{"id":3766,"date":"2022-01-11T22:01:07","date_gmt":"2022-01-11T22:01:07","guid":{"rendered":"https:\/\/melodybenefits.com\/?p=3766"},"modified":"2022-06-08T20:45:17","modified_gmt":"2022-06-08T20:45:17","slug":"cash-in-lieu-of-wage-parity-benefits-5-reason-not-to","status":"publish","type":"post","link":"https:\/\/melodybenefits.com\/cash-in-lieu-of-wage-parity-benefits-5-reason-not-to\/","title":{"rendered":"Cash in Lieu of Wage Parity Benefits: 5 Reason NOT To"},"content":{"rendered":"

In a complicated business, the cash vs. benefits decision doesn\u2019t have to be complicated, too.<\/span><\/p>\n

Since the <\/span>Home Care Worker Wage Parity Act<\/span><\/a> of 2011, New York home health care agencies must pay a minimum base pay of $15 an hour to home health care workers plus an additional $3 – $4.09, depending on location. Agencies can choose whether to pay the additional amount in <\/span>employer benefits or wages<\/b>.<\/span><\/p>\n

Some agencies struggle with the decision. Paying in wage parity benefits<\/a> is a program unto itself and takes time and attention. Most businesses need to hire a third party company to manage those benefits<\/a>. Cash benefits for employees may, therefore, seem easier and cheaper.\u00a0<\/span><\/p>\n

But Shaya Sternhill, Melody\u2019s Head of Marketing and Business Development, explains that reality is just the opposite.<\/span><\/p>\n

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Here\u2019s why giving cash in lieu of benefits is almost never a good idea:<\/b><\/p>\n

1. Wage parity benefits save agencies money on taxes<\/span><\/h3>\n

It\u2019s simple math, says Shaya.\u00a0<\/span><\/p>\n

Every dollar you pay your employees is subject to payroll taxes, such as FICA, worker\u2019s comp, unemployment taxes, and more. Average total cost is 15%.\u00a0<\/span><\/p>\n

Those taxes apply to wage parity cash benefits, too. In NYC, for example, if you\u2019re paying your home health care workers in cash only, that\u2019s $19.09 per hour. ($15 base pay + $4.09 wage parity.) The bottom line is you\u2019ll be paying approximately $2.86 an hour in payroll taxes\u2014 a whopping15% of $19.09.<\/span><\/p>\n

Most wage parity benefits, however, aren\u2019t taxed. Going back to our NYC example, let\u2019s say you\u2019re paying $15 per hour in cash and $4.09 in medical, dental, and dependent care benefits. In this case, you\u2019d only pay the 15% taxes on the $15 base.<\/span><\/p>\n

Your net savings? $.61 per hour. That doesn\u2019t sound like much, but when you multiply 61 cents by an annual average of 1560 hours, <\/span>you save $951.60 per employee per year<\/b>!<\/span><\/p>\n

Net savings for a 1000-employee agency paying wage parity benefits can be close to $1,000,000 annually!<\/span><\/p>\n

Multiply $951.60 by 100 or even 1000 employees, and your savings reach 5 or 6 digits.<\/span><\/p>\n

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2. Benefits are better for cash flow<\/span><\/h3>\n

Building on point #1, Shaya adds that offering benefits does more than save you money. Benefits can directly impact your cash flow, too.<\/span><\/p>\n

How? Your aides work this week and get paid at the end of next week. In other words, you need enough positive cash flow to pay wages weekly or bi-weekly.\u00a0<\/span><\/p>\n

Unfortunately, your agency doesn\u2019t get reimbursed that quickly. Many agencies work with multiple <\/span>MLTC<\/span><\/a> (Managed Long Term Care) systems to pay them. Agencies often have to wait for their payments, creating a crunch when they need to pay their employees more quickly and more often.<\/span><\/p>\n

Wage parity benefits break this cycle because they are paid out once a month. \u201cReducing your weekly cash wages responsibility gives your agency breathing room,\u201d says Shaya.\u00a0<\/span><\/p>\n

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3. Cash in lieu of benefits costs you more in overtime<\/span><\/h3>\n

Once again, some basic arithmetic shows the benefits of benefits.<\/span><\/p>\n

An HHA who works more than 40 hours a week is entitled to <\/span>overtime pay<\/span><\/a> at time and a half. Looking at an NYC example again, if an agency pays aides the full $19.09 in cash, time and a half is $28.64.<\/span><\/p>\n

But wage parity benefits aren\u2019t subject to overtime regulations. So if an agency pays $15 cash and $4.09 in benefits, only the $15 is multiplied. The total overtime pay adds up to only $26.59.<\/span><\/p>\n

That’s a $2.05 savings per overtime hour<\/b>. And we saw in the previous examples that the savings multiply quickly.<\/span><\/p>\n

As Shaya says, \u201cPaying overtime is a killer for home health care agencies<\/a>.\u201d Paying wage parity in benefits can help contain the ballooning cost of overtime.<\/span><\/p>\n

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4. Taking care of your employees is good for your business<\/span><\/h3>\n

Consider these available wage parity benefits<\/a>:<\/span><\/p>\n