BENEFITS AND OTHER COMPENSATION ISSUES

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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

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Benefits

Include all financial rewards provide to employees for being employed for the organization

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Benefits in a Total Compensation Program External Environment

Internal Environment

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Compensation

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

Financial Non-FinancialThe Job Job EnvironmentDirect

Mandated Benefits(Legally Required)

• Social security• Unemployment

compensation• Worker’s compensation• Family and Medical Leave

Act of 1993 (FMLA)

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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

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Payment for Time Not Worked“PTO”• Paid vacations • Sick pay• Jury duty• Sabbaticals• National guard or other

military reserve duty• Voting time• Bereavement time

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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

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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

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Employee Services

• Relocation benefits• Child care• Educational assistance• Food service/subsidized

cafeterias• Legal benefits

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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

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Nonfinancial Compensation

Very powerful factor in compensation equation

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The Job as a Total Compensation Factor

• Skill Variety• Task Identity• Task Significance• Autonomy• Feedback

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Workplace Flexibility

• Flextime• Compressed workweek

• Job sharing• Flexible compensation (cafeteria

compensation)• Telecommuting• Part-time work

• Modified retirement21

Illustration of Flextime

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Flexible Time Core TimeFlexible

Time (Lunch)

Core Time Flexible Time

6 a.m. 9 a.m. 6 p.m.3 p.m.Noon

Bandwidth

Advantages of Telecommuting

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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)

For the Company For the Employee For the Community

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