Employee Coverage

We are in the process of completing the 2013 budget for our HOA. During today's session, it was expressed that we are too generous with our benefits package to our staff employees. This is community of 1900 homes in Florida. About 3 years ago the Board changed the percentage of coverage by the HOA from 100% to 80% for medical and dental. It is now being suggested that we cut the medical coverage to 70% and drop dental coverage. The budget also includes a 2% pay increase which was suggested that we freeze. We have our own Manager, admin and maintenance staff.
Would be interested in hearing from others who are self managed as to what your employee's benefit package look like. Dennis

Tim,
When you say you are self managed and only hire independent contractors I'm not sure how that works. Do you staff an HOA office and have regular maintenance service? Or do you hire temps and just bring contractors in on call? Do you have a HOA manager or do your Board act in this capacity. I was never involved in an HOA until I retired here so have no idea how other communities are set up. We have 6 full-time maintenance personnel and 4 full-time staff persons and 1 part-time not including a full-time manager, activities director and golf manager. We also have a large landscape contract which maintains the common area and golf course.
Thanks for you input and hope to hear from others with a similar set up to ours so I can see what they cover. Dennis

Dennis,

The IRS has strict rules to determine whether an individual may be treated as an independent contractor or an employee which you must follow. Some have tried to treat individuals the IRS determines are employees as independent contractors. When discovered by the IRS the organization may find itself owing back Social Security and Medicare taxes, plus penalties and interest.

From your description, those on your staff appear to meet the definition of employees. As for benefits, the main thing you need to consider is competitiveness. How HOAs on the national level handle the situation is not very useful to you. What you want to know is how other HOAs and other companies in your area compare in compensating their employees performing similar tasks. Local labor, business, and government organizations typically compile such statistics and I would suggest you start there.

If your wages and benefits are not competitive you may find it difficult to retain and hire employees. Those that you do manage to hire may be those who have difficulty finding employment elsewhere which could result in a decrease of productivity or quality of work and end up actually costing you more. There is also the cost associated with training new employees and learning curves.

It's not an exact science and there are many things to consider when determining wages and benefits. Your best course of action is to be competitive and be somewhere within the low-to-high range where you feel comfortable.

I agree with Bruce, the IRS does have some very specific rules that must be followed to keep from crossing over the line from independent contractor to employee. One of these rules that I find most difficult is that the Association can't tell them contractor how to do the job. You are paying for the end product not the specific process used.

Here is a link to the IRS page Independent Contractor (Self-Employed) or Employee?. The links on that page provide the specifics for Determining Whether the Individuals Providing Services are Employees or Independent Contractors.

What you may want to consider is minimizing some of the benefit expenses by transferring some of the tasks to independent contractors.

Appreciate your inputs. First we have employees not independents contractors. The only person with a contract is the HOA Manager.
As for checking the local area for other businesses and companies to see what they do, I see this as a different matter. I believe this would be like mixing apples and oranges in getting an answer. Unlike business, we are not for profit, so other than increasing monthly maintenance fees, the goal is to keep the budget in check and reduce the burden as much as possible on the residents, many who in today's economy are also struggling. This is way I was seeking input from other HOAs who have paid employees to give me an idea as to what benefits they provide. Dennis

Comparing your employees' compensation to the compensation of employees of associations in other areas across the country is comparing apples to oranges and a variety of other fruits. Comparing your employee compensation to the compensation of employees PERFORMING THE SAME OR SIMILAR TASKS by other businesses in your area is comparing apples to apples, although the varieties of apples may be different. Why? Because you draw your employees from the labor pool in your area, not from across the country. A carpenter is a carpenter, a plumber is a plumber, a gardener is a gardener, a painter is a painter, and so on. It doesn't matter whether they work for your association or for some other employer in the area. If an individual can get a better deal performing the same work for another employer in your area rather than your association, then that's where they will go to work. Whether you are a profit-making or a non-profit organization is irrelevant. That's not how the employee looks at it.

I know first-hand of an employer in my area that requires mechanics for a fleet of vehicles he needs to maintain. He pays the poorest wages and has the worst benefit package in the area. The result? Quality mechanics won't work for him. They go elsewhere. At least half of this guy's mechanics are unemployable, meaning they've gotten fired from other employers in the area who offer higher wages. The productivity is low, and the quality of the workmanship is poor. Some of his mechanics are unreliable and often don't even show up for work. But he keeps them on because they are cheap and he knows they won't quit (because they can't get work elsewhere). His vehicles are constantly in disrepair to the point where he sometimes doesn't have enough that are roadworthy to do the jobs he's been hired to do. His vehicles often fail to pass state inspections and have to be redone. Is he saving money? An emphatic no! Of course, this is a worst-case scenario, but I describe it to demonstrate what happens when you become uncompetitive.

If you feel the need to cut, better to reduce your staff size, either by lay-off or by attrition (you just don't fill a position when someone leaves) rather than have an uncompetitive compensation package. Poor productivity and poor workmanship cost money. Eight good quality employees can often do the work of ten poor quality employees at less cost. If you have to hire additional employees or pay overtime to get the work done or to re-work jobs that were not properly done, you are not saving any money. People often have a hard time understanding this unless they've had some background or education in economics because it is hard to quantify.

Even if you are non-profit, you still need to compete with other businesses (including businesses that make a profit) for workers in your area. That's the point you need to remember.