Russ Sullivan

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Survey Shows Wage Growth Slowing in 2018

Posted by Russ Sullivan on Dec 4, 2017 8:00:00 AM

It seems that Massachusetts employers embody all the ambivalence and contradictions that have marked the longest economic recovery since the Second World War.

Image.jpgOn the one hand, the 205 employers who participated in the 2018 AIM HR Practices Survey predict lower salary increases, less hiring, and higher health-care costs for 2018 than this year.

On the other hand, employer confidence in the state economy stands at a 13-year high, the state economy grew at a brisk 5.9 percent pace in the third quarter and unemployment throughout the commonwealth has dropped to 3.7 percent.

The year 2018 promises to be an interesting one.

Participants in the AIM survey project a 2.66 percent increase in salaries in 2018, down from a 2.75 percent increase in 2017. Non-manufacturing companies are fueling the overall decrease, with an expected increase of just 2.43 percent. Manufacturing companies held steady at 2.70 percent, slightly down from the 2.71percent increase within this sector in 2017.

Survey participants also project a decrease in recruitment activity in 2018. Last year, 44 percent of participants projected that recruitment activity would increase over the previous year. This year, only 33 percent of participants project an increase in recruitment activity.

These lower projections for salary budgets and recruitment activity come at a time of increased confidence in the economy, as measured by AIM’s Business Confidence Index. In October 2017, the index reached 62.7, its highest level in 2017 and an increase of 6.5 points since the October 2016 recording of 56.2.

“The acceleration of the Massachusetts economy in the third quarter provided additional fuel to an already solid sense of confidence among employers as we head for 2018,” said Raymond G. Torto, chair of AIM’s Board of Economic Advisors and a lecturer at Harvard University’s Graduate School of Design.

Health-care costs continue to rise for Massachusetts employers. Survey participants report increases in the annual renewal rates for health plans. The average annual premium increase is 7.84 percent, with higher percentage increases reported for HMOs and consumer-driven health plans. Average premium increases in 2016 were 6.1 percent.

The Centers for Medicare and Medicaid Services indicate that Massachusetts, at 30 percent above the national average, is the second highest spending state for health care. Per-capita personal health-care spending in Massachusetts increased more than 12 percent in five years—from $9,417 in 2009 to $10,559 in 2014.

In response to the escalation of health-care costs, more employers (42 percent) are limiting the number of health-plan options available to employees to just one.

In addition, more employers are offering high-deductible health plans. For the second year in a row, there has been a 33 percent increase in the number of companies that provide high-deductible health plans as the only health plan option for employees. Although only 16 percent of all survey participants offer a high-deductible health plan as the only plan option, these employers represent 38 percent of participants that offer only one plan.

Massachusetts employers will have an additional health-care cost come 2018. Companies will pay an additional $180 million over two years as part of an assessment designed to close a budget deficit with the state Masshealth program for low-income people. Companies with employees currently using MassHealth will shoulder the bulk of the new assessment.

Meanwhile, the Massachusetts legislature is currently developing legislation that Beacon Hill leaders say will address the overall cost of health care.

Survey participants also commented on their preparations for compliance with the Massachusetts Pay Equity Act. This law, which takes effect on July 1, 2018, creates a potential liability for employers who pay different rates to men and women who perform comparable work. Employers who perform a self-evaluation to identify and remove gender-based pay inequities can maintain an affirmative defense to employee claims under the act. However, successfully performing a self-evaluation requires an investment in time and resources to build a compliant compensation process.

Despite the impending July 1, 2018 deadline for completing a self-evaluation and implementing remedial actions to secure the affirmative defense, only 19 percent of survey respondents state that they have completed the self-evaluation. Even fewer participants (12 percent) state that they have taken remedial actions.

Completing self-evaluations may be further complicated by a lack of pay-equity-compliant job descriptions. Fifty-seven percent of participants state that their job descriptions are either out of date or nonexistent. An additional 8 percent state that while they have updated their job descriptions for pay equity compliance, they do not have job descriptions for all positions.

The act also affects employee recruitment through its prohibition on asking applicants to disclose their current salary or their salary history. While employers acknowledge that this fundamentally changes the recruitment process, 17 percent of participants state that they do not currently have a plan to comply with this requirement, and another 38 percent plan to wait until July to remove requests for salary information from their applications.

Survey participants see a strong 2018 for their companies, with 82 percent rating their business conditions as either excellent or good. Addressing pay equity, employee recruitment, limited salary budgets, and increased health-care costs will stretch the capacity of most HR departments as they try to stay ahead of the economic recovery. Employers are encouraged to integrate their compensation, benefits, and recruitment strategies into a pay-equity-compliant value proposition that establishes them as an employer of choice in 2018 and beyond.

Topics: Compensation, Human Resources, wages

Health Reform Repeal and Replace - What Does It Mean to Employers?

Posted by Russ Sullivan on Mar 7, 2017 11:33:38 AM

Republican members of the U.S. House of Representatives yesterday released their long-awaited alternative to the Affordable Care Act (ACA).  The proposed law retains some of the more popular features of the ACA while modifying or outright repealing others.

Health.Energy.jpgWhat would the proposal mean for employers in Massachusetts? Here is a quick, initial review of key provisions:

Employer-Provided Health Insurance:

  • Eliminates the employer mandate retroactive to December 31, 2015.
  • Eliminates taxes on prescription drugs, over-the-counter medications, health-insurance premiums, and medical devices.

Employer-Provided Health Insurance and the Individual Health Insurance Market

  • Retains ACA provision allowing parents to retain dependents on their plan until they are 26. 
  • Health Savings Accounts - Allows individuals to contribute at the current family amount and allows families to contribute at twice the current family amount

Individual insurance market

  • Eliminates the individual mandate retroactive to December 31, 2015. 
  • Retains ACA prohibitions on pre-existing conditions, but effective in 2019 imposes a 12- month surcharge equal to 30 percent of the premium for enrollees in individual market who had a 63-day or more lapse of coverage in prior 12 months.
  • Effective January 1, 2020, repeals cost-sharing subsidies, currently available to individuals with incomes from 100 percent to 250 percent of the federal poverty level (FPL) to assist with out-of-pocket expenses
  • Effective January 1, 2020, eliminates the Premium Tax Credit for individuals purchasing health insurance in state exchanges, replacing that credit with tax credits for qualified plans on individual market.
  • Repeal of plan tiers based on actuarial value.
  • Increase age ratio for plan costing from 3:1 to 5:1, allowing aged-based cost variations to differ by as much as five times based on enrollee’s age.

Tax credits for Qualified Plans on the Individual Market

  • Annual credits begin at $2,000 for 20 year olds, and increase by $500 per decade, capping at $4,000 for people in their 60s; reduced by 10 percent of modified adjusted gross income (MAGI) over $75,000 ($150,000 for joint filers); reduced by amount received under a small-employer health reimbursement plan; penalties on erroneous filers.
  • Effective January 1, 2020 payments may be made in advance and on behalf of eligible individuals directly to health plan provider.
  • Applies to plans on individual health insurance market and COBRA.
  • Qualified plans do not include those that cover abortion, except in case of rape, incest or when mother’s life is threatened.

The bill also establishes a Patient and State Stability Fund, which provides states with $100 billion over nine years to design programs promote participation and stabilize risks in the individual health insurance market.

That provision has a down side for Massachusetts -15 percent of the funds are available only to states that either experienced an increase in the uninsured population from 2013-2015 among people below the poverty level; or to states that have fewer than three health insurance plans available on their state exchange in 2017.  Massachusetts would forfeit 15 percent of the available funds for not meeting either of these requirements.

There are also provisions that would roll back the expansion of Medicaid, the federal health insurance program for low-income people, and change the manner in which Medicaid funds are allocated to states:

  • Effective January 1, 2020, repeals Medicaid eligibility expansion from individuals with incomes at or below 138 percent of federal poverty level; and to children, pregnant women, and breast cancer and cervical cancer patients with incomes at or below poverty level.
  • Effective January 1, 2020, changes state funding from claims-based allocations to “per capita” allocations, potentially reducing funding to eligible recipients in Massachusetts.
  • Eliminates ACA requirement that Medicaid provide “essential health benefits.”
  • Requires state to verify Medicaid eligibility every six months.

Expect animated discussion and debate on both the federal and state level as advocates and opponents dig into the details over the coming weeks.

Topics: Health Care Reform, Health Care Costs, Health Insurance

Judge Puts Hold on New Overtime Regulations

Posted by Russ Sullivan on Nov 23, 2016 10:17:01 AM

Yesterday, a federal judge in Texas imposed an injunction effectively blocking changes to federal overtime laws that were to take effect on December 1.  The decision affects employers in all states, including Massachusetts.  In deciding the case, U.S. District Judge Amos Mazzant of the Eastern District of Texas ruled that the Department of Labor regulations exceeded its authority.  As a result, once again employers who scrambled to meet the new regulatory requirements find themselves in the difficult position of either undoing the changes they have made to comply or leaving those changes in place, as well as the associated costs.

The Fair Labor Standards Act (FLSA) establishes overtime rules and the standards by which employees may be exempted from them.  Exemption requires that employees perform certain duties and be paid at a certain threshold level.  Although the FLSA does not specify that employees must be paid at a certain threshold, regulations issued by the Department of Labor in 1940 and updated numerous times since then have set a minimum salary threshold as one of the requirements for exemption from overtime.  The salary threshold was most recently updated in 2004 to $455.00 per week, or $23,660 per year.

The Department of Labor’s new regulations, issued in May and scheduled to take effect on December 1, would more than double the threshold to $913.00 per week, or $47,476.00.  In his ruling Judge Mazzant stated the increase of this magnitude would “supplant” the duties test, adding that responsibility belonging to Congress, not the DOL.

The eleventh hour ruling means that many employers who have already implemented changes to employee’s pay and timekeeping procedures now have to decide if they want to roll back those change or just forge ahead.  Unfortunately, many employers have already communicated these pay and procedural changes.  For these employees, it will be difficult to take advantage of the injunction and delay any changes until a final ruling is made.

Unknown at this time is whether the DOL will appeal the ruling.  Ultimately, the court process may drag on while the new Congress takes action to undo the regulations.  Employers may want to communicate to employees the current uncertainty and that they will be monitoring developments.  In the meantime, employers who have not implemented or communicated changes should sit and wait.  Those who have implemented or communicated changes should assess the business and employee relations impact of undoing these changes and determine whether they will proceed as planned or return to prior practices.+++

Topics: Employment Law, Overtime

Employers Plan Modest Wage Growth, Despite Pressures

Posted by Russ Sullivan on Jun 20, 2016 7:34:03 AM

An acute shortage of skilled workers, a state economy near full employment and an increase in the minimum wage all spell accelerating wage increases for 2016, right?

Well, not exactly.

Wages2016.jpgThe persistent and curious disconnect between the tight labor market and wage increases will continue this year, according to the results of the 2016 Associated Industries of Massachusetts General Wage Survey. The study indicates that employers plan to increase wages by a modest 2.78 percent, more than last year’s 2.69 percent, but still less than the 2.9 percent budgeted by employers before the financial crisis of 2008.

The AIM results mirror national and global projections that wages will increase an average of 3 percent this year. The slow pace of wage increases appears to defy conventional economic theory that wages rise as the number of people looking for work falls – a process called the erosion of “spare capacity,” which ensures that all those who want to work do so, and leaving as few resources unemployed as possible.

Baffled economists have attributed the wage-recovery disconnect to everything from the rapid growth of low-wage positions to outsourcing to historically low rates of labor-force participation. But few of those factors pertain to the AIM survey results, which are heavily tilted toward higher-wage manufacturing companies that are particularly challenged by the shortage of qualified production workers.

Current economic conditions only deepen the mystery.

Massachusetts approached full-employment levels this spring as the state jobless rate dropped to 4.2 percent. The AIM Business Confidence Index rose to a 10-month high during May and has remained in positive territory since October 2013.

“The good news is that the Massachusetts and US economies have proven remarkably resilient in the face of weak growth globally that unsettled financial markets at the beginning of the year,” said Raymond G. Torto, Chair of AIM's Board of Economic Advisors (BEA) and Lecturer, Harvard Graduate School of Design.

So, how to explain a projected 2.78 percent average wage increase?

Start with the fact that many employers remain cautious about increasing wages or expanding amid what has become a wildly inconsistent economy. Just when the nation appears to be building momentum in terms of output and financial performance, the pace of job growth dropped to its lowest level in May since 2010.

Inconsistencies also infuse the Massachusetts growth picture. The shortage of software professionals, scientists and engineers that has prompted some companies to pay five-figure referral bonuses in the white-hot Greater Boston region becomes far less acute in Gateway Cities and in other regions outside the Route 128 technology belt.

Consider as well the relentless development of technology that allows companies to automate products, operations and services. Massachusetts manufacturers now turn out far more product with far fewer people than they did 25 years ago, changing the demand equation from finding large numbers of people to finding smaller numbers of more qualified people.

The lingering question is whether employers will be able to hold to their modest wage-increase budgets in the face of all the upward pressure on compensation. The employers who participate in the AIM General Wage Survey are generally cold-eyed and realistic about their wage plans, but experts believe the tight labor market may force them to raise their projections to attract and retain key performers.

In the meantime, employers are considering multiple strategies to manage compensation costs:

  • Target variable and incentive pay to reward top performers so the company provides incentive without incurring pyramiding year-over-year increases to base wages.
  • Differentiate between top and low performers with a broader range of merit increases, enabling employers to spread their merit dollars further, though at the risk of turnover in a tight market.
  • Budget for adjustment, promotional or emergency wage increases in addition to the planned merit budget, allowing the flexibility to respond to compliance and market pressures, but at the expense of operating costs.

Here are details about some of the factors influencing wages in Massachusetts:

Massachusetts Minimum Wage

The minimum wage increased from $9 to $10 per hour, effective January 1, 2016.  It will increase again on January 1, 2017 to $11.  These increases will strain the year-over-year salary budgets of many employers in two ways.  First, employers with employees at the minimum wage will experience a 22 percent increase to labor costs in those positions. Second, as wages for minimum-wage earners increase, employees in positions currently compensated in the $11-$15 range will be seeking above- average increases to maintain their differential to minimum wage.  Employers will be hard pressed to meet these needs within a 3 percent increase budget.

“Tough to Fill” Positions

Many Massachusetts employers have expressed concern about the shortage of potential employees possessing the necessary skills needed in an increasingly complex economy.  Filling these positions will result in newer employees entering the work force at wages equal to, or higher than, existing employees with more years of experience.  Employers will thus face internal pressure to dedicate additional dollars to experienced employees to maintain internal equity.  A detailed discussion of “tough to fill” positions is included in the AIM 2016 General Wage Survey summary, including listings of positions experiencing the largest annual increase from 2015 to 2016.

Managing Poor Performers

For the fourth year in a row, participants in the annual AIM General Wage Survey have identified managing low performers as their compensation priority.  The strategic handling of poor performers may provide additional budget strain as low performers exit the work force and employers seek to replace them in a tight employment market.  Strategies for effectively managing performance are discussed in more detail within the AIM 2016 General Wage Survey summary.

Employers will need to choose wisely and set priorities for targeted employee groups.  Treating 3 percent as a hard cap on wage escalation might not be the best option for 2016.

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Topics: AIM General Wage Survey, Compensation, wages

Government Postpones Health-Reform Reporting Deadlines

Posted by Russ Sullivan on Jan 4, 2016 7:00:00 AM

The federal government has extended the February 1 deadline for employers to provide eligibility and other information to workers under federal health care reform. The extension is good news for employers struggling to implement the complex reporting regulations of the Affordable Care Act (ACA).

The Internal Revenue Service announced on December 28 that it will extend by two months the deadline by which employers must provide detailed form 1095-C to each employee who had an offer of insurance in 2015 or worked 130 hours in any month during 2015. Employers now have until March 31, 2016 to file forms 1095-B (self-insured plans) or 1095-C to employees.

Filings to the IRS have also been extended by three months.  Whereas employers had to transmit their information to the IRS by February 28 (March 31 if filing electronically), employers now have until May 31 to file with the IRS (June 30 if filing electronically).

Under ACA regulations, the 1095-C form requires extensive review of multiple factors such as prior year W-2 earnings, enrollment or waiver of health insurance, eligibility periods and pay rates and hours worked annually and month to month for each employee on the employer’s payroll.  

The IRS had previously allowed employers to request two 30-day extensions of the filing deadlines before extending the deadlines for everyone.

The revised filing deadlines are outlined below.


Topics: Health Care Reform, Health Care Costs, Massachusetts employers

Top Signs that Your Compensation Plan is Broken

Posted by Russ Sullivan on Oct 5, 2015 1:34:42 PM

The first inkling that your company’s compensation system is out of balance often comes when a key performer suddenly leaves to take more money somewhere else.

FourpeopleI have heard the same story many times in the years I have taught compensation management to experienced HR people as part of AIM’s HR Leve Two certificate series – a valuable performer is recruited to another employer, perhaps even a competitor, because the compensation program at your company has drifted away from the market.

What are the top signs that your pay and benefits are out of balance?

  • The company has no job descriptions or poorly written job descriptions.  Not knowing what the job is makes it impossible to know what to pay the job.
  • Title creep.  Companies often award titles, rather than compensation, so there is a disconnect when the employee compares her or his pay to others with the same title outside the company.
  • Lack of salary ranges. There is no understanding of the minimum or maximum value of a particular job.
  • When they do have salary ranges, companies often forego increasing those ranges when they have had a difficult year financially.  The market still moves ahead and so they find themselves out of sync with the market.
  • Lack of consistency among departments in the way in which employees are compensated.  One department is conservative when it comes to pay while another department looks for every opportunity to give money.
  • Across-the-board increases.  The company compensates high performers and low performers with the same percent of increase, leading to a culture of mediocrity.  High performers start to wonder why they put in superior effort when they receive the same increase as an employee who puts in half effort.
  • Failure to periodically check the internal equity of the pay structure.  Companies sometimes make the mistake of hiring people at or above the salaries of workers doing the same job and who have more experience.  This drives turnover.  It is a little like the bank that gives special rewards and rates to new customers, but existing customers are not eligible.
  • Lack of a well-defined pay philosophy.  How does the company want to pay in comparison to the general market?  Does the company want to be a market leader, pay the same as market or be a market laggard?  Having a plan and managing to the plan makes a company more likely to be in control of their compensation system.
  • Trying to manage compensation with people who don’t have expertise in compensation.  You would not go to a general practitioner if you needed back surgery.  Getting the right help is critical.

Register for HR Level Two Certificate Series

Topics: Compensation, Management, Human Resources

Are Wellness Programs Legal or Not?

Posted by Russ Sullivan on Dec 16, 2014 2:54:00 PM

Many employers have made wellness plans the centerpiece of their efforts to control the spiraling costs of employee health insurance.

StethescopeWellness programs use tools such as annual personal health assessments (PHA) and biometric screenings to identify employee health issues, establish baselines and develop plans to improve employee health. 

Many employers provide incentives to employees who participate.  These incentives range from cash awards to decreased employee contributions to premiums to employer contributions to HRAs (healthcare reimbursement accounts). Companies frequently extend these programs to employee spouses as well. 

Initial data on wellness programs are promising. Johnson & Johnson estimates that wellness programs have cumulatively saved the company $250 million on health care costs over the past decade. And a study by Towers Watson and the National Business Group on Health shows that organizations with highly effective wellness programs report significantly lower voluntary attrition than do those whose programs have low effectiveness (9 percent vs. 15 percent). 

Sounds great, right?

Not so fast says the U.S. Equal Employment Opportunity Commission (EEOC).  The Chicago branch of the federal agency has taken several companies to task for their wellness programs.  According to the EEOC, these programs violate a provision in the Americans with Disabilities Act (ADA) that prohibits employers from requiring medical examinations or making disability-related inquiries of an employee, unless the examination or inquiry is job-related and consistent with business necessity. 

The EEOC’s position directly contradicts Affordable Care Act guidelines for establishing wellness incentives.  The ACA sets forth detailed guidance for health contingent wellness plans and incentives based on either participating in activities related to improving identified health factors or achieving certain goals also based on identified health factors. It even allows employers to provide incentives equal to 30 percent of the individual annual insurance premium (50 percent for tobacco-related incentives).

Here in Massachusetts, the employer wellness tax credit requires some type of evidence-based wellness program.  A common way for employers to gain this evidence is through PHAs or biometric screenings.

Despite the ACA’s guidelines, the EEOC has brought legal action against three employers over wellness programs:

  • In EEOC v. Flambeau, Inc., the employer’s wellness program gave employees the choice of taking a biometric screening or paying 100 percent of the health-insurance premium.  Employees who took the screening only had to pay 25 percent of the premium.  One employee who was on leave at the time the screenings were administered was not allowed to take screening upon return and had to pay 100 percent of the premium.
  • In EEOC v. Orion Energy Systems, employees could either complete the PHA and biometric screening or pay full premium.  One employee was terminated for not completing PHA and taking biometric screening. 
  • The third case, EEOC v. Honeywell, focuses on what the EEOC has characterized as surcharges for failing to take biometric screenings.  These surcharges include an annual $500 additional premium cost, a loss of $1,500 in employer contributions to the HRA and another $1,500 premium surcharge for using tobacco products.  The employer took the position that absent a biometric screening, employees were assumed to be smokers.

All three cases are currently pending in the courts.

The EEOC defines a "disability-related inquiry" as a question (or series of questions) that is likely to elicit information about a disability. The agency also defines a "medical examination" to include procedures or tests that seek information about an individual's physical or mental health or impairments, such as vision tests, genetic tests, blood pressure screening and cholesterol testing. The questions asked on a PHA and the information derived from a  biometric screening would likely fall within these definitions. 

However, the ADA allows voluntary medical exams and disability-related inquiries that are part of an employee health program.  In these instances, an employer does not have to show that the questions are job-related and consistent with business necessity. Unfortunately, neither the ADA nor its associated regulations define what is “voluntary."

So where does this leave employer wellness programs?  A few practical points might assist in keeping these programs working for the benefit of employers and employees: 

  • Remain committed to wellness as part of your health insurance strategy.
  • Do not discipline employees for not participating in the program.
  • Provide make up opportunities for employees who miss a screening deadlines.
  • Start small – the larger the incentive, the more likely it will be viewed as punitive and the program as less voluntary.

Meanwhile, AIM will monitor these and other any other cases and keep you updated on any developments

Topics: Health Care Reform, Health Care Costs, Benefits

Best Advice on Paid Sick Days Law - Sit Tight

Posted by Russ Sullivan on Nov 25, 2014 9:53:44 AM

Here’s some advice for employers wondering how to comply with the new Massachusetts Earned Sick Time law - sit tight, communicate with your employees, review your current policies, educate yourself on the new law and watch for further guidance. 

Health.EnergyMassachusetts voters approved a ballot question on November 4 mandating that employers with 11 or more workers provide 40 hours of paid sick time. Companies with fewer than 11 employees will be required to provide 40 hours of unpaid sick time.

Approval of the new law has touched off a scramble among employers to review existing policies governing paid time off. One area of particular concern is the law’s accrual, carryover, use and documentation provisions, which leave most employer plans noncompliant.  

Many employers want to get a jump on the July 1, 2015 implementation date for the law and develop compliant policies effective January 1.  It is easy to understand why - most time-off plans run on a calendar-year basis.  For budgeting and scheduling reasons, employers would like to manage one plan for all of 2015.

But hold on a moment. We currently lack many specifics and clarification is needed on matters such as:

  • the coordination of the law with existing attendance, discipline and other employment policies;
  • whether premium pay must  be applied to absences taken under the law;
  • the application of the law to seasonal employees;
  • whether to count seasonal employees and owners when determining whether an employer has 11 or more employees;
  • the coordination of accrual and use of Earned Sick Time in the second half of 2015 with the accrual and use of time off benefits in the first half of the year.

The Attorney General’s office will be responsible for issuing guidance on these and other matters.  AIM looks forward to communicating the concerns of employers to Attorney General Maura Healy and recommending regulations to allow employers to manage budgets while retaining the value provided by current policies.

The prudent strategy may be to approach 2015 as a transitional year.  No changes need to be made prior to July 1.  Sure, waiting until then will result in having two policies for this transitional year, but employers will also enjoy the benefit of clarity and be able to issue a policy that will remain in place in 2016 and beyond.

Employers should not wait until July to communicate with employees.  Workers should understand that the new law may impact current policies. A possible communication might look something like this:

As you know, Massachusetts voters passed the Earned Sick Time Law this November.  We will likely need to make some changes to our current time off-policies to comply with the new law.  It appears that the law will require us to modify how time off is accrued, used, carried over, documented and tracked.  The law may also require that we reclassify some of our existing time off benefits as earned sick time.  We will watch for guidance that may be provided by the commonwealth and announce changes to our policies sometime prior to July 1, 2015 when the law takes effect.  In the meantime, we will follow our existing policy.

AIM will continue to help employers - first with first with a free Webinar on Wednesday, December 3 at 10:00 am, then with a subsequent Webcast in Januaryto help companies identify critical decision points. The association will schedule detailed workshops around the state once the attorney general issues regulatory guidance.

Register for the Paid Sick Days Webinar

Topics: Employment Law, Human Resources, Paid Sick Days

Employer FAQ | The New Paid Sick Time Law

Posted by Russ Sullivan on Nov 5, 2014 9:26:00 AM

Massachusetts employers wake up this morning facing one of the most comprehensive mandated paid sick time laws in the nation.

Bay State voters last night approved a ballot question mandating that employers with 11 or more workers provide 40 hours of paid sick time. Companies with fewer than 11 employees will be required to provide 40 hours of unpaid sick time.

VoteHereSignAssociated Industries of Massachusetts opposed the ballot question as an undue intrusion by government into the benefit decisions of private employers. AIM nevertheless acknowledges the will of the electorate on ballot question 4 and is now moving to help employers implement what will be a complex and administratively difficult law.

Last night’s vote must be certified by the Secretary of the Commonwealth and the Legislature before taking effect on July 1, 2015.

Here are some questions and answers for employers on the new Massachusetts paid sick time law:

1. How much paid sick time is a company required to offer?

Businesses with 11 or more employees will be required to offer up to 40 hours of paid sick time per calendar year. Businesses with fewer than 11 employees will be required to offer up to 40 hours of unpaid time to workers each calendar year.

2. How do I count employees for the purposes of the law?

Any person who performs services for an employer for “wage, remuneration or other compensation,” including all full-time, part-time or temporary employees.

3. How and when is mandatory sick time earned?

An eligible employee will earn a minimum of one hour of sick time for every 30 hours worked.  Employees will begin to accrue this earned sick time on their date of hire, or on July 1, 2015, whichever date is later.  Exempt employees will earn paid sick time based upon the assumption of a 40-hour work week, unless their normal work week is less than 40 hours, and in that case their paid time would accrue based upon their normal work week. Employees may begin to use earned sick time on the 90th day after hire.

4. For what reasons may an employee use earned sick pay?

An eligible employee may utilize earned time to care for a physical or mental illness, injury or medical condition, or to attend routine medical appointments for him/herself or one of the following relations: child, spouse, parent, or parent of a spouse. Earned sick time may be taken to address the physical, psychological or legal effects of domestic violence.

5. Can an employer require an employee to work additional hours to make up for missed time?

If an employee misses work for a reason eligible for earned sick time, but agrees with the employer to work the same number of hours or shifts in the same or next pay period, the employee would not have to use earned sick time for the missed time, and the employer would not have to pay for that missed time.  Employers would be prohibited from requiring such an employee to work additional hours to make up for missed time, or to find a replacement employee.

6. Are employees permitted to take earned sick time in less than full work day increments?

An employee will be able to use earned sick time in increments as small as one hour, or the smallest increment or the smallest unit that employer’s payroll system allows for taking time off.

7. Will earned sick time carry over from one calendar year to the next?

Employees will be able to carry over up to 40 hours of earned unused sick time to the next calendar year, but may not use more than 40 hours in a calendar year. 

8. Is an employer required to pay earned but unused sick time at the time of an employee’s termination? 

An employer will not be required to pay employees for earned unused sick time at the end of their employment.

9. Is documentation required to take sick time?

Employers may require certification of the need for sick time when more than 24 consecutive hours of earned sick time are requested.  But employers may not delay the taking of, or payment for, earned sick time because they haven’t received the certification.  The employee does not need to provide documentation for absences of fewer than than 24 consecutive hours. 

10. Does an employee have to provide advance notice of the need to take time off? 

An employee must make a good-faith effort to notify the employer in advance if the need for the earned sick time is foreseeable.

11. What if I have a Paid Time-Off program?

Employers with a Paid Time-Off (PTO) program that combines vacation, holidays, sick time and personal time should determine whether it makes sense to carve out sick time so that the mandatory paid sick time is not applied on top of their employees’ PTO bank.

12. Our business has a “good attendance” policy for our employees.  Will our policy be impacted by this legislation?

“Good Attendance” policies must be reviewed since the ballot question makes it unlawful for any employer to prevent an employee from utilizing paid sick days or to penalize an employee for using leave. “Good attendance” policies provide incentives to employees who do not use their earned paid time off.

13. Who enforces the law?

The attorney general will enforce the proposed law, using the same enforcement procedures applicable to other state wage laws, and employees could file suits in court to enforce their earned sick time rights. The Attorney General would have to prepare a multilingual notice regarding the right to earned sick time, and employers would be required to post the notice in a conspicuous location and to provide a copy to employees. 

Members with questions regarding the new law should contact AIM’ Hotline / Employment Resource Group at 617-262-1180.

Topics: Employment Law, Human Resources, Paid Sick Days, Mandated Paid Sick Days

Connector Seeks Repeal of Section 125 Requirement

Posted by Russ Sullivan on Oct 30, 2013 11:15:00 AM

Health Care ReformThe Massachusetts Health Connector announced Monday that it plans to file legislation to repeal several key requirements of the state health reform law, including the Section 125 requirement, the Employer Health Insurance Responsibility Disclosure (Employer HIRD) requirement, the free-rider surcharge, and the recently created Section 125 notification requirement.

The announcement comes as welcome news to Massachusetts employers.

The 2006 Massachusetts health reform required employers with 11 or more workers to offer all employees who work 64 hours or more per month the opportunity to pay for health insurance on a pre-tax basis through the employer’s section 125 plan.  Employees could use the plan to purchase insurance through the employer, if eligible, the Massachusetts Health Connector or a private third party.  Now, effective the last day of current plans in 2014, the federal Affordable Care Act eliminates the use of section 125 plans for the purchase of health insurance through a public health exchange such as the Massachusetts Health Connector.

Despite the new restrictions, Massachusetts has maintained its section 125 requirement so that employees who do not meet their employer’s health care eligibility requirements may still purchase health insurance privately through a third party and save money through pre-tax payroll deductions.  Those employees just are not be able to use the section 125 deductions for plans purchased through the Connector.

Massachusetts employers raised concerns about this process during recent forums with the Health Connector, the Division of Insurance and AIM.  Collecting payroll deductions and forwarding the funds to a private insurance company seems a significant burden to employers, while benefitting few employees.

AIM applauds the Health Connector for listening to employers and addressing their concerns. The association also urges members of the Massachusetts Legislature to approve the Connector’s plan to eliminate the section 125 requirements.

In the meantime, some advice for employers:

  • If you currently have employees using your section 125 plan to pay for plans through the Connector, they may continue to do so until the plan year ends in 2014. 
  • You need not make your section 125 plan available to employees who are not eligible to participate in the company’s health insurance.
  • You may continue to use the existing Notice of Health Care Exchanges for new hires. 


Topics: Health Care Reform, Issues

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