So it seems my last post (timely as it was), which mused about the proposed HIRING Act of 2010 was trumped by an announcement that President Obama had decided to jump on the bandwagon with his own proposal.  In his proposal, The Small Business Jobs and Wages Tax Cut, outlined on Jan 29, 2010 is intented to kickstart new hiring by small businesses.  Under Obama's plan, small businesses would receive a $5,000 tax credit for every new employer hired in 2010.  This would be capped at $500,000 per business and $250,000 for start-ups.  The credit would take the form of reimbursement for the increase in Social Security Taxes paid on real increases in their payrolls, creating what was referred to by the White House as a "de facto payroll tax holiday".  Like the HIRING proposal I mentioned in my last post, this credit would be claimed on a quarterly basis but unlike the other proposal, explicitly states the method of renumeration.

President Obama claims that this proposal will be worked into the various other proposals that have already advancwed in Congress, such as the HIRING Act of 2010 and the Jobs for Main Street Bill of 2010 (which was approved by the House on December 16 and would be paid from TARP funds as part of the Emergency Economic Stabilization Act of 2008.  The Small Business Jobs and Wages Tax Cut carries the blessing of Morgan Stanley, the Economic Policy Institute, the Small Business Majority, and a number of leading economists.

What do these mean for us?  First, the President's proposal is specific in that the credit is for "Net Jobs Created".  In other words, if you lay off 10 people and hire 5 in 2010, you are not eligible for the credit.  Your business would be eligible for credit an increase in "Net Gross Pay" as well, providing the proper incentive for you to do so by eliminating the proposed increase in your employer share (6.2% of the Employee's Gross Wages up to $106,800) of the Social Security Taxes.  This proposal seems sound in the sense that the employer cost to bring on a new employee is lowered significantly and if you assume that the employee is hired with the intention of either delivering new revenue, or new growth to the business, then that means that the cost of doing so hs just come down signifcantly for  2010.  As well, if your company has increased revenues in 2009-2010 and you now require new employees to fulfill the obligations created to your clients by that growth, then your cost of labor has decreased significantly, at least for 2010.

But is it sustainable?  What happens if I as a business owner get used to the lower cost of labor, and as a result, must meet the reality of "newly" realized employer taxes in 2011?  Not if we are betting the jobs growth will create economic growth and the resulting increase in employment opportunties.  But if that economic growth does not happen, won't we be back in the mode of trimming headcount again?  Which leads me to my second concern about this plan:  while the cost to employ is decreased in 2010, the risk of hiring does not in the sense that employers still must bear the pain of supporting their State's unemployment burden, which can increase for a business if the new hire "doesn't work out".  In other words, most State Unemployment Agencies are under pressure to grant benefits to the unemployed even if the reason for unemployment was justified.  This means that the burden again, goes to the employer who is funding the unemployment benefit. 

So could this plan be the beginning of the end for the employer Social Security Tax, and potentially a reprieve in unemployment benefits...?  Don't count on it.  And as I have said before, there is still healthcare to deal with.  But all, in all, the idea (and the fact that we are talking about it), is a good start.

      By Cheryl Barbato

So you need to do some hiring.  You want to do it quickly, but at the same time you need full confidence that you are bringing the very best talent into your organization.  Recruiting should be viewed as a business strategy, not just an operational task.   I recommend taking a step back from the constant need to “put out the fires” and examine the engine you have in place for recruitment at your organization. 

Increasingly, companies are turning towards a unique solution, particularly in these times of uncertainty.  Working as an extension of your company, an outsourced recruiting partner is quite valuable.  Whether you fully outsource or augment what you already have in place, they will get to know your culture, take the time to understand your business goals and help you to streamline your process to ensure optimal hiring. 

A properly managed outsourced recruitment solution offers many benefits that can improve your business. 

Decrease Time to Hire

Due to the efficiencies that are brought into the mix with an outsourced provider, you will save time.   You will avoid the need for hiring, training and retaining an internal team.  While streamlining your recruitment process, you will also see the development of best practices which will cut out time in the process, leading to less lost candidates and the ability to bring the most desired talent on board more quickly. 

Increased Candidate Quality

Because contingency fees are not involved when working in this capacity, it automatically sets up a more pleasing scenario for a candidate.  Candidates often say they feel like they are just a dollar sign and being bullied into jobs that just don’t feel right.  Not only isn’t this the case, but because of the approach of many outsourced partners, you will be able to receive honest and open feedback through this unbiased intermediary. 

Reduce Cost

Outsourced recruitment decreases not only your direct recruiting costs, but also can save on recruitment search tools and advertising.  Additionally, you will be able to cut back or even completely eliminate those skyrocketing third party agency fees. 

Flexibility and Customization

Often, outsourced recruitment programs can be customized and offer flexibility.  As your needs evolve, many programs can usually be adjusted to coincide with changes.  A solid recruiting partner will not be static.  They will provide continuity of the team and at the same time be able to bring on professionals with varied subject matter expertise as needed.

Whether you are an emerging company, a mid-sized firm or a Fortune 500 organization, you have options!  I encourage you to take a look at your current situation and don’t be afraid to get creative on your approach to strategic and effective hiring.

About the Author

Cheryl Barbato is a founder of Talent Retriever, a recruitment consulting firm. She can be reached at 781-425-5571 or cheryl.barbato@talentretriever.com.

      By Jeffrey Siegel

Employers doing business in New Hampshire must now be aware of a state law requiring employers to provide written notice to employees in advance of a mass layoff or plant closing.  The New Hampshire Worker Adjustment and Retraining Notification Act (“NH WARN Act”), took effect on January 1, 2010.  See RSA 275-F:1, et seq.  The NH WARN Act is patterned after the Federal WARN Act; however, there are some important differences between the two laws.  For example, the NH WARN Act applies to employers who employ 75 or more employees, whereas the Federal WARN Act applies to employers who employ 100 or more employees. 

The NH WARN Act requires covered employers to give 60 days advance, written notice to employees if there is an employment loss at a single site during a 30 day period of at least 250 employees or at least 25 employees if that constitutes 33% of the full-time employees.  Employers must also give notice if there is a permanent or temporary shutdown of a single site of employment in New Hampshire if the shutdown results in a loss of 50 or more full-time employees.  Employers must give notice to the affected workers, their union, the chief elected official of the municipality in which the mass layoff or plant closing occurs, the New Hampshire Attorney General, and the New Hampshire Commissioner of Labor.  The NH WARN Act provides limited exceptions to the notice requirement in the following circumstances:  (1) the employer is a faltering company and was actively seeking capital;  (2) the need for notice was not reasonably foreseeable; (3) the plant closing is the result of completion of a particular project and the employees were hired knowing that their employment was limited; (4) the mass layoff or plant closing was necessitated by a natural disaster, act of terrorism, or physical calamity; or (5) the layoff or closing constitutes a strike or lockout not intended to evade the NH WARN Act.   

An employer who fails to give proper notice is liable to each employee who lost his or her employment for back pay, the value of the cost of any benefit that the employee would have been entitled to, including the cost of medical expenses incurred, that would have been covered under an employee benefit plan, and attorneys’ fees.  In addition, the Commissioner of Labor may asses a civil penalty of up to $2,500 and/or $100 per employee for each day of noncompliance.  Lastly, unlike the Federal WARN Act, failure to provide sufficient notice under the NH WARN Act allows state officials to place liens on the business revenues and real and personal property of violators.

Employers must carefully review the requirements of the Federal WARN Act and state plant-closing laws, including the NH WARN Act, when determining the proper course of action during a mass layoff or closing of a facility. 

About the Author

Jeffrey S. Siegel, Esq. is an attorney with Morgan, Brown & Joy, LLP and is a member of the bars of Massachusetts and New Hampshire.  Jeff may be reached at (617) 523-6666 or at jsiegel@morganbrown.com.  Morgan, Brown & Joy, LLP focuses exclusively on representing employers in employment and labor matters.

On January 13, 2010 a new bill was introduced to Congress, HR 4437, under the name Hiring Incentives to Reinvest and Incentivize New Growth Act of 2010, or HIRING Act of 2010.  Intended as an addition to the same section of the IRS Code that provides credits to first-time homebuyers, its intent is to grant a 15% tax credit to any employer who expands their payroll by 3% in any calendar quarter of 2010 and a 10% tax credit to any employer who expands their payroll by 5% in any calendar quarter of 2011.  The credit would be paid quarterly so benefits would accrue to businesses more quickly.  The intent, of course, is to get businesses to hire more employees, restore or increase employee pay and increase employee hours.

According to the wording of the bill (see link in preceding paragraph), if my company's total gross payroll in Q1 2009 was $100,000 (for easy number's sake) and my total gross payroll in Q1 2010 was $110,000, then I would be eligible for a credit of $300.00 under the following formula:

• Wages Q1 '10 $110,000 - Wages Q1 '09 $100,000 = $10,000
• 3% of $10,000 = $300.00

What isn't so clear is that whether this credit will be against taxes to be paid to the IRS on a corporate return, or perhaps some form of a credit against employment-related taxes. Since the bill explicitly states that the benefit will be paid quarterly so the business realizes the benefit more quickly, that leads me to believe that it would be against employment-related taxes.  So is the intent to short the employer-paid portion of FICA?  Unlikely.  That is the only portion (other than Federal Unemployment Tax) that could be credited on a quarterly return.  The text of the bill is notoriously unclear on this point. 

Since most small and medium-sized businesses (those that constitute the largest portion of taxpayers and employers in the US) only file tax returns with the IRS on an annual basis, this leaves me to wonder whether this is a credit that would have to be explicitly filed for on a quarterly basis-separate from the process that is the status quo- which in itself may make the time and effort not worthwhile.  And as is standard practice with many S Corporations, many try to show no profit at the turn of their fiscal year so to avoid double-taxation, so there would be again, nothing to credit. 

To be fair, this bill was introduced less than a month ago, will be subject to much debate and evolution, and could have a very positive effect on the employment situation in the US.  But this is a classic example of the devil being in the details.  If the resulting change to the Tax Code is a SMB friendly process for both earning and realizing the credit, then it should be very effective and a win-win for employers and employees.  But should it become a credit not worth persuing, or "toothless" in its benefit, then like much of the other recovery legislation proposed or enacted, its potential benefit will have been lost in translation. 

Now onto healthcare! 

In my last entry, I pontificated about the pro's and con's of the Social Security Administration's eVerify system.  I solicited your commentary on the program, and whether you thought it was a good or bad thing for our employers, and our country.

Well, indirectly the SSA has chimed in.  In a January 18 article published in the Washington Times, an audit conducted by the Inspector General concluded that during 2008 and 2009, the Social Security Administration itself did not eVerify its nearly 20% of its own prospective and new hires.  It also failed to eVerify another 18% within the three days of hire allotted time frame by the program.

What makes this so bad is that all government agencies are supposed to run their new hires through this system, and the SSA is the agency responsible for the program.  It seems to be a classic example of "Do as I say, not as I do".  I am not sure this is the kind of Government role modeling the Department of Homeland Security had in mind when it launched the program.  They either 1.  Believe they are above the very regulation they are tasked with implementing or 2.  Are so procedurally inept that they cannot comply with their own mandate.  You be the judge.

Jim Harper, Director of Information Policy Studies at the Cato institute was quoted in the article.  He states quite accurately, "When this happens in the Government sector, well the upshot is an IG report.  But in the private sector, you are talking about investigations and penalties."

It used to be that when you hired an employee, you relied on the information they provided with their I9 as proof that they had the right to work in the United States.  This proof took the form of various sources of identification issued by the federal government, like a passport, a driver's license or a social security card.  In other words, if they could meet the criteria of the I9 that would be enough for the employer to have "done their part".  In reality what this meant was that you could hire an employee in January who provided you with his or her "proof".  If you were in compliance, you would then retain copies of the W2 and I9 (as well as copies of the identifiication), report this information to your payroll provider and they in turn would report the employee to the State in which the employee was working, to meet that State's (and this is the case in all 50 states) New Hire Reporting requirement.  The chief purpose of the State's New Hire Reporting requirement was to track down deadbeat parents who have not fulfilled their child support duties, and other individuals whom the state and federal government. 

Given the assumption that the employee in question did not have an outstanding obligation to fulfill from the State or another state (they keep a nationwide database with this information), the employee was allowed to work, and be paid for a significant amount of time.  But come the next January, when W2 files are transmitted for the previous year and the IRS and Social Security Administration compare notes, they verify whether or not the SSN provided by that employee matches the employee in question.  Over the last 10-20 years however, there has a dramatic increase of instances of what the Social Security Administration calls an "SSN Mismatch" , and now that the department of Immigration and Naturalization has become part of the Department of Homeland Security, things have changed.  This meant that the employer, having potentially paid this individual over the course of the year, invested time and effort in training, etc, now has to deal with the termination of what may be a good employee, as well creating turnover in a position that was supposedly stable.  It costs time, money effort and hassle for the employer who was in compliance.

There is a new system now in place with the now U.S. Citizenship and Immigration Services, called eVerify, which is similar to the State's New Hire Reporting but with some important and dramatic differences.  It is the child of the IRCA-Immigration Reform and Control Act of 1986, and the IIRIRA-Illegal Immigration Reform and Immigrant Responsibility Act of 1996, and like most things government-mandated, has taken some time to evolve.  First, as of now, it is a voluntary for more employers, and is only required by  federal agencies but also any company who is engaged in business with the U.S. Government.  Every participating employer is required to sign a Memorandum of Understanding that requires the employer to safeguard the information it receives and acknowledge that this information is governed by the Privacy Act and Social Security Act.  The employer or their reporting agent (like a payroll company) would submit data upon hire of new employees for verification, or an "instant match" of the employee's Social Security Number against the Social Security and Department of Homeland Security databases to make sure the employee is authorized to work in the U.S.  The mandated employer would be required to do so as soon as a job offer is accepted and no later than three days after the start of employment. 

The returned result can be an "Employment Authorized"-when there is a match, or a "Tenative Non-Confirmation"-when the information does not match and then the employee is given the opportunity to contest the result.  Whether contested or not, if the final ruling is a "Final Non-Confirmation" then the employer must terminate the individual immediately or notify the DHS that they cotinue to employ the individual. 

On paper, this solves the problem of investing in an employee only to find out they are not eligible to work in the U.S.  Why not mandate it for every employer, or connect it to the New Hire Reporting system?  I suppose that there are a group of employers whose labor pool has a tendency to gravitate to foreign nationals or recent immigrants, but does this not protect them as well?  Doesn't it ensure that jobs do not go to those who are not authorized to work?  There is always the question of accuracy, but according to the eVerify website, from July 2008-Sept 2008 there were 96.9% of individuals became work-authorized within 24 hours, while .3% were "Tenative Non-Confirms" who later resolved to "Employment Authorized", while 2.8% were confirmed mismatches.  If these statistics hold tight in a larger sample, then the program is an absolute success.

What do you think?  Is the eVerify program so good for the country, and its employers that this system should be fully mandated as a step perhaps to replace or accompany the I9 process?  Or is it a violation of our privacy and our civil rights, imposing more requlation and red tape on employers many who are struggling as it is?  Let me know.

         By Mark Burak 

The number of employment-related lawsuits continues to rise, and new theories of liability are always emerging. Even something as innocuous as reimbursement of expenses can result in costly litigation.

Two real-world examples prove the point.

In Tedesco v. Innovo Group, Inc. , Michael Tedesco was the vice-president of sales and marketing for Innovo. After Innovo terminated Tedesco's employment, he filed suit for, among other things, the reimbursement of expenses he claimed were due. Specifically, after he was fired, Tedesco turned in receipts and claimed entitlement to $31,038 in reimbursements. In defending the claim, Innovo presented evidence to “suggest” that some of Tedesco's expenses were personal rather than business expenses. For example, there was evidence that Tedesco arranged a trip to visit a friend and that some of the expenses were “questionable.” Nevertheless, Innovo's evidence was insufficient, the jury awarded Tedesco $27,000 in expenses, and the Texas Court of Appeals upheld the jury verdict. Had Innovo's controls on expense reimbursements been better, it probably could have avoided both the $27,000 and the legal fees associated with defending the claim.

In Gattuso v. Harte-Hankes Shoppers, Inc. , the employer required its sales representatives to drive their own automobiles on sales calls and compensated them by paying higher base salaries and/or higher commission rates. One of the sales representatives filed a class action lawsuit, arguing this method of expense reimbursement was unlawful. The California Supreme Court ruled the employer's method of reimbursement was permissible, but the employer still had to identify the amounts representing payment for labor performed and the amounts representing reimbursement for expense reimbursement. In other words, the employer still had to track and document expense reimbursements carefully.

Summary

About the Author

Mark Burak is a shareholder in the Boston office of Ogletree Deakins, a labor and employment law firm with 35 offices across the country. Mark has been named as a "Super Lawyer" by Boston Magazine (ranked as the top 5% of lawyers in New England). This information is not intended to constitute legal advice and should not be relied upon in lieu of consultation with appropriate legal advisors in your own jurisdiction. It may not be current as the laws associated with the subjects of the article change frequently.

      by Michael Rodgers

Did your company’s healthcare expenses rise last year?  If the answer is YES, there may be some good news on the horizon.

Really?  What is it?

Today, there is new technology available to you and your benefits professionals that is rapidly changing the way companies manage their healthcare program costs. These changes, if implemented correctly, can have a material impact on your company’s bottom line. Predominantly available in the Midwest and West coast markets for over 10 years, this technology is now available in the Northeast and its use is earning vast praise by financial and HR executives who identify its value.

The technology is based on the concept of data-mining a company’s claims utilization information. The executive consults a professional to decipher the data and assist him/her with the successful negotiation of lower renewal premiums.  This method is vastly different from the conventional, i.e. less transparent, approach used by most carriers when developing renewals for their customers because it offers your own independent evaluation and record of the claims utilization which, for groups over 100 employees, is what directly drives the increased cost of the medical program renewals, regardless of whether the plan is fully insured or partially self-funded. 

There are 10 key areas of a medical program into which these tools are able to mine in order to help facilitate a deep analysis of a company’s overall claims utilization data. You can now analyze each individual area for network and plan design inefficiencies, model potential change, and track year-over-year performance of the concern areas.  This enables you to easily measure trends of problematic issues, address them, and create solutions quickly, without the calorie burn of yesterday. 

Just So You Know…

The key to the success of the data-mining process lies in the readability of the specific coding of claim reimbursements from physicians.  This coding (commonly known as CPT - Current Procedural Terminology) is the basis of reimbursement for all physicians’ providers from the insurance companies.  Every time a patient of any health insurance program receives a service, the physician provider must include these codes to submit the claim to the insurance company for payment.  The CPT codes capture all of the information in one line item such as: the type of service, the setting in which it was received, the length of visit, the charge, a rough diagnosis (ICD-9 code), and many more pieces of critical information.  So, who can read these codes anyway? The answer is, basically, hardly anybody.

The Solution

This process of analysis is rapidly changing the way benefits professionals work, plan, and recommend alternatives.  Armed with this data, benefits professionals can track material changes and work together with insurance carriers on an entirely different level.  The power shifts to you, the premium payer, and away from the premium collector! You come armed; the benefits professionals can disarm the insurer.  Actually, you no longer need to rely on the insurance carrier’s underwriter for estimates of trends, plan alternatives or hard copy reports (have you ever really tried to read those?).  With our help, as you analyze your specific data, you can observe both areas of weakness and strength. It becomes a much more dynamic, collaborative process of program management.  Plan design and network design can be specifically tailored for each group. 

Make no more mistakes.  You no longer need to rely upon marketing a census to carriers to receive their lowest cost bids.  That process, although still commonly used, is the old and inefficient brokerage technique of yesterday.  Instead, you are able to choose a plan design, a network and an administrator (carrier) before going to the market.  The benefits professionals know at that stage that they are only contacting the markets which they already know are solutions for our clients!

What’s in it for me?

Picking targeted plan design modification, or overlaying stronger network managers, to maximize the claims’ discount are just two examples of how benefits professionals help lower the paid amount of claims (utilization).  Of course, these may result in:

• lower costs and lower renewals
• enhancement of employee satisfaction
• changing carriers less frequently
• identifying longer-term strategies
• creating longer-term partnerships
• inflating your bottom line
• putting forth less effort

“I’m concerned.  Don’t reduce our benefits”. 

We’ve heard that too.  In fact, it doesn’t mean that benefits are reduced.  Since the data gathered from the carrier includes specifics with regard to the census data, utilization data, as well as plan design information, the modeling tools highlight changes that may not have normally been suggested.  There are many instances where increases of benefits in particular areas of the plan can lower utilization in others.  For example, emergency room visits, wellness benefits, co-payments, or even some outpatient services are smaller areas that can affect other larger parts of a program’s utilization.  This methodology will help you fine-tune each area and help you determine the right plan – for you.  If your data shows that that ER usage is extremely rare for your group, why would you choose a plan that has a high amount of coverage in that area?  You wouldn’t.  And you don’t have to.

While these new tools and processes are helpful during the renewal and plan year, it is important to realize that it is only one tool and no two analyses are alike. Without a doubt, these tools create a consistent, measurable process that can be repeated year after year. But it is still the benefits professional, your advocate, who reads and interprets this information on your behalf.  In many cases this new information will represent more information than is possessed by the actual underwriters or carrier representatives. Your benefits professional is the one that can articulate this information in a usable format to structure renewals, negotiate pricing and build programs with lower costs.

About the Author:

Michael Rodgers is a benefit professional with over 17 years of experience in the New England marketplace.  His firm, Axial Benefits Group (ABG), specializes in corporate employee benefits consulting and brokering for all size companies. ABS is located in Burlington, Massachusetts.

To survive and thrive in this economic environment, companies more often are seeking to control expenses by focusing on efficiency.  One way this is happening with larger organizations is by turning to strategic outsourcing arrangements to maximize cost-saving opportunities and reduce the burden of noncritical activities. According to the latest study by Towers Perrin on HR outsourcing (HRO), cost reduction was the top goal driving HRO for 73% of the companies polled in 2009.  While this poll was primarily of companies large enough to have HR departments in the first place, it is a lesson not only applicable to the small and medium marketplace but even more vital to their survival or success. 

Many clients in the SMB marketplace are of 20-100 employees and often do not have a resident HR team.  More likely, the “HR” responsibilities are being handled by an administrator, finance professional or often by the business owner themselves.  This means that not only are HR activities being handled by someone who may not be fully fluent with State and Federal regulation surrounding employment, but who may not be focused enough on it (due to their other job duties or “hats” that they may wear) to stay current, who may, as a result, often make decisions based on hearsay, and draw incorrect conclusions drawn from experience and not necessarily what is legal or right.

While the easiest decision for most companies in this position is to address HR requirements and issues at the point of pain, this can be devastating to a company who allows HR process and strategy to take a back seat in what may be a critical juncture in their growth and maturation, or what many in the consulting world refer to as the “professionalization” of the management of a company.So business owners need to make a decision at their point of significant headcount growth. 

One choice is to take the path of immediate least resistance (the “Point of Pain” approach) which is certainly can be the least expensive, require the least mental and organizational effort, but which may carry a large amount of risk in the form of employment-related claims, litigation and cost the company from a culture and ultimately, competitive perspective.  Another is to recognize their shortfalls, and address transactional HR and its required expertise in some more direct way.  This, in the eyes of many business owners and management teams means the hiring of an “HR Professional” and may not be congruent with their goals for the company P&L. 

But there is another option. HRO, or fractional HR. 

According to the Towers Perrin survey, the emergence of improving service quality (in the form of employees' experience interacting with HR) has become a very strong driver of companies' decisions to outsource. In 2009, 50 percent of those polled said improving HR service quality was a top goal of their HRO efforts--a jump from 33 percent in the 2008 study. Curtailing time-intensive administrative tasks that added minimal value also remained a top reason for outsourcing, with 73 percent of respondents listing "eliminating the distraction of administrative and transactional work" as a top priority for their HRO strategy. 

For the SMB marketplace, adopting fractional HR still often represents adding additional cost where there was none before and this fact makes it a more difficult decision for the management team.  But with some companies (and I know one in particular) this decision does not need to be so binary.  In other words, fractional HR can be more efficiently combined with the execution of the payroll process and as a result, replace a cost already incurred by the SMB. 

And with justification, HRO is simply added value.  A tremendous value at that.

• We must RECOGNIZE the need to change.
• We must DEVELOP the plan to change
• We must EXECUTE the plan