Cut Pay if EE Takes Health Benefits

RuthG

If you hire  employee with the understanding that they are not going to be on your health plan, but they later sign up for it, can you cut that employee's pay to make up the difference?

Mikey1

Unless the employee has an employment contract, his or her pay can be cut at any time. Having a legitimate business reason for the cut protects against any possible discrimination claims.
It's important to note that some states have notice requirements for pay cuts.

IT HR

Are you/have you done this in the past with other employees?  What is the reason for doing this - to off set the portion of the benefits premium that the company pays?

TXHRGuy

Benefits is my weakest area but isn't there something about interfering with the use of a benefit?  If the pay cut is substantial, how is it any less coercive than simply firing employees right before they're eligible?

pammcconnell

I have to ask what the understanding was or is.  Was it simply that at the point of hire they have other coverage, or did they not qualify for your health plan at hire, but now do?  If your policy says that for example a part time employee does not qualify for benefits, but now that employee is working full time, I don’t think you can hold them to the original policy.  How can you deny one employee coverage that you offer to others if this is the case? 

ParkHR

Why would you want to do it?  You're not saving enough to make a difference, I wouldn't think, and the risk of litigation seems especially high in this situation.   I happen to be an employee that is retired from the military, and I've elected to take the military versus our benefits.  But the savings to the company, for just my premium cost, isn't enough to warrant a legal risk for.  I'd suspect you're in the same situation.

Sounds like "lesson learned" this time.

HRforME

The only way I have seen this work is if the company allows the employee to make the choice at time of hire. Pay is calculated using that decision. Then if the employee ever wants health insurance company they pay a premium from their paycheck to join the plan (usually 100% of the current cost). If there is a Section 125 POP in place, then the premium could be pretax. 

For example, one of my employee's spouse is the head HR person at her architectural firm. A few years ago her firm gave the employees the choice of being covered on the health plan or getting a raise. Those that chose the raise were told if they ever wanted health insurance benefits they would have to pay the whole cost. Therefore she is on our plan under her husband because we still subsidize part of the dependent's cost.

Honestly, I never think it is a good idea to condition pay for a job on what benefits the employee chooses. Because changes can always occur (marriage, divorce, babies, etc).  Instead set the pay for the position, decide what % the employer wants to pay for benefits and then charge every employee the difference.  But hindsight is 20/20.

I would not decrease pay ....but would look into charging the premium back to the employee some other way even if it is an authorized voluntary deduction each pay period.