Archive for November 2011

Illinois HR: Changes to Illinois Workers’ Compensation Act

On September 1st 2011, changes to the Illinois Workers’ Compensation System became effective as a result of the high cost and alleged fraud associated with workers’ compensation claims. The Illinois Workers’ Compensation System was designed to settle cases between employers and injured employees through a state–run process that eliminates the need for ligation.

In 2005, Amendments were enacted to the Workers’ Compensation Act, which empowered the Illinois Department of Insurance to create a special investigative unit to oversee fraudulent workers’ compensation claims and maintain insurance compliance. This law requires employers to obtain workers’ compensation insurance. Penalties for knowingly and willfully failing to obtain insurance include fines up to $500 for every day of non-compliance, with a minimum fine of $10,000 and imprisonment for corporate leaders.

Currently, the Workers’ Compensation System costs employers $3 billion a year. According to the Governor’s office, Illinois ranks 19th  in the nation among states with the highest workers’ compensation premiums and  pays 40% more in workers’ compensation charges than neighboring states such as Indiana, Michigan and Wisconsin. To restore solvency to the system, Illinois legislatures implemented House Bill 1698 (HB1698) to reform the 2005 Workers’ Compensation Act Amendments. This reform is expected to save employers an estimated half-billion dollars annually and reduce doctor and hospital fees by 30%.

Notable changes in the reform include decreased compensation for carpal tunnel injuries, limited wage differential pay, limited medical provider options, and a revised intoxication defense standard.

  • Compensation for Carpel Tunnel Recovery Capped: The amount of benefits an employee can receive for Carpal Tunnel Syndrome in the hand is capped at 15 percent (30 percent for severe cases). HB1698 also reduces the amount of time an employee can receive benefits to 190 weeks.
  • Permanent Disability Determination: Under the new legislation, an employee’s age, occupation, future earning capacity and evidence of disability in medical records are required to claim permanent disability. An employee’s testimony is no longer sufficient evidence to claim permanent disability based on its subjective nature.
  • Wage Differential Limitations: An employee can only receive differential benefits for the latter of five years or until the employee turns 67 years old.
  • Limited Medical Provider Options: Employers can now enroll in a Preferred Provider Program (PPO) to significantly decrease the employee’s choice of medical providers covered under the plan by mandating they visit doctors in the network. Employees may decline entry into the PPO plan through a written consent but will only be entitled to one medical provider option.
  • Reduction in current Medical Fee Rate:There is a 30% deduction fee rate provided to doctors and other medical providers.
  • Intoxication Defense: An employee is not entitled to workers’ compensation benefits if involved in an accident that is a direct cause of drugs or alcohol use. Also an employee may not be awarded workers’ compensation benefits if he or she fails a drug or alcohol test.  If there is evidence of a blood alcohol level of .08% or if there is evidence of impairment as a result of the use cannabis or other drugs, then it will be presumed the employee was intoxicated and intoxication was the proximate cause of the injury. To overcome the denial of benefit, the employee has the opportunity to present admissible evidence that indicates intoxication was not the sole cause of the accident.  The statute provides that a drug or alcohol test should be taken immediately after the accident.

What do you think of the Workers’ Compensation Act reform?

California HR: Employee Terms of Employment should be presented in a Written Notice

California Governor Jerry Brown recently signed bills enacting several new employment statutes that will affect the way employers conduct business. One Statue in particular, Section 2810.5, outlines an employer’s responsibility to communicate an employee’s terms of employment in a written notice. Effective January 1, 2012, employers should present the written notice to non-exempt employees at the time of hire and communicate the content in a manner that is deemed understandable by a “reasonable” person.

The written notice should include:

  • The rate or rates of pay and basis thereof, whether paid by the hour, shift, day, week, salary, piece, commission, or otherwise, including any rates for overtime, as applicable.
  • Allowances, if any, claimed as part of the minimum wage, including meal or lodging allowances.
  • The regular payday designated by the employer.
  • The employer’s name, including any “doing business as” names used by the employer.
  • The physical address of the employer’s main office or principal place of business, and a mailing address, if different.
  • The employer’s telephone number.
  • The name, address, and telephone number of the employer’s workers’ compensation insurance carrier.
  • Any other information the Labor Commissioner deems material and necessary.

Employers should notify employees in writing, within seven calendar days, if changes transpire to the information above through a written amendment, new written notice or modified paycheck stub containing the new information. Section 2810.5 does not apply to overtime exempt employees or public sector employees. Additionally, it dose not apply to employees covered by a valid collective bargaining agreement if their regular rate of pay exceeds California’s minimum wage by at least 30% and if their overtime compensation is paid at the proper premium wage rate.

The Labor Commissioner will publish a template sample of the notice in the following months for employers to customize. Employers are encouraged to use the template to ensure compliance.

What do you think about this Statue?

Compensation Strategies in the Recession: How to Cope with the New Economy

According to a Harvard Business Review survey, which analyzed the responses of 1,379 global business leaders, 70% of the respondents predicted a “double” recession will transpire in the following months. Additionally in a similar survey conducted by World Bank, indicated a decrease in global growth to 2.8% in 2011 from 3.8% last year (Harvard Business Review). These statistics indicate the recession is far from over. As the economy struggles to get back on its “feet” and the potential for a second recession grows more promising, it becomes even more important to manage human capital with a compensation strategy that is cost-sensitive as well as motivating. With the addition of performance-based initiatives incorporated into the compensation strategy, employers can foster an environment for learning, innovation, creativity, problem-solving and empowerment, while managing compensation budgets and ensuring resources are allocated accurately.      

Pay for Performance links an employee’s reward to their performance and the performance of the company. This type of compensation structure allows the employee to be an individual as while a collective contributor to the company’s bottom line by aligning their goals to match the organization’s goals. A key component in executing performance based-pay is implementing the “right” periodic performance review. Performance reviews or performance appraisals should reflect an employee’s true performance, instead of a subjective interruption of what managers think performance should be based on their own evaluation approach. The employee performance reviews must invoke both internal and external equity for it to be adopted by the employee.   

Primary Components of an Effective Performance–Pay System

  • Conduct a job analysis
  • Evaluate the worth of the job based on an absolute basis and relative basis of the job compared to others in the organization; assign a labor grade to the job based on the position  
  • Assign rate ranges (minimum, midpoint and maximum) with dollar values for each labor grade 

Best Practices of an Effective Performance Appraisal System   

  • Implement a rating system that supports calibration (adjusting the performance measurement to match a known standard), to eliminate a flat distribution of ratings. A wider rating scale results in a fairer and more accurate distribution.
  • Implement performance appraisal periodically, at least quarterly, to give an accurate assessment of the employee’s progress. Use the performance appraisal to document the employee performance throughout the year.
  • Provide feedback to employees on a constant basis (not only through the performance appraisal).This helps to motivate the employee and pinpoint problem areas.
  • Engage employees in two-way communication about their performance through an Open Door policy. This communication style decreases the likelihood of rumors or complaints about information being withheld and enables the employee to trust the manager and vice versa which leads to increased commitment and performance.
  • Implement an employee self-appraisal assessment to the process. The employee self-appraisal assessment can be completed prior to the performance appraisal meeting to gage the employee’s perspective on their performance in comparison to management’s point of view.
  • Creating and presenting performance goals is a critical step in the performance appraisal process. Goals should be set in way that reinforces the employee’s ability to plan, implement, and achieve the goals.