Why can’t things just be simple? Every employee performs his or her job to the best of their ability day after day without asking for special shoes, or chairs or weeks off in the Caribbean to mourn their second cousin twice removed?
Any boss knows that it just doesn’t work that way. Along with attempting to make a profit in a struggling economy and keeping everyone employed and as happy as possible, there has to be some drama along the way.
This morning I had a question that truly stumped me and that doesn’t happen too often. So who else to turn to but you folks, the experts on everything from super powers to finger prints.
Our company is very generous with benefits for full time employees. We pay 100% health insurance for each employee, full short term disability, life insurance and have employee contribution options for dental and vision.
Most full time people coming on board elect to accept the free benefits. However, there have been a few throughout the years that were covered in full by their spouse’s insurance and wanted to waive our coverage. (Usually they felt the spouse had a better plan.) In fairness, those folks had the equivalent of those premiums added to their base salary. Everyone’s happy, right?
One of these people has been with the company over 8 years. This morning she came to me and explained since her husband’s premiums have become too expensive, she would like to be added to our plan during open enrollment next month.
I reminded her of her initial agreement and she looked at me incredulously when I stated that I wasn’t sure if we would have to adjust her salary or not. I told her honestly, I really don’t know as we have no policy on this and I would have to explore it further. She doesn’t think it is fair that she should lose any salary since this was years ago and she doesn’t feel like she has received as many raises as she should have throughout the years. :dubious:
I have spoken to our accountant and insurance adjuster and they weren’t much help. The two things I have found it are; legally, we can cut her salary and legally we can’t force her to waive coverage if we offer it.
Adding the insurance with no offset is the equivalent of giving her a 12% raise.
Probably too late to make the clarification, but the amount shouldn’t have been described as being added to her base salary. Rather it was a stipend in lieu of accepting insurance coverage.
Consistently describing it this way would make it clear you can’t have both.
I really don’t see how you can’t do your best to describe that to her now because unless there’s some other reason her salary should be 12% higher, she shouldn’t receive the stipend if she gets the health insurance.
You have a very generous company, especially if you get the additional premium added to your salary if you waive the benefits. I am not aware of any company in my area that does that.
Well, I would explain to her that whether she realizes it or not over the past eight years, she has been getting a higher salary to offset the fact she chose not to take the benefits. Give her the choice of keeping the salary and staying with her husband’s benefits or else taking the cut and getting the benefits. The fact they are 100% covered is a huge incentive and one that she should understand is unusual, in and of itself, especially in this economy.
While I would certainly make this a written policy going forward should it ever happen again, I don’t think the fact you don’t have it in writing now gives her any basis for suing you or doing anything other than temporarily hurting her feelings.
Another vote that you have to clean up your policy and procedures. The amount paid to the waived employee in lieu of benefits should be a specific separate credit, easily identified as for that purpose. It should not be rolled into base pay. All of your documentation should clearly spell that out.
For the existing employee I would strongly consider biting the bullet and leaving their base as-is, perhaps with the agreement that there will be no raise in the next cycle to even it out.
Suppose that, instead of giving any additional pay when someone waives benefits, in the past you had not done that at all. Employees could choose benefits or waive benefits, their choice. An employee waives for 8 years then chooses to enroll. Based on your benefit offerings, they would get the advantage of all of the employer paid benefits at that point - an effective 12% increase in their overall compensation, based on your estimate. Would you attempt to penalize this employee in this circumstance, in order to make it “fair”?
Stuff like this used to make my head hurt back when I was a manager.
Bottom line is that you are not cutting her salary, or at least not cutting her compensation. You are buying health insurance for her with it, because it will save her money (over continuing to use her husband’s coverage).
I think your tactical error was to say you weren’t sure if you would have to adjust her salary. You obviously do - why should she get her benefits for free?
Yeah, I don’t get more pay even though I opted out.
OP, the employee is essentially asking for a raise using some distorted logic. Too bad people act like that. If it was a rational enough person I’d restate the matter in that way. “You feel as if you deserve the increased pay without regard to the insurance coverage. We would have to treat that as a request for a raise”. Probably followed by a short period of time and then “I’m sorry we can’t give you a raise at this time because yada yada yada”. It seems possible this person would not receive this well, so it’s time for someone to make it clear that the additional money is based solely on participation in the insurance plan. It should appear in their records and pay stubs as a separate item.
So her argument isn’t really “it’s not fair to deduct the money from my paycheck now”, it’s “I deserve more than I’m currently earning”. I’d approach it as a straightforward request for a raise.
And yeah, time to go clarify some stuff in your documentation.
I think the employee has a valid point. Do managers take into account that she has been waiving her health insurance for these 8 years when they hand out raises? Or do they look at her pay, at her cow-workers pay, and try to pay everyone evenly based on merit without taking this into account? I’d expect the later.
If it’s really the former, I’d expect that you’d have documentation of how raises were calculated, showing this taken into account. At least for a few years, maybe not all 8. Do you have this?
Ultimately, what everyone else said, that this needs to be a separate line item.
Yep, this exactly particularly since she’s grousing about her lack of previous raises.
If she deserves a 12% raise, let it go. If she deserves a 3% raise, offer to add benefits and only deduct 9% from her current salary. If she deserves no raise because she’s a shmuck or just received one or whatever, then tell her she can take the pay cut and get benefits, or stick with her husband’s plan.
Also, like everyone else said, tidy up your paperwork a bit. However, unlike the bereavement leave situation, I think you do have the possibility of creating a bad precedent here.
No, raises are pretty much cost of living combined with company profit plus merit. However, I guess if we think of it this way, her base was higher so her percentage of cost of living was higher and she ultimately was given a bigger increase than others.
You guys are right. I think I am just going to ditch this entire thing allowing people to waive it and join any time during open enrollment in the future.
Salary is usually decided before the person is hired and then, once hired, the new employee enrolls in the various benefit programs. For this reason I find it hard to believe that this person wouldn’t notice a 12% bump in pay right after starting and wouldn’t have had it made crystal clear by HR about the policy. But then we also had someone here recently who failed to notice that 401K contributions were’t being taken out for two years, so I guess some people just choose not to pay attention to this stuff and expect others to hold their hand and wipe their ass through life. In short, I think she’s a liar and is now just using the “didn’t get the raises I deserved” as a distraction because she was ignorant of the fact that her pay would decrease once she enrolled in the benefits.
After 8 years it’s likely she just forgot that that’s your policy, so she forgot to include it in her math when figuring out how expensive her husband’s insurance is, and got a bad shock when you reminded her. So she reacted badly.
Agree that the paystub should treat the insurance premium amount as a separate line-item distinct from wages. And whether or not she deserves a raise should be treated as a separate issue. I hope this policy is documented somewhere? Employee handbook? Benefits handbook? In which case, just point out to her where it says that the cash value of the insurance premiums are returned to the employee if they opt-out of insurance coverage. It’s not part of her salary, it’s her insurance premium, which she can either keep as cash without the insurance, or use to pay for the insurance.
What I’m saying is - you would not cut her salary if she chose to go from waive to benefits as I describe in scenario #2, even though you would be increasing her overall comp in this scenario. Correct?
I’d be careful of this one too. Traditionally, in a benefits plan design, the purpose of open enrollment is to allow employees to make changes. You can usually restrict mid-year changes to only be allowed if there is a family status change - including a spouse losing coverage. But open enrollment is just that - open. Are you suggesting that someone must make the choice at time of hire and then they’re stuck with it for their entire duration of employment? Really?
The insurance premium should not have been added to base salary; it should have been a separate line item, just like the insurance would be. My company used to give the premium amount to those who waived insurance, but eventually dropped that policy a few years ago, so now those who waive coverage get nothing. It really wasn’t a big deal when they ended it, because it was clearly spelled out, and the extra money clearly had absolutely nothing to do with raises.
Actually this is the way insurance works. Unless you’ve had a circumstances change such as marriage, divorce or a child, you can’t just drop and add insurance when ever you want. Only once per year.
It hasn’t come up before because people don’t usually want to screw up a good thing. I have a feeling she isn’t going to be the most popular employee around the office when all this changes. It only takes one.