I have written about this previously directly and tangentially, but given that this is ‘open enrollment
’ period (for those who still have more than one choice), it is worth repeating.
I report this as a part owner of a small business whose costs are increasing every year while revenues are decreasing.
Therefore, I present to you all the new, improved EHR: Effective Hourly Rate.
The EHR should be given to all employees of all companies.
What it will consist of is simple: all of the total compensation divided into what that rate would be on an hourly basis. Let’s give an example:
Employee paid $18.00 per hour
Employee gets 3 weeks paid vacation (or 120 hours of ‘paid time off’) and does not miss other days (we will assume no overtime payments)
Assuming that this covers a full 52 weeks at 40 hours per week that equals 2080 hours in a year.
A bit more math: $18 x 2080 = $37,440.00
And that is all an employee sees.
Under the EHR: (same employee)
Gross salary: $37,440.00Employer Paid Medicare Taxes: $2321.28Employer Paid Social Security Taxes: $542.88Employer Paid Unemployment: $350Employer Paid Health Insurance for employee (fully paid by employer): $4000
Total Compensation: $44,654.16
Divided by the 1960 hours worked during the year (2080 – (3 x 40 hours paid vacation))
Effect Hourly Rate (EHR)= $22.78In other words: the EFFECTIVE HOURLY RATE IS ACTUALLY 26% GREATER than what appears to the employee.
Why is this so important? Because most people—including
employers—have little idea of how much money is spent on health care
benefits (or other benefits and additional employer taxes, for that
Question: Do employees not currently ‘pay’ for their health
insurance, even when it is ‘covered’ by the employer? Answer—of course
they do; they pay in lower wages.
The EHR gives employers the ability to accurately let employees know
what their ‘cost’ is—of course, if their ‘value’ was not at least equal
to that cost, the employer would likely not keep them employed. If
employees do not feel that they are receiving an EHR equal to (or
greater than) their value, they will likely consider other options for
With the Effective Hourly Rate, prospective employees can better
assess the value of a job in the marketplace across employers, trades,
professions, and location.
Until we bring these numbers ‘out of the shadows’, we are doing
ourselves, employers, employees, our economy, and our health care
system a real disservice.
(oh, and by the way, it does not require any new bureaucracy, legislation, or regulation.)