1. BENEFITS AND OTHER COMPENSATION ISSUES

2. Chapter Objectives Define benefits as indirect financial compensation.
Describe mandated (legally required) benefits.
Describe the basic categories of voluntary benefits.
Describe the range of employee discretionary benefits.
Explain factors involved in non-financial compensation.
Explain factors that are involved in workplace flexibility.
Discuss workplace flexibility

3. Benefits Include all financial rewards provide to
employees for being employed for the
organization
This includes direct and indirect compensation

4. Benefits in a Total Compensation Program External Environment Internal Environment
Financial
Non-Financial
The Job Job Environment
Direct
Indirect (Benefits)
Legally Required Benefits Social Security Unemployment Compensation Workers’ Compensation Family & Medical Leave
Voluntary Benefits Payment for Time Not Worked Health Care Life Insurance Retirement Plans Employee Stock Option Plans Supplemental Unemployment Benefits Employee Services Premium Pay Unique Benefits
There are two types of benefits. Direct and indirect. Indirect benefits can account for as much 30% - 40% of an employees compensation

5. Mandated Benefits (Legally Required)
Social security
Unemployment compensation
Worker’s compensation
Family and Medical Leave Act of 1993 (FMLA)
Certain benefits have been mandated and count for 10% of the total compensation

6. Social Security (SS) Created system of retirement benefits
Federal payroll tax to fund unemployment and retirement benefits
Increased SS has caused for the use of skilled nurses and home health care
SS 6.2% and Medicare 1.45%
95% of workers pay into and draw SS
Solving the surplus problem by 2038
Social Security was setup up to fund unemployment and retirement.
95% of people who work pay into Social Security
Currently the SS program is running a surplus but if changes are not make by 2038 our nation will not have a surplus. This is due to the 77million baby-boomers retiring.

7. Unemployment Compensation
Laid off individual receives compensation for up to 26 weeks
Provide compensation until job is found
Help sustain the consumer spending
Programs administered by states and will have direct guidelines
When employees are terminated through no fault of their own they can receive unemployment. During the recent recession the government increase the weeks of unemployment.

8. Worker’s Compensation
Expenses resulting from job-related accidents or illnesses
Administered by states
Program paid for by employers
Encouragement for proper health and Safety programs
When employees on injured on the job the employer will pay all cost of the worker’s compensation. Companies may sometime investigate claims to make sure the are legitimate

9. Family and Medical Leave Act of 1993 (FMLA)
Private employers with 50 or more employees and governmental employers regardless of number of employees
Up to 12 workweeks of unpaid leave per year
Employees come back to the same or equivalent job
Applies to companies that have employees of 50 or more. If the organization is governmental the number of employees do not make a difference.
For employees to take advantage of the FMLA benefit they must be employed for at least 12months and worked over 1250hrs within the 12 months.

10. Discretionary Benefits (Voluntary)
Payment for time not worked
Health care
Life Insurance
Retirement plans
Employee Stock Option Plans (ESOP)
Supplemental Unemployment Benefits (SUB)
Employee services
Distinctive benefits
Premium pay
Part-time employee benefits
There are other benefits that do not provide direct compensation. These benefits will vary by company.

11. Payment for Time Not Worked “PTO”
Paid vacations
Sick pay
Jury duty
Sabbaticals
National guard or other military reserve duty
Voting time
Bereavement time
Some companies offer Vacation time separate from Sick time.
The normal is moving towards companies offering “PTO” and having sick and vacation rapped into one
Employers pay and allow time off for Jury duty military, voting and bereavement leave. The time off will vary by company.

12. Health Care
Health maintenance organizations (HMO) – cover services for fixed fee, but control exercised over doctors and health facilities
Preferred provider organizations (PPO) – incentives to use services within system, may use outside providers at greater costs
Point-of-service – requires primary physician and referrals to see specialists
HMOs have a fixed fee but controls which doctors are used by the employees
PPO provides flexibility to employees and employees are able to control which doctor they use
Point-of-services indicates that before an employee can see a specialist they must have a referral from their physician

13. Health Care (Continued)
Defined-contribution health-care system – employee gets set amount of money annually to purchase health-care coverage
Medical saving accounts – employees set aside pretax money to pay for medical bills that are not covered, including deductibles and co-payments
Dental and vision care
Defined contribution- Employees receive a certain amount of money to purchase the health care needed
Medical Savings- Employees have the opportunity to set aside pretax dollars for medical reasons. Employees must use it within the calendar year.

14. Life Insurance
Group life insurance commonly provided benefit to protect employee’s family in event of death
Employees have the ability to select the coverage they need/want. It can include coverage of as much as 2 times to times an employees base salary

15. Retirement Plans Defined benefits plans Defined contribution plan
Cash balance plan
Disability protection

16. Employee Stock Option Plans (ESOP)
Firm provides employees the opportunity to purchase stock
Employees can buy stock at a discount
Promotes ownership within the organization
Promote ownership in the company and is offered to employees at all levels

17. Employee Services Relocation benefits Child care
Educational assistance
Food service/subsidized cafeterias
Legal benefits
Companies provide relocation of household goods and help ensure that the employee can arrive at work and not worry about their personal items. It also provides temporary housing if need
Companies are now providing on-site child care or permit employees to bring Child to work
Companies offer subsidized lunches, soda machines, coffee to help increase productive and provide a great place to work
Companies offer employees the ability to purchase insurance policies and receive a payroll dedication and discount

18. Premium Pay
Compensation paid to employees for working long periods of time or working under dangerous or undesirable conditions
Hazard Pay - Pay provided to employees who work under extremely dangerous conditions
Shift Differentials - Paid to employees for the inconvenience of working less desirable hours
Companies will pay extra for the conditions employees are put in. This includes hazard pay and shift differentials.
Hazard employment could be a washer for skyscrapers or military pilots.
Shift differentials is for inconvenient work schedules. For example working from 12am – 7am.

19. Nonfinancial Compensation
Very powerful factor
in compensation
equation
It is a well known fact that people do not always want a lot of money to stay or even join a new company. There are other factors that come into play that do not include direct compensation.

20. The Job as a Total Compensation Factor
Skill Variety
Task Identity
Task Significance
Autonomy
Feedback
Skill Variety – when an employee has variety in their job has the ability to utilize different skills
Task Identity- When an employee is able to identify their job with a certain accomplishment. For example, a Footwear Product Developer will see his or her shoe in footlocker.
Task Significance- when an employees job influence the lives of people it adds a sense of achievement. For example, a doctor or police officer.
Autonomy- leads employees to feel they have ownership and responsibility for outcomes on the job
Feedback-

21. Workplace Flexibility
Flextime
Compressed workweek
Job sharing
Flexible compensation (cafeteria compensation)
Telecommuting
Part-time work
Modified retirement
Flextime- allows employees to have the benefits of adjusting the time they come to work. Businesses can offer flexible services to customers, supervisors are forced to communicate more effectively.
Compressed workweek- employees have the opportunity to work 4 days a week with longer work hours, usually 10hours per day. In return they are able to take one day off a week with out using vacation.
Job sharing- two part-time people split the work schedule of 40 hours a week. Sometimes the days work over lap to allow for successful hand-offs and communication. Trust is very important in this role
Flexible compensation- allows employees the ability to select what components that have for their compensation package. This approach with employees individual needs and preferences
Telecommuting- allows employees the ability to work from home if they are able to maintain their performance. Not every job can be performed remotely. For example, Customer Service Representative. Most telecommuters are information workers. For example, programmer or recruiter.
Part-time work- the employee who are students or parents with young children may need part-time schedules. The retail industry is known for having its workforce be part-time.
Modified retirement- permits older workers to work fewer hours for a certain time period while maintaining their eligibility to retire

22. Flextime
Practice of permitting employees to choose, with certain limitations, their own working hours
Work the same number of hours per day as they would on a standard schedule
Many firms are using

23. Illustration of Flextime
Flexible Time
Core Time
Flexible Time (Lunch)
Core Time
Flexible Time
6 a.m.
9 a.m.
Noon
3 p.m.
6 p.m.
Bandwidth

24. Compressed Work Week
Arrangement of work hours that permits employees to fulfill their work obligation in fewer days than the typical five-day workweek
Four 10-hour days
Often greater job satisfaction

25. Job Sharing
Two part-time people split the duties of one job in some agreed-on manner and are paid according to their contributions
Partners must be compatible, have good communication skills and trust must exist between the job sharers and their manager

26. Flexible Compensation Plans
Permit employees to choose from among many alternatives in deciding how their financial compensation will be allocated
Determine the compensation package that best satisfies his or her particular needs

27. Compensation Vehicles Utilized in a Cafeteria Compensation Approach
Accidental death, dismemberment insurance
Birthdays (vacation)
Bonus eligibility
Business and professional membership
Cash profit sharing
Club memberships
Commissions
Company medical assistance
Company-provided automobile
Company-provided housing
Company-provided or –subsidized travel
Day care centers
Deferred bonus
Deferred compensation plan
Dental and eye care insurance
Discount on company products
Education costs
Educational activities (time off)
Free checking account
Free or subsidized lunches
Group automobile insurance
Group homeowners’ insurance
Group life insurance
Health maintenance organization fees
Home health care
Hospital-surgical-medical insurance
Incentive growth fund
Interest-free loans
Long-term disability benefit
Matching educational donations
Nurseries
Nursing home care
Outside medical services
Personal accident insurance
Price discount plan
Recreation facilities
Resort facilities
Sabbatical leaves
Salary continuation
Savings plan
Scholarships for dependents
Severance pay
Sickness and accident insurance
Stock appreciation rights
Stock bonus plan
Stock purchase plan

28. Telecommuting
Work arrangement whereby employees, called teleworkers or telecommuters, are able to remain at home, or otherwise away from the office, and perform their work using computers and other electronic devices that connect them with their offices

29. Advantages of Telecommuting
For the Company
For the Employee
For the Community
Aids recruitment and retention
Broadens labor market (worker location not a factor; caters to employees with disabilities
Reduces sick time and absenteeism
Improves job satisfaction and productivity
Saves costs for office space and utilities
Provides work/life flexibility
Reduces transportation and clothing costs
Reduces stress of travel
Caters to most productive hours for both “early birds” and “night owls
Decreases traffic congestion
Conserves energy and reduces pollution
Relieves public transportation of “rush hour” problems
Reduces peak-time congestion for many service organizations (e.g., retail and health care)

30. Part-time Work
Some people do not either want or need full-time employment
Adds many highly qualified individuals to the labor market by permitting both employment and personal needs to be addressed

31. Modified Retirement
Permits older employees to work fewer than regular hours for a certain period of time preceding retirement
Allows an employee to avoid an abrupt change in lifestyle and move gracefully into retirement