mgmt 471-4-09 comp and benefits presentation 10-08
TRANSCRIPT
Employee Compensation and Benefits
Mike Otis, Associate DirectorHuman Resource Services
Employee Benefits3770 Beardshear Hall
Human Resource Services
Agenda• Typical HR Organization• Compensation Goals • Compensation Approaches • Benefits Exercise• Employer Challenges • General Benefit Concepts• Health Benefits• Welfare Benefits• Retirement Benefits• Closing Thoughts
Employee Benefits3770 Beardshear Hall
Human Resource Services
Typical HR Structure
Employee Benefits3770 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 Benefits3770 Beardshear Hall
Human Resource Services
Employee Benefits3770 Beardshear Hall
Human Resource Services
Supportive Corporate CultureExecutive Sponsorship
RewardsRewards• Bonus
• Salary Increases
• Promotions
• Equity Offerings
• Awards
• Recognition
• New job assignments
SalarySalary• Pay• Overtime (if in non-exempt classification)
BenefitsBenefits• Health Plans
• Retirement Plans
• Vacation/ time off
• Paid Training
• Working Hours
Employee SatisfactionEmployee Satisfaction
Total Compensation
What Factors Determines 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 Benefits3770 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 Benefits3770 Beardshear Hall
Human Resource Services
Employee Benefits3770 Beardshear Hall
Human Resource Services
Compensation Structure
Job Classifications
Rewards/Recognition
Compensation Philosophy
BenefitsBenefits
Employee Benefits3770 Beardshear Hall
Human Resource Services
Compensation Structure ExampleGrade Minimum Midpoint Maximum
Midpoint Progression
Range Width
12 $93,500 $131,000 N/A 14% N/A
11 $81,800 $114,500 $147,200 14% 80%
10 $71,800 $100,500 $129,200 14% 80%
9 $65,300 $88,200 $111,000 14% 70%
8 $57,200 $77,400 $97,200 14% 70%
7 $52,000 $67,600 $88,400 14% 70%
6 $45,600 $59,300 $73,000 14% 60%
5 $40,000 $52,000 $64,000 10% 60%
4 $37,800 $47,200 $60,500 10% 60%
3 $34,300 $42,900 $51,500 10% 50%
2 $31,200 $39,000 $46,800 8% 50%
1 $28,800 $36,000 $43,200 N/A 50%
Utopia Enterprises – Your Employer of Choice!
We provide a “buffet” of benefit choices to meet your individual
needs!!
Employee Benefits3770 Beardshear Hall
Human Resource Services
Employee Benefits3770 Beardshear Hall
Human Resource Services
Benefits OfferedSource: 2005 Iowa Employer Benefits Study, David P.
Lind and Associates
Offered by Employers with 250 or more Employees
Rank
Health Insurance 97.7% 1
Life Insurance 95.4% 2
Retirement Plans 94.4% 3
Paid Holidays 94.1% 4
Pre-Tax deductions for Employee benefit contributions 86.5% 5
Long Term Disability Insurance 84.1% 6
Paid Vacation 83.7% 7
Educational Assistance/Tuition Reimbursement 75.1% 8
Sick Leave 73.8% 9
Employee Assistance Program (EAP) 73.1% 10
Fitness Center or Gym subsidy 36.7% 11
Long Term Care Insurance 32.8% 12
Flextime 32.5% 13
Casual Dress (every day, not just Fridays) 32.2% 14
Retiree Health Insurance (post age 65) 25.6% 15
Telecommuting 18.9% 16
Child Care Assistance (on or off site) 7.4% 17
Subsidized employee meals Not on list 18
Free Coffee/Soda Not on list 19
Pet Insurance Not on list 20
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 Benefits3770 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 Benefits3770 Beardshear Hall
Human Resource Services
Core vs. Non-Core Benefits
Employee Benefits3770 Beardshear Hall
Human Resource Services
Core Benefits (Traditional)
Non-core Benefits (Voluntary – Elective)
Health Insurance Dental
Prescription Drugs Vision
Basic Life Insurance Supplement Life, Dependent Life
Vacation Long-term care insurance
Holidays Auto-homeowners insurance
Sick Pay Mortgage services/discounts
Disability On-site daycare
Tuition reimbursement
Yes, even Pet Insurance
Health Benefits • General types of health coverage
– Medical– Prescription Drugs– Dental– Vision
•Most health benefit employee contributions will be deducted from pay pre-tax
Employee Benefits3770 Beardshear Hall
Human Resource Services
Wellness Programs • Many employers are starting to see the value from incorporating wellness initiatives into their work places
– disease management– health risk assessments– fitness programs– on-site clinics and pharmacies
• Prevention vs. Payment• Improve productivity/reduce absenteeism/presenteeism• Difficult to measure the Return on Investment (ROI) of wellness programs
Employee Benefits3770 Beardshear Hall
Human Resource Services
Welfare Benefits • Provide safety and monetary security beyond health• Typical benefits
– Basic life– Supplemental (optional) life– Accidental Death and Dismemberment (AD&D)– Dependent life insurance– Short-term disability (STD) – Long-term disability (LTD)
Employee Benefits3770 Beardshear Hall
Human Resource Services
Vacation• May be provided under separate program or combined under a PTO (paid time off) plan with sick days
Employee Benefits3770 Beardshear Hall
Human Resource Services
Retirement Benefits•Defined Benefit Plans (traditional Pension)
– Based on a formula that determines a future benefit
•Defined Contribution Plans (think 401(k))– future value depends on contributions from employee and/or employer
• 403(b)/ 457 Not-for-profit employers• 401(k) For-profit employers
• Other Types - Deferred Compensation Plans• IRS restrictions
Employee Benefits3770 Beardshear Hall
Human Resource Services
Comments on Retirement • Defined Benefit (Pension) plans are the exception rather than the rule • Many employers now will automatically enroll employees in 401(k)/403(b) plans• Understand the time-value of money – compounding• “DIVERSIFY” investments – Many employees are too conservative or too risky
Employee Benefits3770 Beardshear Hall
Human Resource Services
Employee Benefits3770 Beardshear Hall
Human Resource Services
401(k), 403(b) Illustration - saving $100/month - average 5% annual return - retirement @ age 65
Age
# of years
to save Balance
@ Age 65 25 40 $152,602 40 25 $59,551
Opportunity Loss $93,051
- with employer match of $50/month 25 40 $228,903 40 25 $89,326
Opportunity Loss $139,577
Conflicting Priorities for Savings/Retirement
• Car payments/car insurance• Mortgage/rent/student loans• Utilities• Food/beverages• Clothing• Entertainment• Life expenses in general
Employee Benefits3770 Beardshear Hall
Human Resource Services
Other Voluntary Benefits • Offered as optional benefits – typically employee pays full cost• Voluntary benefit programs typically offered at a discount price resulting from group purchasing power• Employer may offer the option of payroll deduction• Examples are auto/homeowners insurance, pet insurance, computer purchase discounts
Employee Benefits3770 Beardshear Hall
Human Resource Services
Laws Affecting Employee Benefits and Compensation
• 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• Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001• Health Insurance Portability and Accountability Act of 1996 (HIPAA) (and amendments)• Pension Protection Act of 2006• many, many others
Employee Benefits3770 Beardshear Hall
Human Resource Services
Closing Thoughts
Employee Benefits3770 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• Employees should take advantage of retirement plan offerings and save early (time value of $$) – and always save enough to at least take advantage of employer’s matching contribution
Employee Benefits3770 Beardshear Hall
Human Resource Services