Singled Out

Balancing The Scales

How is an employer supposed to deal with this divisiveness? Survey the experts, and the advice is plentiful--and diverse. For starters, Ed Lawler, director of the Center for Effective Organizations at the University of Southern California in Los Angeles, says there is a quick cure: Pare benefits to the bone. "My advice to entrepreneurs is always to provide lean benefits," says Lawler. That means lower costs for you, plus you want to attract workers who are excited about your business, not your benefits."

Besides, Lawler adds, most workers fail to value benefits at the true costs paid by employers. "Every dollar you spend on benefits gets you about 70 cents in perceived value; that's the rule of thumb," he says. "Many of the entrepreneurs I consult for say that benefits provided by big corporations are why those companies are at a competitive disadvantage--and by not providing them, the entrepreneur gains a real competitive advantage."

Sound extreme? While minimizing benefits would put an abrupt halt to squabbling between the childless and workers with families, many businesses would hesitate to take this step, and for good reason. At least a skeletal menu of benefits is offered by most employers: "Medical, life and disability insurance are the basic coverages," says Henry Moyer, a partner at Hirschfeld, Stern, Moyer & Ross, a New York City benefits consulting and brokerage firm. Most employees won't work for an employer who doesn't provide at least these essentials.

So how can the inequity issue be resolved? Fiddling with the present setup may remove many inequities. One large step: Put an end to ad hoc decisions about employee requests for days off by setting up a "time-off bank" that lumps together sick days, personal days and vacations. Workers who need time off, whether to care for a sick child or an ailing cockatoo, can take the day off by withdrawing from his or her account.

"This idea is growing in popularity at many businesses," says Young. "It eliminates the need for a worker to go through a song and dance to get a day off. And it takes bosses out of the business of deciding which worker's requests should be granted or denied."

How many days should you put in each worker's account? That's up to you. But, says Young, "Make sure workers get the same number of days, regardless of life status."

Another cure: If you offer flextime, make it available on an equal basis. Ditto for telecommuting. If workers choose not to use these options, that's their choice; there's no room for blaming those who do.

One way to erase inequities is to replace existing benefit plans with cafeteria plans that grant workers latitude in the benefits they get. "Cafeteria plans are tremendous tools. People have different needs at different stages of their lives, and a cafeteria plan allows them to put money into what they need now," says Art Bachman, an attorney specializing in employee benefits with Blank, Rome, Comisky & McCauley, a Philadelphia law firm.

Cafeteria plans work like this: Each employee is generally given a fixed amount to spend on benefits of his or her choice. Cafeteria menus run the gamut from typical benefits--medical, dental and life insurance--through child-care reimbursement, even coverage of health or dental deductibles. What about employees who want no benefits? Many cafeteria plans require that some benefits be bought (medical insurance, most often), but most allow employees to put into their own pockets any dollars that aren't spent (although at that point, the money is taxed as ordinary income).

Sound fair? It does to many employees, and, for employers, pluses include silencing complaints about inequality and putting benefits dollars to more effective use: "A cafeteria plan lets employees put money where they want it, so they value their benefits more. That means the employer isn't wasting money on benefits employees don't want," says Bachman.

Tasty as cafeteria plans seem, there is a hitch. "These programs are difficult and time-consuming to administer," says Moyer. Legal pitfalls are plentiful, and missteps in setting up a plan can void any tax benefits and expose employers to legal liabilities. If you're considering this option, close consultation with a benefits professional or attorney is crucial. In truth, while cafeteria plans are much talked about, implementation has been scant. "No more than 20 percent of our clients have delved into cafeteria plans in a big way," says Moyer.

Aren't these companies worried about perceived imbalances? "Frankly, not many of my clients are very concerned with the inequities that are often part of standard plans," adds Moyer. "These complaints have always been around. They might be a little louder today, but we've heard similar complaints for many years."

By all means, if many of your employees are howling about inequities in your benefits plans, take a hard look at applying patches that soothe at least some of the resentments--set up a "time-off" bank, for instance. But another response is simply to point to the federal tax code: "It has many built-in `inequities' and offers benefits to those with children," says Alex Chernoff, a managing partner with Albertson, New York, benefits advisory firm Chernoff Diamond and Co. She adds: "It's not difficult to create a system that treats everyone equally. But sometimes we should treat people equitably, not necessarily equally."

Contact Sources

Blank, Rome, Comisky & McCauley, (215) 569-5715, bachman@blankrome.com

Chernoff Diamond and Co., 1157 Willis Ave., Albertson, NY 11507, (212) 772-0902

The Conference Board, (212) 759-0900, http://www.conference-board.org

Hirschfeld, Stern, Moyer & Ross, (212) 408-0565, fax: (212) 582-1040

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This article was originally published in the March 1998 print edition of Entrepreneur with the headline: Singled Out.

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