BENEFITS AND OTHER COMPENSATION ISSUES

Benefits (Indirect Financial Compensation) All financial rewards that are not paid directly to the employee

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

Mandated Benefits (Legally Required) Social security Unemployment compensation Worker’s compensation Family and Medical Leave Act of 1993 (FMLA)

Social Security Created system of retirement benefits Federal payroll tax to fund unemployment and retirement benefits Amendments included disability insurance, survivors’ benefits, and Medicare

Unemployment Compensation Laid off individual receives compensation for up to 26 weeks Administered by states Payroll tax paid solely by employers

Worker’s Compensation Expenses resulting from job-related accidents or illnesses Administered by states Program paid for by employers Premium expense directly tied to past experience

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 for absences due to employee’s own serious health condition, need to care for newborn or newly-adopted child, seriously ill child, parent, or spouse

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

Health Care Legislation Consolidated Omnibus Budget Reconciliation Act of 1985 (COBRA) – Temporarily continue coverage if employees would lose it because of termination, layoff, or other change in employment

Health Care Legislation (Continued) Older Workers Benefit Protection Act (OWBPA) - Employers must offer benefits to older workers that are equal to, or more than, the benefits given to younger workers with one exception. Is not required when costs to do so are greater than for younger workers

Health Care Legislation (Continued) Employee Retirement Income Security Act of 1974 (ERISA) – Strengthen existing and future retirement programs Older Workers Benefit Protection Act (OWBPA) – extends coverage to all employee benefits

Nonfinancial Compensation Very powerful factor in compensation equation

The Job as a Total Compensation Factor Central issue in many motivation theories Vital component of total compensation program

Job Characteristics Theory Skill variety – extent work requires number of different activities for successful completion Task identity – extent job includes an identifiable unit of work carried out from start to finish Task significance – impact job has on other people

Job Characteristics Theory (Continued) Autonomy – individual freedom and discretion employees have in performing their jobs Feedback – amount of information employees receive about how well they have performed the job

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

Other Compensation Issues Severance pay Comparable worth Pay secrecy Pay compression