Discrimination among Benefits
lshlensky
1 Post
Our IT consulting company has historically provided benefits (vacation pay, health insurance, etc) only to salaried employees but not to hourly employees, even though the hourly employees are full-time and working 40 hours per week. I have questioned whether this practice makes sense and whether any other companies make such a distinction. I believe it makes more sense to limit benefits to full-time workers as opposed to part-time.
With respect to vacation pay, is there any rule in the law that prohibits providing different classes of employees with differing amounts of vacation time, such as professional vs. non-professional, management vs. non-management, or must all employees be treated similarly based on their years of service? Can a new employee be hired in with more vacation time than other employees based on a negotiated contract?
Thank for your comments
Comments
There's no particular law that prohibits you from offering different vacation policies to different classes of employees, but I would hesitate to change it on a person by person basis due to negotiations. That raises the possibility that you will find yourself appearing to offer better benefits to one group of protected employees (gender, race etc) than to another. Better to define the classes upfront based on function or business structure and find something else to negotiate with.
Vacation pay matters are highly dependent on state law and circuit. Individual negotiation of pay and benefits isn't, on its face, illegal. However, if significant differences among employees can be grouped statistically by protected characteristics (e.g., national origin), that could be a problem for you. If you have individuals with equal experience and education or certifications but unequal vacation time, that may be evidence of a problem but not necessarily. I would be more concerned about serious pay inequity and all else equal than PTO bank inequality.
If the plan is being administered as a POP 125 plan, you may be violating the discrimination rules, depending on whether or not you have highly compensated employees in the salaried ranks.
What makes sense is to offer what is necessary to hire qualified employees. If you are having difficulty retaining or attacting qualified salaried employees then it might require more benefits than what is needed for hourly employees. But to answer your question: yes, you can provide different classes of employees differing amounts of vacation, health insurance, etc.
I don't see anything discriminatory in how your plans are set up. You can offer different benefits or no benefits to different classes of employees. Exempt, managers, or (fill in the blank). Just as long as you can define it as a distinct class.
I do agree with the last poster though, you should do what makes sense for your business model. If you're having problems filling non-exempt positions, then you may want to seriously consider adding some benefits to that class.
I would have to caution you on one point- and that is ERISA. You may offer" benefits to fit your business model"- but I caution that you do not offer" better or more benefits" to "attract" younger workers and less to people over 40, 50, or 60 or you may find yourself in a lawsuit. I think you may want to look at what your competition is doing to retain top talent and benchmark that model. If you are a member of your local SHRM- network and share your thoughts- and ask for some guidance.
I work for a high tech company and we have a unique niche- so I sympathize with you. I wish you the best of luck.
Angie
HR Manager