HR, payroll and benefits professionals step up as employers cut back
From the April 2009 issue of Ceridian Connection.
These are trying times for companies that must cut back expenses, for employees who must manage on less -- and for the staunch legion of HR, payroll and benefits staff who must find a way to implement the hard realities of this changing landscape: pay cuts, furloughs, 401(k) changes and new COBRA regulations. Many HR professionals can't remember a time when they've been called upon to do more.
A rise in the use of forced furloughs
Employers' use of involuntary furloughs is increasing because they're one way to reduce payroll costs without eliminating jobs. A furlough is time off from work without pay, often with the continuation of some or all benefits.
"One client has implemented a mandatory two-week furlough in addition to salary freezes and many reductions in the workforce with severance pay," says Jackie Giesen, HRO service delivery manager at Ceridian. "Workers must take two weeks furlough between February and June. They can take the unpaid time either in daily increments or weekly increments, ensuring that when they do take the furlough time that they still have enough paid time to cover any deductions they might have for that pay period."
Jackie and her team stay busy helping Ceridian customers with this array of new challenges. "Our clients have outsourced their entire HR and payroll functions to Ceridian. They need us to do everything we can to make this as efficient and painless as possible for our customer while still ensuring the accuracy of the payroll. A lot of what needs to be done is manual and needs to be monitored very closely."
There is some evidence that an increase in layoffs could be part of a rapid rise in the number of EEOC discrimination claims, which could make furloughs even more attractive to employers during this time of economic challenge. Collective bargaining agreements and required notice periods for unions can delay implementation of mandatory furloughs for employers with a highly unionized workforce.
Cuts in pay and changes to 401(k)
Companies trying hard to save money and jobs are instituting reductions in pay rates -- even though such cuts can be very demoralizing to employees. Roberta Vivant, manager of Payroll Services at Ceridian, says that companies often go out of their way to make pay cuts more palatable. "Some employers are keeping salaries the same but applying negative 'offsets' to wages as a way to reduce overall payroll costs," she says. "Maintaining salaries in theory preserves short-term disability eligibility, pension status and bonus potential in the long term."
When an employee's pay is cut, 401(k) contributions can be affected. An employee's 401(k) deduction percentage is applied to actual pay received, so if an employee deducts a specific percentage of income, the 401(k) contribution will be reduced commensurately.
Vivant reports that both employers and employees are implementing changes to 401(k) plans. "Some employers have stopped matching contributions," Vivant says. "And many employees have stopped or adjusted their contribution levels.
Sadly, some employers' reductions in their workforce have been so large that they are termed "business events" that ripple changes throughout the HR/payroll and benefits administration systems. These frequent changes to payroll and deductions add even more complexity to accurately calculating payroll.
Changes to COBRA regulations
The recently enacted American Recovery and Reinvestment Act of 2009 (ARRA) outlines provisions for a COBRA subsidy that is to be made available to involuntarily terminated employees whose termination dates were between September 1, 2008, and December 31, 2009. ARRA also provides for a special election period for eligible qualified beneficiaries who previously declined COBRA, as well as a special open enrollment period for current COBRA participants.
"The practical application of the COBRA changes in ARRA presents a big challenge," says Jason Grimm, service delivery manager for Ceridian HRO. "Compliance with COBRA is crucial, so we're working side-by-side with our customers to help them ensure full compliance. We're also sensitive to the needs of laid-off workers. We're all focused on the same goal to ensure that former employees can continue to receive the full benefits available to them."
Some employers seek ways to make separation from the company less traumatic. "One client has already subsidized COBRA payments for employees who have been workforce reduced," Grimm says. "So Ceridian is assisting that customer in understanding how the existing company subsidy and the new ARRA subsidy will coincide."
Report from the front lines
In the face of unprecedented challenges, Ceridian's experienced HR leaders understand that their customers' concerns reflect the severity and the depth of today's economic realities. "Our customers are working with Ceridian even more closely these days," says Vivant. "The people who work in HR, payroll and benefits are being called upon to do more -- in real time, with little notice, and with a great degree of accuracy and empathy. We've assisted clients who were implementing furloughs, such as two weeks over the holidays. We have seen customers reduce salaries by 10-25 percent, clients who are not giving any merit increases and clients who may not give bonuses this year. Ceridian HRO service managers are especially respectful and accommodating to our clients. We're aware of just how tough these decisions are for employers. And we see the impact on employees every day."
Grimm describes the scope of the challenges his team -- and his customers --are facing. "I've had clients eliminate their 401(k) match, and it's obviously not an easy decision for them to make. Others have eliminated contributions to legacy pension programs. Some companies have implemented across-the-board pay cuts for salaried, non-union workers. Another client is implementing a layoff of up to 15 percent of its workforce. Even when it's stressful, we're in this together and have a common focus. We trust each other to do our best. We're helping each other succeed."
Pervasive uncertainty in the workforce, continued waves of job loss and the loss of benefits have led increasing numbers of clients to take advantage of Ceridian's Critical Incident Stress Debriefing (CISD) service, says Todd Kohl, a consultant with the LifeWorks Management Services team. "We're experiencing a spike in interest and use of that service among clients," he adds. "The counselor goes on site and offers support services to the workforce by meeting with small groups and individuals, and with the management team -- the people who are bearing the brunt of these changes. This is a traumatic period in our country and in our economy. It is also a particularly stressful and demanding time for clients. We're encouraging clients to use the CISD service."
These tough economic times prove just how quickly HR must move to translate enormous political and economic change into reality. There is so much at stake and employers count on HR to deliver with speed and accuracy. Individual employees who feel the effects of change are likely to be friends and valued colleagues. To both groups, HR has never mattered more -- because there literally has never been so much at stake.
As a service to employers and to the public, Ceridian is making selected new LifeWorks resources available to assist workers who may be coping with reduced hours, pay cuts, mandatory furloughs, home foreclosure, changes to health care coverage, or a loss of retirement savings. Click here to view.
These are trying times for companies that must cut back expenses, for employees who must manage on less -- and for the staunch legion of HR, payroll and benefits staff who must find a way to implement the hard realities of this changing landscape: pay cuts, furloughs, 401(k) changes and new COBRA regulations. Many HR professionals can't remember a time when they've been called upon to do more.
A rise in the use of forced furloughs
Employers' use of involuntary furloughs is increasing because they're one way to reduce payroll costs without eliminating jobs. A furlough is time off from work without pay, often with the continuation of some or all benefits.
"One client has implemented a mandatory two-week furlough in addition to salary freezes and many reductions in the workforce with severance pay," says Jackie Giesen, HRO service delivery manager at Ceridian. "Workers must take two weeks furlough between February and June. They can take the unpaid time either in daily increments or weekly increments, ensuring that when they do take the furlough time that they still have enough paid time to cover any deductions they might have for that pay period."
Jackie and her team stay busy helping Ceridian customers with this array of new challenges. "Our clients have outsourced their entire HR and payroll functions to Ceridian. They need us to do everything we can to make this as efficient and painless as possible for our customer while still ensuring the accuracy of the payroll. A lot of what needs to be done is manual and needs to be monitored very closely."
There is some evidence that an increase in layoffs could be part of a rapid rise in the number of EEOC discrimination claims, which could make furloughs even more attractive to employers during this time of economic challenge. Collective bargaining agreements and required notice periods for unions can delay implementation of mandatory furloughs for employers with a highly unionized workforce.
Cuts in pay and changes to 401(k)
Companies trying hard to save money and jobs are instituting reductions in pay rates -- even though such cuts can be very demoralizing to employees. Roberta Vivant, manager of Payroll Services at Ceridian, says that companies often go out of their way to make pay cuts more palatable. "Some employers are keeping salaries the same but applying negative 'offsets' to wages as a way to reduce overall payroll costs," she says. "Maintaining salaries in theory preserves short-term disability eligibility, pension status and bonus potential in the long term."
When an employee's pay is cut, 401(k) contributions can be affected. An employee's 401(k) deduction percentage is applied to actual pay received, so if an employee deducts a specific percentage of income, the 401(k) contribution will be reduced commensurately.
Vivant reports that both employers and employees are implementing changes to 401(k) plans. "Some employers have stopped matching contributions," Vivant says. "And many employees have stopped or adjusted their contribution levels.
Sadly, some employers' reductions in their workforce have been so large that they are termed "business events" that ripple changes throughout the HR/payroll and benefits administration systems. These frequent changes to payroll and deductions add even more complexity to accurately calculating payroll.
Changes to COBRA regulations
The recently enacted American Recovery and Reinvestment Act of 2009 (ARRA) outlines provisions for a COBRA subsidy that is to be made available to involuntarily terminated employees whose termination dates were between September 1, 2008, and December 31, 2009. ARRA also provides for a special election period for eligible qualified beneficiaries who previously declined COBRA, as well as a special open enrollment period for current COBRA participants.
"The practical application of the COBRA changes in ARRA presents a big challenge," says Jason Grimm, service delivery manager for Ceridian HRO. "Compliance with COBRA is crucial, so we're working side-by-side with our customers to help them ensure full compliance. We're also sensitive to the needs of laid-off workers. We're all focused on the same goal to ensure that former employees can continue to receive the full benefits available to them."
Some employers seek ways to make separation from the company less traumatic. "One client has already subsidized COBRA payments for employees who have been workforce reduced," Grimm says. "So Ceridian is assisting that customer in understanding how the existing company subsidy and the new ARRA subsidy will coincide."
Report from the front lines
In the face of unprecedented challenges, Ceridian's experienced HR leaders understand that their customers' concerns reflect the severity and the depth of today's economic realities. "Our customers are working with Ceridian even more closely these days," says Vivant. "The people who work in HR, payroll and benefits are being called upon to do more -- in real time, with little notice, and with a great degree of accuracy and empathy. We've assisted clients who were implementing furloughs, such as two weeks over the holidays. We have seen customers reduce salaries by 10-25 percent, clients who are not giving any merit increases and clients who may not give bonuses this year. Ceridian HRO service managers are especially respectful and accommodating to our clients. We're aware of just how tough these decisions are for employers. And we see the impact on employees every day."
Grimm describes the scope of the challenges his team -- and his customers --are facing. "I've had clients eliminate their 401(k) match, and it's obviously not an easy decision for them to make. Others have eliminated contributions to legacy pension programs. Some companies have implemented across-the-board pay cuts for salaried, non-union workers. Another client is implementing a layoff of up to 15 percent of its workforce. Even when it's stressful, we're in this together and have a common focus. We trust each other to do our best. We're helping each other succeed."
Pervasive uncertainty in the workforce, continued waves of job loss and the loss of benefits have led increasing numbers of clients to take advantage of Ceridian's Critical Incident Stress Debriefing (CISD) service, says Todd Kohl, a consultant with the LifeWorks Management Services team. "We're experiencing a spike in interest and use of that service among clients," he adds. "The counselor goes on site and offers support services to the workforce by meeting with small groups and individuals, and with the management team -- the people who are bearing the brunt of these changes. This is a traumatic period in our country and in our economy. It is also a particularly stressful and demanding time for clients. We're encouraging clients to use the CISD service."
These tough economic times prove just how quickly HR must move to translate enormous political and economic change into reality. There is so much at stake and employers count on HR to deliver with speed and accuracy. Individual employees who feel the effects of change are likely to be friends and valued colleagues. To both groups, HR has never mattered more -- because there literally has never been so much at stake.
As a service to employers and to the public, Ceridian is making selected new LifeWorks resources available to assist workers who may be coping with reduced hours, pay cuts, mandatory furloughs, home foreclosure, changes to health care coverage, or a loss of retirement savings. Click here to view.
