Human Resource Terms: Employee Leasing & PEO Services

Human Resource Terms

The Americans With Disabilities Act - Makes it unlawful for an employer with 15 or more employees to discriminate against a qualified individual with a disability.

401(k) Plan: An employer-sponsored retirement plan divided into two different categories: the defined benefit plan and the defined contribution plan. In the defined benefit plan, the employer pays a defined amount to a retiree who meets certain criteria. In a defined contribution plan, the plan defines the contributions that an employer can make. 401(k) plans are instrumental in ensuring a company’s competitiveness in attracting and retaining talented employees. It is common for companies to outsource all or some of their plan including performance monitoring, investment selection, and administration.

Administrative Services Only (ASO): The hiring of a firm (usually a health care vendor) to perform specific administrative services. The firm would not have to assume any risk. For example, a self-insured employer would use this arrangement in order to retain financial responsibility for paying claims without having to perform administrative functions.

Application Service Provider (ASP): An organization (usually a business) that provides access to their servers through the Internet for a fee. ASP customers do not have to install and manage software themselves and the ASP can be accessed from any location via the Internet. Companies have access to such services as Calendar systems and Human Resources tools (timesheets, benefits, etc.). HRmarketer.com is an example.

Benefits: Employers provide a package of additions to the base salary to employees. These benefits can include health insurance, dental insurance, life insurance, disability insurance, a severance package, tuition assistance, and more. On average, organizations spend 41 cents for benefits for every dollar of payroll. That’s 29 percent of the total employee compensation package.

Benefits Administration: Software that enables HR professionals (or, brokers, agencies, TPAs or anyone else responsible for managing a company’s employee benefits) to track employee participation in benefits programs including healthcare, insurance and pension plans. Benefits administration software automates and streamlines these tasks.

Business Process Outsourcing (BPO): The managing of an organizations business applications by a technology vendor.

Cafeteria Plan: A plan in which an employer offers employees a variety of different benefits. The employee is able to choose which benefits would fit their individual needs. Examples of benefits offered in the cafeteria include group-term life insurance, dental insurance, disability and accident insurance, and reimbursement of healthcare expenses.

Carve-Out: The elimination of coverage of a specific category of benefit services (e.g. vision care, mental health/psychological services, or prescription drugs). The employer opts out of certain services with one vendor and contracts another to deliver them.

COBRA: Consolidated Omnibus Budget Reconciliation Act. 1985 Federal law that requires employers to offer continued health insurance coverage to terminated employees and their beneficiaries. The coverage may continue for the following cases: termination of employment, change in working hours, change in dependent status or age limitation, separation, divorce, or death.

Cost-Per-Hire: The costs linked to recruiting talent. These costs can include advertising, agency fees, relocation costs, and training costs.

Disability Income Insurance: Health insurance that is paid to a policyholder who experiences a loss of income due to an injury or an illness. Disability insurance plans pay a portion of the salary of a disabled worker until his/her retirement age.

Defined Benefit Plan: A retirement plan that pays participants a lump-sum amount that has been calculated using formulas that can include age, earnings and length of service.

Defined Contribution: A pension plan that clearly defines the amount of contributions, which is usually a percentage of an employees salary. The benefits payable at retirement depend on several factors including future investment return and annuity rate at retirement.

Equal Employment Opportunity Commission: Its laws make it illegal for employers to discriminate against an employee or potential employee in certain workplaces. The Equal Employment Opportunity Commission (EEOC), which was created by the Civil Rights Act of 1964, is the federal agency that has the responsibility to handle discrimination complaints.

Employment Eligibility Verification (I-9): The form that is required by the Department of Homeland Security U.S. Citizenship and Immigration Services to document eligibility for employment in the United States. All employees, citizens and non-citizens, hired after November 6, 1986, must complete Section 1 of this form at the time of hire, which is the actual beginning of employment.
Exempt Employee: An employee who, because of his or her positional duties and responsibilities and level of decision making authority is exempt from the overtime provisions of the Fair Labor Standards Act (FLSA).

EAP: An employer-sponsored program that is designed to assist employees whose job performance is being adversely affected by such personal stresses as substance abuse, addictions, marital problems, family troubles, and domestic violence. For every dollar invested in an EAP, employers save approximately $5 to $16. The average annual cost for an EAP ranges from $12 to $20 per employee. Source: US Department of Labor.

E-Recruitment: Web-based software that handles the various processes included in recruiting and onboarding job candidates. These may include workforce planning, requisitioning, candidate acquisition, applicant tracking and reporting (regulatory or company analytics).

Employee Self-Service: A program that allows employees to handle many job-related tasks normally conducted by HR departments including benefits enrollment, and updating personal information. Employees can access the information through the company's intranet, kiosks, or other Web-based applications.

ERISA (Employment Retirement Income Security Act): A federal law that governs pension and welfare employee benefit plans. ERISA requires plans to provide participants with plan information including plan features and funding. It also requires that plans provide fiduciary responsibilities for those who manage and control assets. It gives participants the right to sue for benefits and breaches of fiduciary duty.

Fair Labor Standards Act: Sets standards for the basic minimum wage and overtime pay. The FSLA also sets standards for recordkeeping and for child labor. The FLSA affects most private and public sector employment, including state, local, and federal government.

The Family and Medical Leave Act: Requires covered employers to provide twelve weeks of unpaid leave to eligible employees within a 12-month period. The FMLA applies to private employers with 50 or more employees, and to all public employers.

Flexible Spending Accounts (FSA): Allow employees to set aside a portion of their earnings on a pre-tax basis into separate spending accounts to fund allowable health care and/or dependent day care expenses. The funds must be segregated as per IRS regulations.

Flexible Work Arrangements: Schedules that allow employees to structure their work hours around their personal responsibilities. Examples include flextime, job sharing, telecommuting and a compressed workweek.

Garnishment: A legal procedure in which a person’s earnings are required by court order to be withheld by an employer for the payment of a debt such as child support.

Human Resource Development: The framework for helping employees develop their personal and organizational skills, knowledge, and abilities. Human Resource Development includes such opportunities as employee training, employee career development, performance management and development, coaching, succession planning, key employee identification and organization development.
Human Resource Management: The function within an organization that focuses on recruitment, management, and the direction of the people in the organization. Human Resources management is also performed by line managers.

Human Capital Management: The challenge of recruiting and retaining qualified candidates, and helping new employees fit into an organization. The goal is to keep employees contributing to the organizations intellectual capital by offering competitive salary, benefits and development opportunities. The major functions of human capital management include Recruitment, Compensation, Benefits and Training.

Human Resource Information System (HRIS): Business software systems that assist in the management of human resource data (e.g. payroll, job title, candidate contact information). Some of the larger HRIS platforms include SAP and Peoplesoft.

Human Resource Outsourcing (HRO): A contractual agreement between an employer and an external third-party provider whereby the employer transfers responsibility and management for certain HR, benefit or training-related functions or services to the external provider.

Independent Contractor: A person or a business that performs services, produces a particular outcome, or produces a product for a person or a business under a written or implied agreement or contract.

I-9 (Employment Eligibility Verification): The form that is required by the Department of Homeland Security - U.S. Citizenship and Immigration Services to document eligibility for employment in the United States. All employees, citizens and non-citizens, hired after November 6, 1986, must complete Section 1 of this form at the time of hire, the actual beginning of employment.

Managed Care: A health care system in which the provider manages the care of the individual for a fixed fee. The opposite of this preventive intervention (or, population-based) approach is fee-for-service. Managed care emphasizes wellness and prevention.

Non-exempt Employee: An employee who, because of the type of duties performed, the usual level of decision making authority and the method of compensation, is subject to all FLSA provisions.

"Non-Traditional" versus "Traditional" Employee Benefits:Traditional benefits include life, retirement, health and disability benefits. Non-traditional benefits include various types of life management benefits such as EAPs, child and elder care counseling and referral, etc.

Open Door Policy: Means, literally, that every manager's door is open to every employee. The purpose of an open door policy is to encourage open communication, feedback, and discussion about any matter of importance to an employee.

Outsourcing: Paying a second party to perform one or more of your internal processes or functions. Business process outsourcing of certain functions is an increasingly popular way to improve basic services while allowing HR professionals time to play a more strategic role in their organizations. Frequently outsourced: payroll, 401(k) administration, employee assistance, and retirement planning.

Paid Time Off Policy: Definition of the paid time off approach to employee vacation, sick days, and personal days for the human resources glossary of human resources related terms.

Profit Sharing: Taking a percentage of a company’s annual profits and then dividing the pool of money generated across all employees using a formula for distribution. Profit sharing payments are only made if the company has been profitable for the time period specified. Find out more about profit sharing.

Plan Sponsor: An entity that has adopted and has maintained an employee-benefit plan. The plan sponsor is often an employer, but may be a union or a professional association. The Plan Sponsor is responsible for determining employee participation and the amount of benefits involved.

Risk Management: The use of insurance and other strategies to minimize an organizations exposure to liability in the event a loss or injury occurs.

Severance Pay: Money that an employer might want to provide for an employee who is leaving their employ. Normal circumstances that might warrant severance pay include layoffs, job elimination, and mutual agreement to part ways for whatever reason. Severance pay usually amounts to a week or two of pay for each year of service to the company. In some instances, a severance package might include extended benefits and outplacement assistance.

Self-Funded (Self-Insured) Plan: A health care insurance program in which employers (usually larger companies) pay the specified health care costs of their employees, rather than insuring them. Self-funded plans may be self-administered, or the employer may contract a third party administrator (TPA) for administrative services only (ASO).

Tuition Assistance: An employer-provided employee benefit that is a win-win for your workplace. In a tuition assistance program, an employer pays all or part of an employee's cost to attend college or university classes.

Third-Party Administrator (TPA): An organization that is responsible for the administration of insurance for a self-insured group. It does not have any responsibility for paying claims. The self-insured group is financially responsible.

Voluntary Benefits: Benefits that are paid for by the employee through payroll deductions. The employer pays for administration. Examples of these benefits include life insurance, dental, vision, disability income, auto insurance, long-term care coverage, medical supplement plans and homeowners insurance.

Unemployment Compensation: Created by the Social Security Act of 1935 to protect workers who became unemployed through no fault of their own. The federal government provides incentives and guidelines to the states about unemployment compensation, but each state is responsible for its own guidelines and program for unemployment compensation.

Underwriter: A person or organization that ensures money will be available to pay for losses that are insured. An insurance company can be considered an underwriter.

Virtual HR: The use of various types of technology to provide employees with self-serve options. Voice response systems, employee kiosks are common methods.

Work/Life Employee Benefits: Work/Life benefits are "non-traditional" employee benefits that assist employees in managing their lives. Employers purchase these services from vendors and they are offered to employees as benefits. These services can make the difference in attracting and retaining employees. Common life management benefits include: child and elder care referral services, employee assistance program (EAP), concierge, legal assistance, and emergency back up childcare.