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An EHR We Can All Agree On, by Eric Novack

NovackI 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:

Current situation:

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
matter).

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
employment.

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.)

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PeterEricMatthew HoltBarry Caroleric novack Recent comment authors
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Peter
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Peter

How about, “Day of Reckoning” costs put on pay checks as well. If people really want to know the true cost of living well.
Cost of Global Warming: $xxx,xxx
Cost of National Debt: $xx,xxx
Cost of Iraq War: $xx,xxx
Cost of Electing Bush (twice!): $xxx,xxx,xxx,xxx,xxx,xxx
You can add your own.
“I report this as a part owner of a small business whose costs are increasing every year while revenues are decreasing.”
You’re in good company Eric.
http://www.boston.com/business/personalfinance/articles/2007/08/21/more_americans_making_ends_meet_with_less_money/

Matthew Holt
Guest

I agree completely with Eric Novack here. So I’m going to go and lie down for a little while…..

eric Novack
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eric Novack

please note that the “eric” above is not me, eric novack…

Eric
Guest
Eric

EHR should not be tied to employer. It is the patients information. Think about that for a minute.
Also, health insurance should not be tied to an employer. If you don’t understand that, then try to start your own company or do independent contracting, or just lose you job for longer than 18 months, then get back to me.

Tom Leith
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Tom Leith

> have you had the data routinely at > every job over the last 25 years? I don’t remember whether they did at a startup I was with for a year and a half, but everywhere else, yes. > When you have been hired, was you ‘salary’ > presented as an EHR? Of course not. It was presented as an annual figure, I suspect because I wasn’t paid (strictly speaking) by the hour. The mostly-silent expectation was that I’d work somewhere between 2,000 and 2,500 hours for it. I can do the arithmetic quick enough. > your ‘disagreement’ implies to… Read more »

Matthew Holt
Guest

As I said to Eric, it’s one post in which I completely agree with him. I ahve asked hundreds of rooms of healthcare types the question “how much does your health insurance cost” over the years and no-one other than the few self-0employed saps in the audience (i.e. me) ever knows.
I also suspect this is true in the US with overall tax rates. (And for that matter with understanding about government spending)
This is not a healthy situation.

Barry Carol
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Barry Carol

“they pay in lower wages” I think what Eric meant is that cash wages would have been higher by an amount equal to the cost of health insurance if the employer were not incurring the cost of paying for health insurance on the employee’s behalf. The same is true with respect to the employer’s share of FICA taxes and all other benefits for which the employer pays cash. Paid time off is a little trickier in that if the nature of the job is such that a temp does not have to be hired to fill in and the work… Read more »

eric novack
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eric novack

Tom- we ARE doing it… but have you had the data routinely at every job over the last 25 years? When you have been hired, was you ‘salary’ presented as an EHR? A poll question for readers: what is your EHR? If 5% of all THCB (which is not an ‘average’ cross section of employees), I would be shocked- pleasantly shocked- but shocked nonetheless. And, Tom- your ‘disagreement’ implies to casual readers that I do not believe employees ‘earn’ what they are paid– read ” If employees do not feel that they are receiving an EHR equal to (or greater… Read more »

Tom Leith
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Tom Leith

At least for me (being salaried) they didn’t break it down by the hour, but a little chemical company I worked for 25 years ago did something very much like that in the annual recap of salary at tax-time. Today I think we can file this under “Duh!” Any decent payroll services provider will do it, and lots of their customers buy it. This is not an endorsement, but my wife’s company uses ADP, for example. They can customize letters and reports to suit, and I’m sure they could divide timesheet hours into total compensation and report that as EHR,… Read more »