What Should HR Be Doing?

January 30, 2013 – Jim Egan

We have done pieces on this topic before, but I thought it good to surface this again at the start of a new year.

For many organizations, HR is but the “Personnel” Department, mostly transactional, and mostly tactical. That might be acceptable to some businesses but I believe to survive as an organization and function, HR needs to be much more. 

Many say HR is (or should be) a business partner, but what does that really mean? For me, the HR organization is a business partner when it drives an organization towards excellence. How does it do that? At a minimum:

• Effective staffing (looking for and hiring the “A” players, developing the “B” players into “A” players and eliminating the “C” players)
• Paying for performance (developing pay systems that differentiate pay based on achievement of real work)
• Integrating performance management with strategic/ tactical corporate planning (so as to drive the organization towards the future – its vision)
• Helping drive the strategic planning activity and the development of both strategic and tactical objectives so that the organization becomes focused and the workforce is aligned to where the company is going.
• Developing career paths (allow/ providing for growth for those that wish to by developing job families that provide stepping stones)
• Developing critical skills needed for the future (determining now what is needed to meet the challenges 3-5 years ahead and develop a plan to get those skills when they are needed)
• Turning managers into leaders (targeted training, coaching and mentoring)
• Creating a strong employee value proposition that not only attracts and retains the best candidates but helps develop a pipeline of candidates for openings the company does not yet have.

Here are the 5 critical areas (with a bit more detail) where I believe HR should be involved:

(1) Develop a strong employee value proposition for the organization (so as to attract & retain a high quality workforce). The value proposition consists of 5 pieces:

a. Pay and incentives

• Base pay (competitive and improved based on merit)
• Incentives (proper timing and amounts)
• Pay Process / Transparency (open, understood by all, no “black boxes”)
• Cash recognition / rewards (additional on-the-spot rewards for a job well done)
• Equity (across jobs, ranges)

b. Competitive benefits

• Health (broad spectrum to meet employee/family needs)
• Retirement / savings (ways to save for the future)
• Work / life balance (policies that balance work with time-off to recharge and meet life’s needs)
• Perks (what makes us special / unique)

c. Career paths

• Advancement opportunities / growth (places to go, if employees want to go and achieve the skills)
• Appropriate titles (meaningful definitions of work being done)
• Targeted training (employee development based on specific needs of the organization)
• Security (structuring work so that it does not become obsolete)

d. The Work

• Challenge (broad jobs that require effort / growth)
• “Cool” jobs (“I want to do that for that company”)
• Teaming vs silos (Developing jobs that foster teaming so that work is not done in silos)
• Autonomy (Creating jobs with enough “space” to show what the employee can do and work to their potential)
• Impact (Creating jobs with enough responsibility so employees can make a difference)
• Feedback (Developing systems that tell me how employees how they are doing - often)
• Facility (Providing a great environment to do work in)
• Resources (Ensuring the right tools are there to maximize the employee’s potential and be a success)

e. Association:

• Mission / vision (why do we exist and what do we do)
• Values (what’s important in doing our work and how we deal with our customers, internal and external)
• Reputation (how people view us from the outside)
• Culture (how we get things done)
• Ranking (how we’re viewed by others in our business)
• Community (what we give back)

(2) Stewardship:

a. Managing the largest single budget item for the company – labor costs (balancing the needs of the organization and the employees)

b. Ensuring compliance (federal / state / local laws are followed – equity and fairness are instilled in our culture)

(3) Create and maintaining an environment for success through:

a. Best Practices (we’re always improving)

b. Competency models (the skills we need for each worker to be a success)

c. Orientation / mentoring (getting people started on the right foot when they join us)

d. Culture (ensuring how we do things is efficient, fair, equitable and will get us to our strategic direction)

e. Company values (how we play with each other and how we treat our customers; making certain we do what we say is important)

f. Minimal intrusion (we won’t micro-manage your day at work)

g. Simplification (keep policies and guidelines simple and easy to understand)

h. Coaching (people need to know what they need to do to be better)

i. Performance management (tell me how well I’m doing my work)

j. Compassion (we care)

k. Community (how we relate to the community in which we work)

(4) Manage the organization's talent through:

a. Talent acquisition (getting the “A” players)

b. Retention (Keeping the “A” players)

c. Workforce development (developing our “B” Players into “A” players)

(5) Lead organization change (where needed) by:

a. Ensuring the right structure in place to meet strategic objectives (without it we fail)

b. Culture review / culture change (does the current culture hinder us from moving towards our strategic objectives – what needs to change?)

c. Making strategic hires (looking ahead, what critical skills will be needed 3+ years from now)

d. Succession planning (looking ahead, who are the future leaders? How do we get them ready?)

e. Gap / skill analysis (what do we have and what do we need and how do we close the gaps?)

We do lots more of course - we’re a service organization after all. But we must do these things and do them well if we are to be a value-add to the organization.

Benefit Limits 2013

January 7, 2013

Here are some selected limits for benefit plans, pension plans, IRAs and so forth. 

	2013	2012	Change
Pension Plans
Catch-up Contribution age 50 and older 414(v)(2)(B)(i)	$    5,500	$    5,500	0.0%
Defined Benefit Limit 415(b)(1)(A)	$205,000	$200,000	2.5%
Defined Contribution Limit 415(c)(1)(A)	$  51,000	$  50,000	2.0%
Elective Deferral Limits for 401(k), 403(b) and most 457 plans	$  17,500	$  17,000	2.9%
Exclusion of elective deferrals limit 402(g)(1)	$  17,500	$  17,000	2.9%
Annual Compensation Limits - 401(a)(17)/404(l)	$255,000	$250,000	2.0%
Key Employee - 416(i)(1)(A)(i)	$165,000	$165,000	0.0%
Highly Compensated Employee Threshold - 414(q)(1)(B) Key	$115,000	$115,000	0.0%
Social Security
Social Security COLA	1.70%	3.60%	-52.8%
Maximum Taxable Wage	$113,700	$110,100	3.3%
FICA tax for employees	7.65%	5.65%	35.4%
FICA tax for employers	7.65%	7.65%	0.0%
FICA for self-employed	15.30%	15.30%	0.0%
Medicare Part A Deductible	$1,184	$1,156	2.4%
Medicare Part B premium (monthly)	$104.90	$  99.90	5.0%
Medicare Part D Natl Avg Premium	$  31.17	$  31.08	0.3%
Maximum Monthly Benefit at Normal Retirement	$2,533	$2,513	0.8%
ESOPs
ESOP maximum account balance subject to the five-year distribution period	$205,000	$200,000	2.5%
ESOP limit for dollar amount used to determine the lengthening of the five-year distribution period	$1,035,000	$1,015,000	2.0%
Spending Accounts
Flexible Spending Account	$  2,500	unlimited
High Deductible Plans - HSA limit for individuals	$  3,250	$  3,100	4.8%
High Deductible Plans - HSA limit for family	$  6,450	$  6,250	3.2%
HSA Catch up Contributions age 55 or older	$  1,000	$  1,000	0.0%
High Deductible Health Plans
Minimum Deductible for HDHP (Individual)	$  1,250	$  1,200	4.2%
Minimum Deductible for HDHP (Family)	$  2,500	$  2,400	4.2%
Maximum Out-of-Pocket for HDHP (Individual)	$  6,250	$  6,050	3.3%
Maximum Out-of-Pocket for HDHP (Family)	$12,500	$12,100	3.3%
SIMPLE
SIMPLE Retirement Account Limit	$12,000	$11,500	4.3%
SIMPLE Catch-up Contributions - 414(v)(2)(B)(ii)	$  2,500	$  2,500	0.0%
Roth IRA
Adjusted Gross Income (AGI) for determining maximum Roth IRA contribution – married filing jointly or qualifying widow(er)	$178,000	$173,000	2.9%
AGI for determining max Roth IRA contribution - other filers	$112,000	$110,000	1.8%
Traditional IRAs
Annual Contribution to IRA age 49 and below 219(b)(5)(A)	$  5,500	$  5,000	10.0%
Annual Contribution to IRA age 50 and above 219(b)(5)(B)	$  6,500	$  6,000	8.3%

Tax Increases – National Healthcare

HR News Feeds - Jim Egan - Sept 14, 2012

Many new taxes were created when the “Affordable” Care Act was passed. Some taxes affect you directly, while others affect you indirectly. Here are some highlights.

Ones impacting you directly:

2011: the so called “Medicine Cabinet Tax” : Americans were no longer able to use health savings account (HSA), flexible spending account (FSA), or health reimbursement (HRA) pre-tax dollars to purchase non-prescription, over-the-counter medicines (except insulin)

2011: the HSA withdrawal tax increasing the tax on non-medical early withdrawals from 10 to 20% (vs 10% for other tax-deferred instruments like IRAs.

2012: A precursor to future taxes, employers required to report the value of your medical benefits to the government on your annual W2.

2013: 3.8% surtax on investments for households making $250k or more (singles $200k or more).  Capital gains taxes increase from 15% to 23.8% in 2013, while taxes on dividends rise from 15% to 43.4%. Taxes on other “unearned income” such as interest, annuities, royalties, net rents and so on increase from 35% to 43.4%

2013: Medicare tax increase for those who earn more than $200k ($250k for families). The tax rises from 1.45% to 2.35%. Self employed individuals will see a rise from 2.9% to 3.8%.

2013: The amount of medical expense deductible on your income tax return rises from amounts above 7.5% of adjusted gross income to amounts above 10% (waived for seniors 65 and over for 2013-2016 only). 

2014: Individual mandate (the Supreme Court recently verifying this as a tax), begins at 1% of AGI, increasing to 2% in 2015 and 2.5% in 2015.

Taxes that indirectly impact you:

2013 2.3% excise tax on medical device manufacturers. How does that affect you? Think higher costs and less people employed in this industry.

2014: Employer Mandate: $2000 tax per employee for employers with 50 or more employees for failure to offer coverage that is reasonable in cost and meets yet to be defined standards. Employees who go to exchanges for insurance increase this tax to $3000 per employee. Employers with waiting periods for coverage pay an additional $400 per employee or up to $600 if the waiting period is 60 days or more. How does that affect you? Think less employees to offset the penalty taxes.

2014: Tax on health insurers profits phases in through 2018. Think higher premiums.

2018: 40% excise tax on “Cadillac” plans (plans that cost more than $10,200 for singles and $27,500 for families). How does that affect you? Think less coverage, more transfer of cost to you.

Unemployment Update

HR News Feeds - Jim Egan - April 7, 2012

The numbers are out for March and despite the hype in the media and from the White House, the real numbers remain dismal.

Officially the rate is down to 8.2%. But there is a reason for that – the Census Bureau, now under the control of the White House, estimated that less people were in the workforce and/or looking for work. Lowering the numerator for this simple calculation makes the rate of unemployment decline. But this is only an assumption made by Census and their methodology is open to debate.

The economy in March added but 120,000 jobs, down from the 200,000+ jobs added in previous months. Yet unemployment went down.  If you add back the numbers who stopped looking for work, the rate is more like 14.5%. Throw in the underemployed (ie, college grads working as checkers in Walmart) and the number runs to 18-19%.

To achieve a 6% rate the economy must add some 350,000 jobs per month, every month, for the next 3 years. That’s not happening, but in an election year, to make one look like they are doing things to grow the economy, one simply “plays” with the numbers to generate the illusion that things are getting better.  This was the reason for taking the Census Bureau under the White House wing – The Census Bureau used to be independent.

No president has ever been re-elected with unemployment higher than 7.8%. You can expect the illusions to continue and the rate to decline as the election draws near.

Jim Egan is a HR executive with more than 25 years’ HR experience, most recently with SEMATECH, the global semiconductor R&D consortium. Jim is the founder/ editor of HRNewsFeeds and @HRNewsFeeds on Twitter, the leading source of HR news and jobs in cyberspace.

Too Many Rules?

HRNewsFeeds - Jim Egan - March 15, 2012

John Stossel did an interesting piece the other day on how too many rules are killing America. Congress it seems, simply can’t stop enacting tens of thousands of rules each year – many incomprehensible to most, many unneeded. John quotes Churchill in saying “If you have 10,000 regulations, you destroy respect for law”. Indeed, Congress passes that many in a year.

So what about the office? Do you have too many regulations and policies? Are they all needed?

I often see job postings where it is apparently important for the company to mention the need for the incumbent to write and maintain an employee handbook and policies. I would agree that some rules are necessary, but are they all needed? 

I would argue that written policies are a double edged sword.  Policies can become so complex that they can be damaging to the operation of your company and difficult to defend if you find yourself in court. Rather, guidelines should be used that define broad operational directions – this allows for flexibility, discretion within reason, and better flow of operations.

Policies and rules give those who enforce them a sense of importance and self-worth within the company but often cripple creativity, development and productivity.  Most companies are far too complex to define them by specific rules and regulations – companies are a maze of intricate associations, alliances and partnerships that make the company go – throw too many rules in the way and a company begins to slow down and die.

Don’t paralyze your employees with rules, policies and forms. If you are buried in a mass of policies, throw them out and develop broad guidelines.

Instead of being a rule enforcer, be a guideline consultant.

Jim Egan is a HR executive with more than 25 years’ HR experience, most recently with SEMATECH, the global semiconductor R&D consortium. Jim is the founder/ editor of HRNewsFeeds and @HRNewsFeeds on Twitter, the leading source of HR news and jobs in cyberspace.

Health Care vs Health Insurance

HR News Feeds - Jim Egan - March 2, 2012

I have been around the health insurance business a long time. I recently experienced what many are experiencing more of these days: Cost vs. Care.

My plan sponsor recently changed from BCBS from one state to another. With that change, 2 prescriptions of mine have been dumped – one changed to an alternative because it’s cheaper, the other denied because of cost. I had been on those medications for many years and had achieved a delicate balance with them after trying virtually all the other “alternatives” and combinations.  So now the delicate balance has been lost simply because of cost. My doctor should be my advocate but doctors seem too busy these days to fool with penny-pinchers. The plan sponsor doesn’t care – they get a cost break for providing less. So that leaves the patient or employee staring at an insensitive insurance company whose motivation is cutting cost, not health.

When plan sponsors make a shift from one plan to another, there is a right way and a wrong way. The wrong way is to slap in the new plan and let the employees figure it out – that was my case. I didn’t, for example, get the new drug list until 7 weeks into the new plan – I had already figured out there was a problem. The right way to do a plan change is to negotiate with the insurance provider to proactively work with those people who will be impacted by medication changes, loss of providers in the new network, and so on, BEFORE the start of the plan year. That’s just basic, good people relations – HR-101. (I have had other problems as well including  family problems with two other medications and the dental coverage, but you get the picture.)

I’ve been firmly convinced that the fundamental problem with the health care system is the intrusion of insurers and the government between the provider and the patient. It has directly resulted in poorer care, increased cost and regulations. The government has never been known to do anything that is cost efficient – they are the model for cost overruns. Insurers never do anything unless it benefits them to do so. Employers, in large part, simply aren’t the advocates they once were for their employees. They are motivated by cost, not benefit of their plan participants.

The year-long battle in Congress in 2009 to enact national health care wasn't about care at all - it was about control of the money that pays for health care.

As national health insurance is implemented, these types of problems will increase, not decrease, because it’s all about the money – not about health.

Jim Egan is a HR executive with more than 25 years’ HR experience, most recently with SEMATECH, the global semiconductor R&D consortium. Jim is the founder/ editor of HRNewsFeeds and @HRNewsFeeds on Twitter, the leading source of HR news and jobs in cyberspace.

Aligning Your Employees To Your Mission

HR News Feeds - March 1, 2012 - Jim Egan

Aligning your workforce to where you are going is a powerful way of increasing productivity, engagement, and customer and employee satisfaction. So how do you do it? 

The easiest way is to integrate your corporate planning cycles with your performance management system. Having your planning cycles cascade into the performance management system helps people understand what role they play in the annual and strategic objectives of the company, if done correctly. 

The cycle goes something like this: (click to make chart larger)

Aligning Your Workforce to Your Mission

(1) Strategic planning – sessions where you review your mission and vision and the long-term steps you would take to realize them. This often includes a SWOT analysis – exploring strengths, weaknesses, opportunities and threats and formulating ways to capitalize / avoid them in pursuit of the mission. 

(2) Annual objectives – out of the review of your strategic direction, what are the steps you can take in the coming year to advance your way towards realizing your strategic plan. These objectives generally coalesce in three areas:

• technical / manufacturing advancements and business development opportunities,

• business process improvements and

• people development.

Clear metrics to determine whether these objectives are reached are established at this point. These are what your senior management should be measured on each year in their performance reviews. 

(3) Division / department objectives –  what steps does each division / department take to address and realize the corporate objectives? Your division /department management team is measured on achievement of these objectives. 

(4) Finally, from the division/department objectives, individuals write their own objectives that support and achieve the division / department and/or corporate objectives. These objectives should be directly related to either a division or corporate objective - nothing else should be included. 

Clear metrics defining success are essential to each step. The individual’s goal is directly linked up the chain all the way to your strategic plan and mission and vision. In HR, there should be a component of staffing for critical skills, developing the workforce to improve skill levels, and proper, competitive rewards and discipline steps dependent upon outcomes. 

The entire process should be directly linked to the rewards program so that you are acknowledging and incenting actions and activities that are directly linked to achievement of objectives.

Some would argue that this is not possible in every area of the company – some would point to the hourly workforce for example and say this isn’t practical. In fact, not only is it practical, but necessary. Certainly things like quality, customer service, on-time delivery and the like should be part of your mission and corporate objectives. This can be measured at every level of the company. 

What are you waiting for?

Jim Egan is a HR executive with more than 25 years’ HR experience, most recently with SEMATECH, the global semiconductor R&D consortium. Jim is the founder/ editor of HRNewsFeeds and @HRNewsFeeds on Twitter, the leading source of HR news and jobs in cyberspace.