Over the last year the economic downturn has caused many employees to experience a high degree of uncertainty in their careers. And turmoil at work has left them with the sense that their employers don't care about them. A recent survey of 50,000 employees by the Corporate Leadership Council (CLC), a program of the Corporate Executive Board, indicates that 42 percent of employees don't believe their employer looks out for their best interests.

The downturn has fundamentally changed the employer-employee relationship for the worse. Layoffs, compensation cuts, rapidly contracting career opportunities, and dissolved pensions and retirement plans are only a few examples of what underlies the breakdown in the employment contract. Not surprisingly, employee engagement has suffered: The number of employees putting forth the highest levels of effort on the job has decreased by 50 percent since 2007, according to CEB research.

This presents organizations with a unique challenge — and opportunity: how to ensure that the best employees don't leave when the job market improves. But more pressing is that high-potential employees, who do have job opportunities at other organizations, are twice as likely to be looking for a job at another company right now, compared to the broader work force. The employer-employee relationship is defined by the benefit(s) each receives from the employment contract. For the employee, this employment value proposition (EVP) is about the rewards, opportunities, and experience gained by working for a particular employer. Components of the EVP lost value with the economic downturn and in turn drove down employees' engagement at work. Improving engagement and preventing employee departure when the job market expands means rebuilding the value part of the EVP.

 

These days, when every dollar counts, owners want to make sure every employee pulls their weight. You want to hire someone with a proven track record of success. But so does every other company. While lower-level workers might come as a relative bargain, don't expect high achievers to jump at a bare-bones salary just because they're currently unemployed. As soon as the economy picks up, they'll be the first ones to jump for more money.

Small businesses may not be able to offer the perks or prestige of larger companies, but they've got certain advantages in the current economy. To boost your appeal to highly skilled applicants, emphasize the pluses of working for a small, owner-operated company:

 The personal touch: Many laid-off workers left their employers feeling undervalued and unappreciated. Some watched as executives held on to their bonuses and country-club memberships even as thousands of workers were shown the door.

Value creativity: Small businesses can move faster and more nimbly than massive, global conglomerates. Show potential employees how they can make an immediate impact, and they'll be excited about coming on board.

Offer flexibility: You may not be able to beat large corporations on salary. But quality-of-life benefits may tip the balance in your favor. Generous vacation packages, work-from-home arrangements or flexible schedules show workers that you're willing to accommodate their lives outside of the office. Over the long term, that creates loyalty. In a year or two, large corporations may get back to hiring, but your employees (hopefully) will stay put.

Increased wage recovery efforts have resulted in more cases of retaliation against employees, New York has amended its Labor Law to increase protections against employee retaliation.  The amendment increases the remedies and penalties against employers for failing to comply with their statutory wage obligations. 

The Massachusetts Supreme Court issued a ruling that increases the damages workers can receive if they have been misclassified as independent contractors instead of employees.  According to the court, the damages incurred "equal value of wages and benefits" individuals should have received as employees but did not.  The workers can therefore retain the fees earned as independent contractor and recover the value of holiday pay, vacation pay, and other benefits that they would have received as employees.

If like most people you plan to retire some day, take some good advice and avoid these five mistakes that could postpone or prevent you from enjoying your golden years.

1. Procrastinating. Those who hesitate are lost.  It’s never too early to start planning and saving for your retirement.  People often put it off for a couple of days, which then turns into months and years.  Then, before they know it, retirement is just around the corner and it’s too late.  Instead of retiring, they are looking for a job at the mall or fast food restaurant.
2. Skipping an employer plan. If your employer has a 401(k) or similar retirement plan and you’re not in it, hit have your friend slap you across the face. If your company has a matching-contribution plan and you’re still not in it, have your friend hit you with a baseball bat.  First of all you are missing out on tax savings today.  Contributions you make to a 401k plan can be tax deferred, meaning you won’t pay tax on those earnings until you take the money out of the plan years from now after you retire.  Most plans let you have the money taken right out of your paycheck, which is not only easy, but after the tax savings you will hardly miss after a while. Second, you are missing out on free money from your employer.  When an employer provides a matching contribution, they are giving you money by contributing directly into your plan based on how much you contribute.  This could provide you with a 50% or 100% return on your investment before you even consider market returns that you may earn.
3. Saving for college first. Look at it this way: If you put all your spare money into a college fund for your kids, do you think they are going to fund your retirement? Good luck with that. That’s not to say you shouldn’t try to save for your children’s education, but your retirement is the first priority.
4. Investing too conservatively. The recent market meltdown was enough to scare anyone into putting money into only the safest — and lowest paying — investments. Most advisers say that’s a mistake, especially if you’re more than five years from retirement. Putting your money in blue chips is OK, however. Better there than in ultraconservative holdings.
5. Investing too aggressively. This of course is the flip side of the too-conservative approach. Some may feel they have to catch up — quickly — for recent market losses by taking chances on risky stocks. Don’t do it. Stick with solid, moderate-risk investments. And the diversity rule is: Don’t put yourself in a position where the failure of one part of your investments dooms your whole portfolio.

Potential Reductions in 401k Contribution Limits
 
First people saw their 401k’s become 201k’s as the market dropped precipitously in the fourth quarter of 2008 and the first quarter of 2009.  Now, just as the market is starting to recover (it recorded the best third quarter returns in history in the quarter ended September 30, 2009), and people want to increase their contributions to grow their accounts, the IRS may reduce contribution limits for 2010.

Why you may ask.  Because the limits for defined benefit and defined contribution plans are adjusted each year using an inflation based formula.  As a result of negative inflation in 2009, the contribution limits may not get the cost of living increase and, in fact, may be decreased.  Currently, employees may contribute up to $16,500 into their 401k plan, but that could be reduced by $500 to $16,000 in 2010.  Similarly, the maximum compensation eligible to receive company contributions may also be decreased by $5,000 from $245,000 to $240,000.

While nothing has been announced and the IRS has never lowered these limits, given the current economy and mounting federal deficits there is no telling what will happen.  All we can do is wait and hope for the best.

On The Horizon

In these difficult economic times, states are realizing that there is a significant tax revenue to be gained by making sure that employers are not misclassifying employees as independent contractors. 

State changes in labor laws, combined with all of the recent and imminent changes to federal law, place employers on the brink of the greatest change in labor and employment law since the Reagan Administration.

 

 

 

According to the Society for Human Resource Management:

• Statistics Confirm that an employer is more likely to have an employment claim than a property or general liability claim.
•  The average amount paid for out of court settlement is $40,000. 
•  Defense of an average EPLI (Employment Practices Liability Insurance) case, through trial, costs over $45,000. 
• The median compensatory award is EPLI cases is $218,000. 
• 67 percent of all employment cases that litigate result in judgement for the plaintiff.
• 10 percent of awards involving discrimination or wrongful termination are in excess of $1 milliion. 
• 41 percent of all EPLI claims are brought against small employers with 15 to 100 employees.
• Total Team Solutions can help your company greatly reduce the risk of employee claims by providing best of class HR advice
• Total Team Solutions has been providing very cost effective EPLI to their clients for over 15 years.

UPDATE ON THE PROPOSED HEALTHCARE REFORM LEGISLATION

The latest version of the Senate Finance Committee’s proposed Healthcare Reform Legislation would provide health coverage to 29 million uninsured Americans.  However, it will also cost an estimated $856 billion that will be paid for with higher taxes imposed on companies and individual taxpayers.  But that is not all.  The proposed legislation will also impact companies and individuals in other ways and these changes could take effect as early as January 1, 2010.
For example, did you know that the current proposal would require companies to report the value of employer provided health insurance benefits on each employee’s W-2?  Existing law does not require any tracking and reporting of employer paid health benefits.  If multiple plans are provided (medical, dental, vision, etc.), then the aggregate value of all of these benefits would need to be reported.
Also proposed with an effective date of January 1, 2010, are changes to allowable expenses for reimbursement under Flexible Spending Accounts (FSA) and Health Spending Accounts (HSA).  The proposed legislation would no longer allow the reimbursement for the cost of over-the-counter medicines unless prescribed by a physician.
Another aspect of the proposed legislation would be the allowance of employee paid long term care insurance premiums paid by employees to be reimbursed under Flexible Spending Account plans.  Current law does not allow for long term care insurance premiums to be paid with pre-tax dollars. 
Whether or not these provisions are included in the final legislation is anyone’s guess.  However, experts now project that some form of healthcare reform will pass before the end of 2009.  And if history is any indication, once a law of this nature and magnitude is passed, it will never be repealed.  So stay informed, and keep your congressmen informed of your opinions/

Among the most active wage and hour compliance areas has been determining which employees are exempt or nonexempt for the purpose of overtime pay under the Federal Labor Standards Act.  The Department of Labor has developed criteria employers must apply when determining whether an employee is exempt or nonexempt, but these criteria can be unclear and subjective, which has resulted in a steady stream of lawsuits, a situation not much improved with the issuance of DOL’s updated and clarified regulations in August 2004.  Over the past five years, there has been a substantial increase in wage and hour litigation in worker classification.  Employers and in some cases entire industries have been found noncompliant which has resulted in enormous back pay liabilities.  DOL has made FLSA enforcement a top priority and overtime violations have been put on the top of the list.

Part of Total Team Solutions HR outsourcing solutions is to help our clients to become fully compliant with federal & state wage and hour laws.  Maintaining the best workplace policies and procedures in order to stay compliant with changing laws and regulations is a business necessity for all employers regardless of a company’s size or industry.  The price of noncompliance is penalties, lawsuits and reduced productivity.  

In the latest democratic proposal to reform the nation’s healthcare system, Senator Baucus has proposed for an excise tax on the most expensive insurance plans to pay for about one quarter of the estimated $774 billion cost.  The new tax is also intended to discourage the overly generous coverage that is blamed for the reckless spending on healthcare.  However, while touted as a tax that only impacts the most affluent Americans, in reality it is likely to impact many middle class workers.  
The proposal would impose a 35% excise tax on all insurers selling a plan that costs more than $21,000 annually for family coverage or $8,000 for single coverage.  While the national average premium for a family policy is only $13,375 per year, there is significant variance in different regions of the country with many, especially in the Northeast, that are much higher than that.  With an annual limit of $21,000 per year, this is only $1,750 per month.  Additionally, the cost of benefits would not just include medical premiums, but would include related benefits such as dental coverage and money contributed to flexible spending account plans.  At this level, it is estimated that one in every ten plans would be subject to the new tax.  Given the rate of healthcare inflation, this number would increase each year as more and more plans exceed the threshold. 
While Senator Baucus said he may consider increasing the limits in certain regions with higher costs, there is no guarantee.  In the meantime, many small businesses and union plans will likely be subject to the tax.  Because they have fewer employees to spread the risk of older or sicker employees and have less purchasing power than large corporations, small businesses often pay more for premiums.  Consequently, 14% of small business plans would potentially be subject to the new tax.  Similarly, union plans often cover older employees and retirees who have not yet qualified for medicare, causing their premiums to be higher. 
This proposed new tax will continue to be debated in Congress along with other provisions of the healthcare reform bill.  However, it is important to note that President Obama supports this new tax. He recently defended the new tax saying, “I do think that giving a disincentive to insurance companies to offer Cadillac plans that don’t make people healthier is part of the way that we’re going to bring down health care costs for everybody over the long term.”
Source:  NYTimes – 9-21-09