Doing right by reservists
More big companies have implemented generous policies for called-up reservists.
March 20, 2003: 1:45 PM EST
By Gordon T. Anderson, contributing writer to CNN/Money

NEW YORK (CNN/Money) - There's been no shortage of ugly news from the executive suite in the past few years: accounting swindles, fat-cat gluttony, callous layoffs.

The story is different, however, when it comes to employees who have been called up to active duty by the U.S. armed forces reserves. These days, Corporate America is putting public virtue ahead of private gain.

By law, companies aren't mandated to do much more for called-up reservists than they do for new mothers. Boiled down to their essence, the complex regulations obligate companies to offer some leave during military training, and to guarantee that the soldier's job (or its equivalent) will be there upon returning from service.

In practice, however, more than a few companies are going the extra mile. Many firms are paying the difference in lost wages and extending health, 401(k) and other benefits. They're also offering counseling and other assistance to families left home.

Approximately 170,000 reservists have been called up since planning for the war in Iraq began, and the Defense Department has stated clearly that additional activations may be necessary.

Pro-reserve Policies
Some companies with generous benefits for called-up reservists
Schering-PloughSGPPays full salary and benefits for duration
W.W. GraingerGWWFull salary and benefits for up to one year
First Data Corp.FDCFull salary and benefits for up to one year
Morgan Stanley Dean WitterMWDFull salary and benefits for up to six months
Pacific Lifen/aFull salary for up to six months
Coca-Cola KOFull salary for up to three months
National City CorpNCCFull salary up to six months
PittstonPZBFull salary up to six months
ExxonMobilXOMSalary differential for the duration
IBMIBMSalary differential for the duration
*List is not intended to be comprehensive. Other firms may offer similar policies.
Source:Reserve Officers Association

In fact, reserves play a larger role in U.S. military -- and homeland defense -- strategy than at any point since World War II. Today, about half of all American military personnel are part of the reserves.

Companies large and small are scrambling to respond. Some of the most generous are even willing to pay full salaries, full benefits and more -- for the length of the reservists' active service, no matter how long that ultimately is.

Pharmaceutical company Schering Plough is one such firm. Its current policy simply treats called-up employees as if they were still working at the company, and therefore entitled to their full salary and benefits.

Reserve Officers study

The Reserve Officers Association, a Washington-based group concerned with military personnel issues, regularly polls Fortune 500 companies about their policies regarding reservists. In this year's survey, conducted in January, the group saw the most pro-reserves response since its annual polling began before the 1991 Gulf War.

More than two-thirds of the respondents to the survey provided pay differential -- the difference between a corporate salary and that of a full-time soldier. In the same survey a year ago, only 58 percent of respondents did so.

"There's been a definite positive trend," says John O'Shea, a spokesman for the ROA. "Right after Sept. 11, we began to get a large number of calls from companies asking what they could do." As the war with Iraq became news, the inquiries and corporate policy changes -- picked up pace again.

Take, for example, Electronic Data Systems, the technology services firm founded by Ross Perot. "Following the terrorist attacks of Sept. 11, we re-evaluated our leave policies," said EDS spokeswoman Kristin Dobrowolski.

Today, called-up EDS employees are guaranteed to be paid the difference between their military salary and their EDS paycheck for up to 540 days. Previously, the company had underwritten salary differentials for up to a year. The firm has also put in place a number of measures, from counseling to house-sitting, for families that need help on the home front.

"EDS has a long history of hiring veterans and reservists, so when the occasion arose, we thought it was important to be supportive of our employees," Dobrowolski notes proudly. "It also builds morale and fosters a sense of corporate commitment."

Schering and EDS are among the most generous, but they're far from alone. Most firms in the survey provide health benefits for reservists and their dependents, to address any gap in coverage between their company health plan and what the military offers. Another common practice is to extend the length of time returning reservists will have to get back on the job after the war.

Add it all up, and it can make a difference. Take, for example, a salesman making $100,000 in the private workforce. If he is called up to serve at the rank of a master sergeant in the Army, his military salary would be approximately $56,000 -- a big shortfall if the reservist has mortgage payments to make, school bills, or a range of other civilian necessities.

Size matters

To be sure, the most benevolent companies tend to be among the biggest, which can more easily afford it. (Indeed, the ROA survey covers only the Fortune 500.)

For smaller firms, the question of dealing with call-ups can be both a financial and strategic challenge. According to the Small Business Administration, for every 100,000 reservists called up, about 16,000 small businesses are affected by losing key employees.

In fact, an estimated 8 percent of activated reservists are small business owners, from doctors and dentists to building contractors. "The most extreme example may be the physician with a private practice," says the ROA's O'Shea. "When they get called up, their whole business may just go away."

Joseph Pally, a spokesman for the SBA, acknowledges the hazards smaller companies and their employees face. "They don't have the largesse of a Fortune 500 company, so it's more of a struggle financially."

For its part, Pally says, the SBA is "trying to make small businesses aware of what they should be doing to get a contingency plan in place for business continuity." The agency offers a range of services to companies, from the consulting services of retired executives (the SCORE program) to low-interest rate loans.

In the most extreme cases, the SBA's "disaster loan" program will provide low-cost loans to fund operating expenses and other costs to small businesses that have "sustained substantial economic injury as a result of the loss of a key employee." Business-owner reservists are covered.  Top of page

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