Remember when Jack Welch and GE were all the rage with the system of ranking employees and firing those at the bottom of the pile? Does it really work?

Essentially, you may remember, the system involves ranking employees according to grades on their performance reviews. For instance, the top 20% of employees are considered hot commodities, and are of course safe from the ax. The next 60% are middle-of-the-roaders – adequate performers that the company would like to hang onto. And then there’s that bottom 20%. They have a bull’s-eye on them. If they don’t improve, they’re gone.

You probably can see right away that the practical effect of the system is that one in five employees will be let go each year – since you’re always going to have a lower 20%. Some call it “efficient”; others call it “ruthless.”

Use of the system peaked in 2009, when the Institute for Corporate Productivity reported that 42% of employers were using “rank and yank.” This year, the figure is down to 14%.

Does that mean it’s out of favor? Not necessarily, according to the Wall Street Journal. Some companies may have just changed the name of the system or modified it a bit so that it doesn’t seem so stark and cruel.

Should you use it? Performance experts say it can work , with some modifications to prevent destroying morale and unfair decisions. For example:

• Instead of using the rankings to determine who gets fired, use them to determine the amount of bonuses or merit pay. Certainly, some poor performers will get fired, but their terminations can be based on a set of performance standards for the job, and not on ranking against other employees.
• Managers should have to justify rankings. One of the major complaints about the system is that some managers fall prey to favoritism or that standards tend to vary among managers. One manager with high standards might give low rankings, while another manager might be a little softer. To prevent that, companies that use the system, or some form of it, have roundtables at which managers have to explain and justify their rankings to other managers, as well as to the boss. That takes away the unilateral, and dictatorial, aspect of the rankings.

Note: GE no longer uses the system. The company dropped it shortly after Welch retired as CEO.

What if your company could add 5% to its bottom line this year?  Don’t look to Sales or Marketing for this one — turn an eye to Finance.

Turns out you can do it without adding a new product or service or landing a major new customer?

The revenue booster: Plug the holes that allow organizations to lose 5%  of their revenue to fraud each year, according to the Association for Certified Fraud Examiners (ACFE).

Whether it’s expense padding, inventory shrinkage or phantom vendors, occupational fraud costs … big. Unfortunately, most companies still take a reactive rather than proactive approach to financial funny-business.

That’s one trend you want to buck in 2012, says James Ratley, President of the ACFE, in a recent podcast. His appeal to companies of all sizes and in all industries: It’s much more cost-effective to prevent fraud and detect it early.

And how successful your company will  be rests on the people you tap to do that.

Have you assembled the right team?

In fact, there’s one key trait you need the people in charge of ferreting out fraud to possess: sharp investigative skills.

That’s what sets apart your peers who are most successful at fending off fraud from the ones who take the bigger hits, says Ratley.

No one’s talking about the ability to play amateur P.I., per se. But just because someone works in Finance doesn’t make him or her best at spotting financial funny business. There’s a specific skill set your company should seek out.

Encourage your CFO to zero in on which of his or her staffers possess the following three traits and tap them to drive your fraud prevention efforts:

1. Attention to detail. Hopefully the majority of your finance staffers have this – it’s key in Finance overall. But hunt for your sharpest staffers who’ll spot the tiniest discrepancy others might overlook.
2. Strong communication skills, particularly interview skills. Staffers will have to ask probing questions when they find something fishy. Not only must they be good at interviewing, but they’ll need to be able to switch gears mid-interview if they uncover something new.
3. Strategic thinkers. Your more tactically-minded staffers won’t have the big picture awareness to understand all the places fraud could extend nor know the right questions to ask.

Of course, it’s more than just your Finance department that needs keen investigative skills. Another critical area? IT. The tech members of your fraud prevention team should include “forensic” experts – folks who can retrieve vital info that’s been deleted, for example.

Top technology people list 10 areas of concern that companies need to address.

These are from the latest survey of technology chiefs by the folks at Logicalis

1. IT Managed Services – IT leaders are looking at ways to offload some IT operations in order to better focus staff energies on core activities—those that will drive revenue.
2.  Cloud – No surprise that cloud computing was a top topic of conversation that will continue well into 2012 as IT leaders decide the best ways to use the cloud in their operations.
3. Social Networking – Once again, social media itself was a topic of conversation among technologists, often the early adopters of new communications tools.
4. SaaS – Software as a Service gained more momentum as applications from large and small software developers were offered à la carte via the web.
5. IT Workplace Issues – This was a hot topic in last year’s survey and was just as important again this past year. IT leaders are focusing on IT Jobs, CIO resumes, CIO salaries, workplace motivation and demotivation as well as the ethical workplace.
6. IT Governance – IT leaders acknowledged that IT governance ensures IT is aligned with business strategies and objectives in what will undoubtedly be a talked-about topic for years to come.
7. Compliance – Similarly, compliance with industry and government regulations and requirements was a topic that hit the top 10.
8. 8. ERP – Streamlining the organization often falls to the IT department making discussion about enterprise resource planning an obvious topic.
9. Outsourcing – IT leaders are embracing many options, including smart outsourcing, for maintaining costs and controls when it comes to the delivery of IT services within their organizations.
10. Virtual desktop – IT has not forgotten the desktop in its many forms, including tablet and mobile device. With the proliferation of mobile devices and bring your own device (BYOD) workplaces, delivering secure access to critical business applications has become a focus.

Every company has a slacker, and it’s no big deal, right? It’s a very big deal, according to one study.

An analysis shows that one bad employee – even among several good employees – can ruin your numbers.

A study — by Stanford professor Robert Sutton and detailed in several publications, including the Wall Street Journal – indicates that “bad apples” are contagious. They can drag down even the best groups. That runs counter to the common belief that an overall solid group will perform well even if it includes an occasional slacker. In other words, even a small negative can undo the good of a large positive.

The study even puts a number value on the bad-apple effect: Quality and productivity drop by 30% to 40% when a slacker joins a top-notch group.

The real villain isn’t the poor work done by the low performer; it’s the emotional effect the low performer has on others. Industrial psychologists call it the “affective” influence. People tend to sink to the level of the low performer, but it’s rare that the low performer rises to the level of the top people.

The consequences: Managers have to rethink the idea that they can pull up workers’ performance by teaming them with top people. In fact, the effect may be the opposite – good performers get pulled down.

Starting April 30, employers will have fewer options when it comes to stopping an election to unionize employees.

As expected, the National Labor Relations Board approved a set of rules designed to speed up the union-election process and hinder employer efforts to fight that process.

The new rules take effect April 30. They amend existing procedures by:

• giving a hearing officer authority to limit the pre-election hearing to matters relevant to “question[s] concerning representation.” The practical consequence of this change is that employers may not know which employees are eligible to vote until after the election takes place.
• authorizing the hearing officer to decide whether to permit briefing after the pre-election hearing, including the subjects to be addressed and the timing for filing
• eliminating the possibility of employer appeals of pre-election matters, thus cutting the time between the filing of an NLRB election petition and an election; estimates set that time at 28 to 35 days between the filing of the election petition and the election
• narrowing the circumstances in which a request for special permission to appeal to the Board would be granted; such permission would be granted only in extraordinary circumstances when it appears that the issue addressed in the appeal would otherwise evade review, and
• giving the NLRB discretion to hear and decide any appeals to the election process, whether they concern pre-election or post-election issues.

The NLRB’s rationale for changing the rules: The action will reduce “unnecessary” delays and litigation; in 10% of the cases, employers file formal challenges to unionization votes, a move that often delays such votes by a month or more.

The full text of the final rule can be accessed at the NLRB website.

In just a few months, we should know whether the Patient Protection and Affordable Care Act will become law or become extinct.

The U.S. Supreme Court has announced the 2012 dates and agenda for oral arguments in the lawsuits challenging the validity of the act:

• On March 26, the court will hear arguments on whether there are grounds for abolishing the Act’s individual mandate provision before the mandate actually goes into effect in 2014. Attorneys for the Obama administration are arguing that opponents would have to wait until the provision takes effect before petitioning the court. The court has allocated one hour for this argument.
• On March 27, the court will hear arguments on whether Congress had the constitutional power to pass the individual mandate provision. The Court has allocated two hours for this argument.
• On March 28, the Court will hear arguments on whether, if the individual mandate provision is unconstitutional, the entire act must be invalidated. The Court has allocated 90 minutes for this argument.
• On March 28, the Court will also hear arguments on whether Congress exceeded its powers by requiring states to expand Medicaid coverage or lose federal funding for Medicaid programs. The Court has allocated one hour for this argument.

For a summary of the cases and challenges leading up to the Supreme Court case, go to the website of the legal firm of Ford & Harrison.

Here are the top 10 stories of the year, as chosen by our readers.

1. IRS changes W-2 reporting requirement for health benefits

2. EPA says it’s ‘creating jobs’

3. Immigration laws: States get tougher on employers

4. What’s going to happen to employer health coverage in 2014?

5. Labor board gets an earful over pro-union rules

6. 3 lessons every company can learn from the Netflix debacle

7. Congress puts 12 EPA ‘job-killing’ rules on chopping block

8. What do you think of these 3 ideas to create jobs?

9. Why the payroll tax cut may be a bad idea

10. Does being a jerk make you a better boss?

Half the battle in winning over workers is knowing what they value and what scares them. One study addresses both.

More and more workers worry about their benefits, and especially about retirement accounts, according to a nationwide eight-year study by benefits consultant Mercer. The corollary is that more and more workers are loyal to an employer whose benefits package addresses worker concerns.

Here’s a snapshot of what came out of the Mercer poll:

• Retirement. The number of workers who said they were worried about saving enough for retirement jumped by about 50% between 2008 and 2011. Even among workers under age 50, the number who said they’d probably delay retirement went up by about 50% during the same period. Reflecting their concerns, workers this year expect to put an average of $7,763 into their retirement accounts in 2011, up from $6,440 last year.
• Job security. Even during just the last year, the number of employees who expressed worry over their job security went up by about 25%. It appears that in 2010, a lot of workers thought the economy would get better by now. Because it hasn’t, they’re more worried about whether they’ll have a job tomorrow.
• Importance of benefits. Almost four out of five employees (79%) in 2011 said benefits are one of the main reasons for choosing and staying with an employer. That’s a 4-percentage-point jump over an already high number who had the same response in 2010. As you might expect, respondents were especially tied to the importance of employer-provided health benefits; 86% said what they pay out-of-pocket for their health benefits, including premiums, is probably or definitely worth it for the coverage they get.

What it all means

Based on the data, employees clearly put a lot of stock — and a lot of loyalty — in employers that offer:

• Good retirement plans, via 401(k)s or other accounts
• An environment in which management makes decisions based not just on generating short-term profits but also on the long-term financial security of the company, and
• A solid — if not lavish — benefits package that’s attractive enough that workers won’t dwell on missed pay raises or other salary concerns.

Related story: Do you offer this in your 401(k) mix? Why you should.

A seven-year study of healthcare expenses shows where costs have been headed and claims to show what effect the Affordable Care Act will have on costs.

The study by the Commonwealth Fund – “State Trends in Premiums and Deductibles, 2003-2010: the Need for Action to Address Rising Costs” – found that during the ’03-’10 time period:

• The average premium cost for family coverage increased 50%
• The employee’s average annual share of premium costs increased 63%, and
• On average, single-person deductibles for private-employer health plans increased by 98%.

Note that the data are for years prior to enactment of the Affordable Care Act. The reason Commonwealth did the study was to show cost trends without reform measures. Commonwealth further projected that the average annual premium for family coverage would continue to rise 72% by the year 2020, to nearly $24,000.

The report asserts that the new healthcare law contains “several … provisions that could help moderate premium growth, make premiums more affordable, and provide improved financial protection for insured individuals and families who have benefit gaps, high deductibles, or limits on covered medical care expenses.”

Among those provisions are mandates that health plan

• in the large-group markets spend at least 85% of their premiums on medical care or services, and

• in the small-group and individual markets spend at least 80% of their premiums on medical care or services, or offer rebates to their enrollees.

These requirements, the report says, are intended to force insurers to reduce their administrative costs. In addition, the law mandates that insurers justify any “unreasonable” insurance premium increases.

The report includes a state-by-state analysis of healthcare cost trends.

To find out more about the Commonwealth Fund, go here.

After the death of Steve Jobs, stories leaked out — mainly in a biography — about his genius and his cruelty. Does one go with the other?

The question has been analyzed by several authors, including Walter Isaacson, who wrote the best-selling biography of Jobs. Isaacson told of Jobs’s genius, as well as his extraordinary insensitivity. For instance, according to Isaacson, Jobs routinely parked his Mercedes in handicapped spots and seemed to delight in publicly humiliating employees while taking credit for their ideas, too.

Of course, Jobs also engineered one of the biggest business successes of the century. So, we come to the question again: Does being a jerk boss lead to success?

A Stanford professor of management, Robert Sutton, examined the question in his book (crude-language alert!), The No Asshole Rule: Building a Civilized Workplace and Surviving One That Isn’t.

Sutton found that a lot of managers, in Silicon Valley and elsewhere, firmly believed in what they saw as Jobs’s secret to success: The bigger the jerk, the better it is for business.

Except Sutton found it’s not true. He maintains in his book that there’s really no correlation between being a jerk and being a success — “success” being defined as “making a lot of money” or “running a company that makes a lot of money.”

Sutton notes that for every Apple Corp., headed by a jerk, there are the Googles, the Virgin Atlantics, the Procter & Gambles and Southwest Airlines, which are successful and, according to most accounts, aren’t headed by jerks, but rather by sensitive people who put their employees’ interests ahead of their own.

So, the good news is that you don’t have to be a jerk to be a success. We assume you think that’s good news, too.

Whether you’ve been watching every debate or are waiting until the field narrows, the 2012 presidential election push has gotten underway. So what will the impact be on your business?

No denying, the economy will be a hot topic this go-around. And tax reform remains an integral part of any strategy to right the ship.  One specific target? Corporate taxes.

With good reason: The United States is well above-average in its corporate tax rates. While the international average falls around 20%, we blow that away.

But maybe not for long.

The candidates vying for the Republican presidential nomination plan to change that. Each has pushed for a flat tax approach to even things out.

Election Day will be here before we know it. Let’s take a look at what each major candidate is currently proposing to see how it would translate to your business.

Same structure, different rates

The fact that there should be a flat tax seems to be something all the top contenders in this race agree upon. Depending on who gets the Republican nod, here’s what your company would be looking at:

• Romney: A corporate tax rate of 25% is key to his 59-point jobs plan.
• Perry: A 20% corporate tax rate on domestic earnings. However, Perry wouldn’t dump the existing graduated rate system. For the time being, you’d get to choose which you went with.
• Cain: A 9%  corporate tax rate on corporate net income, under his famous 9-9-9 Plan. You’d kiss payroll taxes goodbye under Cain, too. However, you’d be saddled with a nationwide flat 9% sales tax rate.
• Gingrich: A 12.5% corporate tax rate.
• Bachmann: A 0%? Bachmann has said she’s “open” to the idea of eliminate corporate taxes all together, just like Sarah Palin was. Though she has yet to come out and officially announce this as her plan.

Only time will tell which person (and rate) will triumph. We’ll keep covering the candidates and their plans for your business. Stay tuned.

The late Apple co-founder will be remembered for a number of things, including his ability to attract and captivate audiences and the media. An analysis shows he used the same formula — one that anyone else can employ.

What made Jobs’s presentations so intriguing? In many cases, it boiled down to a combination of these five traits:

1. His presentations were always based upon a central theme: Sometimes Jobs would repeat a slogan, other times he’d double back to a common idea. But Jobs was always sure to plant a seed in prospects’ minds early, and reinforce it often. The common theme was almost always associated with a vision of how Apple’s products could help customers achieve their goals.
2. He made a clear connection between each of his major selling points: Jobs once said, “The great thing about Apple products is that they’re innovative and they work … and when you buy more than one, they work even better.” Much like his products, Jobs was an expert at connecting each benefit to a need. He didn’t simply present features, he backed them up with everyday examples customers could relate to.
3. He sold the experience: Steve Jobs’s presentations were all about showing buyers the future of technology, and the simplicity of embracing it. He empowered people by showing them how much simpler or unique their lives would be by simply using the product he was promoting.
4. He used strong adjectives: Jobs used language to excite the people in his audience. His enthusiasm was a major driving force behind each product.
5. He knew how to create a “Wow” moment: Jobs always surprised his audience by offering stats or demos that drove home the extreme value and “wow” factor of Apple’s products. His presentations were billed as must-see events, with the media rushing to summarize (and advertise) all the major bullet points.

Based in part on “How to Deliver a Great Presentation Like Steve Jobs,” a BNET video presentation.

Given the chance, these three types of people will destroy your company. Most times, the only choice is to fire them.

These come from G. Michael Maddock, author of the upcoming book Brand New: Solving the Innovation Paradox—How Great Brands Invent and Launch New Products, Services, and Business Models:

The victim. This is the person who sees problems as occasions for persecution rather than challenges to overcome. The persecution apparently comes in the form of you-name-it — humans, processes, and inanimate objects with equal ease. And if there isn’t a problem, the victim will find one. The victim is often angry, usually annoyed, and almost always complaining. Note to HR: After termination, the victim will no doubt look for someone like you for sympathy and agreement that the world is against him.

The nonbeliever. This person lives by the Henry Ford quote: “If you think you can or think you cannot, you are correct.” Winners really believe they can do it; losers (nonbelievers) always doubt it’s possible. The link between believing and succeeding is powerful and real. So is the link between nonbelieving and failure.

The know-it-all. The best innovators are learners, not knowers. The same can be said about innovative cultures; they are learning cultures. Those who think they have nothing to learn will invariably be overtaken by learners, or will drag down an organization and let the competition overtake the organization. They never see new things coming because they think there are no new things. That’s how it is when you think you know everything.

Maddock’s advice: A lot of managers will convince themselves that they can turn around the three harmful types and make them productive, reliable employees. Experience and history show that’s usually a pipe dream and just a reason for delaying the inevitable.

This is the story of an employer that tried to follow the rules, and got run over.

The case revolves around the use of E-Verify, the federal program that matches new hires with government records, such as Social Security Numbers – and whose use is required in states like Alabama, Arizona, Mississippi, South Carolina and Tennessee.

Attempting to follow the law, a flower wholesaler in North Carolina used E-Verify to ensure all new hires were legally permitted to work in the United States. Note: Verification can be done only after the applicant is hired.

The result: After hiring and training employees in a highly seasonal business, the company had to fire 60 of them who couldn’t meet the E-Verify standard. The Catch-22 is that although employers aren’t required to use E-Verify in most states, but if you do use it and uncover an illegal worker, you have to fire that worker.

So, what happened to the employer and the 60 workers?

• The employer got caught short in high season and suffered a loss of business, and
• The speculation is that the 60 fired employees went to work for competitors who don’t use E-Verify or hire off the books.

Ironically, a manager’s faults can grow out of a good worth ethic and a desire to lead.

These ideas come from Tony Schwartz, who runs his own business, has authored books on leadership and is a regular contributor to the Harvard Business Review:

• If you insist on getting involved in every decision, decisions won’t get made. This a variation on the “delegate, delegate, delegate” advice, but on an even more practical level. A manager who refuses to delegate decision-making is one who’s trying to defy the laws of time and space. You can’t be everywhere all the time, and that means if every decision is waiting for your “OK” stamp, some of those decisions — some very important decisions — will get delayed. That’s never good for business or for the business of managing people.
• If you do what you love, you miss too much. It’s natural, for example, that when someone who worked in sales then moves to a broader management position, that person will want to keep a (heavy) hand in the nuts and bolts of sales. That’s a management mistake because (a) you’re missing out on other facets that you should be mastering and (b) you’re violating the “delegate, delegate, delegate” principal. You’ve already shown you can sell; it’s time to branch out.
• If you don’t link autonomy with accountability, you’ll probably get neither. OK, you want to give your employees the independence to make mistakes. You’re delegating. So far, so good. Now, what happens when they make a mistake? Do they also have to take responsibility for fixing it? And do they understand the measures of success? Those are the keys to granting autonomy. Employees have to understand the responsibilities that come with freedom.

Five statements can make a bad situation even worse.

These come from Jeff Haden, who’s managed a 250-employee printing plant and written four books on managing:

“You’re a good employee, but we have to cut staff.” That statement is commonly used (a) when the company is going through some sort of downsizing or (b) as a cover-up to avoid telling the employee that the firing is for poor performance. In either case it’s mistake.

If you’re downsizing – which, in effect, is an admission that the company’s performance has faltered – just say so, without getting into the employee’s performance. If the termination is for poor performance, don’t try to cover that up with a the downsizing excuse. That could lead to legal problems. For instance, what if the employee is in a protected class – such as workers over 40 – and you hire a replacement? That opens you up to a lawsuit.

“This is really hard for me.” C’mon, does someone whose world had just been turned upside-down really want to hear about how terrible this is for someone who still has a job? Keep your feelings – and your problems – out of it.

“I disagree with you, and here’s why.” Some employees may want to debate the reasons for the firing. Don’t do it. If the employee persists in arguing, one approach is to say, “There’s no point in debating this, since it’s not going to change anything.” You can listen to the employee vent – for a little while. But stick to the facts and the issue at hand.

“This could work out best for you in the long run.” Even if that’s true, the employee who’s just been fired doesn’t want to hear it. Finding the silver lining in a termination is one awfully tough task.

“We’ve decided to go in a different direction.” If you’re tempted to use that statement, consider that you may have watched one too many press conferences in which NFL coaches get fired. The simple “John, we’re letting you go” is preferable.

To start off, the biggest mistake is to think you won’t be a target.

Fact: Fraud is on the rise across the board.

And yet in most organizations, the two main groups charged with preventing and catching any financial funny business – management and internal audit – have two very different ideas on everything from what’s causing it to how prepared they are to spot it.

Those are the eye-opening findings of a recent survey by Vonya Global. A disconnect like that could cost your company a bundle.

But it doesn’t have to. Check out three potentially costly perception gaps.

Could they exist in your company?

Perception Gap #1: How real the threat to you actually is

When it comes to the problem of corporate fraud, perhaps the most troublesome disagreement is just how real a threat it actually poses.

The vast majority of internal auditors believe the risk of fraud has increased in the past 24 months. And a quarter of them believe it will rise further. However, a third of executive management team members think their fraud risk has either dropped or stayed the same.

If other top execs don’t believe your cash is at risk, you might face resistance to putting more controls and protections in place.

Perception Gap #2: What the top threats are now

Even if you can get the most important people to agree on the fact that fraud is a real and present threat, you may face another critical disconnect in the specific type of threats. Here both groups have very strong feelings about the greatest fraud risk – too bad it isn’t the same one! According to the Vonya research:

• Managers are most worried about asset misappropriation on the supplier side, specifically in the
  form of billing schemes, while
• Internal Audit is most concerned about employees’ taking liberties with their expense reports at your company’s expense.

While your company certainly doesn’t want to let its guard down anywhere, it’s vital that you reach agreement on the greatest threats so you can hone your efforts.

Perception Gap #3: How prepared you are to catch it

Regardless of what the threat is, how confident are you that your company could spot it before any (or too much) damage is done? Once again, it depends on whom you ask in your company. Your top execs are quite confident in this area. Your internal auditors? Not so much.

More than 80% of management team members believe their companies have an effective fraud prevention program. While barely half of internal auditors are equally as confident.

One of the largest disconnects that’s worth addressing in your own anti-fraud efforts: how proactive vs. reactive your plan is. Talk to your CFO about this. Yes, you’ll need some of each, but be sure the balance hasn’t shifted too far to the reactive side.

To download a PDF of the report on fraud risk management, go here.

Related story: Fraud! Why you’re not as safe as you think.

If these behaviors ring a bell, you likely have a problem.

These come from business consultant Karie Willyerd, author of The 2020 Workplace and CEO of SuccessFactors, who says you can’t rely on an HR manager who:

• Communicates with employees mainly by email or some other electronic method. An HR manager who doesn’t make time for face time, especially when business is in the doldrums, is hurting everyone.
• Doesn’t understand — or try to understand — the business end. An HR manager who can’t name the company’s top 10 customers, list the top five competitors, or describe the basic business model needs help. Along with that, the HR manager should understand operating margins, cash flow, inventory and revenue — and offer HR solutions for improving business metrics.
• Doesn’t keep up with technology. Nearly 35% of the workforce consists of Millennials, born after 1977, and they will make up nearly 50% of the workforce by 2015. An HR manager who can’t navigate the tools they are using is unlikely to engage and retain those employees — whose everyday vocabulary encompasses tweeting, RSS feeds, cloud computing and SaaS.
• Hates change. An HR manager should be a key resource for managing and effecting changes in business.
• Doesn’t use metrics to gauge success. An HR manager who can’t measure ROI for hiring and paying employees won’t be much help in building a high-performance organization.
• Doesn’t have vision of how HR enables the people to achieve extraordinary performance. Yes, those sound like nice words. And HR is supposed to have a plan for putting them into action.
• Dwells more on style than substance. One clue: spending more time on the content of a business card than on getting to know the business.
• Acts as a gatekeeper for the CEO. Isolating the boss from the direct contact with others in the business ensures that information only goes one way.
• Doesn’t have the support or respect of the workforce. Yes, HR sometimes has to make tough, unpopular decisions, but HR also should build loyalty and engagement, too.

Here’s a chance to compare your health costs against those of employers who took part in two nationwide surveys, and to see how some employers are saving money.

A survey of 1,600 employers by consultant Mercer shows:

• Employees’ share of healthcare benefit costs is expected to increase 5.4% next year. That’s the smallest rise in 15 years, but higher than the 3.9% rate of inflation or overall salary increases. The past two years have each seen increases of about 9%.
• The favorite cost-cutting measure by employers are raising deductibles, increasing paycheck contributions and moving employees to lower-cost health plans. One-third of survey respondents said they plan to raise deductibles or co-payments next year.
• The median in-network PPO deductible for an individual is $1,000 among small employers and $500 for large employers.
• This year, about 51% of large employers have consumer-directed health plans, or CDHPs, which high-deductible plans that offer tax-saving add-ons such as health saving accounts. They are also a lot less expensive than other plans. Next year, 58% of large employers plan to offer a CDHP.

A separate survey of 2,000 employers by the Kaiser Family Foundation looked at costs for 2011. The highlights of that survey:

• Premiums for family coverage rose an average of 9%, to an average of $15,703, and
• That compares with an average increase of 3% in the same survey in 2010.

Note: The Mercer survey in 2010 predicted a premium increase of 6.4% in 2011 — far less than what showed up in the Kaiser survey.

Related story: Court clears you to go this far to cut healthcare costs

The IRS recently sat down with the American Bar Association and employers to confirm how the Taxman would rule in several common benefits scenarios. See if what IRS says matches what you do.

Hot Topic #1: Wellness programs

Of all the efforts to contain ever-climbing healthcare costs, wellness programs are one of the few to make any headway. Which is why many employers are embracing them.  But could the way you set up the program create compliance issues? IRS tackled two common scenarios during the recent ABA sit-down:

Question 1: As an incentive to participate in its wellness program, a firm “pays” employees in points every time they take a biometric screening, walk a certain number of miles, etc. Points are then traded in for prizes like $25 gift cards and company logo T-shirts. Are these taxable to the employee?

IRS says: Yes … and no. The gift cards are considered taxable because there’s a clear monetary value to the reward, while the T-shirts would be exempt as a de minimis fringe benefit.

Question 2: This company’s health insurer runs a wellness plan the company takes part in. If an employee goes to the gym three times a week in a month, the insurer will pay $20 of that person’s monthly gym membership. Are the payments taxable income?

IRS says: Yes. The Taxman differed with the ABA on this one. Because the insurer appears to be acting as an agent for the employer, the company is responsible for tracking, withholding and reporting employment tax on these pre-tax payments. (It’s not unreasonable or administratively tough to do so.)

Hot Topic 2: Flex spending plans

Besides wellness, your peers are latching onto other plan types to help employees and themselves offset their health costs. IRS hit them, too:

Question 1: An employee’s doctor prescribes an over-the-counter pain reliever and a cold medication.
Can they be reimbursed under the company’s flexible spending account?

IRS says: Yes. Even though OTC meds were recently eliminated as FSA eligible, because they were prescribed by a physician, they are reimbursable.

Hot Topic 3: Hardship withdrawals

Unfortunately, there’s a phenomenon more employers are facing more and more frequently: employees who need to tap into their benefits for some fast cash. IRS tackled 401(k) hardship withdrawals:

Question 1: A cash-strapped employee charges medical expenses on a credit card, then requests a hardship withdrawal. Is that acceptable?

IRS says: Probably not. Since the employee paid by plastic, there’s a question of how much “immediate and heavy financial need” is involved.

Question 2: An employee participates in a 401(k) and a deferred comp plan. The deferred comp plan allows for emergency distributions. Can he take the 401(k) safe-harbor withdrawal first?

IRS says: No. The employee isn’t eligible until he’s taken all available distributions and loans from other plans.

Note: While questions were answered by an IRS official, the Service maintains they may not reflect the official IRS position. Though they certainly give you an idea how IRS leans.