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Gearing Up for Active Duty

December 30, 2002
Related Topics: Employee Leave, Featured Article, HR & Business Administration
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Nancy Wong was a technical sergeant in the Air National Guard when the callcame in, an order to leave her full-time civilian job and report for 16 weeks ofmilitary training. Her employer refused to release her and made it clear thatthe company did not support her commitment to the Guard. Wong found a readysolution: she quit.

    She is now a major in the Air National Guard and a highly valuedcommunications specialist at EDS, the IT services giant in Plano, Texas.

    She was called away from EDS in June 2002 for 90 days of active duty inOperation Enduring Freedom. From the day she left, EDS made up the differencebetween her military pay and her regular salary and continued her benefits. Thecompany’s referral service helped her find a reliable house-sitter. During themonths she spent overseas living in a tent, she received care packages from hercoworkers and friendly e-mails from her supervisor--welcome reminders of home.

    Wong is one of thousands of reservists who have been called to active duty inthe war against terrorism. Thousands more are being deployed in the coming yearas the United States prepares for military action against Iraq, responds toterrorist threats around the globe, and tightens homeland security. As a result,a growing number of employers will be forced to choose between simply meetingtheir legal obligations toward reservists and implementing more generouspolicies. Whether they decide to generously support the activated reservists orto do the minimum required by law, there will be costs to the company. But doingmore than the minimum can have rewards for the employer and employee. Managementmust decide if those intangible rewards are sufficient.

    Companies that opt for supportive policies reap three immediate rewards:improved recruitment and retention of reservists, public recognition for apositive contribution to national defense needs, and fewer compliance problemswith the Uniformed Services Employment and Reemployment Rights Act (USERRA), thecomplex federal law on reservists’ employment rights.

    EDS has reaped all three rewards. Its constructive response to Wong’sabsence had an "absolutely positive effect" on her attitude toward thecompany, she says. Steve Whitton, director of U.S. benefits for EDS, says thatthe company’s policy reflects the value it places on its reservists. "Theyare people of extremely high caliber," he says. "We want them to come backto work for us when their active duty is over."

    EDS has received several awards and recognition from the White House for itsreservist policy and has never experienced compliance problems with USERRA.

    The company has hundreds of reservists--primarily professional and technicalemployees and middle managers--among its 66,000 U.S. workers. The number onactive duty has ranged between 50 and 60 since the September 11, 2001, terroristattacks. Like many other companies, EDS is aware that reservists often have thecritical skills, leadership training, work ethic, and team orientation thatemployers need. No law requires employers to provide pay differentials or coverthe cost of continued benefits, but of the 127 Fortune 500 companies whosepolicies were studied by the Reserve Officers Association in Washington, D.C.,20 percent continue to pay their reservists’ full salaries while they are onactive duty. Many limit the payments to one month or less, but then pay thedifference between the reservists’ military pay and company salaries. Anadditional 52 percent do not pay full salaries but provide pay differentials forperiods ranging from several weeks to the full period of active duty.

    Although the military provides health care for activated reservists, mostemployers in the ROA survey continue to provide health-care and life-insurancebenefits for their deployed reservists and their dependents. Some companiesrequire reservists to continue their employee contributions; others pick up theentire tab while employees are on active duty. Reservists on active duty receivemilitary pay based on their rank and years of service. A captain with 10 yearsof service, for example, would receive $4,200 a month. A private first classwith two years of service would earn $1,240 a month.

HR’s role
    At EDS, HR plays a central role in formulating reservist policies. "Thepolicy originated within EDS’s HR community and was then approved by thebenefits oversight committee, a subcommittee of the board of directors,"Whitton says. "It received wholehearted support from the committee and fromthe CEO as the right thing to do for our employees and their families."Although the formal company policy limits the pay differentials and benefitscontinuation to 180 days, the company has twice extended the payments for anadditional 180 days so that all reservists affected by the post-September 11call-up continue to receive pay supplements and benefits. "The extensions wereapproved by the board’s subcommittee without hesitation," Whitton says.

    The reservist policy at Atlanta-based United Parcel Service also originatedin HR. "Our human resources department managers routinely review situationsand policies that affect large groups of employees, and our reservist policycertainly fits the criteria," says Dale Whitney, corporate healthcare manager,who is responsible for executing UPS’s reservist program. The organizationemploys about 5,000 reservists, with nearly 500 now on active duty.

    The company provides pay differentials and continues health-care and lifeinsurance coverage for deployed reservists and their dependents.

    UPS implemented the policy during the Persian Gulf war, but the currentcall-up has lasted much longer. "The policy is routinely reviewed and extendedby our human resources department to safeguard the economic welfare of ourmilitary reserve employees and their families," Whitney says.

    At Sempra Energy, an energy services holding company based in San Diego, morethan 40 of the company’s 12,000 employees are reservists on active duty. Thecompany covers the difference between their military and company salaries andpays all premiums for medical and dental care for the employees and theirdependents. "The decision to institute Sempra’s policy came from our CEO,who is a former Marine captain, and our senior vice president of humanresources, who worked with approval from the board of directors," says RandallPeterson, vice president for human resources.

    Public Service Enterprise Group, an energy company in Newark, New Jersey,with 13,000 employees, has more than a dozen reservists on active duty. PSEGprovides its activated reservists with a lump-sum payment of one month’ssalary for the first full month of active duty, plus pay differentials for thesecond through twelfth months. It also provides health and life insurancecoverage at no cost to the employees through the twelfth month of active duty.The company’s CEO asked human resources to develop a crisis-period directivefor reservists "that enhances our normal policy and provides added benefits toemployees who are activated during the crisis," says Margaret M. Pego, vicepresident, human resources. The firm has implemented the enhanced directive anumber of times, including the Persian Gulf war, the Bosnia crisis, and afterSeptember 11. "The company has chosen to continue its enhanced support foremployees called to active duty for at least another year," Pego says.

Costs and objectives
    A June 2002 study by the U.S. General Accounting Office reports thatreservist employees often cost employers more than non-reservists even if theemployer does not provide pay differentials and benefits. Costs occur whenemployers pay overtime premiums to their remaining workers or hire temporaryworkers to do the work of deployed reservists. In addition, pre-deploymenttraining can cause major disruptions to work schedules, and the unexpected earlyreturn of a reservist can add costs if both the reservist and the substitutemust be paid.

    Despite these unavoidable financial burdens and the substantial expense ofmaintaining pay differentials and benefits, "cost was not a consideration"in the decision-making process at EDS, Whitton says. "The motivation for thepolicy goes back to EDS’s legacy of supporting our country and the military,"he says. "Our policy provides a morale boost for current employees, who seethat we are supporting the reservists, and gives the reservists peace of mind inwhat is often a time of personal anxiety."

    Like EDS, Sempra does not calculate the cost of its reservist policy. Thecompany’s objective, Peterson says, is to send "the right message to ouremployees--that their military commitment is fully supported by their employer.It is clearly just the right thing to do." Sempra has received awards andsubstantial public recognition for its policy, and USERRA compliance has neverbeen an issue. "Since we not only meet but exceed federal law as it relates toreservists who have been activated, the company has not encountereddifficulties," Peterson says.

    UPS’s reservists include pilots, mechanics, and package handlers who havebeen with the company for years. "Because the average length of employment forfull-time UPS employees is 15 years, we felt that it was imperative that thecompany show its support of its reservist employees," Whitney says. "Loyaltyis a long-standing tradition at UPS, and there is no better way to show loyaltythan by supporting employees when they are called up for active military duty."

    He notes that UPS’s strong promotion-from-within policy has created anetwork of managers who know the company’s business inside out and haveexperience doing almost every job in the company. "We value this experienceand want to encourage employees to return to their jobs with UPS when theirmilitary service is complete," he says. In addition to the costly paydifferentials and benefits continuation, UPS supports reservists with relativelyinexpensive services. "Beyond financial issues, UPS also recognizes that thefamilies of reservists need support and interaction while their loved ones areon active duty," Whitney says. The company’s HR managers across the countryorganize support networks to provide reservists’ families with carpools, eldercare, home maintenance, and other services to help them handle addedresponsibilities when a call-up occurs.

    Employers that cannot make the financial commitment to pay differentials canadopt programs such as UPS’s support networks to express a positive approachto their reservists without incurring high costs. Employers with supportivepolicies generally agree that the returns justify the investment when reservistsare deployed. Some employers are concerned about the ongoing cost of supportivepolicies as months of active duty turn into years, or as employees are called upfor second and third assignments. These employers can limit differentials andbenefits to a set period, with or without the possibility of renewal.


For more information
   For information on reservist policies, employer awards and recognition, andUSERRA compliance, contact:

    National Committee for Employer Support of the Guard and Reserve 

    Reserve Officers Association 

    U.S. Department of Labor’s Veterans’ Employment and Training Service(VETS)

Workforce, January 2003, pp. 33-36 -- Subscribe Now!

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