Workforce - April 2016

workforce.com

April 2016

HER WAY AT FENWAY Boston Red Sox HR chief Amy Waryas swings for the fences.

HEAD IN THE CLOUDS

HR outsourcing joins cloud computing revolution.

MEDICINAL VALUE

PBMs might work in mysterious ways, but they do work.

# hellowork Collaboration and success translate worldwide.

Creating a global workforce that maintains a local touch isn’t easy. ADP human capital management solutions utilize data-driven insights with innovative software to help you manage and connect your workforce, no matter where they live. Because taking pride in what you can accomplish together is a feeling that knows no borders.

Visit adp.com/hellowork and see how we can provide a more human resource for your business.

ADP and the ADP logo are registered trademarks of ADP, LLC. ADP A more human resource. is a service mark of ADP, LLC. Copyright Š 2016 ADP, LLC.

Human Insights | Innovative Software | Happily Connected

Think You’re Good at Your Job? Tell Us About It! Great ideas are only inspiring if they’re shared. If you’ve developed a new program, come up with an innovative approach or devised a creative solution to an HR challenge, don’t keep quiet.

Get the word out with Workforce.

Simply submit your best HR achievement online. We’ll follow up with an interview, potentially share your achievement in the Workforce blog and possibly invite you to speak at an upcoming Workforce event.

What’s your greatest HR achievement?

Tell us about it!

events.workforce.com/achievement

From Our Editors

READER FEEDBACK

At HR departments large and small, you’ll find the same thing: dedicated professionals coaching, counseling and cajoling, doing the often thankless work of keeping the organization together.

But for a function that makes people its primary business, HR can be isolating work.

That’s why events like our Workforce Live series — kicking off this month in Boston, NewYork and Washington, D.C. — are so important.

It’s a rare opportunity to get together, hear inspiring stories and feel reinvigorated and renewed to carry out the organization’s most critical — and underappreciated — role.

And if you’re unable to join us this month, keep an eye out for the online edition of Workforce Live and mark your calendars for our stops this fall in Chicago, San Francisco and Dallas.

It’s high time we spent some of that people time on ourselves.

— Mike Prokopeak, Editor in Chief 4

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The January 2016 “Work in Progress” column “The Big Lie of Hiring for Cultural Fit,” p. 14, drew this response from reader Ed Baldwin: It’s true that hiring managers can use ‘culture fit’ as an excuse for not hiring a candidate, but it is also crucially important to the candidate and the company that a culture fit exists.The question is how best to assess cultural fit. It starts with feeling a strong professional connection to your boss, will he or she support and guide you professionally throughout your time there? If not, next candidate, please. But the fit can’t just be with the boss. It has to be with the team and organization, and that’s trickier to assess in the hiring process.

Reader Angela Cavallari Walker added: I completely understand the frustration behind hearing that ‘fit’ argument. Simply put, it’s vague and dismissive. However, I am currently in a role where one team member isn’t a fit and was hired anyway.This person is nice but complains quite a bit about the environment and also recognizes that they don’t fit either. As someone on the other end of not being a fit and taking the job anyway, it proved to be an unnerving feeling that is not a good choice for either party. In the end, you spend more time with these people than you do your own family, so removing an awkward piece of not fitting in makes sense.

Workforce.com/CulturalFit

Reader Monica Street took exception to the February 2016 “Last Word” column “ ‘Big Aristotle’ on Leadership,” p. 50: Perhaps you should do a little more research on Dr. Shaquille O’Neal. I would not call someone with three degrees, including a defended research-based doctorate in education, “decidedly not from the pantheon of history’s deepest thinkers.” It takes more than physical skill to be the type of player and leader that Shaq was during his basketball career.This is offensive and degrading ... unacceptable.

Gary DePaul also reacted to the column: I appreciate the Shaq quotation and would add that anyone — regardless of rank or status — can influence others. I can imagine a calm soldier influencing other soldiers to find calmness. Looking to those in authority

for leadership exemplifies traditional thinking, but the concept of leadership is radically changing. Roughly around 2007, I noticed that authors have shifted how they view leadership. In more recent years, Simon Sinek, Liz Wiseman, L. David Marquet and James Hunter have introduced new ways to practice leadership. Likewise, John Maxwell, James Kouzes and Barry Posner, Jim Collins, and Ken Blanchard have contributed to this new perspective. As more and more people become aware of how leadership is changing, I think we’ll have hundreds of new quotations that can influence how we think about and practice leadership.

Workforce.com/BigAristotle

A recent “Working Well” blog post “Obama Announces Initiative to Help Intercede in Opioid Epidemic” spurred some interesting responses, including this from “Martha”: It seems as though everywhere I look in the last few months I see references to the huge economic losses due to addiction to opioids, the tragedy of suicide by overdose or a teenager’s first step on the road to addiction due to the irresponsible storage of opioids. I would like to say that it is heartwarming that others are so concerned about the well-being of others. Except no one seems to listen to those of us who live with chronic pain. I am able to function because of opioids. Now pain medications are more tightly controlled so I have to see a doctor every month, take a prescription to the drug store, go back and pick it up — oh, and let’s not forget that we better make sure it is a small number of pills. So I get to do it all over again in a couple of weeks.

And pay more office visit copays, more prescription copays, etc. Being in chronic pain is a really tough way to live your life.

To the unaware, it probably seems as though those in pain should get it treated, get it fixed or, more likely, suck it up. I do not deny that there are addicts. I don’t dispute that there are likely people taking opioids to escape things other than physical pain. But I am not one of them.

Workforce.com/WorkingWellOpioids We welcome your comments on these stories and others on our website.

Be sure to follow us and give us a shout on Twitter at @Workforcenews, too.

Hope to hear from you! april

2016

THE SCIENCE OF PERSONALITY

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Westin New York at Times Square 7 a.m. - Noon ET

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Speaker lists for each city and registration details at events.workforce.com/live Earn up to 12 HR (General) recertification credit hours toward PHR, SPHR and GPHR recertification through the HR Certification Institute. For more information about certification or recertification, please visit the HR Certification Institute website at www.hrci.org.

The use of this seal is not an endorsement by the HR Certification Institute™ of the quality of the program. It means that this program has met the HR Certification Institute’s criteria to be pre-approved for recertification credit.

Human Capital Media is recognized by SHRM to offer Professional Development Credits (PDCs) for the SHRM-CPSM or SHRM-SCPSM. This program is valid for 12 PDCs for the SHRM-CP or SHRM-SCP. For more information about certification or recertification, please visit www.shrmcertification.org.”

WEBINARS Workforce

April 2016 | Volume 95, Issue 4 PRESIDENT John R. Taggart jrtag@workforce.com

ASSOCIATE EDITORS Lauren Dixon ldixon@workforce.com

MEDIA MANAGER Ashley Flora aflora@workforce.com

DIGITAL SPECIALIST Lauren Lynch llynch@workforce.com

EXECUTIVE VICE PRESIDENT, CREATIVE SERVICES Gwen Connelly gwen@workforce.com

Bravetta Hassell bhassell@workforce.com

VICE PRESIDENT, EVENTS Trey Smith tsmith@workforce.com

LIST MANAGER Mike Rovello hcmlistrentals@infogroup.com

Sarah Sipek ssipek@workforce.com

COPY EDITOR VICE PRESIDENT, CFO, COO Frannie Sprouls Kevin A. Simpson fsprouls@workforce.com ksimpson@workforce.com EDITORIAL ART DIRECTOR VICE PRESIDENT, Anna Jo Beck GROUP PUBLISHER abeck@workforce.com Clifford Capone EDITORIAL INTERNS ccapone@workforce.com Andie Burjek VICE PRESIDENT, aburjek@workforce.com EDITOR IN CHIEF VICE PRESIDENT, Mike Prokopeak RESEARCH AND mikep@workforce.com ADVISORY SERVICES EDITORIAL DIRECTOR Sarah Kimmel Rick Bell skimmel@workforce.com rbell@workforce.com RESEARCH MANAGER Tim Harnett GROUP EDITOR/ ASSOCIATE EDITORIAL tharnett@workforce.com DIRECTOR RESEARCH ANALYST Kellye Whitney Grey Litaker kwhitney@workforce.com clitaker@workforce.com MANAGING EDITOR James Tehrani jtehrani@workforce.com

RESEARCH ASSISTANT Kristen Britt kbirtt@workforce.com

CONTRIBUTING EDITOR Frank Kalman fkalman@workforce.com

WEB COORDINATOR Sam Dietzmann sdietzmann@workforce.com

John R. Taggart PRESIDENT

BUSINESS ADMINISTRATIVE MANAGER Melanie Lee mlee@workforce.com

EVENT CONTENT MANAGER Ashley (Wynne) Collins awynne@workforce.com

is pleased to offer live and on-demand webinars!

FREE LIVE

ONLINE EVENTS

WEBCAST COORDINATOR LEAD GENERATION ADMINISTRATOR Alec O’Dell aodell@workforce.com Nick Safir nsafir@workforce.com BUSINESS MANAGER Vince Czarnowski vince@workforce.com

REGIONAL SALES MANAGERS Derek Graham dgraham@workforce.com Marc Katz mkatz@workforce.com Daniella Weinberg dweinberg@workforce.com ACCOUNT EXECUTIVE Brian Lorenz blorenz@workforce.com

CONTRIBUTING WRITERS Marty Denis Kris Dunn Sarah Fister Gale Richard Y. Hu Jon Hyman Mark T. Kobata Patty Kujawa Katie Loehrke Gary B. Kushner Rita Pyrillis Michelle V. Rafter

DIRECTOR OF BUSINESS DEVELOPMENT, EVENTS Kevin Fields kfields@workforce.com AUDIENCE DEVELOPMENT DIRECTOR Cindy Cardinal ccardinal@workforce.com

Gwen Connelly EXECUTIVE VICE PRESIDENT

Kevin A. Simpson CHIEF FINANCIAL OFFICER CHIEF OPERATING OFFICER

Norman B. Kamikow CO-FOUNDER (1943 - 2014)

WORKFORCE EDITORIAL ADVISORY BOARD Arie Ball, Vice President, Sourcing and Talent Acquisition, Sodexo Angela Bailey, Associate Director and Chief Human Capital Officer, U.S. Office of Personnel Management Kris Dunn, Chief Human Resources Officer, Kinetix, and Founder, Fistful of Talent and HR Capitalist

HR and the Challenge of Agile Talent Wednesday, March 23 2 PM ET

New Research: Employee Education Improves Talent Outcomes Wednesday, March 30 2 PM ET

Curtis Gray, Senior Vice President, Human Resources and Administration, BAE Systems Jil Greene, Vice President, Human Resources and Community Relations, Harrah’s New Orleans Ted Hoff, Human Resources Vice President, Global Sales and Sales Incentives, IBM Tracy Kofski, Vice President, Compensation and Benefits, General Mills Jon Hyman, Partner, Meyers, Roman, Friedberg & Lewis Jim McDermid, Vice President, Human Resources, Cardiac and Vascular Group, Medtronic Randall Moon, Vice President, International HR, Benefits and HRIS, Lowe’s Cos. Dan Satterthwaite, Head of Human Resources, DreamWorks Dave Ulrich, Professor, Ross School of Business, University of Michigan

Workforce, ISSN 2331-2793, is published monthly by MediaTec Publishing Inc., 318 Harrison Street, Suite 301, Oakland, CA 94607. Periodicals Class Postage paid at Oakland, CA and additional mailing offices. POSTMASTER: Please send address changes to: Workforce magazine, P.O. Box 8712, Lowell, MA 01853. Subscriptions are free to qualified professionals within the U.S. and Canada. Nonqualified paid subscriptions are available at the subscription price of $199 for 12 issues. All countries outside the U.S. and Canada must be prepaid in U.S. funds with an additional $33 postage surcharge. Single copy price is $29.99.

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Available live on airdate and on-demand for one year after unless otherwise specified.

Check them out today and keep the education going!

workforce.com/ webinars

CONTENTS

ON THE COVER INSIDE BASEBALL

The Boston Red Sox’s top HR person,Amy Waryas, knows that keeping a dedicated workforce takes a lot of teamwork.

COVER PHOTO BY FRED LEVY

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36 FEATURES SPECIAL REPORT 44 THEY BET THEIR LIFE

Buying life and disability insurance is on the back burner for many millennials.

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28 IN LARGE DOSES

36 THERE’S SKILL INVOLVED

32 CLOUDY WITH A CHANCE OF CONSULTING

CORRECTION The February 2016 story “Quicker to the (K) Zone,” p. 20, misidentified the shortened name of an online 401(k) service. It should be AB401k.

Given their size and lack of transparency, its easy to mistrust PBMs. But they also help keep costs down.

Staying competitive as an HR outsourcer means catering to clients and acting more like a partner.

Bridging the skills gap and addressing chronic underemployment can have an exponentially positive effect on workers.

april

2016

ON THE WEB SPEAK UP!

28

The Workforce online community provides you with virtual meeting places to chat about issues and trends affecting you and your workplace.

LIKE US:

TRENDING

facebook.com/workforce.magazine

FOLLOW US: twitter.com/workforcenews

32

JOIN THE GROUP: workforce.com/LinkedIn

WATCH US:

FOR YOUR BENEFIT 16 HEARING BENEFITS: BARELY A PEEP 4

YOUR FORCE

Workforce Live returns this month.

14 WORK IN PROGRESS

Want a great HR pro? Hire a great recruiter.

20 ACING THE ACA

The IRS’ Paradox City.

25 THE PRACTICAL EMPLOYER

Arbitration process should not be arbitrary.

50 THE LAST WORD

Zenefits’ kinder, gentler RIF.

april

2016

Facebook aims to get a foot in the workplace door.

10 DEAR WORKFORCE

Flat pay; onboarding interns.

workforce.com/youtube

COLUMNS

10 A LOOK AT FACEBOOK AT WORK

Employers often ignore hearing benefits, but they’re missing a big piece of the wellness puzzle.

17 DEBT PERCEPTION

With student loan debt on the rise, many employers are starting to consider voluntary benefits offerings.

17 SAP FETED FOR GENDER DIVERSITY

In an industry notorious for few female workers, tech company SAP received a recent seal of approval.

18 OBAMA LOOKS TO ADD PEP TO MEP

Small businesses might soon have a chance to offer retirement savings plans under Obama initiative.

12 FROM THE WEB, PEOPLE MOVES AND BY THE NUMBERS

Data on hire;Weber to Lowe’s; tax season.

12 SECURITY PREACH

Q&A with cybersecurity pioneer John McAfee.

12 IBM’S NEW CHECKPOINT

The tech giant tapped its workers for ideas on its review system.

LEGAL 24 ENDING THEIR CAMPAIGN

Employees can be fired for expressing their political views.

25 LEGAL BRIEFINGS

Multiple choice; hole in Dunkin’ Donuts’ argument.

w o r k f o r c e . c o m | Workƒorce

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TRENDING

A Look at Facebook at Work

By Andie Burjek

F

acebook, which is synonymous with “distraction” in most workplaces, is striving to pull up a chair in the professional environment with its latest product: Facebook at Work.

The upcoming offering has the same look and feel as Facebook, and it will have the same features. Users will use their work email to form the account, which is not connected to their personal account. They can form groups, send private messages, post links on their timelines, update statuses and access the site from a cellphone, computer or tablet.The only major difference: Facebook at Work has a different color scheme than Facebook, so when the boss or colleagues walk by they know that users are working on a project and not cyberstalking friends.

The overall goal of Facebook at Work is to improve workflow, increase productivity and decrease dependence on email.

Over a six-month period, 300 companies participated in the Facebook at Work beta test, including Club Med, Heineken and the Royal Bank of Scotland.

Facebook Inc. declined to provide a statement, but Workforce spoke with Jake Wengroff, a social business expert and consultant at JXB1 Social Business, and Courtney Hunt, a digital expert and founder of the Denovati Group, about the new product and their expectations.

Hunt believes the familiarity of Facebook will do little to help with the success of Facebook at Work because other enterprise social platforms like Yammer copied the look and feel of Facebook years ago.

Wengroff, on the other hand, said the familiar, intuitive nature of Facebook is what helped it grow so quickly in the public audience when it left the college market. For the same reason, companies might give Facebook at Work a second look. They know Facebook is ubiquitous and that using the site is mostly intuitive.

Despite the familiarity, there are some major hurdles that Facebook at Work will have to overcome.

One challenge is the already crowded enterprise social marketplace.

Enterprise social platforms such as IBM Connections, Microsoft Corp.’s Yammer, Salesforce Chatter and Slack have been around for years and have had time to adjust and improve.

Also, privacy and security are bigger concerns,Wengroff said. Some companies might not warm up to Facebook at Work because they know Facebook is a data collector. Companies might be unwilling to talk strategy on the platform if they think Facebook will be able to see the conversation.

According to the Facebook at Work website, however, Facebook doesn’t own the data.The company using the platform still owns it.

One final hurdle for Facebook at Work, according to Hunt, is the emphasis on “organizationwide chatter” rather than meaningful communication among team members. She argued that although chatter is good for culture and morale, it’s not good for managing work.

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Dear Q: How Do We Reward Employees With Flat Pay? Aside from restarting raises, how else could we reward employees whose pay has been relatively flat during the past several years?

—Money Isn’t Everything A: Dear Money: The simple answer is that bringing back merit raises and competitive pay is important. Today’s global knowledge-based economy is dependent on people and their knowledge, skills and commitment. As companies seek to re-engage employees, many find that pay alone is not the answer. Reward and recognition help, but they are also not enough. They may attract and even retain employees, but may not engage them. At the same time, the concept of work-life balance is changing. Employees are not looking for a balance so much as a way to integrate both their work and personal lives into one. Re-establishing competitive pay is a starting point. But you also should get to know your employees. Offer formal and informal coaching and mentoring. Recognize employee contributions. Encourage teamwork. Ask employees for their feedback and then act on it.

Source: James Sillery, principal, Buck Consultants at Xerox, Minneapolis

Q: What Are Best Practices for Onboarding Interns? We have some highly qualified candidates who we want to bring on as interns. How can we help them transition into our organization?

—We Might Be Hiring A: Dear Hiring: If you follow these 4 C’s of onboarding, you and your interns will have a successful onboarding experience: 1. Communicate 2. Challenge 3. Coach 4. Connect Communicate: Onboarding needs to begin the day the offer letter is signed. Once the intern has entered the office, it is important to have a conversation around managing expectations. Be candid with the intern to let them know that there will be some awesome parts of the internship and some grunt work, but it is all part of the learning process.

Challenge: Interns leave companies or reject full-time positions most often because they aren’t feeling challenged. Offer experiences by allowing the intern to shadow in multiple departments.

Coach: Millennial interns have spent their whole lives looking up to a parent, teacher or coach. Instill a culture of coaching within your organization to give them the tools to learn most effectively.

Connect: During onboarding, interns need to feel connected to your organization, know their importance, and see they are part of the bigger picture or they will leave. Ask what motivates them. Pinpoint passion projects, causes, individual interests and reasons why interns joined your company, so you can set the stage for a successful relationship.

Source: Brad Karsh, JB Training Solutions, Chicago

april

2016

TRENDING

FROM THE WEB

THIS DATA’S ON HIRE In this edition of “The Wacky World of Work,” host James Tehrani talks with Greg Moran, the CEO of the newly formed OutMatch hiring analytics company, about the merger and how companies can get the most out of their analytics.

Workforce.com/ DataonHire ZEN MOMENT With Parker Conrad out at Zenefits, Rick Bell blogs on the possible changes coming at the human resources benefits automation platform under new CEO David Sacks.

The young company has brought in “truckloads” of investment dollars but has also run into compliance issues. As Bell writes, “Before there were alleged problems, we were impressed with Conrad’s story.”

Workforce.com/ ZenefitsChange NOT SEXY, BUT SERIOUS Blogger Sarah Sipek tells us that it might not be as funny or clever as some of the other Super Bowl ads, but an AstraZeneca ad about opioid-induced constipation shows the importance of the issue of addiction.

Workforce.com/ SuperBowlAds april

2016

PEOPLE

moves

JENNIFER WEBER Lowe’s Cos. Inc. named Jennifer Weber chief human resources officer. She will report to President and CEO Robert Niblock. Weber will succeed Maureen Ausura, who announced plans to retire after 11 years with the company. Weber will oversee global HR practices, policies and operations. She joins the company from Duke Energy, where she served for the past seven years on the company’s senior leadership team as executive vice president and CHRO. ADWOA JONES The Atlantic Council named Adwoa Jones as its first chief talent officer. Jones was promoted from director of human resources. She brings 15 years’ experience in HR management in the private and nonprofit sector. A native of Ghana, Jones joined the council as its first director of HR in 2012.

ELIZABETH OWENS BILLE The Society for Human Resource Management has named Elizabeth Owens Bille general counsel and corporate secretary. Bille has served in a legal capacity for SHRM for more than seven years, most recently as vice president and associate general counsel.

To be considered for People Moves, email a brief announcement and a high-resolution color photo to editors@workforce.com. Include People Moves in the subject line.

By the Numbers compiled by Rick Bell

It’s Tax Season!

We can’t promise you won’t be audited but you’ll be better informed on taxes if you read this.

Approximate number of words in the U.S. Tax Code

3.7 million

0.64%

The percentage of individual income tax returns from people who make $50K to $100K per year that are audited by the IRS.

1.5 million

Number of tax-exempt organizations recognized by the IRS Source: Motley Fool

Bloated Workforce?

Comparing the IRS’ workforce size with other U.S. federal agencies

Defense Department

800,000 231,117 94,516 62,343 Source: Wall Street Journal, 2013

16,304

The Write-off Corporations write off billions in out-of-court settlements as business costs.

$80 billion $48 billion paid in settlements

taken as a tax deduction

Source: U.S. Public Interest Research Group’s “Settling for a Lack of Accountability?” report

Department of Homeland Security IRS Social Security Administration Labor Department

Average IRS

Employee Salaries Information technology specialist

$49,539

Certified public accountant

$80,120 Auditor

$69,586 Secretary

$39,979 Source: PayScale Inc.

Sept.15 Extended deadline for corporation income tax returns (Forms 1120, 1120A, 1120S) Source: About Money

$131,324

Did you know?

The Ohio State University is home to the Accounting Hall of Fame.

workforce.com | w Workƒorce orkforce.com 10| Workƒorce

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TRENDING

SECURITY PREACH

By James Tehrani John McAfee has rants in his pants.

John McAfee, cybersecurity expert

The former head of the McAfee Associates anti-virus software company has since moved on to other things and is keeping busy. He is the “chief evangelist” for a startup tech security company called Everykey as well as founder of a security and privacy company called Future Tense Central. And, oh yes, he’s running for president, too, as a Libertarian candidate.

A few years removed from his exploits of putting on a unique disguise and evading authorities in Belize who wanted to question him about the murder of his neighbor, McAfee is probably more well-known now than ever before. When he gets rolling on a subject, he can go off like a bullet train with faulty brakes. Workforce recently spoke with McAfee via Skype, and here are a few edited excerpts from the talk.

Workforce: Why did you invest in Everykey?

John McAfee: Obviously, since I’m very heavily into security, I use a different password for everything I log into. … Every single week I forget one and have to reset it, which is a time-consuming process. This little key allows me never to have to remember another password.

WF: How can companies improve cybersecurity?

McAfee: The problem is the mobile device you use to call home, your office, whatever. That is the most ubiquitous spy device ever created. Why? Because it is designed specifically … to collect information about you because information is the commodity of exchange in this world. … This is the problem: Corporations allow this mobile device, your mobile telephone, into the workplace. What madness is that? It is utterly insane. And yet, if they say you can’t do it, you’re going to find another job. They’re [companies] are going to have to bite the bullet simultaneously so that when they say, ‘You may not bring your mobile phone into the workplace, you can’t find another job that will allow you to do so.’ I’m sorry. It sounds horrible.

If corporations had any sense at all, they would give you a dumb phone, a stupid phone that cannot be hacked and say, ‘If you need to call home, use this, and if you need to access the Internet, you use one of our servers that is behind the firewall, which is protected.’

WF: If elected president, how would you deal with cyberwarfare, something you’re particularly concerned about?

McAfee: The first thing I would do about it is I would put up a booth at Def Con, and I’d say, ‘We, as the U.S. government, are hiring.’ … I say we start an Office of Digital Transformation. We staff it with 10,[000] to 15,000 of the greatest hackers we can hire, and we’re going to have to pay them a lot of money. These people are used to making a half-million dollars a year. I’m sorry; these are the facts of life. We must figure it out.

To read more, go to Workforce.com/McAfee.

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IBM’s New Checkpoint Reflects Employee Preferences

By Bravetta Hassell

F

or IBM Corp. employees, performance review time might come with a little less hand-wringing as the global technology and consulting company tapped into its workforce for ideas on how to make a better review system.

With the recent introduction of its app-based performance review program called Checkpoint, IBM says there’s more flexibility — employees can change their goals during the year — and a more constant pulse on personal performance with discussions on shorter-term goals and feedback at least every quarter.

To understand employee preferences for the new system, IBM’s HR department started a conversation about performance management through the company’s internal social media last summer.

Workers covered such topics as the nature and frequency of feedback, how individual contributions affect a team’s success and the appropriate basis for evaluation.

“IBM has a long tradition of inviting our employees to co-create on major initiatives. We’ve been doing this for more than decade,” said Michelle Rzepnicki, director of IBM performance management. “So when it came time to reinventing performance management, we knew we’d get lots of dialogue and engagement among 380,000 employees.”

Aubrey Daniels, president of Aubrey Daniels International, said IBM’s overhaul of its evaluation is a step in the right direction but not enough.

“I tell people all the time, eliminate performance appraisals period,” Daniels said. “Data shows they don’t help the performer, and they’re certainly not favorable.” april

2016

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TRENDING

Wo r k i n P r o g r e s s

WANT A GREAT HR PRO? HIRE A GREAT RECRUITER

By Kris Dunn

I

s HR actually improving or getting worse? Sometimes it’s ability to say “yes.” The traditional HR profile includes a tough to tell. high rules orientation (because of the traditional focus of For all the best practices, talent management seminars compliance), which causes HR pros to use “no” as a default. and hand-wringing related to HR getting a seat at the Successful recruiters score lower on rules orientation proverbial table, it still seems too rooted in compliance, and get paid to find solutions to candidate and hiring manprocess and transactions. ager objections. They’re used to shades of gray and using And when it comes to what the leaders we support their influencing skills with multiple parties to get to want from HR, I can tell you most don’t care two shakes “yes” — exactly the type of HR candidate you need. about compliance, process and transactions. They assume Finally, great recruiters always have a keen understanding those things will just get of employer brand — pritaken care of. But those armarily because they’re used en’t the things they value to selling a company. That most from HR. experience bodes well as The problem is that most they make the transition to of the leaders you support retaining as well as recruitcan’t articulate what they ing employees. want from HR. Like style, Not all high-performing bad judgment or porn, they recruiters can make the know it when they see it but transition to an employeecan’t tell you what it is. facing HR role in your While many of you have company. Before you hire deep HR specialization in that recruiter as an HR your company, one strong manager, you’ll want to opinion I have is this: If you aren’t able to recruit as an HR check under the hood for a couple of things. manager or director, you’re an administrator who is subject HR managers have patience. Workplace politics and huto being outsourced at your employer’s whim in the future. man nature conspire to make HR pros take four steps I believe HR people need to be heavily involved in the where one step would have gotten the job done to keep talent acquisition process in their companies. I know re- everyone happy. If a high-performing recruiter doesn’t cruiting can and is outsourced, but if you are good on the have the patience for that, then don’t put them in the job. recruiting front as an HR manager, you’ll always have a job.

Judgment also plays a role in whether a successful reThat’s why your next HR manager or director hire cruiter can make the transition to HR.What’s the recruiter’s should be a great recruiter. The things leaders value most reputation for integrity and good decision-making? Are they from HR are consistently found within the high-perform- viewed as a business partner by the departments they recruit ing recruiter profile. for or the jester that wears the lampshade after knocking a Not all recruiters would make great HR hires. But many couple back at the Christmas party? Great recruiters, like would. Let’s explore the top reasons why great recruiters great salespeople, can get results in a variety of ways. would be great HR hires for your company.

Of course, recruiters will see more administration and The best recruiters have a lot in common with successful red tape in an HR role than they are used to. If they seem salespeople — including high assertiveness. That trait in overly frustrated by the administrative burdens of your perany HR hire means your leadership team and client group formance management or equal employment process, they will see a consistent level of high energy and aggressiveness, probably won’t be a great fit. Confirm detail orientation to which isn’t consistent enough in our profession. check tolerance levels in this area.

Great recruiters are also used to working a funnel and It’s time to interrupt your normal pattern with your closing business.There’s usually a scoreboard involved, such next HR hire. Recruiters are great candidate sources for as the number of vacancies, time to fill or cost per hire. HR pro openings in your organization. Follow these That means most recruiters worthy of a promotion to HR guidelines to determine if they have the chops, and you’ll know how to compete and are motivated by individual end up with a great selection without getting burned. results, which is inconsistent with how many incumbents view their role in HR. Kris Dunn, the chief human resources officer at Kinetix, is a Workforce One of the things leaders say they want from HR is the contributing editor. To comment, email editors@workforce.com.

GREAT RECRUITERS ALWAYS HAVE A KEEN UNDERSTANDING OF EMPLOYER BRAND — PRIMARILY BECAUSE THEY’RE USED TO SELLING A COMPANY.

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FOR YOUR BENEFIT

Hearing Benefits Barely Make a Peep Employers often ignore hearing benefits, but they’re missing a big piece of the wellness puzzle.

By Rita Pyrillis

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ellness plans seem to address every area of well-being them at risk. We try to help them improve their health and from heart health to mental health, but one aspect of their performance, and this was a low cost way to do that.” employee health is being overlooked, according to a recent Since the plan launched last year, 75 teachers have signed survey. So employers, listen up. up, and Hines expects that number to grow in the coming Poor hearing can be linked to many conditions, such as years.The plan is offered by EPIC and covers a hearing exam depression, dementia and cardiovascular disease, yet hearing and $750 per year for a hearing aid. health is mostly absent from employee wellness programs, according to EPIC Hearing Healthcare, a benefits provider.

‘IF I’M GOING TO OFFER The company recently launched a hearing wellness program that offers discounts on hearing services to employees who BENEFITS TO HELP MY take an online hearing test and participate in various activities, like taking quizzes and experiencing hearing loss with a TEACHERS DO THEIR JOBS virtual simulation.

“Hearing is a vital life sense that we all rely on, so why is it BETTER, THIS MADE SENSE.’ not covered as an ancillary benefit like vision and dental?” said Dru Coleman, national sales and marketing manager —DAVID HINES, NASHVILLE SCHOOLS with EPIC. “People expect major medical will cover hearing aids, but most don’t. The cost of hearing aids can be excessive, and there’s no rhyme or reason to it.”

According a 2013 EPIC survey, 30 percent said they susAccording to the survey, hearing health is absent from pect they have hearing loss but haven’t sought treatment, 92 percent of employee wellness programs. and almost all of them indicated that it is affecting their job.

“Hearing health is a critically important part of employee One reason is the stigma associated with hearing loss — a well-being and should be included in the wellness program condition most associated with the elderly. But according to of any business that is serious about fostering a culture of Rogin, hearing loss can hit at any age. well-being,” said Carole Rogin, execu“Our population and workforce is agtive director of the Better Hearing In- Impact of Hearing Loss on the Job ing, and people are staying in the workstitute. “Hearing loss is linked not only force longer,” she said. “Moreover, reThese are the most common obstacles to quality of life but also to other health search suggests that hearing loss is employees with a hearing problem face. conditions such as depression, diabetes, common among people in their 40s, cardiovascular disease, moderate chronand that it’s increasing among 20- to ic kidney disease, dementia and cogni39-year-olds. Hearing health is an imAsking people to repeat tive function. It’s even linked to falls portant issue that warrants an open and what they said and hospitalization.” constructive dialogue.”

Some jobs carry a higher risk of hearRogin said employers can help by ofing loss — such as construction, factory fering on-site hearing screenings, eduStraining to understand a or farm work — but teachers are also at cating employees on the effect of unconversation when there high risk, according to one recent study treated hearing loss on quality of life, is background noise or that showed 15 percent of teachers have and making sure hearing aids are covother people talking a diagnosed hearing loss compared with ered by their health plans.

12 percent of workers overall.

There are more simple approaches as When teachers at the Metropolitan well, like not conducting meetings at Misunderstanding Nashville Public Schools in Tennessee noisy restaurants, using noise-absorbent what is being said presented that information to David materials in cubicles, and moving emHines, director of benefits, he decided ployees with hearing problems away to start offering hearing health insurfrom noisy hallways, machines or air ance to the district’s 6,000 teachers. conditioning and heating vents.

Pretending to hear “If I’m going to offer benefits to help “By encouraging employees to treat hidmy teachers do their jobs better, this den hearing loss rather than hide it, an emmade sense,” he said. “If you think about ployer creates a win-win situation by ensurSource: EPIC Hearing Healthcare the constant noise and the drone that ing that the loss of hearing does not teachers are exposed to every day, it puts interfere with job performance,” she said.

61%

57%

42%

40%

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FOR YOUR BENEFIT

Debt Perception With student loan debt on the rise, many employers consider voluntary benefit offerings.

By Sarah Sipek

SAP Feted for Gender Diversity

By Rita Pyrillis

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orget dogs in the office and free lunches, and put unlimited time off on permanent vacation. What the millennial workforce really needs is a way out of debt. And employers willing to help will attract the talent.

According to the Project for Student Debt, the average college student graduated with $28,950 in debt in 2014. Based on current projections by One Wisconsin Institute, a nonprofit organization that conducts research on student loan debt, it will take 21 years or so to repay this amount.

While the price of college tuition has long been a political issue, it is rapidly becoming an area of concern for employers looking to attract and hire talented, but indebted, college students.

“We’re seeing a spike in concern over student loan debts among employers,” said Amy Hollis, a national voluntary benefits practice leader at Willis Towers Watson. “Employers are noticing more and more the impact of the financial drain and emotional strain on employees who are carrying an enormous amount of student loan debt.”

While Hollis said more employers are inquiring about ways to help employees pay off their debts, few have put that advice into practice. A recent Society for Human Resource Management study found that, of 460 HR managers surveyed, only 3 percent were currently helping employees manage student loan debt payments.

The greatest roadblock is indecision, Hollis said. And it comes from too many choices. Some companies, such as PricewaterhouseCoopers, are planning to give some employees up to $1,200 a year for six years to put toward their student-loan debt.

Software-maker Kronos Inc. will pay employees up to $500 a year toward student loan debts for as long as they need it.

“The practice needs a lot of vetting,” Hollis said. “There is currently a lot of energy being put into that space as an employer-sponsored voluntary benefit.”

One way employers are approaching the issue is through payroll deduction programs, said Heather Prohaska, vice president of marketing partnerships at BenefitHub. Employers can create a system where payroll automatically deducts a pretax student loan payment from their paycheck.

As with any program, employers should first evaluate their employee population before instituting such a plan, Hollis said.

“If you have a diverse population that includes many millennials or recent college graduates, voluntary benefits have proven to be a great way to meet their needs without having to spend additional money on the plan,” Hollis said. april

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n an industry notorious for its dearth of female workers, tech company SAP America Inc. received a seal of approval recently for its commitment to gender diversity with certification from EDGE, which stands for Economic Dividends for Gender Equality.

A team of scientists and diversity experts launched the international program at the World Economic Forum in 2011 and it is compared with Leadership in Energy and Environmental Design, or LEED, Certification, which recognizes environmentally sustainable building practices.

More than 100 companies in 31 countries have received EDGE certification, including cosmetics giant L’Oreal and oilfield services company Technip in the United States, but SAP America is the first U.S. tech company to be certified.

“We have a holistic diversity and inclusion strategy,” said Anka Wittenberg, chief diversity and inclusion officer at SAP, which is based in Germany. SAP America is a subsidiary of SAP SE. “It’s not about filling a quota. At SAP, we are very committed to finding sustainable solutions.”

To receive certification, companies are assessed in five areas, according to EDGE: equal pay for equivalent work, recruitment and promotion, leadership development, flexible working, and company culture.

SAP’s gender diversity efforts include a yearlong leadership development program, a monthly webinar series that tackles topics like negotiation, effective communication and political savvy, and a global business network of 8,000 female employees around the world, among other initiatives.

Women make up more than 30 percent of SAP’s global workforce and hold about 23 percent of all leadership positions. Wittenberg said that the company’s board of directors has committed to increase that number to 25 percent by 2017.

“You can do a lot of great programs, but if the commitment is not there, it’s just a lot of activism,” she said. “It feels like ownership has been shared in the leadership team and among employees.This is not a top-down effort.” w o r k f o r c e . c o m | Workƒorce

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Obama Looks to Add Pep to MEP Small businesses may soon have a chance to offer retirement savings plans under the president’s multiple employer plan initiative.

By Patty Kujawa

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n his State of the Union address in January, President Barack Obama said Americans are on shaky ground when it comes to saving for retirement. Because many people don’t have a retirement plan at work, the president used his final budget to Congress to define his most aggressive plan to loosen certain rules to increase the number of 401(k) plans at companies nationwide.

The key idea would help small-business owners join with others to create a defined contribution multiple employer plan, or MEP. While the idea has been around for years, the president’s proposal would relax existing rules that have prevented small businesses from taking advantage of the strategy.

“Even as we invest in better skills and education for our workforce, we must respond to dramatic changes in our economy and our workforce,” Obama said in his budget message on Feb. 9.“To address these changes and give Americans more economic security, we need to update several key benefit structures to make sure that workers can balance work and family, save for retirement and get back on their feet if they lose a job.”

MEPs are defined contribution plans, like 401(k)s, where employees contribute pretax money into savings accounts. If it is a traditional 401(k) MEP, the money grows tax-free but gets taxed upon withdrawal. The difference with an MEP is that more than one business participates, so workers from different companies are in a shared plan.

Today, small businesses can take advantage of the MEP rule only if they join with similar but unaffiliated companies.Typically, trade associations provide MEPs for their members. Under the trade association umbrella, small companies are able to take advantage of lower costs because the MEP’s scale is larger than what they would have with a single defined contribution plan.

The president’s proposal unlocks a giant barrier, allowing any small business to join a MEP; companies would not have to be from the same industry to be eligible to participate. In addition, if the worker changes jobs, the MEP would be portable — meaning the worker’s account could move to the person’s next job.

“The president is using the existing system in a much more

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expansive way to draw small businesses to create plans,” said Kevin Crain, head of workplace financial solutions at Bank of America Merrill Lynch. “For years, the small employer has not had an easy path” to create a 401(k).

Under the plan, small businesses would be able to unite and take advantage of costs savings that are usually for large plans only.

A FIDELITY INVESTMENTS STUDY SHOWED 55 PERCENT OF RESPONDENTS RISK NOT BEING ADEQUATELY PREPARED TO COVER EXPENSES IN RETIREMENT. “The proposal to enable employers to bring institutional approaches to their employees through participation in multiple employer plans presents a real opportunity to expand access to retirement savings plans without sacrificing adequacy,” said Lew Minsky, president and CEO of the Defined Contribution Institutional Investment Association.

In his budget message, Obama said not enough people with full- and part-time jobs have access to retirement plans at work.

In 2015, 66 percent of private industry had access to retirement plans on the job, according to the U.S. Bureau of Labor Statistics report on employee benefits.

The real issue of access becomes apparent when looking at the number of small companies with retirement plans and part-time worker access. Additionally, a recent Fidelity Investments Retirement Savings Assessment study showed 55 percent of respondents risk not being adequately prepared to cover retirement expenses.

According to BLS data, only 46 percent of workers at companies with fewer than 50 people have access to plans, while 37 percent of part-time workers have retirement benefits available at work.

The president’s budget proposal included several other new and recycled ideas to increase access and usage at work, including: • Part-time employees who work at least 500 hours a year for three consecutive years would be eligible to participate in their company’s 401(k) plan.

• A $100 million pilot program for states and nonprofits to design new retirement approaches that create portable retirement solutions and increase availability of plans at work.

• Tax breaks for small businesses to start a retirement plan or to automatically enroll workers in an existing plan.

• Long-term unemployed people to withdraw up to $50,000 a year without facing tax penalties from their retirement accounts for up to two years.

• A directive for companies with more than 10 employees to offer an automatic individual retirement accounts at work.The proposal includes a tax credit for businesses to help cover startup costs. april

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FOR YOUR BENEFIT

Acing the ACA

THE IRS’ PARADOX CITY

By Gary B. Kushner

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ate in 2015, the IRS issued yet another set of proposed But my favorite proposed regulation comes from an abregulations regarding a slew of Affordable Care Act-relat- solutely bizarre interpretation by the IRS that also deals ed issues in IRS Notice 2015-87. with affordability. In the very common situation of a medIt addressed a number of areas that were questioned by ical opt-out plan under Internal Revenue Code Section practitioners. These include items such as the indexing of 125, whereby the employee agrees not to take health covthe Section 4980H(a) and 4980H(b) penalties (now $2,160 erage in exchange for some amount of taxable cash, that and $3,240 for 2016 cash amount may need updating the previous to be added to the emACA defined $2,000 ployee contribution and $3,000 penalties when the employer reunder the employer ports the employee cost. mandate provisions); Using the IRS’ own indexing the affordabilexample in the proity percentage for the posed regulations, if an three safe harbors (now employee is required to 9.66 percent in 2016 contribute $200 per for the 9.5 percent month for employtests); and perhaps best ee-only coverage under of all a temporary rethe plan, and the emprieve of the imposiployer offers $100 per tion of penalties for employers failing to properly file the month of additional compensation for any employee who new 1094 and 1095 reports for 2015 as long as they made is otherwise eligible for the health plan but who opts out, “good faith efforts” to do so. the total employee contribution is considered to be $300 And, of course, the IRS has reiterated once again that per month ($200 + $100) and reported as such on that you cannot, shall not — we really mean it this time — al- year’s IRS 1095 reports. low any reimbursement of individual health premiums of Think about this logic: For affordability purposes, the almost any kind by the employer be it pre- or post-tax, employee is in essence considered to have both elected and unless you: a. Just give everyone some taxable dollar not elected health coverage at the same time. As an HR amount not subject to them actually buying insurance; b. professional, I never thought I’d be able to reference Have a retiree-only plan; c. Have a one-participant plan (no, Schrödinger’s cat in responding to IRS proposed regulayou can’t create a separate plan for each employee); or d. tions, but, alas, here we are. For those not familiar, Erwin Can stand on your head for 24 hours while whistling as Schrödinger was an Austrian physicist who, in 1935, was you consume three boxes of Saltine crackers. having difficulty understanding a concept in quantum meHowever, there are also lots of “out of the blue” items in chanics (you can undoubtedly see the HR and Tax Code question-and-answer form in the notice as well. For exam- intersection here). ple, if adopted in final regulation form, if you are a current He describes a situation in which there’s a closed box employee who had built up an HRA — even while it was containing a cat, a flask of poison and a radioactive source. properly integrated with a health plan, but who now is no If an internal monitor detects any radioactivity, such as a longer enrolled in that health plan — you cannot use the single atom decaying, the flask is shattered, releasing the existing money to purchase individual coverage. poison that kills the cat. Under the prevailing wisdom of Another example is how the IRS would like an employer the time, after a while the cat was considered to be both to consider flex credits in a cafeteria plan. If the credits can dead and alive at the same time.Yet if you actually opened only be used for a group health plan and no other benefit the box, the cat is either dead or alive. The question of and cannot be cashed out, only then can it be used to re- when quantum mechanics theory ends and reality begins duce what is considered an employee contribution for the collapses into only one possibility or the other, not both. affordability tests. If the plan allows those credits to be used And thus, the IRS has done what no one could contemfor any other plan purpose, including taxable cash, the em- plate before: having an employee simultaneously opt-in ployer may not use that to reduce what the employee is and opt-out of a health plan.Well done, IRS. required to contribute toward the cost of group health coverage, and thus the employer could not meet the af- Gary B. Kushner is the president and CEO of Kushner & Co., a benefits fordability thresholds. consulting firm. To comment, email editors@workforce.com.

I NEVER THOUGHT I’D BE ABLE TO REFERENCE SCHRÖDINGER’S CAT IN RESPONDING TO IRS PROPOSED REGULATIONS, BUT, ALAS, HERE WE ARE.

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Legal Ending Their Campaign In some cases, employees can be fired for expressing their political views.

By Katie Loehrke

s the political races unfold in 2016, just about everyone seems willing to share their opinions on candidates, parties and issues — whether they’re asked to or not.

For many of the nation’s workers, this can lead to uncomfortable situations or outright arguments while on the job.

Responding with a personal opinion might seem like second nature, but it might also be a risky move careerwise.

Employers generally have the right to limit employees’ political commentary during work time, and many of them choose to do so given the often-heated nature of the subject. Workers should always use common sense when deciding whether to discuss political issues at work, but there are some situations in which employees should definitely steer clear of such talk, such as: When the business owner or boss is vocal about their own beliefs. It’s a concept that might be shocking to many Americans, but, in many states, private employers may fire workers for their political beliefs.

Under the at-will employment doctrine, in the absence of a contract, employers can terminate employment at any time and for any reason not prohibited by law.

Every state except Montana subscribes to the at-will doctrine.

Under this principle, organizations don’t need “just cause” to fire someone. If local or state law doesn’t prohibit it, private employers generally may terminate an individual because of his or her political beliefs.

Many misinterpret the First Amendment and believe that it applies in all cases related to 24

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freedom of speech. The First Amendment only applies to government censorship of speech. As such, it restricts public employers from engaging in this practice.

Most private employers won’t typically terminate employees for their political beliefs. The bad publicity from such actions will typically outweigh any perceived benefits.

Even in states and locations without laws protecting employees’ political beliefs, employers will have to tread a fine line. Some states, like Wisconsin, prohibit employers from taking action on employees’ legal activities, such as running for office or voting. If the discussions are union-related, they might also be protected.

ILLUSTRATION BY MIKE CENTENO

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Yet, employees should still be cautious. A business owner or manager who is strongly invested in their political beliefs could discipline or terminate others with opposing viewpoints.

When it wastes time. Many employers recognize that restricting all nonwork-related conversations can have a detrimental effect on morale.

But if employees are spending large amounts of time debating the pros and cons of a particular political candidate or issue when they should be working, an employer is going to take notice and possibly take action. Employers generally have control over what employees may and may not do on company property and on work time.

When discriminatory language is involved.

Employers have a duty to prevent and address discrimination in the workplace.

If employees are holding inappropriate discussions about a candidate’s sex, age, race, religion, ethnicity or other protected traits, the employer will likely want to take action. A business may be held liable for fostering a hostile work environment if it does not halt such conduct.

Because of the legal ramifications, most employers take discrimination in the workplace very seriously and will respond accordingly. This could include discipline and even termination.

When representing the company. If an employee is passing themself off as a company representative, or even sporting company logos (on a shirt, hat, etc.) while giving a personal interview on the subject of politics, an employer likely has the right to act. Such actions could give customers and others the impression that the employee’s beliefs are those of the company.

Think before speaking. When faced with a workplace situation involving heavy political posturing, it can be hard to consider the effects of statements prior to making them in front of co-workers.

But taking a moment to think about the consequences of certain political discussions before engaging in them might be the best way for employees to safeguard their job.

Employees should consider the career risks of bringing politics to work. The best course of action might be to leave political discussion at the door.

Katie Loehrke is a certified Professional in Human Resources and an editor with J.J. Keller & Associates.

She specializes in employment law topics such as discrimination, privacy and social media, and affirmative action. To comment, email editors@ workforce.com.

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Legal Legal Briefings LABOR DEPARTMENT EXAMINES MULTIPLE CHOICE The U.S. Labor Department released an Administrator’s Interpretation on joint employment under the Fair Labor Standards Act and the Migrant and Seasonal Agricultural Worker Protection Act, or MSPA, calling for greater scrutiny of arrangements in which multiple companies might jointly employ workers. The guidance is on identifying scenarios in which two or more employers jointly employ an employee and are thus jointly liable for compliance under the FLSA and MSPA. It states that the scope of employment relationships and joint employment under the acts should be interpreted as broadly as possible. The Labor Department identifies two types of joint employment arrangements that should be analyzed: The first is horizontal joint employment in which an employee is employed by two or more technically separate but related or overlapping employers. The second is vertical joint employment in which an employer has contracted or arranged with an intermediary to provide it with labor and/or perform for it some employer functions. Administrator’s Interpretation No. 2016-1 (Jan. 20, 2016).

IMPACT: Employers using business models or labor arrangements that could result in joint employment should be cautious since the Labor Department is closely monitoring various potential joint-employment scenarios to achieve statutory coverage, financial recovery and future compliance.

THE HOLE IN DUNKIN’ DONUTS’ EXEMPT ARGUMENT The proper classification of employees as exempt remains one of the major drivers of class-action litigation in the employment context. The recent case of Marzuq v. Cadete Enterprises Inc. illustrates the difficulty of ensuring the proper classification of employees. The plaintiffs in Marzuq worked as store managers at Dunkin’ Donuts. Their employers classified them as exempt executive employees based on their status as store managers.

The plaintiffs contended that they had been misclassified as exempt because of the significant amounts of time they spent on nonexempt duties.

The trial court granted summary judgment in the defendant’s favor on the question of whether the plaintiffs were properly classified as exempt, finding that the plaintiffs were primarily engaged in bona fide executive activities as a matter of law, relying on Donovan v. Burger King Corp., 672 F.2d 221 (1st Cir. 1982). The plaintiffs appealed and the 1st Court of Appeals reversed the decision. Among other issues, the court of appeals focused on the fact that the allegedly exempt plaintiffs were paid at rates comparable to their nonexempt subordinates. It noted that “[i]f, on an hourly basis, a manager’s salary for performing a high percentage of nonexempt work is about the same as the wages of crew members for such work, the justification for exempting the manager from overtime pay is weakened.” Marzuq v. Cadete Enterprises Inc., 807 F.3d 431 1st Cir. (Dec. 9, 2015).

IMPACT: In evaluating whether employees have been properly classified as exempt, similarities in duties and pay between exempt and nonexempt workers should signal to the employer that exempt status is questionable and further scrutiny of the criteria for exempt status is warranted.

Mark T. Kobata and Marty Denis are partners at the law firm Barlow, Kobata and Denis, which has offices in Beverly Hills, California, and Chicago. To comment, email editors@workforce.com.

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Legal

Arbitration Shouldn’t Be Arbitrary Jon Hyman |

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The Practical Employer

answer my office phone and hear this question: “Can you draft us an arbitration agreement for our employees?”

“Why?” I respond.“What are you hoping to accomplish?”

“For one thing, it’ll keep us out of court, which we think will keep down our legal costs and finish cases sooner. Plus, it will limit our jury-exposure risk, which is what really keeps us up at night.”

Are these assumptions accurate? The answer might surprise you. One recent survey of employment cases concluded that arbitration is 30 percent more expensive and takes nearly 25 percent longer: • The average costs and fees in an employment arbitration were $102,338 compared with $70,491 for litigation.

• The average life cycle of an employment arbitration, from filing to decision, was 21 months compared with 17 months in litigation.

While this survey is not conclusive, it illustrates that employers need to question the premise that arbitration is a quicker and cheaper way to resolve employment disputes. If the premise is faulty as to cost and speed, then businesses should be questioning whether there are other ways to ensure against juries.

Add to the equation one other reason to be wary of arbitration agreements: the National Labor Relations Board.

In the waning days of 2015, the NLRB released 15 new opinions, and a staggering 13 of them concluded that the employer had promulgated an unlawful arbitration clause.

SolarCity Corp. is the best example of the NLRB’s current stance in these cases. SolarCity required that its employees sign a mandatory arbitration agreement, which included class-action waivers, but which also specifically carved out the right for employees to pursue claims with state and federal administrative agencies: “I understand that … this Agreement does not prohibit me from pursuing … claims with local, state, or federal administrative bodies or agencies authorized to enforce or administer employment related laws. … Such permitted agency claims include filing a charge or complaint with the U.S. Equal Employment Opportunity Commission, the Department of Labor, the Occupational Safety and Health Commission, and the National Labor Relations Board.”

Notwithstanding that carve-out, the NLRB still concluded that the arbitration agreement violated the National Labor Relations Act: “As described, the Agreements state explicitly that ‘all’ or

‘any disputes’ must be individually arbitrated, thereby conveying to employees that, as a condition of employment, they must forfeit their substantive Section 7 right to act collectively in pursuing an employment dispute in any other forum.Viewed from an employee’s perspective … it would take ‘specialized legal knowledge’ to determine whether employees’ right to file Board charges is permitted or precluded by these caveats. Rather than drafting a provision that clearly informs employees that they have the unconditional right to file charges with the Board, the language chosen by the Respondent restrains employees from exercising this protected right out of fear that doing so would run afoul of the caveats.”

In other words, at least under current NLRB law, if an employer wants an arbitration agreement to pass board scrutiny, it must clearly and unequivocally state that employees have an affirmative right to file a charge with the NLRB.This is a difficult standard to pass.

If arbitration is neither faster nor less expensive than court and risky in the NLRB’s eyes, but you still want to foster expediency and limit the risk of a runaway jury verdict, consider two possible alternatives.

Contractual waivers of jury trials: Employers can have employees sign agreements waiving the right to ask for a jury in any subsequent legal disputes. The contract should clearly and unambiguously advise the employee that by signing the agreement, the employee is giving up any and all rights to have any claims related to their employment raised by a jury. The more broadly the waiver is drafted, the more likely it will cover an employment-related claim, provided it is otherwise knowing and voluntary.

Agreements to shorten the statute of limitations: Employers can attempt to limit the amount of time employees have to assert employment claims. Courts have held that abbreviated limitations periods are reasonable and lawful provided that the language is clear and unambiguous. There are no quick answers to whether your business would be better served by arbitrations, bench trials or some other solution. But, there are options you should be considering other than the conventional wisdom that businesses should be arbitrating their employment claims.

One recent survey of employment cases concluded that arbitration is 30 percent more expensive and takes nearly 25 percent longer.

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Jon Hyman is a partner at Meyers, Roman, Friedberg & Lewis in Cleveland. To comment, email editors@workforce.com. Follow Hyman’s blog at Workforce.com/PracticalEmployer.

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IN LARGE DOSES

BY SARAH SIPEK

Given their size and lack of transparency, it is easy to mistrust PBMs. But the affordable access to lifesaving drugs they provide suggests that they’re fighting on the employer’s side.

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mployers are probably dubious about how consolidation in the PBM industry will affect them.

After all, pharmacy benefit managers do have a history of stealthy business practices — but while employers might not know what goes on behind the curtain, PBMs do help lower drug costs. And experts say consolidation will only help with companies’ bottom lines.

In May 2015, UnitedHealth Group Inc. announced its plans to acquire Catamaran Corp. for $12.8 billion.

The deal — paid for in cash — expanded UnitedHealth’s OptumRx business unit to become the third largest PBM company in the United States. Federal regulators formally approved the acquisition at year’s end.

The payout ensued in mid-January when the company released its 2015 earnings reports. Despite heavy losses in its public health insurance exchange business, UnitedHealth reported double-digit revenue growth for the fourth quarter — up 30.4 percent from a year april

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ago. In total, the company’s revenue grew by 70 percent to reach $21.9 billion.

UnitedHealth CEO Stephen Hemsley gives the majority of the credit to the midyear acquisition and the strength of the resulting PBM. “We saw an opportunity, we took it, and the results speak for themselves,” Hemsley told Workforce in an earnings call.

“Revenue for OptumRx doubled during the fourth quarter.

It didn’t take long for us to realize the value in getting bigger.”

And if there is a rule of thumb with PBMs, it’s that bigger is better. Unfortunately, the rule is also cause for concern by those employers that have come to depend on PBM services to manage the rising cost of prescription drugs.

Just take a look at the competition. Express Scripts Holding Co. currently sits at the top position with 90 million lives covered. CVS Caremark is second with 85.1 million lives covered, according to the most recent research from publishing and information company Atlantic Information Services Inc. The acquisition, completed in July 2015, put UnitedHealth Group comfortably in third with 65 million lives covered.

‘GIVING PBMS MORE CONTROL ... PRODUCES MORE SAVINGS.’ —JONATHAN ROBERTS, CVS HEALTH Big business yields big rewards, too. The PBM market is expected to swell to $400 billion by 2020, up from $100 billion in 2014, according to a CVS Caremark study.

“High profit margins and big businesses initially raised concern among employers that the top pharmacy benefits managers would have free reign to charge what they want,” said Ritu Malhotra, vice president and national pharmacy benefits practice leader at consultancy The Segal Co. “Thankfully that hasn’t yet proven to be the case.”

PBMs aren’t the only one gaining a financial edge. Ac-

Who’s on Top? With recent acquisitions and consolidations, PBMs are hard to rank in terms of size and industry influence, but according to the recent numbers, here are the top four U.S.-based PBMs: 1.

2.

3.

4.

Express Scripts CVS Health UnitedHealth Group Prime Therapeutics

Source: Pharmacy Benefits Management Institute

cording to a February report compiled by consultancy Visante Inc., based on the current use of PBMs, employers can expect to save approximately $654 billion from 2016 to 2025. Annual savings currently generated by PBMs for the commercial sector will cover the cost of more than 670,000 jobs in 2016 alone, according to the report.

“The UnitedHealth and Catamaran acquisition was great for the industry because it created another viable competitor,” said Sarah Beis, a senior consultant at Visante. “More competition means more power to ultimately drive down prices for the employers.”

And given the rising cost of pharmaceuticals — especially specialty drugs to treat hepatitis C and certain cancers — employers can use a big guy in their corner.The key is making sure that protecting employee health remains a constant concern for employers.

Necessary Force PBMs are not a new concept.They originated in the 1970s when groups of pharmacists got together to make money by processing claims. They gained power in the 1990s by controlling drug costs with tiered formularies.

Drugs on a formulary are typically divided into tiers, said Matt Heywood, CEO and president of Aspirus, a nonprofit, community-directed health system based in Wausau, Wisconsin. The tier that an employees’ medication falls under

How Plan Decisions Determine PBM Savings

LOW USE OF PBM TOOLS

HIGH USE OF PBM TOOLS

Open formulary

More specific formulary

Few copay tiers

Four or more tiers

Little utilization management

Preapprovals and step therapy

Minimal use of mail-service pharmacy

Strong incentives to use mail services

Open pharmacy network

Preferred pharmacy options and high performance networks

Little use of specialty pharmacies

High use of specialty pharmacies

Source: Visante, 2016

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Reducing Costs Sarah Beis, a senior consultant at Visante, said PBMs focus on six categories to reduce cost for employers by: 1. Negotiating rebates from drug manufacturers: PBMs do this by making deals with certain manufacturers to have their products identified as “preferred.”

2. Negotiating discounts from drugstores: Retail pharmacies often will provide discounts to be included in the plan’s pharmacy network. The more selective the network, the greater the discount because each pharmacy will gain business.

3. Offering more affordable pharmacy channels: Mail service and specialty pharmacy channels typically give plan sponsors deeper discounts than retail pharmacies. These channels also help encourage the use of preferred products for more savings.

4. Encouraging the use of generics and affordable brands: The tiered formulary model steers employees toward certain drugs over others. Gaining access to a desirable tier means pharmaceutical companies need to offer drugs at lower costs.

5. Reducing waste and improving adherence: PBMs often use drug utilization reviews to reduce waste and ensure employees stick to their prescription regimens. This helps improve clinical outcomes and gets patients off drugs faster or lowers dosage.

6. Managing high cost-specialty medications: The combined effect of the above strategies and the millions of lives covered allows PBMs to make deals with specialty drug companies to offer drugs at astronomical costs, such as the $1,000-a-day hepatitis C drug, at up to a 67 percent discount.

—Sarah Sipek

determines the cost of the drug. Most drug benefits programs are divided into three or four tiers: generic medications, preferred brand-name medications, nonpreferred brand-name medications and specialty drugs.

“By choosing which drugs were categorized into which tier on their formularies, PBMs were able to intercede and drive down costs for employers,” Heywood said.

Success in the ’90s led to consolidations in the early 2000s. Basic economies of scale suggested that getting bigger would create more leverage for PBMs to drive down drug costs and create more business.

It helped their cause that, over the past 25 years, the share of the health care dollars spent on pharmaceuticals nearly doubled, from roughly 5 percent to 10 percent, according to Visante’s findings. New medications and broader insurapril

2016

ance coverage have increased outpatient prescription drug expenditures, which are expected to total more than $340 billion annually in 2016.

Higher costs created a greater need for someone to act in the interest of the consumer to drive down high prices.

PBMs accepted that challenge and have worked to increase prescription drug access while reducing cost growth.

And it’s taken some muscle to get the job done.

While PBMs are willing to share their tactics in name, details of the decision process behind how certain drugs end up on formularies and how deals with manufacturers and pharmacies are made are less available. Admittedly, that lack of transparency makes some employers nervous, said Jonathan Roberts, executive vice president at CVS Health.

“Giving PBMs more control over the management of your prescription drug plan produces more savings for employers,” Roberts said. “With that control comes a little less transparency.That’s just a consequence of the industry.”

Employers are not privy to the prescription drug’s starting value, said Mark Mollico, vice president of human resources at 84 Lumber Co. PBMs work with pharmaceutical companies to provide discounts based on a wholesale starting value.

Employers are not told how that value is derived.

“That’s the transparency we’re looking for,” Mollico said.

“It’s like buying a car. There’s a sticker price and you’re not sure how the dealer came up with it.You bargain from there, and while you typically walk away having paid less, there’s always the feeling that you didn’t get the best possible deal.”

84 Lumber recently switched PBMs, moving from Express Scripts to OptumRx, Mollico said. The Catamaran deal helped sway the decision. OptumRx provides the technology and tools 84 Lumber wanted to help manage its employees’ specialty drug usage.

See No Evil, See Less Savings With many of the top PBMs acquiring smaller companies in recent months — UnitedHealth announced in January that it acquired Helios to tap into the workers’ compensation growth arena — it’s natural that employers and industry insiders might worry that a monopoly is forming.

The number of PBMs operating at any given time is hard to gauge, but experts put the number between 60 and 100.

While it’s on her radar, a Rockefeller-like takeover doesn’t seem likely in the near future, Segal Co.’s Malhotra said.

“Right now, each of the top three PBMs have their own niche,” Malhotra said. “With Express Scripts, it’s mail order and specialty drugs. CVS Caremark focuses more on its retail pharmacies and immediate care clinics. UnitedHealth has the tech angle down, which means they’re saving money by collecting data on employee drug usage, which allows employers to make sure they’re selecting plans that employees actually use instead of paying for extra.”

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H R O:

Cloudy WITH A Chance OF

Consulting

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Staying competitive as an HR multiprocess outsourcer means catering to clients and acting less like an administrator and more like a partner.

BY MICHELLE V. RAFTER

T

alk to human resources outsourcing experts and you hear it over and over again: Like other HR technology, outsourcing is moving to the cloud and becoming more strategic, specialized and global.

As more companies transfer HR functions to cloud-based services, HR outsourcing vendors are switching to cloud-based services, too. In some cases, they’re acting as implementation partners or intermediaries between customers and major vendors of cloud-based HR services such as SAP SE and Workday Inc. As companies compete for new hires and wrestle with the effects of the Affordable Care Act and other regulations, they want outsourcers to act as their consultants and not just take over back-office processes.

Multiprocess HR outsourcing still exists, though it never got as big as predicted.

While some vendors exited the business, new providers have popped up offering cloud-based services from day one. At the same time, more companies are bypassing multiprocess outsourcing to partner with

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specialists, whether in benefits administration, recruitment process outsourcing or other categories. On the other hand, professional employer organizations remain a popular option for small and midsize businesses looking to offload payroll and other administrative functions associated with having employees.

HR outsourcing vendors that have solidified market share in one geographic area are eyeing expansion into new regions.To do that they’ll have to build out what they offer to cover functions such as payroll and learning in multiple countries and languages.

Cloud-based services and other changes have added to the outsourcing industry’s soup of acronyms, including new buzzwords such as application management services, or AMS, business-process-as-a-service, or BPaaS, and HRprocesses-as-a-service, or HRPaaS. If there’s one unifying theme to the terminology and trends, it’s the service customers expect to get along with the technology.Today,“really good service is what differentiates” outsourcers, said longtime HR tech industry analyst and Eudemonia founder Christa Degnan Manning.

Here’s a deeper look at HR outsourcing trends.

Benefits Administration The ACA and other federal regulations, growth of benefits products, and pressure to keep a lid on labor costs are pushing more companies to outsource benefits.

In fact, 24 percent of companies now outsource benefits administration, more than any other HR function (aside from payroll), according to the 2015-2016 Sierra-Cedar HR System Survey.

The universe of benefits has expanded so much, NelsonHall HR outsourcing analyst Amy Gurchensky tracks 11 separate service lines, including medical and dental, pensions, 401(k) savings plans, health and wellness, employee assistance

OFFERING SERVICES IS A NECESSITY, AS ‘YOU PUT THE CLOUD IN THE MIX AND THEIR MARGINS ARE PUT UNDER PRESSURE.’ —CHRISTA DEGNAN MANNING, ANALYST programs, risk management and more. According to Gurchensky and other insiders, companies prefer doing business with specialists rather than going with a single provider, and generally work with two or more.

That’s pushed some vendors to zero in on their strengths and sell off other businesses. In September 2015, for example, Mercer sold its 401(k) division to Transamerica Retire34

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PEOs Are Primed You could almost hear Maria Black smiling through the phone.

The day before, ADP announced second quarter revenue of $733 million for ADP TotalSource, the HR services giant’s professional employer organization, or PEO, business, which Black runs. The number represents an 18 percent Maria Black, ADP TotalSource jump from the previous year. “It’s an incredibly exciting time and a significant milestone,” Black said.

ADP isn’t the only one having a good year. The PEO industry is expanding as small and midsize companies look for ways to keep up with workplace regulations while trying to lure good candidates from bigger competitors.

PEOs function as co-employers for clients, giving small and midsize businesses the chance to look and act like larger employers by offering them access to benefits and human resources management tools that they might not be able to afford on their own. In the arrangement, clients hire and manage employees. U.S. PEOs employ 2.7 million to 3.4 million employees. PEOs work with between 156,000 and 180,000 companies for a total estimated market value of up to $156 billion, according to the National Association of Professional Employer Organizations.

PEOs have added approximately 100,000 worksite employees a year for the past 30 years, according to the association. Analysts and industry insiders believe that adoption rate will increase because of a law that took effect in 2016 granting federal recognition to PEOs for the first time. That recognition could compound growth coming from small- and midsize employers who began using PEOs to deal with changes brought on by the Affordable Care Act and COBRA. PEOs such as ADP TotalSource use standardized processes, cloud-based technology platforms and economies of scale to sell smaller employers better recruiting tools and benefits than they could buy on their own.

That allows customers to compete with bigger businesses for top job candidates.

Black, who started in HR outsourcing 20 years ago, said, by taking over transactional processes, PEOs also help company owners or HR directors spend more time making HR a “strategy workhorse.”

—Michelle V. Rafter

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ment Solutions parent company Aegon to focus on its health care and pension businesses.The company has doubled down on health care by opening a private health care insurance exchange that now serves 306 companies with 703,000 eligible employees or retirees. Earlier in 2015, Ceridian sold its U.S. benefits business to Morneau Shepell and its COBRA division to WageWorks to concentrate on its employee assistance program business.

As pressures increase to keep employee benefits costs down, it’s causing industries that traditionally haven’t outsourced benefits to consider it, including health care. Hospitals long believed that as health care providers it would be odd if they didn’t administer their own health care benefits, said Bill Beauchamp, a partner in Mercer’s benefits administration business. Not anymore.“We’re seeing health care really pushing the envelope,” Beauchamp said.

Historically, enterprises with 50,000 or more employees were more apt to outsource benefits. But Beauchamp said he sees that number dropping to companies with 20,000 or fewer.

Gurchensky expects companies to stick with their current medical benefits providers until they know how the ACA will affect their business, but could start looking at other options after 2016.

Recruitment Process Outsourcing Despite tremors in the economy caused by fluctuating oil prices and a gyrating stock market, hiring has remained steady through the first part of 2016. That’s led businesses of all sizes to continue vying for the best job candidates. The trend plays nicely into the strengths of RPOs, which companies turned to during the recession after cutting internal recruiting teams to save money and have used ever since.

RPOs are moving beyond mainstays such as sourcing, recruiting and onboarding to provide services such as employer branding and workforce analytics, Gurchensky said.

“RPO has been a huge market,” she said.

Some are focusing on specific industries. Last November, health care staffing company Supplemental Health Care spun off its RPO business under its own name, Clinical Magnet, to compete in a blossoming health care RPO market. Clinical Magnet works with small and large health systems to fill the gamut of staff positions from neonatal registered nurses and physical therapists to clinical department desk jobs. Like a lot of RPOs, Clinical Magnet uses technology such as candidate relationship management, mobile apps and text messages to connect with potential candidates months in advance of having openings to fill.

In 2015, the company used those methods to find and hire a clinical staff of nearly 450 people for a health care system in the south central United States that was opening two hospitals. Clinical Magnet President Travis Furlow estimates the team dedicated to the project connected with up to 10 times that number of candidates between April april

2016

25

%

The percentage of organizations that outsource benefits administration, making it the most-outsourced HR function.

The increase in human resources outsourcing activity from 2014 to 2015.

11

%

$3.6 billion

$156 billion

The estimated size of the professional employer organization industry.

The size of multiprocess HRO market in 2015, including on-premise and cloud-based services.

Source: NelsonHall; 2015-16 HR Systems Survey, Sierra-Cedar; National Association of Professional Employer Organizations

and September, when the facilities opened.

Like many other RPO project teams, most of Clinical Magnet’s recruiters work remotely on what Furlow calls a virtual delivery basis, which is becoming more common in the industry. “There’s a deeper comfort with productivity with virtual workforces” than in previous years, he said. “And not everyone can afford to have that many people sitting on-site.”

As with benefits outsourcing, RPO is mature in some industries but gaining momentum in others, including health care. With nursing shortages predicted to get worse in coming years, that uptick should continue for the foreseeable future. “RPO can do really good things for early adopters, and that’s where I see health care systems now,” Furlow said.

Multiprocess HRO The multiprocess human resources outsourcing business never made it to the $4.3 billion mark that industry analysts predicted a decade ago, in part because of the difficulties companies encountered turning over multiple processes to a third party. Software as a service also put a damper on multiprocess once companies needing to upgrade legacy on-premise systems chose SaaS over outsourcing. The problems and changing technology led return on investment to fall short of expectations for both companies and vendors. In the past few years, that OUTSOURCING continued on page 48 w o r k f o r c e . c o m | Workƒorce

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There’s Skill Involved Bridging the skills gap and addressing chronic underemployment can have an exponentially positive effect on workers, businesses and the communities we serve.

BY MATT FERGUSON

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e’re facing a skills crisis in America. Nearly 15 million people in the U.S. want to work, but they can’t find jobs.

And at the same time, around half of employers say they have job vacancies, but they can’t find qualified candidates to fill them, according to a Harris Interactive Inc. poll for CareerBuilder. Among information technology and health care employers, the problem is even more pronounced. There’s a huge disconnect that can have a paralyzing effect on business and the economy.

Among companies with extended job vacancies of 12 weeks or longer, 34 percent reported a loss in revenue while others pointed to a lower quality of work, higher employee turnover and deficiencies in customer service, according to the poll.

This gap will only become more problematic in years to come.

The skills for different occupations are evolving, often requiring college-educated labor for positions that were previously held by high school graduates.The number of high-skill jobs that will need to be filled by 2020 is equal to the populations of Chicago and Houston combined.

Jobs are growing at an accelerated rate in the STEM-related fields — science, technology, engineering and mathematics — and other areas, but degree completions and retraining efforts aren’t keeping pace. On top of this, despite falling unemployment, college grads age 22 to 27 are stuck

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in low-paying jobs and account for 40 percent of the unemployment rate. According to the Federal Reserve Bank of New York, the percentage of young people with a bachelor’s degree languishing in low-skill, low-paying jobs is 44 percent, a 20-year high.

Bridging the skills gap and addressing chronic underemployment can have an exponentially positive effect on workers, businesses and the communities they serve. The most sustainable and thriving communities are those with good jobs. That’s why corporate America needs to take a more active role in cultivating the talents of today’s and tomorrow’s generations of workers. Here are three ways your organization can make a difference.

1. Promote where the jobs are.

The skills gap in our country is in large part an information gap — many young people are unaware of jobs that are in high demand, pay well and are aligned with what they’re passionate about. In a separate Harris poll for CareerBuilder, nearly 1 in 4 high school seniors (24 percent) said they have no idea what career they want to pursue.

(Editor’s note: The author is CareerBuilder’s CEO.) Of high school seniors who have pinpointed a desired profession, 23 percent said they made their career choice based on something they saw on TV or in a movie.

Businesses need to do a better job of informing students of fast-growing fields, so they can discover career options that not only provide job security but also pay well. We need to get in front of students at an early age. These are conversations that should be taking place in elementary schools, not just high schools and colleges.

CORPORATE AMERICA NEEDS TO TAKE A MORE ACTIVE ROLE IN CULTIVATING THE TALENTS OF TODAY’S AND TOMORROW’S GENERATIONS OF WORKERS. Tech companies such as Microsoft Corp. and Facebook Inc. have programs to promote STEM careers in schools.

Last September, Microsoft announced it would be investing $75 million over the next three years on initiatives to increase access to computer science education for youth.With the new investment, nonprofit organizations will receive donations and resources from Microsoft, and the tech giant will expand its outreach into high schools through its Technology Education and Literacy in Schools initiative, or TEALS. It’s a major expansion of the company’s YouthSpark program, a global initiative to increase access for all youth to further their STEM education, empowering them to achieve more for themselves, their families and their communities.

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Similarly, last October Facebook announced that in an attempt to get students more involved with meaningful learning, the online social networking service and Summit Public Schools, which has schools in California and Washington, have created a Personal Learning Platform giving students control over their learning. Students start by working with teachers to set long-term goals — such as “become an investigative journalist” or “learn to code” — and then lay out a plan to achieve them over the course of many years. Students can then visualize and track all of their coursework as a path toward these goals, connecting their daily decisions to their long-term aspirations. Facebook CEO Mark Zuckerberg has also backed for-profit startup Altschool, which provides pre-kindergarten through eighth grade education in small schools it calls microschools. When a child joins, the school creates a profile of the child’s interests, strengths and weaknesses, which is then used to create a personalized learning plan. The child is then given a weekly list of individual and group activities and exercises to complete in order to meet their goals.

A few city and state governments are also allocating resources to support tech in schools. Take New York as an example: The city recently unveiled a plan to offer computer science to all students within the public school system within the next decade. More initiatives like this need to be launched.

2. Create the perfect candidate.

Businesses also need to invest in retraining the current workforce to create the perfect hire rather than waiting for one to come along. Now, the good news is half of U.S. companies are already taking action. In a 2014 Harris poll, 54 percent said they have trained workers who have no experience in their industry or field and hired them.

Forty-six percent of employers have hired a low-skill worker and trained them for a higher-skill job within the last two years.

This is encouraging, but the fact remains that while half of employers are retraining workers, half are not. Efforts need to be more widespread.

To ensure workers have the resources they need to excel in today’s workforce, ADP, an HR, benefits and payroll services provider, has built a culture around continuous education, training and skills development for all employees, regardless of their position or time with the company, encouraging them to go back to school and develop the skills that are in line with the discipline of their jobs. The company has also made an effort to ensure today’s students are prepared to be tomorrow’s workers, creating strategic partnerships with various organizations — such as the Women in Technology International — to raise awareness about the opportunities in the STEM fields.

Despite having the recession behind us, many businesses are still in a frenetic state of upheaval, reorganization and trying to do more with less. In this environment, managers and employees tend to be most focused on essential dayapril

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Adding Data to Address the Student Skill Gap Here’s what CareerBuilder is doing to mend the skills gap.

We need to arm students with good data. To this end, CareerBuilder and our economists at Economic Modeling Specialists International created Find Your Calling, a free website to help students discover career and education options based on data from more than 100 employment resources.

Visitors to the website start with a simple, interactive personality test for careers. Students are then presented with careers that match their interests with details ranging from job growth projections, salary ranges and businesses that are hiring to college programs they can apply to today.

The goal is to provide more data-driven career choices that are aligned with demand. The more information and outreach businesses can provide, the better our chances of establishing a pipeline of future talent.

In order for retraining efforts to gain momentum, there needs to be an acceleration of businesses expanding or enhancing training and development programs for new and current employees. This can be easier said than done.

We also initiated a program with similar goals that provides a six-month, paid internship in technology to the long-term unemployed — many with no technical background. Ten or more interns receive formal classroom training and then spend six months embedded within a CareerBuilder team working on real projects.

CareerBuilder partners with recruiters from the start to help place interns once their internship is over, and 90 percent have been placed into a job that uses the skills they have learned during this program at companies such as, Accenture, Dell Inc. and Dish Network. We purposely placed the interns in jobs outside of our company in the hopes of showing businesses that you can provide very marketable skills in technology to workers in a relatively short period of time.

—Matt Ferguson

to-day operations and less interested in longer-term activities perceived as having less certain, immediate payback.This is a mistake.

Training is a competitive advantage in terms of hiring and retention.That said, the kind of training an employee receives is very important. Allowing an employee to pass through a simple 101 training course does not ensure skill-building. In order for training to be beneficial, it must be a companywide priority receiving support on all levels. If it’s presented as an essential component to future success, training goes from an option to an imperative where there is urgency and accountability.

At professional services firm KPMG, the company has established a general skills framework to promote balanced development and ensure that, at every stage of a career, a professional is building a blend of technical, business and leadership skills. To keep curriculum fresh, the firm regularly reassesses skills needs and every year focuses its efforts on areas where it anticipates changes to be especially imminent. And to get ahead, KPMG looks for opportunities to develop employees not only for their current roles, but also future ones as well. Skills once taught in new manager training are now for talent on the road to becoming managers in the future. Instead of a one-sizefits-all approach focused on deficiencies, this model focuses on opportunities.

3. Join forces with educators.

Partnerships between universities, corporate training organizations and corporations aren’t new. IBM Corp. has been teaming up with universities since the early days of computer science education more than 70 years ago. But, as the debate over the skills gap accelerates, collaborations between educational facilities and businesses should become more sophisticated and evolve to meet shifting economic, marketplace and educational needs. As the next-generation partnerships are anointed, companies can help guide the formation of curriculum so the workforce of the future can keep up with rapid technological changes.

Many companies are taking advantage of these partnerships already. For example, in 2014 IBM partnered with 28 business schools and universities to create material that helped prepare students for the 4.4 million jobs the company created worldwide to support big data in 2015.

Likewise, educational technology company Coursera Inc. launched a Global Skills Initiative in 2014, a program aimed at bringing top companies and universities together to advance access to job-relevant skills around the world.

After identifying a high-demand content area, companies are paired with a Coursera partner university that is responsible for the academic expertise, creation of course materials and the overall learner experience.

SKILLS GAP continued on page 49

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PROFILE

A m y Wa r y a s

In the Green Monster’s Yard, She Watches Over the People The Boston Red Sox’s senior vice president of HR understands that, in order to keep a dedicated workforce, they have to feel like the organization cares.

BY SARAH SIPEK

I

f you’re ever in Boston, take the tour of Fenway Park. Re- nization that creates these memories is something I congardless of whether you’re into baseball — or worse, a die- nected with.” hard New York Yankees fan — take it. It’s worth the $17 As the Red Sox’s senior vice president of human reand 90 minutes of your time. sources, Waryas is responsible for developing and fosAs you wind your way through the oldest stadium in tering that culture — not for the athletes and coaches, Major League Baseball — gazing at the locker where the but for 1,400 full-time and seasonal employees. While “Splendid Splinter” himself, Ted Williams, once kept his the high-profile nature of working for the Red Sox gear — it becomes apparent that the Red Sox are more makes attracting talent somewhat less of an organizathan an iconic ballpark with tional concern, making a 37-foot left field wall sure employees have room known as the Green Monto grow and feel apprecister or a team once saddled ated is a top priority. with the “Curse of the BamAnd like the fans that supbino” after it traded Babe port the Red Sox, Waryas Ruth to the Yankees. does not shy away from the The organization rephard work it takes to build a resents the culture of Boston winning organization. itself: hardworking and loyal.

She joined the Red Sox —AMY WARYAS And that culture is defined in 2011, a year before Fenby fans who have supported way Park’s 100-year anniverthe franchise since it won the first-ever World Series as the sary, and has since used her knowledge and experience to Boston Americans back in 1903.Those fans live and die by grow the human resources department from a one-person their team, and it’s that kind of passion that attracted Amy operation focused on administrative tasks to a unit that Waryas to the organization in the first place. identifies, recognizes and supports the talented employees “What drew me here was more the lure of Fenway Park who give their all for their team. than the sport itself,” Waryas said. “It means so much to so many people. Everyone has their own experience of being Hard Work and a Little Elbow Grease here.Visits to Fenway Park become part of family history.

Waryas has never been one to wait for others to do It’s something that is just so big and special in this town things for her. When the Massachusetts native grew tired that to be able to have such an important role in an orga- of her surroundings, she saw college as an opportunity

‘WHAT DREW ME HERE WAS MORE THE LURE OF FENWAY PARK THAN THE SPORT ITSELF. IT MEANS SO MUCH TO SO MANY PEOPLE.’

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A m y Wa r y a s

PHOTOS BY FRED LEVY

PROFILE

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PROFILE

A m y Wa r y a s

to experience another part of the country.

“I wanted a warmer climate,” said Waryas, 44. “So I only applied to schools in the South.”

She chose Vanderbilt University in Nashville, Tennessee. She majored in psychology, but outside of her involvement in her sorority — Kappa Delta — and her work-study commitments, she didn’t explore the field beyond campus.

“Internships weren’t that big of a deal back then,”Waryas said. “I was paying for my tuition, so I spent my summers waiting tables and working in restaurants because that’s where I could make the most money.”

‘I TOLD HER THAT PROFESSIONALLY I DIDN’T WANT HER TO GO, BUT IF SHE WAS MY DAUGHTER, I WOULD TELL HER THAT SHE HAD TO GO.’ —WILLIAM URICH, BOSTON BEER CO. After she graduated in 1994 with a degree in psychology, she was unsure of what to do with it. Her college counselor connected her with a woman who worked in HR at Beth Israel Deaconess Medical Center in Boston who agreed to meet informally about HR career options.

“I was immediately attracted to the position,” Waryas said. “I liked that she didn’t specialize. One minute she would be handling employee relations, then benefits the next. It was so varied.”

In a time before job aggregators and LinkedIn profiles, Waryas found her first job by looking through binders of job postings at the Boston College University career cen-

ter. She eventually found a position as an HR assistant at International Data Corp., a market research and analysis firm in Framingham, Massachusetts.

“There were only two people in HR, and they let me sit in on everything,” Waryas said. “I got to see firsthand how they did their jobs and tackled issues.”

Waryas stayed in that position for a year, eventually making a decision that she both regrets and credits with paving the way for her success.

“Ever since I left college, I was itching to get back in,” Waryas said. “The biggest professional do-over I have is going back into school too quickly and doing it full time.”

Waryas enrolled in an industrial and organizational psychology master’s program at the University of North Carolina at Charlotte. While her advice is to pursue advanced degrees on a part-time basis and wait until your company will pay for it, the decision to go back to school landed her an internship at General Electric Co., which Waryas noted is known for its progressive HR practices.

That internship, and the high-profile brand name it allowed her to put on her résumé, helped Waryas land an HR generalist position back at IDC where she worked for the next three years. Startups were sprouting and offered a challenge to people with Waryas’ background.

“If you want to grow vertically, it’s important to know when it’s time to look for your next opportunity,” Waryas said.“A lot of these startups didn’t have an HR department.

I was scared to make that leap and lead a department on my own. But I realized I had the skills and a network of people to back me, so I went for it.”

Waryas landed a position at a software company where she was responsible for 60 employees and reported directly to the chief financial officer.While she learned a lot about finance and the value of data, the experience taught Waryas that HR needed its own voice so the needs of the employees didn’t become secondary to the company’s financial goals.

After the 9/11 terror attacks and the subsequent layoffs that occurred at many companies, Waryas realized that she needed to work at a company that she really cared about.

“I wanted to work at a company that I could relate to,” Waryas said. “I wasn’t connected to the product or excited about it and I was noticing more and more the impact on employment and on the culture of the company.”

Believe in the Brand

This display, titled American League Champions at Bat, features bats signed by players from the 1975 and 1986 teams.

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What Waryas could relate to was beer. A former IDC colleague passed her résumé to the Boston Beer Co. and before long, she was an HR manager for the brewer that produces the popular Samuel Adams beers.

“When I was interviewing I thought that working for a beer company would provide some level of job security,” Waryas said. “It’s a little bit of a recession-proof business. Plus there is a lot of stability and excitement surrounding the brand.” april

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PROFILE

A m y Wa r y a s

And if there’s one thing that Waryas learned at the Boston Beer Co., it’s that brand matters.

“I was immediately enamored with the idea founder Jim Koch came up with to run the company,”Waryas said. “He was always conscious of the culture he wanted to create there. He had this saying, ‘We are the Boston Beer Co.,’ which basically meant that the company wouldn’t exist without the people. That was my first experience to really see how to create and maintain an employee-focused culture and what the payoff was.”

Unlike being under the chief financial officer, Waryas reported directly to then-chief operating officer and current CEO Martin Roper, who included her in the conversation about how the company should be run.

After six months, Martin asked her to join a management committee that met every six weeks to talk strategic-level issues.

“If HR reports to the CFO, they’re always a layer down,” Roper said. “It suggests that the people aren’t necessarily as big of a focus to the company as the cost and finances are.”

The Boston Beer Co. took a different approach.

“Including me was almost like a symbol to the people and employees that they’re being heard,”Waryas said.“I was able to advocate for the employees directly.”

Roper and Koch instilled in Waryas the belief that open and honest communication with employees was the key to running a successful organization.

“Of everything I learned at my time there, culture is what I took with me to the Red Sox,”Waryas said.

Crafting Company Culture Given the company’s employee-first culture at Boston Beer Co., it was no surprise that former Chief Financial Officer William Urich was supportive when Waryas broke the news that she intended to leave after eight years to join the Red Sox. “I told her that professionally I didn’t want her to go, but if she was my daughter, I would tell her that she had to go,” Urich said.“She had been here for a long time and she was too young to think this would be her last job. I told her to take everything she learned and make her mark on an amazing organization.”

And that’s exactly what she did.

When Waryas joined the Red Sox in 2011, the HR department consisted of one full-time employee and two temps. Six months after she started, the department grew to six and she was already making her mark.

While Waryas is not responsible for the players, she is tasked with boosting the performance of her 1,400 person workforce.The Red Sox had no formal onboarding or review process when Waryas began.

“We evaluated every single person from a talent perspective to make sure we knew where we were and make sure we were developing high performers and unclogging low performers,” Waryas said. “Recruiting isn’t a challenge. We needed to focus on identifying high-potential employees and opening up positions for them to grow and succeed.” april

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The red seat — Seat 21 in Row 37 of Section 42 — marks the spot where Ted Williams hit the longest measured home run in the 104-year history of Fenway Park on June 10, 1946.

She worked closely with Larry Lucchino, the Red Sox’s then-president and CEO and current president and CEO emeritus, to start building a team that could succeed. After the right talent was identified, the focus became motivating employees to work long hours on odd schedules while avoiding burnout.

While 80 hours workweeks can’t always be avoided, Waryas placed emphasis on rewarding employees for their efforts. During the team’s 2013 World Series run, the entire front office was flown to St. Louis for the three away games in the Series.They also all received rings after the Red Sox beat the Cardinals 4 games to 2.

Waryas also tries to infuse as much transparency as possible.

“I don’t want my people finding out things about the organization over sports talk radio before I get a chance to tell them,”Waryas said. “We want to be as open and honest about the direction of the organization as possible.”

It’s a challenge given the nature of being a major league franchise, but in instances where a news release must go out first, Waryas is quick to hold town hall meetings afterward to answer any and all questions.

“My goal going forward is to focus on the things that are going to make us stronger as an organization, and transparency tops that list,” Waryas said. “We want to deliver on everything and continue to be innovative while keeping morale and well-being high so we don’t burn out the employees we love.”

Sarah Sipek is a Workforce associate editor. To comment, email editors@workforce.com.

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SPECIAL REPORT

Group Life and Disability Insurers

They Bet Their Life Buying life and disability insurance is on the back burner for many millennials.

By Patty Kujawa

N

enad Cuk doesn’t plan on dying or getting injured any time soon, so buying life and disability insurance is a waste of money, he said.

When he started his job nearly a year ago, the 27-year-old Internet marketing specialist turned down the chance to spend about $10 a month on policies offered at his company, DaVinci Virtual Office Solutions in Salt Lake City. Cuk said he had his reasons: He is single, doesn’t live a wild lifestyle and wants to put as much money as he can into his company 401(k) plan instead.

“I mean, what are the chances of me dying early?” Cuk said. Plus, “I’m a pretty safe person. I’ve never had anything broken in my life. I take calculated risks, and I’m not into any crazy outdoor activities.”

Cuk said he plans to get married and have kids at some point. Maybe it would make sense to look at life and disability insurance then.“Maybe when I get into my 40s, I may look at it more seriously,” Cuk said. “By then I hope to be a little more settled in my life.”

Insurance companies are courting millennials like Cuk to buy life and disability insurance policies at work. According to a Gallup poll published last year, 69 percent of millennials (those born in 1980 to 1996) are either actively disengaged or indifferent when it comes to buying insurance. Generation X, ages 37 to 51, is close behind at 65 percent.

MetLife’s “2015 Employee Benefits Trends Study” showed only 38 percent of millennials carry short-term disability insurance through their employers compared with 52 percent of Gen X, and half of baby boomers, now ages 52 to 70.

It’s a problem for insurance companies because millennials — the largest segment of the workforce surpassing boomers — simply aren’t interested in these products.

“When you are single and in your mid-20s, you don’t think of life insurance as something you need right now,” said Dan Gangemi, head of research and insight for the retirement plans and group benefits at Lincoln Financial Group.

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MILLENNIAL S AND INSUR ANCE CAREERS Insurance companies are not only having trouble getting millennials to buy their products, but also having difficulty recruiting for the industry. While 40 percent of millennials want to work in the arts and entertainment industry, only 4 percent aspire to be in the insurance business, numbers from The Hartford’s “2015 Millennial Leadership Survey” showed.

It’s hard to blame someone in their 20s or 30s for thinking of things other than an insurance career, but many of the characteristics the industry boasts are in line with what millennials want in a job, said Jessica Gaudio, director of MyPath, an online clearinghouse of industry information for prospective job seekers.

“We hope to change millennials’ perspectives,” Gaudio said. “Much of what millennials look for in a job, including flexible work schedules and jobs that help them make a difference, can be found in the insurance industry. They just aren’t aware of it.”

About half of professionals in the insurance business will retire in the next 10 years, numbers from the U.S. Bureau of Labor Statistics Current Population Survey show. By 2022, nearly 500,000 jobs will open, but only 14,000 students are pursuing undergraduate degrees in risk management and insurance.

“Even if we hired all those students majoring in the field, we wouldn’t come close to filling those jobs,” she said.

—Patty Kujawa

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Lincoln Financial took a look at millennials’ opinions on general finance issues in December 2015, and found 80 percent think things like smartphones are important, but only 54 percent value life insurance and only 32 percent identify disability insurance as a top priority.

Just like Cuk, millennials in Lincoln’s study said they don’t spend money on insurance products because they don’t think they need them today. Only half find it to be a good value for their money.

That can turn into a big mistake for likeminded millennials because the Council for Disability Awareness reports 1 out of 4 young workers will have a health issue that keeps them from

working in their lifetime. And it’s not always a fall or a cut; back injuries, cancer or heart conditions can have people out of work for a few months or longer.

“They don’t understand the risk they face every day and that they are left exposed,” said Jessica Vanscavish, vice president for voluntary products at Prudential Group Insurance.

WHO ARE THESE PEOPLE ANYWAY? Like Lincoln Financial, many insurance organizations have invested a lot of money to find out about millennials’ saving, spending and living habits to figure out how to get them to buy life and disability products at work.

HOT LIST Disability Insurers Listed alphabetically; compiled by Andie Burjek; editors@workforce.com

TO READ OUR LIFE INSURERS HOT LIST, GO TO WORKFORCE. COM/LIFEINSURERSHL

Total group disability net premiums for most recent four quarters

Long-term disability/ short-term disability premiums

Number of corporate policyholders

Number of clientcompany employees covered by insurer

$864.2 million

$606.1 million/$258.1 million

Would not disclose

Would not disclose

Would not disclose

Would not disclose

5,701

737,622

GUARDIAN LIFE INSURANCE COMPANY OF AMERICA guardiananytime.com

$995.8 million

$358 million/$638 million

36,933

2.5 million

LINCOLN FINANCIAL GROUP lincolnfinancial.com

$982.8 million

$591.9 million/$390.9 million

26,415

2.9 million

METLIFE metlife.com

Would not disclose

Would not disclose

20,932

8.8 million

PRUDENTIAL INSURANCE COMPANY OF AMERICA prudential.com

Would not disclose

$641 million/$355 million

7,000

3.8 million

$1 billion

$783.3 million/$249 million

22,088

5.9 million

$620.1 million

$402.8 million/$217.3 million

18,600

2.2 million

$2.3 billion

$1.7 million/$629 million

50,529

5.9 million

Company name & Web address AETNA aetna.com ANTHEM anthem.com

THE STANDARD standard.com SUN LIFE FINANCIAL* sunlife.com/us UNUM unum.com

*Sun Life Financial’s reported 2015 year-end data does not include the disability business it acquired from Assurant Employee Benefits in the first quarter of 2016.

Notes: The Hartford did not respond to requests for information. Assurant Employee Benefits was bought by Sun Life.

Source: Companies

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SPECIAL REPORT

Group Life and Disability Insurers

First, many insurance carriers are realizing millennials are postponing a lot of what they call “life events,” like getting married or having a baby. Often, when a person is going through one of those stages, life and disability insurance becomes more important.

Last year, Pew Research Center compiled data comparing millennials to other generations when they were young and found that only 28 percent of them were married in 2014 compared with 38 percent of Gen Xers in 1998 and 49 percent of boomers when they were younger in 1980.

“Holding off on marriage and having kids has an effect” on

DATA BANK Game of Life Only a handful of adults have individual and group life insurance.

Via individual insurance

Have life insurance coverage

25%

40

%

20%

Via group coverage

Via both

Do not have life insurance coverage

15%

GUIDE ME

Source: MetLife’s U.S. Employee Benefits Trends Study, 2015

Volunteering Voluntary Information About 4 out of 10 adults say they’d be interested in purchasing voluntary life insurance at work.

■ Millennials ■ Gen X ■ Baby boomers

100% 80% 60%

43%

40%

53% 42%

51%

37%

20% N/A Percentage interested in voluntary life insurance

Concerned about financial security in the event of premature death

Source: MetLife’s U.S. Employee Benefits Trends Study, 2015

Disability Insurance a Must?

Less than half of adults believe disability insurance is a “must-have” benefit.

■ Millennials ■ Gen X ■ Baby boomers

100% 80% 60% 40%

36%

45%

44%

37%

46%

48%

20% Percentage who believe short-term disability insurance is a must

Percentage who believe long-term disability insurance is a must

Source: MetLife’s U.S. Employee Benefits Trends Study, 2015

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buying life insurance, said Neal Shah, an analyst with LIMRA, an association of insurance and financial services companies that used to be known as the Life Insurance Marketing and Research Association. “They are more concerned with what they have to pay now, like rent.That is more top of mind than life insurance.”

Millennials are the nation’s most educated generation.

Nearly half, or 46 percent of people ages 18 to 33, told The Hartford Insurance Co. that they are too busy paying off student loans to even think about hitting other milestones in their lives. About 1,000 millennials taking The Hartford’s survey said loans are delaying them from doing things like saving for retirement (50 percent), renting or buying a home (40 percent) and having children (20 percent).

“Student debt makes all of these other decisions harder,” said Laura Marzi, vice president of group benefits marketing for The Hartford.

But millennials are savers. Pew found that millennials had $61,003 in median household income in 2014 compared with $63,365 for Gen Xers when they were young in 1998, and $60,068 for baby boomers in their prime in 1980.

Lincoln Financial’s study showed most millennials identified themselves as savers, and 35 percent said they should spend more on life insurance and 25 percent said they should spend more on disability insurance.

“People understand that they have a need to fill,” when it comes to insurance, Prudential’s Vanscavish said. “They are struggling with how to put together the pieces.”

Armed with this new data, insurance companies are revamping how they are delivering messages about insurance to millennials, experts agreed. Because this is the “me” generation where everything is centered around their needs, insurance companies are getting that the message must be personal, meaningful and should provide value to a millennial’s life.

First item on the list is to get rid of old language. For Prudential, even the phrase disability insurance is too stuffy.

“When we market it, we call it an income protection plan,” Vanscavish said. “We believe ‘plan’ invokes control, so now people might read past the first line.”

People can even confuse the word “premium,” said Kristen Phillips, who heads Lincoln Financial’s insurance and retirement solutions marketing and strategy group.While premium refers to the payments a participant would make, Phillips said some think they are getting a type of bonus.

“We talk this language every day,” Lincoln Financial’s Gangemi said. “We need to communicate in a way that they don’t need a decoder ring to understand what we are talking about.”

The Hartford is marketing products to millennials in the way they like to purchase other items, Marzi said. Digital and mobile applications are their first resource for information.

“If you haven’t designed your communication to be mobile, you’re being knocked out of the competition,” she said.

Millennials want the information broken down to a personal level so they can understand that it really isn’t a big april

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sacrifice of their budget and time to get covered, Marzi said. Peer reviews and star ratings are useful and familiar tools that help them understand and affirm what might work for them.

Last June, MassMutual Financial Group launched Webbased software called MapMyBenefits because its research showed that millennials were most distracted by their finances (58 percent) compared with other groups; most millennials (82 percent) said they would be interested in using an online financial tool.

Some benefits, like life and disability insurance, can get lost in the myriad choices and decisions employees need to make during open enrollment. MapMyBenefits helps workers prioritize health care, retirement, insurance and other financial needs. Users input information like income and expenses as well as existing benefits and other savings.

The tool analyzes the data and makes recommendations on coverage and savings goals.

“It meets millennials in a way that isn’t too threatening,” said Kristine Rice, vice president of worksite insurance marketing for MassMutual.

‘WHEN YOU ARE SINGLE AND IN YOUR MID-20S, YOU DON’T THINK OF LIFE INSURANCE AS SOMETHING YOU NEED RIGHT NOW.’ —DAN GANGEMI, LINCOLN FINANCIAL GROUP

Your Life Work

By Richard Y. Hu No one wants to die. But as Mark Twain put it, “[t]he fear of death follows from the fear of life. A man who lives fully is prepared to die at any time.”

So what do you do to prepare for this eventuality? And as an employer, how do you ensure that the families of your employees are financially secure?

Let’s take a deep dive into group term life insurance plans.

1. Choosing the Plan and Tax Exclusions In general, group term life insurance is a plan for a group of employees within the company that provides a general death benefit to each participating employee based on a formula that prevents individual selection. The formula used for eligibility considers factors such as the employee’s age; job duties; length of service; pay; participation in a pension, profit sharing, stock bonus or accident and health plan; and other employment-related factors. You cannot, for example, tie the level of available benefits to gender or whether the employee has children. But the company can provide a tax benefit: the cost of group term life insurance coverage under $50,000 may be excluded from the employee’s taxable wages for income tax and federal unemployment tax purposes as well as other potential benefits in other employment tax and reporting purposes.

If, however, the coverage is over $50,000, the company must include the imputed cost of the excess coverage in the employee’s reportable wages less any amount the employee pays toward the insurance.

2. Exceptions to Tax Exclusions A company, however, might only exclude the cost of the first $50,000 of a group term life insurance plan’s coverage from the employee’s income if the plan meets certain nondiscriminatory requirements, including: • The plan must benefit at least 70 percent of all employees.

MetLife uses Snoopy and the Peanuts gang in interactive videos to help users learn and make life insurance choices.

One video starts out asking users to rate their stress level.

After a few slides that teach and gather more information, the video checks back asking the user to rate their stress level once again.

And while all the online information is helpful, LIMRA data show that millennials still want guidance from a real person. Nearly half of millennials told LIMRA they would prefer to buy life insurance through a oneon-one meeting. Only 11 percent said online with no professional involved.

Overall, 74 percent of MetLife’s respondents in its Employee Benefits Trends Study said one-on-one in-person meetings were the most effective way to make benefit elections. Broken down, millennials said it was the top method they would most likely use.

“It’s not simply a social media exercise, they still want that personal interaction,” said Phil Bruen, vice president for life and disability products for MetLife.

Patty Kujawa is a writer based in Milwaukee. To comment, email editors@workforce.com.

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• At least 85 percent of all participating employees must not be key employees.

• The plan benefits employees who qualify under one or more of the eligibility factors discussed above that are used by the employer and have been found by the IRS not to discriminate in favor of key employees.

Under the benefits test, the plan cannot provide benefits to all key employees that are not available to other participants. Employees who are either part time or seasonal, have not been with the company for more than three years, are covered by a collective bargaining agreement, or are nonresident aliens with no income from the U.S. can be excluded from this calculation.

3. Your Role in Administering the Plan Once you’ve determined the type of insurance the company should provide, you will need to find the right insurance provider to administer the plan. Group-term benefits tend to be easy to administer because there is no need for constant monitoring and not many claims. Key points to remember as a human resources professional are to make sure that your employees designate a beneficiary for their plan and to keep the designation updated.

Richard Y. Hu is a partner at Taft, Stettinius & Hollister. To comment, email editors@workforce.com.

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PBMS continued from page 31 served by PBMs: private and commercial insurance, Medicare Part D and Medicaid.While many employers express concern over how PBMs are able to offer savings and how much they are profiting from acting as a middle man, employers are not without a choice.

“Employers and plan sponsors are able to choose how actively their pharmacy benefits are being managed,” Roberts said. “It’s not a one-size-fits-all option.They can determine things like formulary coverage and copayment tiers.”

Visante’s Beis offered this example: Nearly 80 percent of employer-sponsored plans used three or four tiers in 2014, which produced an average of 30 percent savings on drug costs. In comparison, 5 percent of employer-sponsored plans chose to manage drug costs less actively. Instead of offering into the tiered system the PBM created, they chose to apply the same copay — $15 on average — to every medication. Their yearly savings dropped to 10 percent.

The Real Deal or Just Hot Air? Every 1 percent decrease in prescription drug spending that PBMs help employers save covers the cost of more than 19,000 jobs nationwide, according to Visante. Statistics like that endear employers to PBMs. Slashing the price of a disease that on average costs $150,000 to cure made employers stand up and take notice. In 2015 Express Scripts brokered a deal to provide exclusive access to a hepatitis C drug that was costing patients $1,000 a day, effectively cutting the cost by 67 percent. The deal gained the approval of the organization’s Pharmacy and Therapeutics Committee.

Hospitals and insurance agencies use these committees made up of doctors and pharmacists to determine which drugs will appear on an organization’s formulary, explained Troy Filipek, principal and consulting actuary at Milliman, an actuarial products and services firm that specializes in health care financing. It is their job to determine not only which drugs are most cost-effective, but also which drugs are most effective across a wide patient population.

Some 15,000 Americans die each year from hepatitis C, according to the U.S. Centers for Disease Control and Prevention, while some 3.2 million Americans are infected with it. While the odds are low that an employer will have an employee who suffers from the disease, PBMs such as Express Scripts offer the knowledge that if it were to occur, the company could afford to help care for its employee.

“It’s true that PBMs are making a ton of money right now, but so far they’ve shown that they’re able to produce real savings,” Segal Co.’s Malhotra said. “Until they stop producing, it’s unlikely that they’re going to stop growing and gobbling each other up.”

Sarah Sipek is a Workforce associate editor. To comment, email editors@workforce.com.

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OUTSOURCING continued from page 35 caused a parade of outsourcers to pare down what they offer or simply exit the business.

As recently as 2013 and 2014, cloud-based services for multiprocess HRO deals were not as big, but companies are starting to embrace it, Gurchensky said. Companies such as Aon Hewitt, IBM Corp., Xerox Corp., and cloud-native newcomers such as OneSource Virtual are moving clients to cloud-based platforms — either their own or systems offered by major vendors such as Oracle Corp., SAP and Workday.

In many cases, customers pick the SaaS platform and pay subscription fees directly. Multiprocess providers help customers implement, operate and maintain it on a consulting basis, and help with strategic planning. Different suppliers market their services under different names, giving rise to aforementioned acronyms like AMS, BPaaS and HRPaaS. A large hospital chain in Las Vegas, for example, hired Aon Hewitt just to implement a new SaaS system.

The move took 12 months instead of the 18 months it previously would have taken to get a hosted system up and running, according to Jonathan Schembor, CEO of Aon Hewitt’s HR Services business.

For some vendors, offering services is a necessity, as “you put the cloud in the mix and their margins are put under pressure,” said Degnan Manning, the HR tech analyst and consultant at Eudemonia.

Indian outsourcers are still a factor but because they’re stronger in information technology outsourcing, more often than not they do multitower deals where multiple HR processes are bundled with information technology and other services, Gurchensky said.

Multiprocess outsourcers — Indian and otherwise — still rely on offshoring from the United States to cheaper labor markets, but the practice isn’t as controversial as it once was, Gurchensky and others said. In addition, U.S. outsourcers are more likely to practice “near shoring,” using facilities inside or closer to a customer’s corporate headquarters country to provide support at lower costs.

Gurchensky pegged the multiprocess market at a still-lucrative $3.6 billion in 2015 and looks for the market to maintain the 5 percent annual growth rate it has seen for the past few years. Midsize companies outsourcing HR and payroll bundles are helping push growth, she said.

Aon Hewitt’s Schembor agrees that 2014 and 2015 saw companies starting to switch to SaaS, and 2016 and 2017 will see more of them adding services.

Part of that growth will come from vendors such as Workday and SAP that have built a solid business in their home continents and are beginning to expand to other regions, building out payroll, talent management and other offerings for multiple countries.

Michelle V. Rafter is a Workforce contributing editor. To comment, email editors@workforce.com. Follow Workforce on Twitter at @workforcenews.

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SKILLS GAP continued from page 39 Still, there are more opportunities for growth. According to research by my company, CareerBuilder, while employers agree that one of the biggest opportunities to bridge the skills gap is to increase the discourse between individual companies and colleges and universities, and most academics (96 percent) agree that their institutions should be talking to employers about the skill sets they require, more than half (55 percent) say this only happens a little or not at all.

Further, while 54 percent of academics said they are adjusting their curriculum based on local demands or shifts among employers, the speed at which they can incorporate those changes remains a challenge. More than half of those changing curriculum (56 percent) say it will take at least a year to implement changes while nearly 1 in 5 (18 percent) say it will likely take three to five years.

Another way to continue to push educational reform and close the skills gap is to work with organizations operating outside of traditional academic institutions.

For example: • Innovate+Educate is an industry-led nonprofit implementing re-

search-based strategies to close the national skills gap and bridge the opportunity divide.

• I.c. stars is a workforce development organization that identifies, trains and jump-starts technology careers for low-income adults who, although lacking access to education and employment, demonstrate extraordinary potential or success in the business world.

• Upwardly Global is a nonprofit that helps work-authorized, skilled immigrants rebuild their professional careers in the U.S. Business leaders have a promising opportunity to bridge the skills gap and transform the nation’s ability to compete as well as generate good-paying jobs. But to do this, coordinated work among employers, educators and policymakers will be essential, and employers will need to rethink their role in nurturing talent and developing skills in their communities, industries and regions.

Matt Ferguson is the CEO of Chicago-based CareerBuilder. To comment, email editors@ workforce.com.

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LAST WORD

Rick Bell

RIFFING ON ZENEFITS’ KINDER, GENTLER RIF

N

ormally when I see a CEO announce layoffs, my initial reaction is to roll my eyes and think, “What an insensitive jerk” followed by a private sigh of relief and, “Thank God it wasn’t me.”

Inevitably that executive’s announcement comes off as little more than indifferent, calculated corporate spin.Take the case of your garden-variety acquisition.You’re likely to hear: “After any acquisition, there is a duplication of efforts, which results in some synergies, and unfortunately for a lot of people today, we’re realizing those synergies. These synergies

gram.” Actually, newly appointed CEO David Sacks was about to riff on a darker form of RIF — a reduction in force.

In the days leading up to the layoffs, Zenefits was a toxic cauldron of controversy. Colorful CEO Parker Conrad had suddenly resigned as a scandal emerged regarding alleged use of unlicensed salespeople in multiple states. Sacks immediately took over, released a strongly worded statement that Zenefits would right the ship and employed Salesforce to oversee its, well, sales force. Then an internal memo surfaced that said in part, “Do not use the stairwells to smoke, drink, eat or have sex,” which naturally made San Francisco-based Zenefits a laughingstock because cocktailing and sex at work never happens. At least, not in the stairwells.

Sacks also announced in the new email that his embattled online health insurance brokerage was sacking 250 people. My muttering “insensitive jerk” (and the private sigh of relief) was about to commence.

Except, this announcement was different. Sacks didn’t offer the rote pontification of client-first satisfaction. This instead was a rallying cry, a sensitive message to the team that outsiders were privy to reading. Hey, 250 of your co-workers are being let go, but we’re going to help them and you through this difficult time at our company. will ultimately provide a better experience for the consumer.”

Sacks wrote: “I want to make clear that this is a reducThen there’s the CEO’s layoff pitch during a tough fiscal tion in force (RIF), meaning that we are not cutting these stretch. In some cases, particularly during the 1980s and jobs for performance reasons.We are letting go many great ’90s when downsizing was all the rage, there was the simple people today, and it is not their fault.” announcement: “We’re right-sizing our company to better Not your typical layoff announcement.There’s more: meet customer demands.”

“We will be offering affected employees three months of Of course, what they meant to say was to please their severance ... six months of COBRA, and transition assisboard and investors. tance to help them find and move on to their next job.”

More recently we see the cold, vague layoff announceSo, this is about employees and not clients? How novel. ment under the strategy to “shift the workforce focus,” as And finally: demonstrated in March by IBM’s cutting an “undisclosed” “[Our] pride may be a little bruised lately by what has number of employees. (FYI, according to estimates by really been written in the press. But I promise you this: If we smart analysts, IBM has cut 90,000 to 100,000 workers move forward and rebuild, that will not be the last word since 2006, thereby qualifying Big Blue to write the man- written about this company. Zenefits will turn the page. ual for corporate layoff announcements.)

And the story of Zenefits will make everyone proud.”

“IBM is aggressively transforming its business to lead in a Now, I don’t know David Sacks. He founded Yammer, was new era of cognitive and cloud computing. This includes chief operating officer at PayPal and now runs Zenefits. For remixing skills to meet client requirements.” all I know he’s an insensitive jerk with a savvy PR company.

Please note the thread running through these cutback But I don’t think so. Part cheerleader, sympathetic colnotices: They were made for your benefit, Mr./Ms. Con- league, businessman and even recruiter, Sacks deals with sumer/Customer/Client.You will sleep better tonight and the gut-wrenching layoff of 250 people in an unparalleled, blindly conduct business with us tomorrow knowing that transparent way that organizations for years have tersely we have turned our ex-employees’ lives inside out in your written off as mere collateral damage in doing business. best interests.

IBM, turn over that layoff manual to Zenefits. There’s a So imagine my reaction when the email “Zenefits news: new author in town, and his name is David Sacks. strategic refocus leads to RIF today” popped into my inbox.

Eyes immediately poised to roll, the wag in me mused,“Seems Rick Bell is Workforce’s managing editor. To comment, email like Zenefits needs more than a Reading Is Fundamental pro- editors@workforce.com.

I DON’T KNOW DAVID SACKS. HE FOUNDED YAMMER, WAS COO AT PAYPAL AND NOW RUNS ZENEFITS. FOR ALL I KNOW HE’S AN INSENSITIVE JERK WITH A SAVVY PR COMPANY. BUT I DON’T THINK SO.

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