Here are three pitfalls to watch out for:

1. You get what you pay for

By and large, the cost savings from a wellness program will be driven by how much you’re willing to spend. Generally, you get what you put into them — both in time and money.

In addition, the program has to be tailored to your specific needs. What works at another company may be a giant flop with your workforce.

2. Tough to administer alone

Most employers find that it’s more effective to outsource wellness. Three reasons:

• Experience. Outsourced vendors have the expertise. They’ve been there, done that — and vendors that’ve been around for a while know how get results.
• Employees’ trust. Many employees are more involved in wellness programs when there’s no fear their employer is looking over their shoulders.
• Legal protection. Outsourcing helps insulate you from later claims that the company fired an employee because of his or her health risks.

3. Tax problems

Some of the most popular incentives offered to employees in wellness plans (think subsidized gym memberships) are taxable as compensation.

If you offer wellness participants discounts on their premiums, the Internal Revenue Service (IRS) caps the incentive at 20% of the total cost of coverage. Beyond that, Payroll has to withhold taxes or you could run afoul of the IRS.

Why the rush to find greener pastures?

• 66% of American workers are not satisfied with their compensation
• 68% aren’t happy with their employer’s contributions to their 401(k) plans
• 78% don’t like their company’s retention efforts, and
• 76% aren’t satisfied with career growth opportunities at their company.

Those figures come from Adecco’s new American Workplace Insights survey.

Boosting job satisfaction

Four ways companies can pump up satisfaction among workers, according to Adecco:

1. Make retention efforts more visible to workers. Companies and managers may be doing all they can to retain employees, but those efforts need to be seen by the workforce.

2. Explain salary decisions. If you suspect salaries aren’t sitting well with workers, explain the reasons behind lower pay. Help them see it’ll help the company through this economy.

3. Provide non-cash rewards. Put in extra effort where extra investment is not possible. Just recognizing good work — though e-mail, handwritten letters, etc. — can boost morale and ease compensation complaints.

4. Show employees where they can grow. When employees are given a map of what they need to do to move up in the organization they are more likely to invest their time and energy to help that business grow.

The answer is yes – so long as you meet certain requirements. According to the Department of Labor, PTO banks, paid vacation and paid sick days are fringe benefits,  which aren’t covered by FLSA.

As a result, you’re allowed to make deductions for absent employees who have already used up their PTO.  Three conditions:

• Your organization must have a “bona fide” PTO (or separate vacation and sick day) benefits plan.
• Deductions for a salaried employee’s unexcused absences come in full-day increments, and
• Your state and/or local labor laws don’t prohibit deductions.

What’s meant by bona fide?

In order to be considered a bona fide benefits plan, your paid time off policy (including the potential for deductions resulting from accidentally overused PTO) must be communicated in writing to employees.

This requirement is partially met by including a section on PTO in your benefits handbooks.The other part: administering PTO policies exactly as they’re described.

Important: Under FLSA, if you don’t have a bona fide PTO plan, it’s illegal to make deductions.

Even if your PTO plan allows salaried employees to take partial days off, you should only make deductions on a full-day basis. Reason: Under FLSA’s arcane formula for determining if an employee is exempt or non-exempt from overtime, partial-day deductions may compromise an exempt employee’s overtime status.

Under FLSA, the amount of salaried compensation includes only only base pay – not fringe benefits. Therefore, while you can measure benefits in partial-day increments, corresponding pay for exempts must be measured in full-day increments.

Note: Partial-day deductions won’t automatically make exempt employees non-exempt in every case. But to be sure, you’d have to first perform the wage tests  required by the feds.

New York City funeral director Peter Dohanich recently put an ad on Craigslist looking for a contractor to perform repairs and add a sitting room to his apartment.

One catch: Dohanich is a little short on cash. In exchange for the additions, he’ll provide a full funeral for the lucky contractor, including burial or cremation, embalming, a casket, viewing and church services, and transportation for both the deceased and his or her loved ones.

So far, no one’s bit on the offer. The funeral director admits some people have said his ad was morbid, but Dohanich claims “it’s savvy, not spooky.”

Here’s a strategy that many employers overlook: Many TPAs offer direct deposit as an FSA reimbursement option, rather than sending checks to participating employees. The choice is up to the participant. 

One of our readers from New Berlin, NY reports that simply adding this option for employees increased workers’ satisfaction with the turn-around of reimbursements, and offset a common reason some employees gave for not participating in the benefit. 

Several employees who hadn’t enrolled in past years because FSA contributions are deducted from their regular  paychecks were convinced to enroll because reimbursements went straight to their bank accounts, regardless of the amount deducted to date during the plan year.

Typically, TPAs require employees to submit a voided check if the employee wants the money direct deposited to a checking account. If the employee prefers the money go into a savings account, the employee typically has to submit a direct depost form from his or her financial institution.

Two common errors to watch out for:  Some employees make the mistake of submitting a deposit slip rather than a voided check. Administrators typically reject this form of enrollment, thereby delaying enrollment.  In addition, it’s up to the employee to notify the administrator promptly of any account changes or closings.

The plans that would be affected would be those that exceed the value of the standard plan offered to federal employees (currently about $13,000 a year for a family of four). An employer-provided plan worth less than that level would remain tax-free,  while any benefit exceeding the cap would be taxed as part of an employee’s compensation.

Such a tax, if adopted, would likely be phased in over the course of several years.  A higher tax threshold and exemptions for unions would make the tax more politically viable but would diminish the amount of  revenue it would raise to provide coverage for the uninsured.

Last month, a congressional committee discussed repealing the tax deduction allowed for certain large medical expenses or creating a tax on flexible savings accounts and health reimbursement accounts . A more dramatic proposal — taxing half of all employer-provided health premiums -was also discussed but is unlikely to get out of committee.

Meanwhile, President Obama  has suggested a limit on the value of itemized tax deductions for families earning more than $250,000 a year.

Democrats in both the House and Senate have pushed for government-sponsored insurance for people who have trouble finding coverage through an employer or individually. The idea is adamantly opposed by most Republican legislators.

The statements can easily backfire – or contain inaccuracies. Here’s how to find and fix two common trouble spots:

1. Avoiding incorrect info

Accidental math errors are the most common – and damaging – problem with total comp statements.
They’re also the toughest for you to spot and correct before the firm sends out the statements, since you aren’t the one who crunches the numbers.

But there are two ways to minimize the risk:

• Make a list of the data sources you use, such as Payroll, your 401(k) provider and health plan carrier, and
• Ask each source to pull and review a few random samples. If they’re OK, chances are the rest will also be fine. But if they contain errors, you can be pretty sure others will have mistakes.

A related problem: Some statements are arranged as a single list of costs, one line after another. To cut the risk of putting something on the wrong line, break the statement down into small sections (e.g., salary, healthcare and retirement). Bonus: This helps make statements easier for employees to follow.

2. ‘Just increase my salary’ syndrome

Sometimes, total compensation statements can actually decrease salary satisfaction, rather than boost morale. A handful of employees may gripe, “Why can’t you just increase my salary instead?” That’s especially true for legally required benefits (like workers’ compensation) and low-profile benefits such as term life insurance. Two fixes that work:

• List “government-required benefits” as a section of the statement. Avoid the term “mandated,” since many employees are unfamiliar with it, and
• Consider adding a section that shows employees how much it’d cost them to line up their own coverage instead.

Compensation specialists refer to the common approach at the “peanut butter plan” because it’s aimed at spreading raise money thinly and evenly.

Here’s how it typically works:

1. A manager gets a lump-sum amount to apportion to employees for raises. The amount usually breaks down to be 3%-4% of total salary.
2. The manager then awards top performers raises of 4%-5% and low performers 2%-3%.
3. And everyone ends up happy, right? Wrong.

According to research by SuccessFactors.com, under that scheme, companies tend to retain low performers — who are happy with almost any raise — and lose high performers, who go elsewhere for raises that typically amount to at least 10%.

And that’s not all. The research shows companies that use the peanut-butter approach — thin spreads between high and low performers — tend to be less successful than those that have wider raise spreads. In the test of 41 companies, those that had wider spreads experienced better revenue growth (33.85% more) and net income growth (8.5% more).

The conclusion: The bigger the in raises between high and low performers, the better the company.

Be aware that 409A has been around a while, since 2005, but IRS had given employers a four-year transition to get up-to-speed on the reg and complying with it. Translated, that means companies could foul up but offer the excuse that they were trying their best to comply. That forgive-and-forget period officially ends on December 31.

OK, what’s 409A and what type of employers are affected by it? The law used to apply mainly to deferred-compensation plans for top execs, but that’s changed. It now covers some basic payments to people under the big wigs. For example, 409A could apply to employees who have:

• a written employment contract or agreement
• an offer letter that spells out how the individual will be paid over time?
• an agreement or arrangement to receive future benefits
• discretion as to the timing of compensation whether under a written agreement or not
• the right to terminate their employment for “good reason” and receive severance pay?
• an agreement by which they perform consulting services after the expiration of their employment
• a change of control agreement
• post-employment rights to any form of benefits or compensation
• post-employment rights to compensation depending on how their separation is classified

One good source for figuring out your company’s 409A status: “An Internal Revenue Code Section 409A Primer.” It’s a publication that was put out by the law firm of Jenner & Block when the law was enacted in ‘05.

Here’s why: Big companies tend to have inflexible rules about compensation, benefits and perks. And often those rules are tied to profit margins — when profits drop, so do comp, bennies and perks. Smart smaller outfits. however, can adjust and mix-and-match benefits and perks to match individual employee needs.

For example: A lot of companies, big and small, are going to face the situation of shrinking raises for employees. The big-company approach to that situation often is, “Sorry, that’s the way it goes.”

But smaller firms can adjust.

• Can’t offer raises this year? Well, then, what if one employee needs to come in late one day a week because of childcare issues? Offering that type of benefit in lieu of a raise can go a long way toward convincing the employee that working for a little guy — even one offering no immediate salary increases — might not be such a bad deal after all.
• Can’t give your top salesperson a bigger slice of commissions? How about letting her family sign on to the company’s cell-phone plan and get a cheaper rate?
• Better still, instead of offering a perk in place of money, ask employees what they’d choose. Sure, you’ll get some wild requests that you’ll have to turn down, but most people have a sense about what’s practical and reasonable — the maintenance worker is unlikely to ask for a company car. Plus, asking them saves you the trouble of trying to dream up the perfect perk for each employee.

The bottom line is that larger firms usually can’t match the flexibility that smaller firms have. So if you’re the HR manager for a smaller company take advantage of what you have.