Compensation and Benefits

Compensation and Benefits

Compensation and Benefits Lisa Epps BUS303 Human Resources Due Date Ashford University There are many people that would choose their life career around the benefits and compensation they may receive. Compensation is known as human resources function that deals with every type of rewards that one may receive in return for performing organizational tasks.()1 Do to these rewards such as compensations; turn-over can be affected in the workforce. If an employee did not feel they valued at the workplace they may leave the job. Some may argue that smaller firm have worst turnover than larger firms. This can be due to the fact that larger firms can offer better benefits to their employees, which smaller firms cannot afford. There are four different forms of rewards offered by the employers to their employees. These rewards are known as guaranteed pay-salary is a fixed amount of money or compensation paid to an employee by an employer in return for work performed, variable
pay- is employee compensation that changes as compared to salary which is paid in equal proportions throughout the year, benefits- are a form of compensation paid by employers to employees over and above the amount of pay specified as a base salary or hourly rate of pay, and equity based compensation. Employees are not willing to work solitary for the cash alone, they expect more. Some companies can offer more benefits known to many as fringe benefits, Fringe benefits are compensations made to an employee beyond the regular benefit of being paid for their work. Some fringe benefits are fairly standard, such as offering a few days of sick time or paid vacation time. Employee benefits are non-financial form of compensation offered in addition to cash salary to enrich workers lives. Typical benefits are known as vacations, insurance of different kind, and services like childcare Employee benefits have no direct affect on employee performance, however, insufficient benefits do contribute to...

What Is a Competitive Salary?

June 19, 2009, 10:02 am By Gabriela Montell Many job advertisements assert that the salary offered (and, often, the benefits package) will be competitive. While I confess that some of the institutions where Ive worked use that very language, I remain unimpressed by it.

First of all, its hopelessly vague to say a salary is competitive. No college or university is going to say in a job ad that its salary is uncompetitive, but the term competitive is a deeply relative term both from institution to institution and from person to person. For instance, my institutions salaries are very competitive with those of the other small colleges and universities in Iowa (actually, were easily in the top three or four among similar institutions in the state), and our benefits are much better than average in that group as well. But, nationally, our salaries and those of our regional peers are quite low. However, you can buy a nice house here for well under $100,000, and other aspects of life are commensurately inexpensive (for example, our auto-insurance rates are among the lowest in the country, and some staples, like milk, are half the price they are in a place like Albuquerque). So, while our starting salaries (generally in the mid-$40,000 range) are not exemplary on a national basis, locally one can live quite well on what we pay. When we say our salaries are competitive, they certainly are when measured against our cost of living and the salaries of our peer group. The challenge is that the academic market is national. On a certain level, were competing with similar institutions that offer starting salaries that are sometimes 50 percent higher. In reality, of course, the purchasing power of those salaries is probably lower than ours, but those comparisons are not that easy to draw, particularly outside major metropolitan areas. Not everyone wants to buy a house, for example, nor does everyone want to live in a rural area (or a city, for that matter). Moreover, at an institution like mine, faculty members incur expenses they may not in a more urban location. For instance, it costs real money to get to the nearest airports, both of which are more than a two-hour drive away. Flights out of those airports are more expensive than flights out of hub cities. Not long ago, I moved from one institution about 1,500 miles from where my family lived in Minneapolis to one about half that far. But the more distant university was close to Atlanta, while the nearer one was in a small city, and airfare from Atlanta to Minneapolis-St. Paul was generally much cheaper than it was from my new city. There is so much that goes into whether a salary is truly competitive in the market and for specific candidates that, to my mind, theres virtually no point in advertising it in that way. If an institution isnt going to name a number, or at least a range, saying the salary for a position is competitive is no more specific and helpful than saying nothing at all.

BASIC COMPONENTS OF COMPENSATION PROGRAMS

A pay program may include the following four components: base pay, wage and salary add-ons, incentive payments, and benefits and services. Base pay refers to the cash that an employer pays for the work performed. This base pay can be further delineated as either a wage or a salary. Wages are hourly rates of pay regulated by the Fair Labor Standards Act of 1938. This federal legislation formed the foundation of minimum wage, overtime pay, child labor, gender equality, and record keeping requirements for U.S. businesses. Employees who are subject to the Fair

Labor Standards Act are known in compensation management parlance as "nonexempt." Salaries, which are usually paid to managers and professionals, are annual or monthly calculations of pay that usually have less relation to hours worked. Most (but not all) salaried workers are "exempt" from the Fair Labor Standards Act of 1938. Wage and salary add-ons include cost-of-living adjustments (or COLAs), overtime, holiday and other premium wages, travel and apparel expenses, and a host of related forms of premiums and reimbursements. Wage and salary add-ons are used to compensate employees for work above and beyond their normal work schedules or to reimburse them for expenses related to their jobs. COLAs are usually across-the-board contractual increases tied to an economic indicator, such as the consumer price index, that reports an increase in the cost of living. Incentive payments refer to funds employees receive for meeting performance or output goals as well as to seniority and merit pay. Companies provide these forms of compensation to influence employee behavior, improve productivity, and reward employees for their years of service or their strong job performance. Finally, benefits and services include paid time off, health insurance, deferred income such as pension and profit sharing programs, company cars, fitness club memberships, child care services, and tuition reimbursement. Social Security, workers' compensation, and unemployment compensation are three legally required benefits. Since its initial passage in 1935, the Social Security Act has been amended and expanded to protect workers and their families from losses due to retirement, disability, and/or death. Employers, employees, and the self-employed make contributions to the Social Security fund over the course of their careers. Workers' compensation benefits have evolved from the early 1900s, when rising industrial accident rates prompted state legislatures to action. All 50 states have enacted laws designed to compensate victims, minimize accident-related litigation, reduce on-the-job accidents, and provide treatment and/or rehabilitation where applicable. Unemployment insurance is designed to help workers through the unexpected loss of a job. Employers pay the premiums for unemployment insurance in the form of variable federal and state taxes. Workers who become unemployed and meet preset eligibility requirements receive weekly benefits. Benefits may also come in the form of protection programs, such as life and health insurance and pensions and retirement plans. Group life insurance is one of the most widely offered benefits because of its cost-effectiveness. Most employers shoulder the premiums for employees (and sometimes retirees), but end coverage at employee termination. Group health insurance has also become an expected component of benefits plans. Employers typically choose between five prevalent systems: community-based, commercial insurance, self-insurance, health maintenance organization, or preferred provider. Each of these systems has advantages and drawbacks, and in an era of skyrocketing medical costs and impending federal and/or state supervision of the health care industry, this aspect of compensation management has become evermore complex. Pension and retirement plans include defined-benefit plans and defined-contribution plans. As many as 80 percent of pension plan participants are the beneficiaries of defined-benefit plans. In such a program, the employer promises a fixed pension level, either in terms of a dollar amount or a percentage of earnings scaled to seniority. Defined-contribution plans specify the amount an

employer will set aside in an investment fund for the benefit of each employee. These plans have grown increasingly popular in the 1980s and 1990s because employers know their costs up front, employees can also contribute, and the funds can accumulate in a tax shelter. Employee stock ownership plans (ESOPs) and 401(k) plans are the most popular defined-contribution plans. 401(k)s allow employers and employees to defer a maximum amount of annual compensation to a tax-sheltered "savings account" that can then be invested on the employees behalf. ESOPs are allocations of company-donated stock that can be used as retirement or incentive funds. Upon retirement, a worker receives cash based on the value of the stock and seniority.