A Bad Day in HR

Rachel has been the head of HR at a large publicly traded corporation in New York City for 2 years now. She worked incredibly hard to achieve her promotion 2 years prior, and prides herself on ensuring their HR practices, especially benefits, were up to industry standards for her company. After her promotion, she conducted a careful audit of the firm’s existing benefits policies, and everything checked out nicely.

One day, she received an email from her boss notifying her that Mark, a young managing director at the company, had received a recent diagnosis of lupus. Rachel felt horrible for Mark. She had been invited to help celebrate their new housewarming. Mark and his wife Darlene welcomed their second child this past winter. Rachel read on:

“Obviously, your utmost discretion is necessary, as Mark is in fairly low spirits and has not shared the news with anyone else in the office. From what I understand at this point, the diagnosis was particularly poor. He will soon not be able to work, and it is yet unclear for how long he will be disabled.”

Mark had been borrowing Rachel’s Advil to soothe his frequent migraines, and had complained of having a tough time seeing, though his eye prescription was up to date. The diagnosis made sense considering his condition, and Rachel knew that in bad cases, lupus can severely affect the kidney function and the brain.

The next day, Mark knocked on her door, and she kindly asked him to come in and sit down. She reviewed with him the company’s standard disability policy, and that it would cover 60% of his base salary.

“Wait, what about my bonuses, and you know I also have some Restricted Stock Units? My entire compensation including those is $800,000 annually.”

She reviewed the documents to ensure she wasn’t missing anything.

“I’m sorry, the policy only covers 60% of your base salary, and there is a maximum of $20,000 a month.”

“So let me get this straight; you’re telling me that instead of $480,000, I’ll only be getting $240,000?! What about my IDI policy?”

“Yes I see that here, but there is a cap on that as well, based on the group insurance.”

Rachel was flabbergasted herself. She was sure this had been the standard practice as long as she had been in HR, but she didn’t realize the extent of the gaps left by the programs. Sure, she had been observing a large increase in executive incomes over the past 5-10 years herself, but why would these be the standard policies if they were so insufficient? The benchmarking she reviewed with her consultant only included Group Long Term disability limits at “peer” companies.

She left disheartened and decided to do some research. It turns out, most executives aren’t protected to the supposed 60% of their incomes where coverage levels are for most of the employees, but rather a far smaller fraction of that due to the components of their compensation. The policies that she had learned were standard weren’t cutting it anymore with increases in incomes and diversification into bonuses and equity awards. She vowed to look into other options for the company and inform her boss of the issue. After all, they needed senior people now more than ever, and how will this look for potential applicants after what happened to Mark?

Surely, there is a better way.

Please contact [email protected] or send us a message here on LinkedIn for more information.