In 2012, South Shore Hospital decided to replace its outdated sick-bank policy with a contemporary, integrated PTO and disability program. In 2013, the Weymouth, Massachusetts hospital launched a new program that has significantly increased productivity among its 4,000 employees and delivered an eye-popping savings projected to be $1.7 million annually. Making the outcome even more valuable in the eyes of Chief Human Resources Officer Bob Wheeler, the transition to the new program was completed in only six months, with very few bumps in the road and with the approval of long-term employees who had benefited most from the old system.
“Had there been negative reverberations, the positive results would have been drowned out,” said Wheeler, a highly regarded member of South Shore’s leadership team for over 20 years. “We were committed to making it work well for everyone. I held my breath for a long time, but now I can say the conversion was a total success — no small credit to the Towers Watson team. They gave me the confidence to make the change we needed.” He also gave high marks to South Shore’s HR, payroll, IT and senior management teams.
Rethinking Vacation, Sick, Personal and Holiday Time Off
Before the transition, employees enjoyed a rich time-off benefit with a generous number of vacation, holiday, sick and personal days. They accrued a bank of sick-time hours separately from vacation days, and they could carry over sick and vacation time from one year to the next. If they worked at South Shore for a long time and didn’t use all their vacation time, they could cash it out as a bonus — potentially thousands of dollars — when they retired.
That was the good news. And many employees — particularly long-term workers fortunate enough to have used less sick time than they had accrued during their careers — greatly valued that benefit. But the potential financial liability to South Shore grew as employee salaries increased. The hospital’s generous vacation carryover allowance was also affecting the balance sheet.
By 2011, three significant trends dovetailed to give South Shore’s HR leadership a compelling reason to launch the more contemporary time-off program the hospital sorely needed.
Trend 1: Inadequate safety net for a changing workforce. Many short-term employees and those who had used their banked sick time could be in a financially difficult situation. This was especially true for those unwilling or unable to enroll in the hospital’s employee-paid STD plan. A sick or disabled worker without banked sick time or STD coverage could be without a paycheck for up to 26 weeks, until the hospital-funded long-term disability (LTD) coverage began.
Many of the newer employees were part of a generation that wanted flexible time-off benefits as part of their total rewards package, and lack of those benefits could negatively affect long-term engagement and retention. Also, the hospital workforce was becoming increasingly diverse, with more primary breadwinners and single heads of household who had little or no financial safety net aside from their paychecks.
Trend 2: Increasing hits on productivity. The team also saw the negative effect of the sick-bank policy on employee productivity: Banked hours were being used for discretionary time off — a detriment to any 24/7 acute care hospital that relies on staff reporting to work as scheduled. What’s more, annual focus group research found that every workforce segment was unhappy with the application of the time-off policy, which differed by department, supervisor and circumstance.
Trend 3: Changes in reimbursement. South Shore was coming to terms with the reality of a changing business model brought about by health care reform legislation: from fee-for-service to reimbursement based on quality, efficiency and health outcomes. The hospital was already experiencing less reimbursement from the country’s largest health care payers — Medicare, Medicaid, employer plans and insurance companies. Now it faced the law’s new reimbursement metrics and growing responsibility for the cost and quality of patients’ continuum of care.
The law heightened the significance of the cost of sick banks, the large vacation time carryovers, and the impact of unscheduled time off on worker morale, productivity, and patient care and satisfaction.
These trends led Wheeler and his team to ask Towers Watson — South Shore’s long-time HR consulting partner and the hospital’s actuary — to help them design a new PTO approach that met the strategy team’s rigorous governance principles:
- Financial protection for employees with qualified disabilities
- Flexibility in how PTO could be used
- Fairness and equity
- Diversity (e.g., flexibility regarding religious holidays)
South Shore and Towers Watson worked hard to design a plan to meet every target principle and to satisfy both new and longer-term employees. “It might sound a little outdated, trite or even corny to some, but South Shore really cares about our colleagues’ opinions — not for Pollyanna reasons, but as a core business issue,” Wheeler said.
After approving a new plan design, Wheeler asked Towers Watson Account Director Gus Bentivegna to assemble the right team to present it to South Shore’s CEO, CFO and other stakeholders. Senior Towers Watson consultant Jackie Reinberg worked with South Shore decision makers to develop a common understanding of PTO programs in general, and to formalize the proposed design. Soon, Wheeler got the green light to proceed, and Towers Watson, South Shore and their new disability administrator, Liberty Mutual, began an implementation juggernaut focused on:
- The seamless integration of the new PTO program with legacy time-off banks
- A transparent, easy-to-understand communication campaign targeting the benefit-eligible workforce of nearly 3,000, beginning with training for 250 leaders
The team recognized training would be crucial to the plan’s consistent application in the trenches, in part because it promoted a very different culture. “For instance, with the previous program, some managers required associates to find a replacement before approving vacation time. That burden only encouraged people to call in sick at the last minute because it was easier than finding a replacement,” Reinberg explained.
Designed for All
South Shore’s newly designed PTO plan integrates all time off for the entire benefit-eligible workforce of 2,700 (omitting physicians) to use, as needed, with a new hospital-funded STD plan. The employer-provided STD plan replaces 60% of salary for employees with a qualified disability through 26 weeks, and the employee may use premium contributions to purchase up to 75% of salary. It also converts the old sick banks to legacy sick banks. If they go on STD, employees can use legacy sick-bank days to provide 100% of salary until the bank is depleted. New parents (birth or adoption) can use legacy sick banks for up to two weeks of bonding with their new child. In addition, during the transition year of 2013, employees were able to cash out up to six weeks of legacy vacation time.
Bentivegna is impressed with the care South Shore leaders took to make sure employees were treated fairly and their accumulated legacy time was protected. “The hospital spent some of its first-year savings to give veteran employees these bonus cash-outs. It made all the difference in their accepting the new program.”
Wheeler was equally appreciative of Towers Watson’s attention to detail. “They became our team, working round the clock with our HR, IT and finance professionals to make sure everything was seamless — from the back-end website and payroll systems programming, to insurance vendor selection and coordination, to manager training, to the quality and sequence of communications.“
Effective Communication, Speed and Transparency
South Shore leaders have measured the new plan’s overwhelming success primarily by its cost savings, ROI, productivity benefits, more equitable design and broad workforce acceptance. To achieve a smooth transition, the HR/Towers Watson team communicated transparently, comprehensively and often. As a result, they got early buy-in from managers, who were prepared to partner with HR in communicating to the broader workforce. This was particularly important to gaining acceptance by long-term staff members who might otherwise have opposed the plan.
Leadership is also happy about how quickly the transition was completed. “We normally advise taking at least a year for this kind of complex transition,” Reinberg said, “but South Shore needed to have the program up and running by January 1, 2013, to hit its financial targets. We got the go-ahead in June, and we needed to have everything ready to go by open enrollment in October. That gave payroll, IT and Liberty Mutual the summer to integrate legacy sick banks with the new PTO and STD system. They wanted employees to be able to access those sick banks on the website used for the new plan.”
South Shore leaders did some compromising on timing to facilitate the rollout, according to Bentivegna. “They agreed to a phased rollout. Most organizations want to put out all the information at once in the name of transparency, as it’s easier on leaders, but we’ve learned that people can’t absorb it all at once. It isn’t effective. South Shore was brilliant in providing information in three batches that were easy to absorb,” he explained.
Wheeler is more modest about his role in the stepped communication approach. He credits good advice he received before the project began from other Towers Watson clients who had shared their experiences in the PTO communication trenches.
“One company told me, ‘Listen to what Towers Watson tells you about communicating. You may not think certain things are necessary or the way you’d do it, but we found out the hard way that they know what they’re talking about,’” Wheeler said.
He took the advice seriously. “One thing I decided early on: I didn’t want to find out anything the hard way.”
Keys to Success
South Shore leaders share suggestions for other organizations looking to make a major change to employee benefits:
- Plan for project management. There are a lot of moving parts and pieces. Structured, disciplined project management is crucial to success.
- Look at it from the employees’ point of view. Understand which factors will cause disruption so you can plan to address them. Examine areas of agreement as well as gaps between the old and new plans. You may find that more people are willing to change than you think.
- Get leadership on board early. No leader likes surprises or unhappy troops. As early as possible, describe the plan in detail, and discuss the impact for the organization and how you plan to win over employees. Leaders also need to understand the cost of not changing.
- Get the administration right. Don’t underestimate the magnitude of necessary technology changes. Spare no effort in giving employees easy access to clear online information about their legacy plans and new time-off programs.
- Communicate in ways you know employees will hear. A comprehensive communication and training strategy, tiered and sequenced for each audience, will make all the difference. Resist communicating everything at once, as it might be too much for employees to absorb.