The Affordable Care Act and the Impact of Healthcare Reform on Retail Workforce Management

The Affordable Care Act and the Impact of Healthcare Reform on Retail Workforce Management Why Retailers Require Up-to-Date Workforce Management Solutions such as Labor Scheduling, Time and Attendance, and Real-Time Execution to Manage the Highly Complex ACA Healthcare Reform.

With the extension of the deadline of the ACA statutory requirement for large employers (50 or more Full Time Equivalents or FTEs) to offer healthcare coverage to FTEs extended to Jan. 1, 2015, retailers still have time to put a comprehensive system in place.

August 2013

The Affordable Care Act and the Impact of Healthcare Reform on Retail Workforce Management

The Affordable Care Act (ACA) signed in March 2010 has enormous ramifications for mid-sized and large retailers in terms of Human Resources and Workforce Management. With many ACA provisions set to kick in starting in 2014, Human Resources, Finance, and Store Operations must decide how to navigate ACA and develop a strategic plan regarding the potential impact to their companies regarding numerous issues: • Do we stick with current coverage plans? • What is the cost impact of non-compliance regarding part-time workers? • Should we offer full-time employees coverage or pay penalties? • How should we balance our mix of full- and part-time employees? • How can we ensure stores execute our HR and labor operations plans?

“Whatever the overall HR and workforce management strategy retailers decide to take, ensuring ACA compliance in their labor operations practices will be critical. . .”

Whatever the overall HR and workforce management strategy retailers decide to take, ensuring ACA compliance in their labor operations practices will be critical. Companies that are unable to accurately track and analyze their workforce labor scheduling and time and attendance practices face potentially significant financial consequences due to fines and increased healthcare coverage costs and taxes. Retailers must ensure that decisions made at the executive level are followed consistently in stores. Companies that attempt to manage their labor operations processes using spreadsheets, paper reports, and other manual tools risk severe negative financial impact to their bottom line. On July 2, 2013, the Obama administration announced an extension of the deadline of the ACA statutory requirement for large employers (50 or more Full Time Equivalents or FTEs) to offer healthcare coverage to FTEs from Jan. 1, 2014 to Jan. 1, 2015. Other extensions may be passed that give retailers a little more breathing time to determine their HR strategy of health care coverage for their employees. Retailers still have time to implement solutions to help ensure their labor schedules and employee time worked are ACA compliant. The penalty for retailers that do not will be severe, and perhaps catastrophic. The health care coverage costs for U.S. retailers per employee averaged $2.59 per hour worked according to a recent report from the U.S. Bureau of Labor Statistics, or 8.5 percent of total compensation. 1At a conservative 30 hours per week at 50 weeks per year, that’s an average of $3,885 annually per employee for health coverage. When the ACA provision requiring retailers to offer coverage to full-time employees kicks in, retailers risk significant additional health insurance coverage costs for parttime employees who are mistakenly allowed to work more than an average of 30 hours per week, or more than 120 hours per month. There are also additional penalties to be paid for those employees who are not offered health insurance: $2,000 per worker (after the first 30). And if employees are not offered “affordable” (less than 1

“Employer Costs for Employee Compensation,” Bureau of Labor Statistics, U.S. Department of Labor, March 2013, page 6. 2

The Affordable Care Act and the Impact of Healthcare Reform on Retail Workforce Management

9.5% of family income), there could be another hit to retailers: $2,000 - $3,000 per worker (after the first 30). Many analysts are predicting that health insurance costs will rise by January 2015. But taking the current average that retailers pay for health care per FTE as of March 2013, below are the negative impacts to the bottom line if 1,000 part-time employees are mistakenly allowed to drift into full-time status (remember, for the second and third numbers, after the first 30): • $3,885,000 per 1,000 additional FTEs annually for health insurance coverage • $1,940,000 fines for not offering 1,000 additional FTEs health insurance • $1,940,000 to $2,910,000 fines for not offering 1,000 additional FTEs

“Reflexis Time and Attendance enables retailers to minimize compliance risk and reduce labor costs by enforcing pay and work rules. The Reflexis rules engine allows retailers to configure rules for complicated work and pay policies and alert managers to workforce management situations requiring immediate action…. Reflexis Time and AttendanceTM automates the process of managing payroll calculation while eliminating the labor requirements to doublecheck time and pay that was formerly manually calculated.” TM

“affordable” health insurance In the thin margin environment of today’s increasingly competitive retail industry, retailers stand to lose millions for ACA non-compliance. Automated labor scheduling solutions enable retailers to comply with their HR strategy regarding the mix of partand full-time workers. The Reflexis platform of budgeting, forecasting, optimized labor scheduling, task management, time and attendance, reporting/analytics, and real-time store execution provides an integrated solution that enables retailers to automate their labor operations procedures, track and ensure compliance, and make better decisions in the following ways: Ensure consistent labor scheduling of full- and part-time employees in compliance with ACA regulations. ACA adds increased compliance pressure for retailers who already needed to control labor costs and comply with state and national laws, and in some cases, union agreements. Reflexis Workforce Manager™ enables retailers to generate labor schedules in ACA compliance while factoring in pay rates and other variables that impact the customer experience such as workloads needed to complete HQ initiatives (e.g., promotions and product launches) and employee proficiency/skills. The solution factors in all the work that must be done in the stores while generating cost-effective schedules. Store managers can respond nimbly to weekly sales trends through mid-week reforecasting and re-scheduling while remaining ACA compliant. Provide accurate information about employee hours worked and rapidly respond to impending non-compliance. The 12-month “look back” provision of ACA requires retailers to have accurate historical data regarding full- and part-time employee time. With Reflexis Time and Attendance™, corporate, regional, and store managers have ready access to accurate data regarding hours worked by employees and the ability to monitor real-time alerts on PCs and mobile devices to proactively respond to impending non-compliance.

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The Affordable Care Act and the Impact of Healthcare Reform on Retail Workforce Management

Ensure compliance with corporate policy regarding full- and part-time employees. Reflexis Time and AttendanceTM enables retailers to minimize compliance risk and reduce labor costs by enforcing pay and work rules. The Reflexis rules engine allows retailers to configure rules for complicated work and pay policies and alert managers to workforce management situations requiring immediate action. Employees can be prevented from punching in outside of their scheduled hours. Store managers can receive alerts on kiosks, PCs, tablets, and smart phones and respond using best practices.

“Reflexis StorePulse™ provides a single application for store managers to monitor and respond in real-time to important workforce management and customer service issues. With Reflexis StorePulseTM, managers receive prioritized, bestpractice action alerts from Reflexis workforce management solutions and other sources regarding important events and situations in their stores — as they happen.”

Increase efficiency in time card tracking, data entry, and workforce management approvals. Reflexis Time and AttendanceTM automates the process of managing payroll calculation while eliminating the labor requirements to doublecheck time and pay that was formerly manually calculated. The Reflexis Employee Self Service module in Reflexis Workforce ManagerTM enables employees to check schedules, request shifts, swap shifts within business rules compliance, and perform other workforce-related tasks on their own, without having to involve store managers. Payroll processes are completed accurately and automatically. Store managers are freed from administrative tasks to spend more time coaching associates and helping customers. Ensure labor schedules accurately reflect all work that must be done in stores, within ACA compliance. With ACA, it’s more important than ever to know the exact impact of plans on store workloads. Reflexis Task Manager™ enables corporate planners to coordinate planning of promotions, complex sales campaigns such as “Back to School,” product launches, and other initiatives that impact the customer experience and drive increased sales. Planners can simulate and evaluate the workload impact of tasks to avoid overloading stores; workload for approved tasks flows seamlessly into Reflexis Workforce ManagerTM to generate accurate, optimized schedules within ACA compliance. Ensure right person is doing the right thing at the right time to increase sales. ACA imposes an even greater need on stores to efficiently and consistently execute the overall retail strategy. With tighter restrictions on employee work time, retailers can’t afford to have their best human assets wasting time checking email and voice mail in an attempt to determine what to do. Reflexis Task ManagerTM streamlines corporate-store communication, providing a single place for store managers to view prioritized tasks in a daily planner. Store managers no longer have to guess what are the most important activities; corporate can monitor completion levels in real-time and manage by exception. Revenue-driving projects are completed as intended to increase sales. Gain visibility into workforce trends, identify exceptions and anomalies, and identify potential areas of improvement. Reflexis Advanced Reporting and Analytics™ complements the many “out-of-the-box” reports already provided by Reflexis Workforce ManagerTM, Task ManagerTM, and Time and AttendanceTM by providing advanced analysis of workforce data. Managers gain insight into labor trends and can detect and uncover the root causes of issues before they become major problems. 4

The Affordable Care Act and the Impact of Healthcare Reform on Retail Workforce Management

Respond to critical labor operations and customer engagement issues with best practices. Reflexis StorePulse™ provides a single application for store managers to monitor and respond in real-time to important workforce management and customer service issues. With Reflexis StorePulseTM, managers receive prioritized, best-practice action alerts from Reflexis workforce management solutions and other sources regarding important events and situations in their stores — as they happen. Managers can view alerts regarding time and attendance, task execution, workforce matters (e.g., employee sick callouts), customer traffic patterns, high-value customer check-in, and more. With each alert including a series of best-practice actions, store managers can take action or delegate follow-up tasks knowing they are responding to these surprise events in the best possible way. Some of the best-known retailers in the world, many of them global businesses operating multiple store brands and formats in multiple languages, have solved their store operations challenges using the Reflexis platform of Retail Execution Management solutions. To learn more about how Reflexis helps retailers improve compliance and increase profitability, visit us at www.reflexisinc.com where you can download additional case studies and white papers.

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