We need to know whether we can treat new employees differently as far as the benefits we offer them. For example, our policy says that with under five years of service, employees get two weeks of vacation. However, when we hire experienced people, they want us to match the vacation they had at their old job, say three or four weeks. We’ve also had cases of people wanting us to give better health and life insurance or make them whole for the loss of unvested pension benefits. What should we do? — Sandra in Adelanto
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We turned this benefits question—one that virtually all hiring managers face—over to Rhoma Young.
Whenever you step outside the “box” of consistent treatment, you take a risk–and sometimes the risk is greater than at other times. To help staff flexibility and deal with competitive recruiting situations, managers sometimes will give more vacation to a senior person being newly hired. That can be done, but it is best to keep it informal and have the supervisor and the employee work out coverage, and best to limit it to a year or two. The law does not require that an employer give vacation, but as it is an accrued benefit, the employer must pay for unused time if the employee leaves. Also, while it is not a legal problem, obvious and unequal extra time away from work can cause morale problems with other employees.
As far as other benefits like insurance and pension issues, some are covered by ERISA, which would preclude differing treatment or inconsistency. One way to get around this prohibition is to make up for a “loss” with a hiring bonus or greater overall compensation. However, you also have to be aware of and monitor “grade creep” to make sure that newer and current employees performing the same job and having similar and/or the same responsibilities are not paid differently unless there is a documented performance disparity, especially if one or more of the employees happens to be a member of a protected group.
In general, unless you have individual employment agreements with senior executives at various levels outlining compensation and performance terms, giving different or preferential benefit coverage can be very problematic.
Rhoma Young is founder and head of HR consulting firm Rhoma Young & Associates in Oakland.