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Compensation and Benefit

COMPENSATION & BENEFIT PRACTICES, PROGRAMS, AND POLICIES.

compensation

Key Compensation Components

Compensation has become a far more complicated issue than just deciding how much to pay your employees. In addition to salary, employers must consider many other components — 401(k) plans, stock options, bonuses and vacation — that have become part of compensation packages today.

Employees also have greater expectations of what should be included in their compensation packages, and they may demand specific benefits that can be costly for small businesses.

Costly or not, building a fair and attractive compensation packages is critical for attracting and retaining employees. When setting up your compensation package, consider the following components:

Salary and wages. This is usually the single largest component of a compensation package and, not surprisingly, the most common point of comparison used by employees and potential employees. Salary should be tied to a person’s skills and experience. Subsequent increases need to be based on an employee’s performance, value and contribution to an organization.

Check salary surveys and want ads, and scout out competitors to see if they are underpaying or overpaying their staff. Paying too much is an unnecessary drain on your resources, but paying too little will make it difficult to find and keep the best people.

Bonuses. Employee bonuses, which are usually paid in a single lump at the end of the year, are one way of providing performance incentives. Profit-sharing plans are a more formal way of doing this, but they’re not as effective for rewarding individual performance and compensating employees for meeting their goals.

Long-term incentives. Stock options or stock grants not only provide long-term incentives to employees, but they can also help retain valuable team members through your organization’s crucial start-up phase.

Health insurance. Employer-sponsored health insurance is fairly standard among medium-size companies. And it’s a benefit that has great value to employees. An employer-sponsored plan saves employees money and gives them peace of mind in knowing that they won’t be denied coverage, even if they have existing health problems.

If you think you can’t afford it, think again. Providing insurance to your employees sends the message that you care about their health and the health of their families. To minimize costs, consider having employees pick up part of the tab. Employees who have coverage through a spouse may want to opt out of a plan, particularly if there’s a cost associated with it.

Life and/or disability insurance. This is also a benefit that usually costs less when it’s purchased by an employer rather than an individual.

Retirement plans. 401(k) plans have become popular because they are relatively easy to administer and are less expensive than traditional pension plans. Many employees like these plans because they maintain some control over the amount of their contribution and how the money is invested. Most small companies try to put some kind of savings or 401(k) plan in place, even if they don’t contribute money to them.

Time off and flexible schedules. This includes holidays, vacations, sick days and personal days. An employer unable to offer competitive salaries may close part of the gap by offering more time off or flexible work hours. Some employers make no distinction between sick, vacation and personal days and allow employees a set number of days off each year to be used at their discretion. This prevents employees from abusing sick days and keeps employees from feeling that they need to lie when a child is ill or a personal emergency arises.

Miscellaneous compensation. Other forms of compensation to consider include employee assistance programs, which can provide everything from psychological counseling to legal assistance; discounts on company products; use of a company cars; and any other incentives that motivate employees and give your company a competitive advantage.

Compensation package of a top executive

The total compensation package of a top executive will generally have some Combination of the following components: base salary, short-term bonus based on Performance over the past twelve months, long-term bonus based on performance over the past 3-5 years, stock options (qualified and/or non-qualified), restricted stock, stock purchase and profit sharing. Everything in addition to base salary is not typical of what the average worker receives, and each item should be examined in dividable. On op of the above there will also be a pension, all the usual insurance (health, dental, disability, life) and special fringe benefits ranging from tax preparation to country club membership. Any practicing economist who has ever dealt with the compensation package of a highly paid executive will have an understanding of the complexities involved in valuation, compared to a normal wage earner.

 

Employee Benefits:

Benefit Plan Costs

Health Care Plans
(PPO, POS, HMO, HSA)

Dental Care Plans

Retirement Plans

Flexible Benefit Plans

Disability Benefit Plans

Group Life & AD&D Insurance Plans

Benefits for Part-Time Employees

Domestic Partner Benefits

Employee Policies and Programs:

Paid-Time Off (PTO)

Alternative Work Schedules
(including Telecommuting)

Recruiting and Hiring

Hiring Bonuses

Referral Bonuses

Retention Bonuses

Severance Practices

Workplace Environment

Career Planning & Professional Development

Military Leave Policy

Benefit Plan Costs

  • Benefit Costs as Percent of Payroll
    • Medical, Dental, Vision, Disability, Life, AD&D Plans
    • Retirement Plans
  • Benefits Costs as a Monthly Amount Per Employee
    • Medical, Dental, Vision, Disability, Life, AD&D Plans
    • Retirement Plans

Health Care Plans (PPO, HMO, POS)

  • Monthly Premiums
    • Premium Cost
    • Percent of Premiums Paid by Company
  • Deductibles
    • Percent of Plans with Deductibles
    • Annual Deductible Amounts
  • Coinsurance
    • Percent of Expense Covered by Plan
  • Out-of-Pocket Maximums (OOP)
    • Percent of Plans with OOP Maximums
    • Annual OOP Amounts
  • Lifetime Reimbursement Limits
    • Percent of Plans with Lifetime Limits
  • Office Visit and Prescription Co-Payments
  • Domestic Partner Medical Benefits

HSA Qualified Health Plans

  • Impact on Other Healthcare Options
  • Monthly Premium Costs
  • Percent of Premiums Paid by Company
  • Annual Deductibles
  • Out-of-Pocket Maximums (OOP)
  • Lifetime Reimbursement Limits
  • Prescription Expense Coverage
  • Company Contributions

Dental Care Plans

  • Types of Dental Plans Offered
  • Timing of Employee Eligibility to Enroll
  • Expenses Covered
  • Costs of Monthly Premiums
  • Percent of Monthly Premium Paid by Company
  • Deductibles and Co-Insurance
  • Out-of-Pocket (OOP) Maximums
  • Orthodontic Expense Coverage
  • Orthodontic Reimbursement Limits

Retirement Plans

  • Types of Retirement Plans Available to Employees
    • Defined Benefit Plan
    • 401(k)
    • Simple-IRA
    • Profit Sharing Plan
    • ESOP
    • SEP-IRA
    • Salary Reduction SEP
  • Eligibility Requirements
  • When do Employee Contributions Fully Vest
  • Retirement Plan Costs
    • as a Percentage of Payroll
    • per Employee
  • 401(k) Matching Policy

Flexible Benefit Plans

  • Premium Conversion/Premium Only Plan (POP)
  • Unreimbursed Medical Expenses (UME)
  • Dependent Child Care Expenses (DCC)
  • Dependent Adult Care Expenses (DAC)
  • Adoption Assistance Expenses (AAE)
  • Cafeteria Plan
  • Transportation Benefit Plan

Disability Benefit Plans (Short- and Long-Term)

  • Who Pays the Premium
  • Eligibility for Disability Benefits
  • Waiting Periods
  • Duration of Plans
  • Setting Amount of Disability Benefits
  • Disability Payouts

Group Life & AD&D Insurance Plans

  • Group Life Plans
    • Benefit Amounts
    • Cost Coverage
    • Supplemental Life Insurance
  • Accidental Death & Dismemberment (AD&D) Insurance
    • Benefit Amounts

Benefits for Part-Time Employees

  • Benefits Available
  • Work Requirements for Eligibility
  • Covering the Costs

Domestic Partner Benefits

  • Domestic Partner Healthcare Benefits: Coverage
  • Eligibility Requirements

Employee Policies and Programs covered:

Paid-Time Off Policies

  • Number of Days Paid Time Off Provided by Type of Day:
    • Holidays
    • Floating Holidays
    • Sick Days
    • Vacation Days
    • Personal Days
    • Annual Leave Pool
    • Other Paid Time Off
  • Number of Days Paid Time Off Provided by Type of Model:
    • Traditional Model with Specified Sick Leave
    • Traditional Model without Specified Sick Leave
    • Annual Leave Model
  • Treatment of Unused Paid-Time Off:
    • Unused Vacation Days
    • Unused Sick Days
    • Unused Annual Leave Days
    • Time Limits on the Use of Carried-Over Paid Time Off
    • Accrual of Paid Time Off
    • Upon Termination

Alternative Work Schedules

  • Types of Alternative Work Schedules Offered:
    • Telecommuting
    • Flexible Work Hours
    • Compressed Work Weeks
    • Job Sharing
    • Part-time Professional Employment
  • Eligibility
  • Productivity of Employees in Alternative Work Schedules
  • Methods Used to Monitor Productivity
  • Tools/Assistance Provided to Telecommuting Employees
  • Requirements for Telecommuting Employees

Recruiting and Hiring

  • Recruiting Budgets
  • Recruiting Sources
  • Job Posting Websites
  • Recruiting Tools
  • Interviewing Applicants
  • Pre-Employment Testing
  • Pre-Employment Screening

Referral Bonuses

  • Referral Bonus Eligibility by Employee Type and Level
  • Referral Bonuses Awarded by Type of New Hire
  • Referral Bonus Payments by Type of Hire
  • Amount of Referral Bonus
  • Timing of Referral Bonus Payouts

Hiring Bonuses

  • Hiring Bonus Eligibility by Employee Type and Level
  • Calculating Hiring Bonuses
  • Hiring Bonus Amounts by Employee Type and Level
  • Timing of Hiring Bonus Payouts
  • Hiring Bonus Forfeiture and Repayment Policies

 

Retention Bonuses

  • Retention Bonus Eligibility by Employee Type and Level
  • Calculating Retention Bonuses
  • Retention Bonus Amounts by Employee Type and Level
  • Payment of Retention Bonuses

Severance Practices

  • Severance Practices by Company Size
  • Calculation of Severance
  • Severance Pay Amounts
  • Placement Services Offered
  • Release Agreements
  • Trends in Severance Amounts

Workplace Environment

  • Dress Codes
  • Work Space Allocation
  • Company Sponsored Events and Activities

Career Planning and Professional Development Programs

  • Career Planning Programs
    • Conference Attendance
    • Professional Memberships
    • Tuition Reimbursement
    • Trade Journal Subscriptions
    • Technical Career Ladders
    • Job Rotation / Cross Training
    • Management Succession Planning
    • Formal Mentoring
  • Tuition Reimbursement
    • Course Requirements to Receive Tuition Reimbursement
    • Conditions of Tuition Reimbursement
  • Professional Development Programs
    • Management or Supervisory Skills
    • Leadership Development
    • Project Management
    • Interpersonal Communication
    • Team Building
    • Conflict Management
  • Training Budgets

Military Leave Policy

Military Leave Policy

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