continues to deal with increasingly creative approaches by employees who participate in fraudulent benefits activity resulting in losses of billions of dollars.

Click here to read about the impact of employee benefits fraud on the insurance industry.

As noted in the articles, benefits fraud is theft. It is stealing. It is exactly like taking money from someone else’s wallet without their express knowledge or permission.

Unlike other crimes, however, it is rare that perpetrators of benefits fraud are charged with a criminal offense. Until recently, it was also rare for employers to act on what was sometimes perceived as an act of ‘entitlement’ on the part of employees.  This perceived inaction on the part of employers does not come from a lack of interest or an act of conscious negligence. It may come from a lack of rigour in monitoring or systems controls which must be included as part of effective compensation management planning.

Not all employees steal from their employer. That is a fact. Some employees do steal from their employer. That is also a fact. Who pays for the consequences of stealing from their employer in the form of benefits fraud? We all do. That is the ultimate and most costly fact. Good compensation planning should take all of these facts into consideration, both positive and negative, in a proactive way so that the actual benefits of an organization’s benefits plan provide support and assistance for those who need it the most.

Discussion Questions:

  1. What types of monitoring systems or controls would you put into place as the Compensation Manager in these types of situations?
  2. The Baycrest and TTC articles state that this type of benefits fraud has been going on for years. How would you go about changing the organizational culture and a possible ‘entitlement’ approach in each organization?
  3. Is benefits fraud a ‘victimless’ crime? Explain your rationale

Time for Baby

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There are so many challenges and opportunities that come with the joyful arrival of a baby. People become parents, single or couple units suddenly become a family, and life changes dramatically for everyone involved.

yavi/Shutterstock

Along with all of these changes, a new parent must also choose whether or not to take time off from work in order to care for their child. This may seem like a straightforward decision, especially for mothers who give birth and are caring for a newborn child along with their own post-birth recovery.

However, there are two challenging considerations that all new parents must face. First, whether or not they can afford to the take time off from work financially; and second, whether or not they can afford to step off their personal career trajectory for an extended period time.

There is no doubt that taking time off from work to have a child is costly. As the cost implications impact both the individual employee and the employer, Canadians can access childcare related benefit programs offered by the federal government. These benefit programs provide both financial subsidies and time-related provisions that allow new parents to spend more time at home. Recently, the federal government introduced new provisions that allow parents to extend their time at home from twelve to eighteen months. There is also a new benefit offering an additional five weeks of leave for those choosing to share parental leave benefits. These are federal government programs for which new parents must apply and meet eligibility requirements order to receive the monetary benefits.

An extensive review of the impact of maternity and parental leave benefits is provided in a recent article published by Benefits Canada.

Click here to read the article.

Click here to read about the additional five week parental leave plan.

As noted in the article by Benefits Canada, with the new 18-month extended benefit for parental leave, the monetary payments are at 33% for the duration of the leave in comparison to the traditional twelve month leave during which time the parent can receive a maximum of 55% of their total salary. The article notes that the uptake for Canadians accessing the 18-month benefit is slower than anticipated, which may not be surprising if individuals simply cannot afford either the reduced benefit and/or the increased time away from work.

The additional five weeks of parental leave benefits also comes with a catch. New parents must decide whether to use it or they will lose it, based on their eligibility requirements and by determining which parent will be able to access this new benefit.

In order to alleviate some of these financial impacts, employers can choose to offer a financial top-up for employees who are in receipt of federal parental leave benefits. Again, this is a cost decision that an employer can make based affordability.

All of these considerations must be taken into account in the context of thoughtful compensation planning when determining how much support in terms of time and money can be provided for new parents.

New parents do need all of the support that they can get, so they can focus on what is truly important – their new child.

Discussion Questions:

  1. Do you agree with the use-it or lose-it requirement for non-birthing parents eligible to take the new the five weeks of parental leave? Explain your rationale.
  2. In your opinion, why is the uptake for new parents taking maternity and parental leave time in Canada so low?
  3. Identify three barriers and three benefits to the employer who provides top-up provisions to maternity and parental leave plans.

The Perks of Perks

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Employee incentive business concept as a group of businessmen and businesswomen running on a track towards a dangling carrot on a moving cable as a financial reward metaphor to motivate for a goal
Lightspring/Shutterstock

When considering the components of a compensation strategy, indirect pay options can provide a significant boost to the value of the overall plan. There is no doubt that both the employer and the employee seek to establish financial stability through competitive base pay components in the form of an annual salary or an hourly wage. Salaries and wages, forming part of the monetary components of the compensation plan, are built on the premise of a fixed amount. As a result, once the compensation plan is put into place, it usually does not need too much tinkering over time, subject to a periodic strategic review.

This is where the value of indirect pay options comes into play. If the monetary plan is bound by  financial constraints and budgets, sometimes the indirect pay plan can expand the options for compensation without incurring significant additional costs. This does not mean that indirect pay plans deserve lesser consideration in the planning stages. In fact, indirect pay plans need a higher level of scrutiny and due diligence in order to ensure that they provide their intended value to the workforce.

Further, the flexibility of indirect pay plans allows for the creation of motivational incentives that can be adapted based on changing organizational need.

A recent article posted by B2C (Business 2 Community) outlines a seven-step approach to using indirect pay plans effectively for short-term gains as part of a long-term rewards system.

Click here to read the article.

As noted in the article, indirect pay plans can include monetary items such as bonuses or commissions which must be included as part of the funding allocated to the organization’s compensation systems. More importantly, non-monetary incentives can provide a creative push that achieves increased productivity and high employee engagement without having a negative impact on the bottom line.

These types of plans depend on the inputs of adaptability, focus, and commitment in order to achieve an output of successful rewards for all.

Discussion Questions:

  1. As the Compensation Specialist for your current organization, outline three short-term non-monetary rewards that would provide effective incentives to boost morale.
  2. What types of measures can the employer put into place to ensure that incentive planning adapts to the changing needs of employees?
  3. In addition to a base salary/hourly wage, what types of incentives are important to you as an employee?