PHR and SPHR Professional in Human Resources Certification: Total Rewards (PHR only)

This Guide Covers The PHR® Exam Content From The Total Rewards Functional Area And Consists Of The Following Responsibilities And Required Knowledge. 

01 Manage compensation-related information and support payroll issue resolution
02 Implement and promote awareness of noncash rewards (for example: paid volunteer time, tuition assistance, workplace amenities, and employee recognition programs)
03 Implement benefit programs (for example: health plan, retirement plan, employee assistance plan, other insurance)
04 Administer federally compliant compensation and benefit programs
 

In Addition To The Preceding Responsibilities, An Individual Taking The PHR® Exam Should Have Working Knowledge Of The Following Areas, Usually Derived Through Practical Experience:
- Applicable federal laws and regulations related to total rewards
- Compensation policies, processes, and analysis
- Budgeting, payroll, and accounting practices related to compensation and benefits
- Job analysis and evaluation concepts and methods
- Job pricing and pay structures
- Noncash compensation
- Methods to align and benchmark compensation and benefits
- Benefits programs policies, processes, and analysis

This guide covers the important topics of total rewards. Total rewards is the term referring to all policies, programs, compensation and benefits, recognition, and rewards designed to attract and retain the necessary talent to meet the organization’s goals and objectives. For the PHR® exam, it represents 15 percent of the total exam content. The day-to-day administration of a total rewards program is the implementation, promotion, and management of the compensation and benefits programs in compliance with federal laws. HR professionals who understand the full details of such programs are much better equipped to analyze and develop strong programs that benefit all the employees of the company. Fairly providing compensation and benefits to company employees is critical to all successful organizations.

This guide focuses on total rewards for all employees that support the company’s mission, vision, and values and help achieve its underlying goals and objectives. In smaller companies that do not have specialists in particular HR disciplines, the priority is the correct administration of the company’s payroll. In fact, many HR departments grow out of necessity from the payroll clerk as the number of employees grows and the company begins to reach thresholds that have legal and regulatory implications. Emerging companies that grow to this point do well to invest in a strong HR professional with knowledge of total rewards to administer the programs involved and ensure compliance with the rules.

Required Knowledge
Because this is a review guide, the assumption here and throughout is that individuals preparing to sit for the PHR® exam already have a base knowledge and are reviewing the exam content in this guide as a refresher. 
The knowledge areas of compensation and benefits can be viewed in different ways: compliance, policies, and methods or means to deliver.

Compliance
The primary transactional function of the HR department and therefore the primary role of HR professionals is the administration of the total rewards programs of the company. Simply put, if the employees don’t get paid, you don’t have a company! This may be obvious, but once the company size grows beyond a handful of workers, rules and regulations take over. It is the complex regulatory landscape that is time-consuming and burdensome for a chief executive, operations, or finance officer to handle and takes away focus from the mission of the company. It isn’t a core competency of the company, and it is delegated to the professional with the expertise and knowledge to handle the daily work and ensure compliance with the law.

Laws and Regulations
As stated previously, HR professionals are not attorneys and are not legal advisors. However, a great deal of their work has legal implications and liability to the company, so it is important that HR professionals understand how their work intersects the law. In compensation and benefits, there are numerous federal, state, and local laws that apply to the proper conduct and execution of this HR function. While an in-depth discussion of all the laws would be its own review guide, this section will discuss the most significant laws that HR professionals should be most familiar with. The following sections discuss the most important of these;

The table below lists several other major laws and their significance regarding compensation and benefits. For more information on these and other Department of Labor laws, visit https://www.dol.gov/general/aboutdol/majorlaws.

TABLE: Additional major compensation and benefit laws

Fair Labor Standards Act
The Fair Labor Standards Act (FLSA) of 1938 is the prevailing law that governs wages and hours worked by the workforce. It is the most significant legislation with respect to compensation, as it has the broadest application and reach concerning labor practices. It applies to any organization that engages in interstate commerce, produces goods for interstate commerce, or otherwise uses materials or goods that were transported as a result of interstate commerce. While there are some exceptions and limitations, such as those based on total volume of business, it is safe to say that the provisions of this important act apply to virtually every business. The Wage and Hour Division of the Department of Labor is chiefly responsible for the enforcement of many of the provisions of this law and is a primary source for clarification on rules, interpretations, and requirements of employers.
After determining applicability, it is then necessary for the HR professional to understand to which workers this law pertains. There is a difference between independent contractors and employees. The determining factors as to whether a worker is an independent contractor or an employee has mostly to do with autonomy over the work being done, the relationship between the worker and the company, and the work itself being a central part of the company’s core mission.
 

Note:  The Department of Labor was reviewing its guidance on the interpretation of contractors versus employees and the concept of “dual responsibility.” However, in general, HR professionals must be careful in classifying workers properly within the organization. When comparing two workers side by side and determining which is a contractor and which is an employee based on duties and general working conditions, the IRS will use 20 different factors to determine a worker’s status as an employee or an independent contractor.
Workers who are employees of the company work hours during working days that are totaled each week. Under the law if an employee works more than 40 hours in the established workweek, they are entitled to overtime pay. There are rules and caveats that determine the workweek and the calculation of working time. HR professionals should know some of the nuances that affect pay and can have implications for the employees. One example would be employees who temporarily work in a different location than their normal place of duty and must travel to and from this location. The travel time potentially has different calculations based on the circumstances. To understand more, see the U.S. Department of Labor website at www.dol.gov for a frequently asked questions section worth reviewing.
Of course, with any rule there is an exception. This overtime rule applies to a certain group of employees. Those in the other group, based on certain qualifiers, are exempt from this portion of the law. Hence, the terms exempt and nonexempt employees refer to their status with respect to the overtime rule. To be exempt, an employee must work in certain fields such as executive, administrative, professional, technical, or sales and perform certain duties in those fields and be paid in a salary (as opposed to hourly) making more than a threshold salary of $455 per week or $23,660 annually.

Table below describes some exempted employees and the criteria.

TABLE: Exempted employees from the wage and hour law (FLSA)

Note: In 2016 the Department of Labor issued a ruling changing the annual salary threshold to more than $47,000. The State of Texas and several other states filed a federal lawsuit to block implementation of that rule. An injunction was ordered, and the case is still pending. For an HR professional, this is an example of how compliance is impacted by outside influence that requires your attention.
 

Employee Retirement Income Security Act
The Employee Retirement Income Security Act (ERISA) is the key legislation that governs actions concerning a company’s benefits, establishing minimum controls and ensuring that benefit plans are administered in a financially responsible way. The key point is that it does not require a company to provide certain benefits, but if the company elects to do so, it must comply with the law and regulations. The general provision of the law states that the plans are operated for the benefit of the employees who participate and their beneficiaries, not the company. Therefore, the company must act in the way a prudent person would when managing the assets of the company. This is called the fiduciary responsibility of the plan.
ERISA sets the vesting requirements of a plan, defining when the employee is entitled to all or a portion of the benefits without penalty. An employee has the right to all of his or her money invested, but the vested portion pertains to the amounts that an employer matches or contributes over time. The vesting may be all at once or over a period of time depending on the plan. The vesting period is also determined by the type of retirement plan such as a defined benefit plan or a defined contribution plan.
ERISA requires that the employer, the benefit plan sponsor, provide a summary plan description (SPD) to the participants at least once every five years. Also, an annual report is submitted to the IRS and must be available to the participants upon request. Since these requirements are very particular and have significant fines attached for noncompliance, it follows that HR professionals should coordinate with benefits administrators and legal advisors with experience in this area to have a full understanding of the law.

Family and Medical Leave Act
Created in 1993, the Family and Medical Leave Act (FMLA) applies to organizations with 50 or more employees for at least 20 weeks of the current or preceding calendar year. This law applies equally in the public and private sectors, including nonprofit companies. The law allows leave to an employee who has worked in the organization for at least 12 months and at least 1,250 hours in that period at a location within 75 miles of where 50 or more employees also work. The law allows for up to 12 workweeks of unpaid leave in which their job is protected based on certain medical cases involving pregnancy, childcare after birth or adoption, or the serious medical issue of a spouse, child or parent, or the employee. Serious medical issues as defined by the law requires incapacity for more than three consecutive calendar days plus two visits to a healthcare provider or one visit and continuing treatment (such as physical therapy).

This law may also be applied with intermittent conditions such as a chronic care situation that requires periodic medical treatments or doctor’s care or convalescence. There are different means by which the 12 months can be calculated, but they must be consistent once determined by the company:
- A calendar year
- A fixed 12-month period (fiscal year)
- The 12-month period based on the employee’s first use of FMLA leave
- A rolling 12-month period

HR professionals must understand the calculation of the time and the required documentation needed to be maintained to provide advice and work with employees who need to exercise this leave right. Upon return from this leave, the employer is required to restore the employment at the same job or one with equivalent benefits and compensation.

The Uniformed Services Employment and Reemployment Rights Act
This important legislation protects our uniformed service members’ employment when they are called upon to serve the country, whether that service is voluntary or involuntary. The Uniformed Services Employment and Reemployment Rights Act (USERRA) was originally signed in 1994 and amended by the Veterans Benefits Improvement Act signed in 2004. This law also applies to applicants to a position if a company uses pending military leave as the reason for denying employment or rescinding a bona fide offer of employment.
There are some provisions that the employee must meet to be covered under USERRA. It requires that they or their command provide written notice of the reason for leave with sufficient notice being 30 days when possible. This is often a challenge to the employee and employer because sometimes orders take time to be processed in times of national military call-up. In all cases, it’s beneficial to everyone for an employee to provide a “heads-up” advance warning to the HR professional or the employer directly to allow sufficient time to plan and prepare for the absence. An employee can take military leave for up to five years (and even more under certain rules), and the right of the employee to return to their job or an equivalent position within the company must be maintained.

While the employee is on military leave, they retain the same benefits as individuals in other, nonmilitary leave statuses. They also must maintain the same level of benefits based on seniority as if they had not left the company, which means general increases in salary for longevity and promotion opportunity upon return. Retirement must remain unaffected without a break in service including any vesting and accruals. There are specific time frames that must be adhered to for the employee to return and restrictions on the position to return to, including additional requirements for disabled veterans. Finally, employees under the provisions of USERRA are not entitled to compensation from the employer except that exempt salaried employees must be paid the difference between their salary and their military pay for their time on military orders if applicable.

The Patient Protection and Affordable Care Act
The Patient Protection and Affordable Care Act (PPACA or ACA), more commonly referred to as Obamacare, mandates certain healthcare provisions for certain classifications of employers (called applicable large employers) and their employees. They must provide health coverage that is deemed to be affordable and provides a minimum value to their employees and the employees’ dependents. This provision applies generally to companies with more than 50 full-time equivalent employees. There are reporting requirements to the IRS for employers to demonstrate compliance with the law. While there are numerous restrictions and provisions with this legislation, there is a frequently asked questions section on the IRS web page located at www.irs.gov. HR professionals must be familiar with how to determine coverage compliance and which employees are covered under this law, as well as all the reporting requirements.
Note:  There has been a great deal of controversy and political discussion about the Affordable Care Act and its viability as a matter of law. While the outcome of legislation is still being determined in the courts and through the political process, it is still important as a subject for HR professionals to study and understand. It is likely that this law or a similar provision will govern healthcare coverage for employees, and therefore, HR professionals will be responsible for the compliance with the law.

Budgeting and Accounting Practices
In today’s complex business environment with tax laws and other external forces impacting budgetary decisions, companies must use generally accepted accounting principles (GAAPs). While HR professionals are not required to be certified public accountants or know the details of these principles, they should have a working knowledge of what the accounting practices are and how to review portions of accounting and financial statements of the company where HR is impacted, such as payroll.
The Financial Accounting Standards Board (FASB) is a nongovernmental organization that decides how company financial statements are to be organized and reported in public companies by their chief financial officer. All these rules impact financial reporting, but a few also have consequences for HR-related topics such as retirement benefits and healthcare costs to the company. An HR professional should be able to review financial disclosure statements prepared by the finance and accounting department and understand where the numbers come from, especially if they are related to the topics discussed. HR should ensure that all budget items that are reportable related to personnel functions are as accurate as possible.

Plans and Policies
In conjunction with the overall corporate strategy and aligned with the HR strategy, HR professionals must help the executive leadership establish a compensation and benefits plan that meets the needs of the organization and its valued employees. They are required to know and understand the factors that impact compensation and benefits within a market. HR professionals should be familiar with the company’s mission, vision, and values to know how to design a compensation and benefits plan that matches them. Organizational culture will impact the strategy as well.

Compensation and Benefits Strategies
HR professionals must know how to establish a comprehensive compensation and benefits strategy to attract and retain the right employees capable of performing the duties required to accomplish the goals of the organization. It begins with the company’s pay philosophy, which determines how it will structure its compensation plan and the types of benefits that can be offered. The strategy must take into account the available resources and consider when and under what circumstances increases will be given.
The strategy first looks at external factors, which include the industry in which the company exists. Industries that have a shortage of qualified talent, like emerging technology or information age companies, will have higher wage demands. Higher technical and skilled craftspeople will elicit a higher compensation scale as well. As a result, even the support functions and roles may have some pay affected by the other core occupations of the organization. Finally, where the company is located will also impact the compensation plan. Geographic distribution may have variations in labor costs, and this is magnified in international markets.

HR professionals must know the market and the company’s competition and with this knowledge make a decision on where to place the company’s pay. If the organization matches the market, they will strive to be in balance with what others will pay for talent. They will use metrics to establish the median salary point and try to target employees’ salaries in a band on either side of this target. Companies with more available resources or seeking to be an industry leader will seek to lead the market by paying the highest salaries and providing the best benefits to the employees. Their objective is to pull the best talent from the market to the company. However, it is important to be careful with this methodology as the highest paid is not always the best qualified; employees can be under- or overvalued. However, bringing in higher-paid employees should result in a more productive workforce, increasing profitability. Finally, a company may choose to lag the market wages because of costs or an availability of talent that allows the company to pay less and not fear loss of employees. It is also possible that any or all of these strategies may be employed at one point in the company’s history or even at the same time with different occupations within the organization.

Figure  below shows the relative position of the wages in the market and their pros and cons.



FIGURE: Quantitative approach

These factors take into account the actual work performed, documented in a job description, and supporting the organization’s mission, vision, values, and goals. They should be reviewed periodically and be valued by the stakeholders of the company.
HR professionals may choose to examine the jobs in their organization compared to the current market value. This takes external factors into account such as the availability of qualified individuals and what competitor organizations are willing to pay for the same knowledge, skills, and abilities. This can be scaled on a local area, state level, or nationally. There are several companies that specialize in doing pay studies that can help by analyzing large quantities of data to refine market-based pay. It is important to know the pros and cons of using external market values. For example, a company may value a particular position or job skill as more important than other companies and therefore have a higher pay value. Or it may be part of an emerging industry that does not have a lot of useful data yet, meaning that its market is not mature enough to price-compare.

Job Pricing and Pay Structures
HR professionals must know how to price a job, that is, find a competitive wage to pay for the right skills and talent that will further the company’s mission without losing profitability. To do this, HR professionals rely heavily on data that includes information obtained from surveys, regularly published information from the government, and historical trends recorded over time. While no single survey can capture all the information, the combination of various data points helps to create a picture of the target pay area that can help when making decisions. The data when collected should capture a range of salaries and a time frame to determine how current this information is. For instance, if salary information in the company is reviewed once every four years, there could be significant economic changes that have impacted the organization during that time. As a result, it will be harder to compare the data and determine the right range. Likewise, if the information is new, it may be the result of a spike with no other data trend for comparison.
When the information is collected, HR professionals must know how to look at the data and find averages in a particular pay band or by occupation. The goal should be to find the midpoint of the range of comparable salaries to have a target from which to base offers and set salary ranges. The pay structure is created by analyzing the data and creating either graduated steps or tiers from the lowest salary point to the highest. There is no specific rule on how to create structures for companies, and it is largely determined by the characteristics of the company itself. However, within the structure there will be pay grades and pay ranges that are established, and this will be the foundation for determining the salaries of the employees.
Pay grades band together jobs that have a similar value to the overall company. They may not be closely related in terms of duties or job function, but they have the same worth to the bottom line of the company. Pay grades will differ between larger or smaller organizations where the total numbers of employees being grouped are different. There may be different levels in the company from line employees to leads, supervisors, department managers, senior staff, or executives. The more complex a hierarchy in a company, the broader or more numerous pay bands needed. How people advance and grow in the company also will impact pay grades. If certain promotions carry increases in salary, it is possible that someone would need to move to a different band with promotion or risk reaching the upper ceiling of a pay range.
Pay ranges are the limits of pay for any employee who may have their pay determined by being in a pay grade.

As shown in the figure below, these upper and lower limits bracket the salaries within a pay grade, but that does not necessarily mean there is no overlap between grades. The determination should consider how often a company moves individuals across pay bands and how an employee whose salary is at the maximum level of one band would be shifted to another band based on an increase in salary.



FIGURE: Miscellaneous stock plans for executives


Align and Benchmark Compensation and Benefits
It is important for HR professionals to know methods to align and benchmark compensation and benefits. Today, the most common practice in benchmarking compensation is to use an external source and purchase or craft compensation studies to compare an organization’s pay scales with the market. Often these studies include factors such as locality, availability of talent, and job specifications to ensure a consistent comparison. Companies may look at what industry trends are to compare their pay. A company must also look at the total rewards to include perks, bonuses, vacation, and other tangible elements of value.
A large portion of total rewards consists of the benefits a company provides its employees. In some cases, employees may opt for a lower base salary if there is an increase in available benefits such as healthcare, retirement savings, continued education, or a general sense of work/life balance. To align benefits to employees, HR professionals must know how to conduct periodic needs assessments and evaluate the benefits program to determine what is most desired by employees that can be provided.

Mandatory Benefits Programs
In addition to paying a fair wage, employers provide benefits to their employees. While the choice of benefits varies from company to company, HR professionals must know what the typical benefits are and the process to deliver them. Certain benefits are mandated by laws and regulations at the federal and state levels. There are only a few that fall in this category, but they are important.
- Social security and Medicare
- Unemployment insurance
- Workers’ compensation
- Benefits provided under other legislation

These benefits require the employer to pay the government for each employee based on an employee’s salary, the amount and number of claims filed, or a fixed structure set by rule. However, these amounts are consistent and can be budgeted by the company as part of the payroll budget.

Social Security and Medicare
The social security program has been in existence since 1935 and has been part of the U.S. employment landscape ever since. HR professionals should be intimately familiar with all the components of this program because it plays an important role in many employees’ decision of when to retire. This program is for workers who have contributed into the program over a cumulative period of at least 10 years, determining the benefit based on their highest-paid 40 quarters in which they paid into social security. Additionally, there are amounts paid in case of disability or death and separately to the survivor of an eligible employee.
Based on the age of the employee, they may receive full benefits between age 65 and 67 but could draw a reduced benefit as early as age 62. There are some caveats based on means testing from other income sources that would result in a reduction in the benefit provided. The employee and employer are jointly responsible for contributing an amount based as a percentage of the employee’s yearly salary and deducted each pay period. The disability benefit is provided when an employee who has not yet attained the eligible retirement age has a qualified disability that limits their ability to work and is expected to prevent their ability to return to work for at least 12 months. Survivors may also receive benefits based on age, as children, or as dependent parents where the employee is responsible for a majority of their financial support.
Medicare is part of the social security program that provides medical insurance coverage and includes hospitalization coverage. Again, the employer and employee pay an amount based on a percentage of salary with eligibility beginning at age 65. If a company has more than 20 employees and provides health insurance, under the law the employee cannot use Medicare as their primary medical coverage. This prevents employers from encouraging their employees older than 65 to decline coverage in favor of a government program. This program also has a prescription drug benefit provided the employee is eligible for and paying into the hospitalization and medical coverage portions of the entitlement program.
 

Unemployment Insurance and Workers’ Compensation
Unemployment insurance is another product of the social security program; it benefits workers who are involuntarily terminated from employment with some exceptions that include misconduct. This program is employer-funded and managed in a trust at the federal level. However, each state administers the program for the workers who file claims in that state. One particular feature of this program is that in most states employers who have fewer claims from employees enjoy a lower rate. This is a direct result of employers less frequently terminating employees from their jobs without cause.
Workers’ compensation is handled at the state level and aids employees (or survivors in the case of death) who suffer work-related injuries or illness. It’s a benefit to the employer to cover the expenses that are the direct result of a work-related accident (such as acute or extended medical care) and is independent of who is faulted for the accident. This ensures that it is reported and the employee receives timely medical attention without the need for legal action against the company. All parties benefit by reducing the cost and actually working to mitigate the risks that tend to cause accidents in the first place.

Additional Benefits Provided by Legislation
While there are several pieces of federal and state legislation that provide benefits to workers, two that are critical are FMLA and COBRA. FMLA was discussed earlier in this guide and provides a benefit to employees where there is a qualified medical event with either the employee or their immediate family. The Consolidated Omnibus Budget Reconciliation Act (COBRA) ensures that employees and their dependents who would have their benefits terminated as a result of separation from employment can pay both the employer and employee portion of any coverage for which they are eligible for a period of 18 to 36 months depending on the qualifying event, that is, the reason they are now eligible for this coverage.
HR professionals are required to ensure that employees are notified with specific information about coverage when the qualifying event occurs and a more general notice within 90 days after initial eligibility for coverage in the group benefit plan. HR professionals must know the reporting requirements and the documentation needed and must have an understanding of the general eligibility rules to counsel and advise employees and the employer on this important benefit.

Employer-Provided Benefits
As discussed previously, there are as many types of benefits as there are employers, and all have distinct features. It is impossible to detail each single type of program within the scope of this review, but HR professionals should be familiar with the general types and examples from each. In general, there are deferred compensation plans (often viewed as retirement or savings plans), health plans (such as medical, dental, and vision), and supplemental plans (including short- and long-term disability, life insurance, leave, employee assistance, and wellness).

The table below shows these various examples and important knowledge points for HR.

TABLE: Employer-provided benefits

Exam Tips:
Understand the major laws that govern compensation and benefits. It is not necessary to know historical events around the laws themselves, but understand the impact to organizations from an HR perspective. The most significant of the laws is the Fair Labor Standards Act (FLSA), which covers wage, overtime, and exemptions. For other legislation, review Table 4.1 for some solid examples and familiarize yourself with the areas covered.
Know the FLSA exemptions and rules for overtime. It is important to understand all the laws governing compensation and benefits. However, by far, this particular element is the most confusing and challenging to HR professionals. You should clearly understand the provisions that classify an employee as exempt versus nonexempt from overtime pay. Additionally, review how worked time is defined and determined when calculating overtime. Remember that these rules are interpreted by the Department of Labor’s Wage and Hour Division and that you must understand the context of these decisions and how they apply to your company.
Understand how job evaluations inform compensation structures. As an organization defines the roles in the company, each job must be evaluated to understand its relative worth and importance to the performance of the company’s mission. Once these roles are established, you should be able to evaluate the compensation structure to ensure that individuals are paid properly based on the role and duties associated with their job. You should look at objective measures that are used in determining a pay scale and compare them to the difficulties of the tasks a certain job performs. Review job descriptions and essential job functions for some key roles in your organization, and if you have the ability, examine the relative pay.

Responsibilities
Ensuring that employees are paid and receive the benefits to which they are entitled is one of the most critical responsibilities of HR professionals. The timely compensation for the hard work rendered by workers shows they are valued and respected and demonstrates the ongoing commitment of the organization to see that their employees’ basic needs are met. HR professionals will determine the needs of employees and develop and implement the procedures and policies that are legally compliant to deliver pay and benefits to all eligible employees.

Ensuring Compliance
As discussed, several laws at the federal and state levels govern compensation and benefits. It is not expected for the exam that you are an expert on all of them and every nuance they contain. However, HR professionals must know how to research the rules, determine which ones are applicable, and lay out a course of action to ensure that the company remains compliant. In the big picture, often this requires record keeping and documentation to provide auditability of pay actions. In other words, if an external party examined the policies, practices, processes, and procedures of the company, they should be able to ascertain how a pay decision was reached, why it was done (justification), who conducted the action, and how it was recorded. The documentation should match the amount in the general ledger that finance has recorded.


Real World Situation:Showing Auditors How a Bonus Was Paid
A company has external auditors review its financial records annually as a public company. In one year, the auditor examines pay records in a given time period and for a particular pay date requests the documentation for all the associated pay transactions. For one employee, they found a $1,000 onetime bonus. Cross-referencing this ledger entry, the employee file should have documentation stating that the employee received the bonus (such as an official letter or notification) signed by someone with the authority to authorize payment and additional documentation justifying why the bonus was paid (such as an award for a special circumstance like employee of the quarter). The auditor may also request to review the policy on bonuses, which would likely indicate the amount a bonus can be for such items and who the approval authority is in the company. This would then demonstrate that the policies are effective and being followed in practice.
HR professionals must establish clear practices and policies and follow them to ensure that the company complies with the laws and regulations. They are responsible for communicating with managers, employees, and executives on the importance of documenting and being consistent when it comes to compensation and benefits. This also includes documentation for benefits such as leave taken under the Family and Medical Leave Act (FMLA) and notifications associated with the Employee Retirement Income Security Act (ERISA).

Developing and Implementing Benefits Programs
As most companies grow and become more profitable, they will have the ability to offer benefits to remain competitive and retain top talent. What benefits are offered depends on the needs assessment discussed earlier and what the company can afford to provide. Companies will provide certain benefits such as health and dental early in the company’s growth life cycle, and then other benefits follow depending on the company demographics and needs. HR professionals are responsible for helping corporate executives decide which programs meet the needs of the company at an affordable cost. Over time, they evaluate the effects and benefits that the program produces and make recommendations to change and then implement those changes.
HR professionals will often meet with third-party providers that offer consolidated services to broker benefit plans from a variety of providers. In many circumstances, these plans are highly subject to compliance laws and regulations discussed in the first part of this guide. Because HR professionals are not legal advisors, it is recommended that these sources be used as they have the legal foundation and support to ensure that all regulatory requirements are met in providing these programs. This is especially important for organizations with a small HR department that may not have the breadth and depth of experience in benefits administration.
HR professionals are responsible for periodically assessing the programs and work with the executives to determine when changes are needed. They may solicit new proposals for services to be provided, such as employee assistance programs or other nonmandated benefits like supplemental insurances. They develop the evaluation criteria and review proposals from vendors. When a suitable program is found, they become the primary point of contact for the company and keep the company informed of the pending changes. If the program is new, then HR professionals develop an implementation plan with start dates, communication plans, and other necessary actions to ensure a smooth start. If, however, this is a change in providers or a new benefits program replacing an existing one, then they are responsible for the transition plan, which may include facilitating new registrations, updating any employee information, and monitoring the changeover.
HR professionals will develop policies and documentation for the benefits programs for new employees as part of the onboarding process and to inform current employees. They may schedule and conduct information briefings on the new plans and their costs to employees and be available to answer any questions. They must work with employees to validate data so that benefits providers have the most accurate employee information when beginning the delivery of the services and benefits program.

Communication and Workforce Training
The key role in all HR actions surrounding compensation and benefits is maintaining the continued communication between the company and the employees. While this seems intuitive, when companies grow and there is constant turnover of employees, or geographical separation between divisions, it is a continual battle. HR professionals must develop policies and procedures to keep the employees informed of changes to their benefit plan and pay structure and ensure that application of those policies is fair and consistent across the organization.

Training the Workforce on Compensation and Benefits
HR maintains the responsibility of training employees on the company’s benefits and compensation plans. This starts from the beginning of the employee work life cycle with recruiting and continues through separation or transition with the company. When HR recruits prospective candidates, they will educate and inform applicants of the benefits the company has to offer. They will market benefits to attract talent seeking better opportunities with better plans. Applicants selected for employment will go through an orientation and onboarding process. During this process, it is the HR professional that will answer questions from new employees and collect the necessary information for these plans as part of their function. This includes verifying eligibility of the employee and dependents. They often provide critical information so that an employee can select the right plan that meets their needs.

Each year during open enrollment, the HR team will prepare information presentations to train the workforce, including management, on any specific changes to current benefit plans. This is a great time to discuss and answer questions about premium changes, changes in coverage, or new providers that the company has partnered with. In growing companies, sometimes a new benefit will be rolled out with the details on how to obtain coverage and the cost.

In addition to health benefits, HR is responsible for monitoring any retirement programs and ensuring that the information about such programs is delivered to the employees. This is a more difficult task because HR professionals do not have the credentials required to discuss financial investments from an advisory capacity and must be careful not to dispense advice, but rather information, about programs and facilitate discussion between the employees and qualified individuals to discuss such programs.

Retirement Briefings
In many companies, HR will facilitate presentations by retirement-benefits subject-matter experts to come in to the company and meet with a group of employees to discuss retirement options and investments. These meetings are important, and HR must work diligently to encourage maximum participation. Some topics that will be discussed are as follows:
- Eligibility to retire and the various plans with a company
- Typical concerns in retirement plans grouped by age demographic
- Historical data on the performance of the retirement plans and other relevant statistics

The subject-matter expert may also have one-on-one meetings with retirement-eligible employees to discuss individual plans and concerns. Companies have many options and may have more than one retirement plan, so these subject-matter experts can provide insight to help employees decide which plan meets their needs most effectively.
HR is also responsible for training when there are changes to pay structures. While this may happen from time to time based on the company’s financial position or growth, it can also occur sometimes with regulatory changes. When minimum wage rules are changed in states or at the federal level, for example, the HR team must train both management and employees on the impact to the organization. It is the responsibility of the HR professional to consult with employment attorneys, the finance department, and other key stakeholders to develop a communication plan to present the changes, execute any necessary actions that bring about the change, and then, finally, conduct a review of the changes and preserve any lessons learned for future analysis and follow-on decisions.

Promote Awareness of Noncash Rewards
HR professionals have the responsibility to implement and promote awareness of noncash rewards. Among some of these types of company benefits are paid volunteer time, tuition assistance, workplace amenities, and employee recognition programs. While each type of program is generally tailored to the organization according to its needs, HR professionals play a vital role in the execution of these programs and ensuring that employees understand what is available to them.

Paid Volunteer Time
As companies continue to enhance and develop their corporate responsibility plans, they promote social responsibility as a value of the organization. Often companies will develop policies to allow employees time away from the organization to volunteer in the community and, in some cases, ensure that time is paid. HR professionals work with managers and executives to develop policies and identify the types of volunteer organizations that meet these requirements. They also develop and implement procedures to track hours and properly compensate the employees. Some examples include reading programs in schools, nonprofit organizations such as United Way, and in cases where a company has a particular service or product, donating a portion of those assets as part of the volunteer effort.

Tuition Assistance
Tuition assistance may be offered by some companies to help with the continued professional development of employees. Companies establish policies to reimburse employees that enroll in higher learning to help defray the costs to obtain degrees that could be of additional benefit to the company or increase an individual employee’s knowledge, skills, or abilities related to their job. HR professionals must track the enrollment and ensure that the employee successfully completes the course to provide payment. As with other benefits, HR professionals must also ensure that employees have fair and equal opportunity to these benefits to be in compliance with existing regulations.

Workplace Amenities
Workplace amenities may create visions of the proverbial “executive washroom,” but in fact companies today strive to create a comfortable workplace environment that has elements designed to inspire creativity and motivation of employees. Coffee bars, free snacks, resting areas, and workplace wellness such as massages or fitness rooms are just a few of the creative ideas companies now offer on their campus. Smaller companies need not be extravagant to entice workers to join the organization, requiring only such items that demonstrate genuine care and concern for the well-being of the workers.

Employee Recognition Programs
The retention of employees is affected by the perception of the employees related to their value to the company. Companies that highly value their employees recognize and reward their contributions to the overall success of the organization. HR professionals assist the company in establishing and maintaining an effective employee recognition program. They must have criteria for awards and a method for identifying eligible employees. They must maintain a fair system that truly rewards contributions in a consistent manner that promotes the best efforts of the group and highlights achievements worthy of recognition. The program might have a financial component or may be honorary such as public recognition. In all cases, such programs must align with the company values and reward behaviors of employees that support those values.

Managing Payroll Information
The old adage “If it’s not recorded, it didn’t happen” is accurate when it comes to the maintenance of payroll documentation and information. HR professionals are responsible for maintaining the human resources information systems or the paper files that contain the critical information discussed throughout this guide and to support any payroll issue resolution. To do this effectively, HR professionals must devise a standardized system to capture, index, retain, recall, and purge payroll information. Policies and procedures will define how new hires, transfers, and other typical HR actions are handled that impact payroll. Some companies choose to make effective dates correspond to certain calendar dates to coincide with payroll events for simplicity.

Whether it uses advanced technology or old-fashioned paper copies in a filing cabinet, the system must be easy to follow and consistent. Documentation should be easy to recall during audits or when needed to confirm or justify why payroll actions were conducted. This information must be secured, and safeguards must be in place to prevent its unauthorized disclosure. When necessary, HR professionals will coordinate with in-house or external counsel, information technology, or the finance department for the proper sharing and use of payroll information in the execution of other important tasks by a company.

When an employee separates from the company, HR professionals must ensure the retention of payroll information for the appropriate period of time based on a retention schedule that is determined by the company and in accordance with relevant regulations. The HR professional will either correspond directly with the employee concerning the continuation of benefits or receipt of retirement or severance pay or use a third-party administrator in this role. These workflows are standard in most companies in the private and public sector and independent of size. What changes with size and growth are the governing regulatory requirements. However, the HR professional who strives to input a strong system from the outset of the organization can layer added protocols on a solid foundation easily instead of dismantling an ad hoc system once the company has outgrown patchwork structures.

Resolving Payroll Issues
HR professionals are responsible for quickly and accurately resolving payroll-related issues. In some cases, it may be that additional information is needed to resolve an issue related to payroll. HR professionals must communicate directly with the employee to notify them of the discrepancy, what may be required to reach resolution, and an expected time frame to solve any outstanding issues.

Note:  HR must work with the finance department or external provider to solve payroll issues quickly. For example, cases such as direct deposit errors resulting from errant bank routing information can be detrimental to an employee’s financial well-being. Failing to correct mistakes quickly can impact morale and performance of the employee.

Exam Tips:
Understand how to develop and implement total rewards programs. These areas are important from an ethical and corporate responsibility standpoint, but most often HR generalists have limited interaction with these topics unless they work in this area specifically. Reviewing health plans, retirement plans, other insurance, noncash rewards, and base compensation will familiarize generalists with these specific topics.
Understand the responsibilities associated with managing outsourced compensation and benefits components with third-party vendors. In addition to managing these programs, the knowledge of the roles and responsibilities when the function is distributed to third parties is critical. The key points include the ongoing communications, notifications to employees, coverage, and compliance. The intent of any outsourced function is to reduce burden of the HR team, so it’s important that these vendors deliver, or the HR department may see an increase in workload.

Summary:
Total rewards will continue to be a core competency of HR professionals, but the landscape of the delivery of these important functions continually changes, impacted by legislation, the market, and the changing workforce population. The needs of workers should be assessed and reviewed periodically to ensure the alignment of compensation and benefits and to meet the burden of taking care of the lifeblood of any organization—its people.

For additional information on this topic, candidates for the exam should visit the Department of Labor website at www.dol.gov, the Social Security Administration at www.ssa.gov, and the Internal Revenue Service at www.irs.gov. At these websites a keyword search of the topics discussed in this guide will provide regulations, guidance, and rulings to review for a more in-depth understanding of the role these federal agencies play in compensation and benefits for employees.

Tip:
The PHR® exam is now available year-round at testing centers. In the past, this exam was offered only two times per year, which meant having to adjust preparation and study time to those windows, which may not work with an HR professional’s busy schedule. Take your time in the preparation of this comprehensive exam.