Employee Compensation and Benefits Mike Otis SPHR, CEBS Associate Director Human Resource Services Employee Benefits 3770 Beardshear Hall Human Resource Services

Agenda Typical HR Organization Compensation Goals Compensation Approaches Employer Challenges General Benefit Concepts Health Benefits Welfare Benefits Retirement Benefits Closing Thoughts Employee Benefits 3770 Beardshear Hall Human Resource Services

Typical HR Structure Employee Benefits 3770 Beardshear Hall Human Resource Services HR Employee Relations Equal Opportunity Diversity Workers Comp Leave Programs PayrollBenefitsCompensation Employee Assistance RecruitingHRIS

Goals of Compensation Plans Why do companies care about how much they pay? Employee Benefits 3770 Beardshear Hall Human Resource Services

Goals of Compensation Plans Employers are able to attract and retain employees who will contribute to the organization’s success Employees feel they are compensated/rewarded fairly/equitably for their efforts and contributions to an organization’s success Employee Benefits 3770 Beardshear Hall Human Resource Services

Is Pay the Only Important Factor? Employee Benefits 3770 Beardshear Hall Human Resource Services

Employee Benefits 3770 Beardshear Hall Human Resource Services Supportive Corporate Culture Executive Sponsorship Rewards Bonus Salary Increases Promotions Equity Offerings Awards Recognition New job assignments Salary Pay Overtime (if in non-exempt classification) Benefits Health Plans Retirement Plans Vacation/ time off Paid Training Working Hours Employee Satisfaction Total Compensation

What Factors Determine Pay Employer considerations – Where employers compete for talent – local or national – What talents an employer competes for – the skill/knowledge level – How strongly the employer wants to compete Lead the market Meet the market Lag the market Employee Benefits 3770 Beardshear Hall Human Resource Services

What Factors Determine Pay? What job duties will be performed determines classification as either Exempt or Non-exempt (Governed by Fair Labor Standards Act (FLSA)) – Non-exempt employees. Eligible for overtime pay for hours worked in excess of 40 Employer must have record of time worked – Exempt employees Typically executive, professional, or administrative positions Must meet minimum weekly pay guideline Not entitled to overtime Must meet both salary test and duties test Employee Benefits 3770 Beardshear Hall Human Resource Services

Employee Benefits 3770 Beardshear Hall Human Resource Services How to Build a Total Compensation “House”

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Philosophy

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Structure Compensation Philosophy

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Structure Job Classifications Compensation Philosophy

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Structure Job Classifications Rewards/Recognition Compensation Philosophy Benefits

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Structure Job Classifications Rewards/Recognition Compensation Philosophy Benefits

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Structure Job Classifications Rewards/Recognition Compensation Philosophy Benefits

Employee Benefits 3770 Beardshear Hall Human Resource Services Compensation Structure Example

Benefits are often as important as pay to employees Employee Benefits 3770 Beardshear Hall Human Resource Services

Utopia Enterprises – Your Employer of Choice! We provide a “buffet” of benefit choices to meet your individual needs!! Employee Benefits 3770 Beardshear Hall Human Resource Services

Employee Benefits 3770 Beardshear Hall Human Resource Services Benefits Offered Source: 2005 Iowa Employer Benefits Study, David P. Lind and Associates Offered by Employers with 250 or more Employees Rank Health Insurance97.7%1 Life Insurance95.4%2 Retirement Plans94.4%3 Paid Holidays94.1%4 Pre-Tax deductions for Employee benefit contributions86.5%5 Long Term Disability Insurance84.1%6 Paid Vacation83.7%7 Educational Assistance/Tuition Reimbursement75.1%8 Sick Leave73.8%9 Employee Assistance Program (EAP)73.1%10 Fitness Center or Gym subsidy36.7%11 Long Term Care Insurance32.8%12 Flextime32.5%13 Casual Dress (every day, not just Fridays)32.2%14 Retiree Health Insurance (post age 65)25.6%15 Telecommuting18.9%16 Child Care Assistance (on or off site)7.4%17 Subsidized employee mealsNot on list18 Free Coffee/SodaNot on list19 Pet InsuranceNot on list20

Employer Challenges Structuring employee benefit packages that meet the needs of a diverse workforce – one size does not fit all Helping existing employees understanding the “value” of their benefits Administering benefit programs – costly and time- consuming. Not a profit-making venture! Continued rising health care costs Limited budgets – Benefits average 25% - 40% of payroll in most organizations Government restrictions/legislation/public policy Employee Benefits 3770 Beardshear Hall Human Resource Services

General Concepts Publicly traded companies will tend to structure pay/benefits that incorporate more equity (stock options, savings match in company stock, bonus tied to company performance, etc) Non-publicly traded companies/organizations will spend more on non-cash incentives Governmental organizations will on average spend more on benefits in lieu of salary Employee Benefits 3770 Beardshear Hall Human Resource Services

Categories of Benefits Employee Benefits 3770 Beardshear Hall Human Resource Services CategoryExamples Government MandatedSocial Security and disability, workers compensation “Core” benefitsMedical, life insurance, disability, retirement programs, vacation, holiday pay, sick pay “Lifestyle” benefitsEmployee assistance programs, work/life programs, wellness, on-site daycare “Custom” benefitsFlexible spending accounts, computer discount purchases, pet insurance, tuition reimbursement

Laws Affecting Employee Benefits and Compensation Patient Protection and Affordable Care Act (PPACA) (new) Fair Labor Standards Act (FLSA) Employee Income Retirement Security Act of 1974 (ERISA) Age Discrimination and Employment Act (ADEA) Family Medical Leave Act (FMLA) of 1996 Stabilization Act of 1942 – birth of employer group benefits Health Insurance Portability and Accountability Act of 1996 (HIPAA) (and amendments) Pension Protection Act of 2006 many, many others Employee Benefits 3770 Beardshear Hall Human Resource Services

Closing Thoughts Employee Benefits 3770 Beardshear Hall Human Resource Services How employees are “compensated” takes many forms – salary, benefits, working conditions, challenging/stimulating work, co- workers, etc. The right “mix” for each person is different Pay policies will differ for every employer – some will focus on Cash compensation and some will focus on Total Compensation The employer’s main goal is structuring compensation and benefit programs is to be able to attract and retain the right employees needed to help the employer be competitive

Closing Thoughts Employee benefits have huge budget impacts to employers Benefits are the “hidden paycheck” for employees Employees need to understand the “total compensation” an employer provides – not just the “salary.” Employers need to sell Total Compensation – not just salary Employees need to be “educated consumers” of benefit programs – especially health care and retirement programs Employee Benefits 3770 Beardshear Hall Human Resource Services

Questions?? Employee Benefits 3770 Beardshear Hall Human Resource Services