Telecommuting among U.S. workers has risen 30 percent since 1995 and should continue to grow, according to a recent survey sponsored by the International Telework Association (ITA).

Slightly more than 11 million people currently telecommute on a regular basis, according to a survey conducted by the New York-based research company FIND/SVP. In 1995, a similar survey estimated that 8.5 million people telecommuted on a regular basis. The number of people working at home has grown dramatically since 1990, when nearly 4 million people telecommuted regularly.

According to the ITA's most recent survey, the average telecommuter spends 19 hours per week working from home, is 40 years old, and earns $51,000 per year. The same survey predicts that the number of home-based workers may top 14 million by the year 2000.

Officials with the Environmental Protection Agency (EPA) report that telecommuting may benefit the environment by reducing the number of people who drive to work. EPA studies show that telecommuters generally cut their vehicle use by nearly 30 percent, even though they tend to take more personal trips per day than "traditional workers."

For more information on telecommuting, as well as the survey results, see the web site of Telecommute America at http://www.att.com/Telecommute_America.

HRMagazine

SEVERANCE PAY DROPS, BENEFITS RISE

Employers are offering less severance pay but more benefits to departing workers, according to a survey by Manchester Partners International, an alliance of outplacement and career management firms based in Bala Cynwyd, Penn.

The average severance calculation formula for senior-level executives was 50 percent lower in 1997 than in 1992, the survey reports. For managers, the drop was even more precipitous--60 percent from 1992 to 1997.

In lieu of cash severance benefits, most employers offer displaced employees other forms of assistance, including outplacement, health insurance and access to Employee Assistance Programs. Some employers also allow displaced workers to keep the full amount of their severance pay no matter how quickly they find new jobs. In addition, 80 percent of companies allow employees to apply for unemployment compensation without any reduction in their severance allotment.

Other benefits offered by companies include using company voice mail and on-site day care.

AN INTRO TO STOCK OPTIONS

Employee stock options are rights to purchase company shares at a specified price during a specified period of time. They are the most popular long-term incentive compensation approach among American companies, including small and mid-size public companies. Private or nontraded companies also often grant stock options, particularly start-up companies anticipating future public stock offerings.

A number of decisions are necessary to put an option program in place. The objectives for most programs are:

Reward stock price growth
Build employee stock ownership
Encourage employment retention
Employ competitive compensation trends

Stock options are governed by a complex and frequently changing regulatory framework of accounting and tax rules, and the Securities and Exchange Commission (SEC). This article is therefore, only a short introduction.

Significant Option Events

There are four significant events in the life of an option that are necessary to consider when designing a program.

The grant date is when the clock starts running on an option. It usually becomes the base period for other time-related events and establishes the stock price above which the option recipient earns a profit for stock price growth. The price may also be referred to as the option price, grant price, strike price or exercise price.

The vesting date is the date when option recipients first have the right to take the option profit by "exercising" their option. If recipients leave the company before vesting, they forfeit their options. To encourage employee retention, most options do not vest until after a specified number of years from the grant date.

The exercise date is the date when option recipients purchase the underlying shares and take the option profit.

The expiration date is the end of the option term, which is the last day the option may be exercised. Options often expire on the 10th anniversary of the grant date, but can be for shorter or longer periods of time.

Design Decisions

After complying with certain accounting, tax and SEC rules, which fortunately requires in-depth knowledge of a few rules and regulations rather than many, there are no rights or wrongs in designing your program. Decisions should be guided by what makes sense in regards to the company's pay philosophy, employee relations objectives, competitive circumstances, financial priorities and business strategy.

When making design decisions, one would consider the following:

Option grant type (e.g., discounted, premium, index)
Option price
Option term
Exercise vesting
Post-termination exercise
Payment at exercise

Another step prior to plan implementation is deciding upon the primary administrative provisions, such as who will participate and the timing and size of grants.

Participation and Trends

Traditional rules of participation no longer apply. Before the late 1980's, option grants were generally limited to executives, except in start-up and growth companies. Now it is common for large and mature companies to extend participation to middle management and equivalent positions.

Five to 10 percent of U.S. companies offer stock options to all employees, typically granting from 100 to 200 options annually, or an amount based on a percentage of salary. According to the same survey by the American Compensation Association, 36% of companies that offer stock options make them available to non-exempt employees.

Why are employers expanding participation? Factors are: efforts to increase pay for performance, control fixed compensation costs, conserve cash and encourage employee ownership. Capital gain tax cuts in the five year budget plan Congress passed last summer make stock options more attractive to employees. The new tax law may further encourage use because some employees' compensation from income (taxed at a maximum rate of 39.6%) would convert to capital gains (which after 5 years will be a maximum of 18%).

HRM Update