Recruitment & Staffing

Plan governs when total compensation is used to recruit

Q: We want to hire someone above the pay we would normally offer. Can we do so but deny them health insurance benefits to help even out the cost?

A: Only if this is done consistently with your benefits plan's eligibility requirements, as stated in your benefits plan document and summary plan description. The eligibility requirements are what govern.

Employers should not arbitrarily offer or deny employee benefits based on the status or pay at which they are hired. While an employer has some choices to make when initially establishing eligibility requirements for a benefits plan, once those requirements are set, they become the “law” the organization must live by.

Let's say you have a plan whose eligibility requirements simply state that all employees working 30 hours or more per week are eligible to participate. Because there are no other exclusions, all employees working 30 hours or more per week will be eligible to participate, regardless of their pay or job class. Employees may not waive their rights to participate, and you cannot deny them the right to participate without violating your own plan and putting your tax qualification for the plan in jeopardy. Therefore, if you hire Joe at a high salary and he works 30 hours or more per week, there is nothing you can legally do to deny him participation in your plan as it is written.

Similarly, employees hired for part-time or temporary or seasonal positions who meet the eligibility criteria (such as working 30 hours per week, as in the above example) also are eligible to participate in the plan. They cannot waive their rights to participate, and you cannot legally deny them participation.

In addition, because no plan will be written to exclude just one individual but will exclude an entire class of employees, employers must make sure that any exclusion does not discriminate against legally protected classes.

When formulating its benefit plan, an employer may choose to offer employees a chance to opt out, giving increased salary or funds in a flexible spending account to those who choose not to elect the group medical insurance. There must be a choice in this, however, and employees must be allowed to revoke their decision and participate in the plan according to normal enrollment procedures.

Article by Shari Lau, SPHR, GPHR, is manager of SHRM's Information Center from http://www.shrm.org/kc/solutions/articles/archives/CMS_019185.asp#P-8_0