Yes it does. Cutting salary is something that should only be done because of an extreme threat to the company’s survival. Once Foxy that the woman in question’s salary is X, she can’t go back and change it to X-Y because she screwed up.
While there seems to be mixed feelings about whether the employee in question should get ( X + Y ) salary w/o benefits, or ( X salary ) + ( Y benefits ), the consensus of this thread seems to be that:
(a) The company seriously f-u their handling of the choices by rolling that X + Y together, and
(b) If I can make out Foxy40’s near-incoherent comments, it looks like the employee’s choices will now be ( X salary ) + ( Y benefits ) or else ( X salary ) and decline the benefits – with no compensation for that at all – and this will now affect all employees similarly situated.
The handling of the case was muddled, leaving Foxy40 with no good “right” solution. (But it isn’t clear if it was just Foxy40 who did that in her department, or if it was company-wide policy.) But then Foxy40 took it up to the brass (CEO, HR, and the corporate lawyer) with the predictable clusterfuck result: Now the whole department will lose the choice to decline the insurance and get compensated for it. And to add insult to injury, Foxy40 is trying to lay all the blame on the employee (not entirely wrong), when she seems to have seriously f-u’d as well.
If something like that had affected me, I’d be updating my resume now. Foxy40 should probably be updating her resume too.
Total clusterfuck. That’s the problem here.
Total clusterfucks are what happens when you choose to make a huge chunk of someone’s compensation package dependent on an informal verbal agreement and don’t give them (or your company) the security and respect that comes with having your rights and responsibilities clearly laid out in a formal agreement. You are supposably running a company, not middle school yearbook club. It’s nothing but bad management when there are any areas for dispute about something as fundamental as what an employee of eight years salary is.
I’d say it’s sheer incompetent management, but my guess is that you benefited from having the employee in an insecure and informal arrangement, and not documenting it properly as a tactical move, and now you are upset that you got called on it. In any case, this certainly isn’t the individual employee’s fault. This whole thing was a ticking time bomb. You can’t put compensations in people’s base salary that are not their base salary.
The only difference is one of framing- and to my mind, saying it’s unfair to change her salary from (X+Y) to X while it would be perfectly fair to take that very same Y away as long as it was listed separately on a paystub is relying on a technicality. If I negotiate a salary of $200 a week and my employer pays an additional $50 because i waived insurance coverage, I am receiving $250 a week , whether it’s all on one line or two separate lines. And if I then want coverage, and the employer stops giving me the additional $50, I now receive $200 whether the paystub shows a decrease in salary or whether there is no longer a separate $50 adjustment for waiving benefits.
And, as usual, what this employee will really accomplish will be to make things worse for herself and everyone else- the company will apparently no longer cover 100% of the premium costs and they will almost certainly no longer provide any additional compensation to those waiving insurance coverage. Unless there is a contract ( union or otherwise) an employer can lower an employees salary anytime they want to , so the company is likely well adjust the salary of any other employees who were being compensated for waiving benefits.
My question is how does the informal arrangement take into account increases in premiums.
If the cost of coverage goes up, then the company eats that extra cost for those employees receiving benefits. The employees don’t get anything “extra”, but still their compensation has increased in value.
And then you remember that some of the employees don’t receive benefits. Their benefit is returned to them in the form of money. But if the sticker price of the benefit increases, would they see a concomitant increase in their paychecks? I think they should, but I don’t know how these things work.
No, it’s not a technicality. Salary and wages are not taxed at the same rate as benefits, nor are deductions applicable to either the same. The fact that those numbers appear in distinct boxes with distinct codes on a W-2 indicate that they are, in fact, distinct. Never mind that every company in the US is required to provide an exact accounting of their benefits to the Department of Labor every year, certified by a licensed accounting firm.
Retroactively changing from (X+Y) as salary to X salary + Y benefits (if done legally, as required, and without a wink and a nod) will require the company refiling IRS and DoL forms, recertification by a CPA (at least), and the filing of amended tax returns by the employee (for three years, IIRC. Not sure about the company’s retroactive obligation.)
Absolutely false. There are cases when an employer can reduce salaries, but they’re far from simple. Absent an employee’s consent, very specific conditions must be met. And then all kinds of fun happy things come into play. Is the employee truly salaried, or paid as if salaried but at an hourly rate? Is the employee exempt or non-exempt? If salary reduction is valid, will it automatically cause the employee to be reclassified from ‘exempt’ to ‘non-exempt’?
And can you imagine all of the hours put in at Treasury, Labor, company, company law firm, accountant, employee law firm, etc. And what those hours cost the taxpayer in the end?
To borrow from Senegoid: “Total clusterfuck. That’s the problem here.” And guess who precipitated said fucking of clusters?
Yea, I was wondering this too… Do does that waive had their premium-rebate adjusted, or was it based on what the premium cost was the first year they waived it? If so, that woman’s “premium rebate” is 8 years old, and I’m sure overall the premiums have increased over the past 8 years.
Also, since she was already receiving “extra” money, the comment about the salaries may be because she herself may have declined or not asked for better raises in previous years because she saw that she was already getting comfortable money due to the “premium-rebate” (that was not listed as a separate line). So by slashing her premium-rebate, she will now may be earning less than others in her position, which is also not fair.
This is the worst managed company I’ve ever heard of. I guess the fact that the CEO needs to be told that paying 100% of healthcare costs is unusual explains why s/he is blind to the incompetence of the manager.
It is a technicality. What can be non-taxable is an employee’s contribution to health insurance benefits. And the provision of other benefits, like a company car, can be taxable. That’s not what’s being discussed here. This is like an additional payment based on assignment, location or shift. It is additional wages and is taxed the same as wages. It does not appear on a separate line of a W-2. It often appears on a separate line of a paycheck for clarity and administrative convenience as do my assignment differential (which I lose if I move to a different assignment) and my location pay ( which I lose if transfer to a different location) although they are included in the wages box of my W-2.
I may be mistaken, but I believe the OP was talking about changing the salary going forward, not retroactively. The salary can’t be changed for time already worked.
I didn’t say it was a good idea , or that it didn’t have a potential to cause problems or that it might not be expensive or that it wasn’t a clusterfuck or even that it wasn’t the OP that caused it.
What I said was it isn't unfair to the employee who knew she was getting the extra money because she waived the insurance to no longer get the money when she takes the insurance.
You are absolutely correct. I’m not sure how, but I got off onto an completely irrelevant tangent concerning retroactive changes that aren’t even part of the OP. Maybe I should stick with reading what’s on the screen and ignore the voices in my head. My criticisms prior to my last post remain, however.
So on that note, I’ll exit thread left.
I agree with even sven and others that this was you and your company’s fault and you not only penalized the person in question because of plain shortsightedness, it sounds like a number of other people hit as well for something they had no control over. This is the second situation of this type that you have brought up here and it brings up more questions than answers. Are you sure you want to be a people manager because it sounds like you handling some core parts of the job incredibly ineptly?
OP, if you haven’t completely exited, my take on it is she accepted extra cash instead of preminum payment and now she wants premium payment so no more extra cash. Go back to the very first month and start a monthly deduction for exactly how much was added. Tell her she’s lucky her raises were based on this higher salary, and if she doesn’t want the insurance she doesn’t have to take it.
Seems to be straight up an, ‘either / or’, situation and should be presented, as such, to her, at all times.
If she wants to purchase her own insurance she can keep all the money and seek out whatever it is she can afford.
OR,
She can have you purchase it, on her behalf, through your provider, just like the other employees do. Her salary will reflect that she now pays into the plan (she wants to be a part of), as it does for the other employees. She is effectively asking for special treatment, that you need to deny.
Noodles is spot on, she needs reminding she needn’t take the insurance, at that cost, if it disagrees with her.
I’m really not seeing how it’s hard, though. Seems quite clear cut to me. “No. Sorry. That’s not how it is. How it is; either / or!”
(If you set this precedent with this woman, rest assured, you’ll be asked (quite rightly!), to match it for every employee.)
What’s missing in this discussion is how good an employee the person is and how difficult it might be to replace her. To me, that is what determines whether you give her what she wants, try to meet her somewhere in between (like letting her keep 6% of the salary bump) or tell her to go pound salt. Obviously there is no employment contract involved here, or else there would be no issue. Without a contract, the employer is not legally bound to pay anyone anything. The only constraint is to keep the good employees happy.
Unless, of course, eight years ago $300 was added to her salary because that was the current premium cost. She’s kept the $300 bump. Now, premiums are $600/month, and that’s what is going to be deducted, even though her “bumps” never went up with the premium increases.
But if the other employees are all currently paying $600, then that’s how it is for them, and how it ought to be for her.
I was hardly on the employee’s side at the start of this, but basically because a woman didn’t remember something from six years ago your company is going from paying a stipend for not taking health insurance to dropping the stipend and lowering the amount of employer contribution for health insurance.
Is the company in some sort of financial crisis that this is necessary for survival? Because if not, all you’re doing is screwing employees, in part because of management’s mistake.
It’s people like you that fuck it up for everyone else. The OPs company tries to do the right thing. They now realize that they didn’t quite document it properly. Never mind. Our ability to learn and improve is what makes us different. I’m sure they’ll document better next time. In the meantime, the employee knew well the spirit of the arrangement. So it should be followed.
Perhaps, however, in the spirt or learning the company only. Drop salary by 50% of the premium as a gesture of goodwill
There is a key point that some people are missing. Benefits like medical premiums aren’t usually considered at all when it comes to comparing different employees’ salary. It is quite common for them to be very different between employees and that doesn’t affect base salary and raises to that.
The most common way that they are wildly different between employees is when some are single, some have domestic partners, and some have whole families. The typically arrangement in the U.S. is for the employer to pay about 2/3’s of the TOTAL premium regardless of family size.
How often have you ever heard an employer say, 'Congratulations on your marriage/new baby! Here is your base pay reduction to offset all the extra money your medical insurance is going to cost the company now."? That is borderline illegal in some circumstances and simply not done in my experience (and I once worked in benefits consulting with many large companies). The same is true for other benefits like dental insurance and others.
Benefits are set up for everyone in the company as a group and anyone this is eligible can take advantage of them and should not have to worry about how it will affect their base pay (in a well run company). That is the whole idea behind their design.
No, if that’s the case, they are currently paying 0 and she is paying -300. If she gets a $600 paycut, then she will be paying $300 more for her benefits than anyone else.