Flashcards in Chapter 5 - Compensation and Benefits Deck (87):
1
Compensation and Benefits
- "total rewards"
- management functions that are valuable to owners of a business, helpful to managers, and significantly important to employees, all collectively identified as stakeholders
2
Davis-Bacon Act
- applies to contractors and subcontractors working on federally funded or assisted contracts in excess of $2,000 for the construction, alteration, or repair (including painting and decorating) of public buildings or public works
- must pay their laborers and mechanics employed under the contract no less than the locally prevailing wages and must pay fringe benefits for corresponding work on similar projects in the area
3
Copeland 'Anti-Kickback' Act
- Section 1: criminal statute prohibiting anyone from inducing by any means any person employed on the construction, prosecution, completion, or repair of a federally funded assisted building or work to give up any part of his or her compensation to which he or she is otherwise entitled; applies to all construction contracts irrespective of amount
- Section 2: civil statute requiring certain employment records to be maintained; administered by the DOL and applies to construction contracts exceeding $2,000
4
Walsh-Heley Public Contracts Act
- establishes minimum wage, maximum hours, and safety and health standards for work on contracts in excess of $10,000 for the manufacturing or furnishing of mateirals, supplies, articles, or equipment to the US governemtn or DC
5
Fair Labor Standards Act (FLSA) - 1938, as amended
- establishes minimum wage, overtime pay, recordkeeping, and youth employment standards effecting employees in the private sector and in federal, state, and local governments
- FLSA minimum wage: $7.25/hour in 2009
- FLSA overtime: overtime for anything over 40 hours in a workweek at a rate not less than 1.5 times the regular rate of pay
- Hours worked: all the time during which an employee is required to be on the employer's premises, on duty, or at a prescribed workplace
- Recordkeeping: must display an official poster outlining the requirements of the FLSA; must keep employee time and pay records
- Child labor: designed to protect the educational opportunities of minors and prohibit their employment in jobs and under conditions detrimental to their health or well-being
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Equal Pay Act (EPA)
- requires that men and women be given equal pay for equal work in the same establishment
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Pregnancy Discrimination Act (PDA)
- discrimination on the basis of pregnancy, childbirth, or related medical conditions constitutes unlawful sex discrimination under Title VII
8
Family and Medical Leave Act (FMLA), as amended
- entitles eligible employees of covered employers to take unpaid, job-protected leave for specified family and medical reasons with continuation of group health insurance coverage under the same terms and conditions as if the employee had not taken leave
9
Health Insurance Portability and Accountability Act (HIPAA)
- federal legislation that provides data privacy and security provisions for safeguarding medical information
- Title I: protects health insurance coverage for individuals who lose or change jobs
- Title II: requires the US DOH and HS to establish national standards for processing electronic healthcare transactions
- Title III: includes tax-related provisions and guidelines for medical care
- Title IV: further defines health insurance reform
- Title V: includes provisions on company-owned life insurance and treatment of those who lose their US citizenship for tax purposes
- Patient Protection and Affordable Care Act (PPACA): landmark health reform legislation passed by the 111th Congress and signed into law by Obama in March 2010
- Employee Retirement Income Security Act (ERISA): establishes minimum standards for pension plans in private industry and provides for extensive rules on the federal income tax effects of transactions associated with employee benefit plans
- Consolidated Omnibus Budget Reconciliation Act (COBRA): provides continuing coverage of group health benefits to employees and their families upon the occurrence of certain qualifying events where such coverage would otherwise be terminated
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Compensation
- the lifeblood of the employment relationship between the worker and the employer
- not just compensation, also includes recognition programs and assorted fringe benefits
- "total rewards"
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Financial Inducements
- total rewards includes the financial inducements and rewards (direct pay, cash-based incentives, and benefit) as well as non-financial inducements and rewards such as the value of good job content as well as a good working environment
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Direct Compensation (Cash) and Indirect Compensation (Benefits
- direct compensation: a variety of pay programs that are cash-based (e.g., base pay, commissions, boniuses, merit pay, piece rate, differential pay, cash awards, profit sharing, gainsharing); some are discretionary while others are mandatory and governed by federal/state/local law and regulation
- indirect compensation applies to programs primarily designed to provide recognition and benefits (social security, unemployment insurance, disability insurance, pensions, 401(k) and other similar programs, healthcare, vacations, sick leave, paid time off ); some are discretionary and some are mandatory and governed by federal law and regulation
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Nonfinancial Inducements
- a study by the Hay Group involving about 4 million employees found that employees listed work climate, career development, recognition, and other nonfinancial issues as key reasons for leaving a job
- job content: workers who are dynamic in nature do not show preference for routine jobs
job environment: employees who receive recognition for their work accomplishments tend to have increased morale and positive workplace attitudes
- compensation ethics: being ethical is essential to fixing problems and improving processes, and is essential to having strong working relationships with people; covering up unethical behavior does the opposite and impedes the individual's ability to grow as a worker or leader
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Wages or Salaries
- wages: primarily associated with employee compensation based on the number of hours worked multiplied by an hourly rate of pay
- salaries: primarily associated with the employer's assessment of job worth; the value of the job t the organization
- many organizations classify all cash-based income as wages
15
Secrecy or Transparency?
- a primary objective of any total rewards program should be to attract, motivate, and retain a workforce that can advance the organization's mission and key business objectives
- federal contractors are prohibited from banning discussions about compensation among their employees
16
Wage Surveys
- to determine the prevailing rate for a job, a company can "benchmark" jobs against compensation surveys that are details and specific to the company's industries and regions
- a good compesation survey uses standard, proven methods of data gathering and statistical analysis to determine how much companies pay for a specific job in a specific industry
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Job Evaluation
- a job evaluation is the systematic process for assessing the relative worth of jobs within an organizations
- a comprehensive analysis of each position's tasks, responsibilities, knowledge, and skill requirements is used to assess the value of the job's content to the employer and provide an internal ranking of the jobs
- the primary objective of a nonquantitative method is to establish a relative hierarchy of jobs based on each job's relative worth
- quantitative job evaluation methods include point-factor and factor comparison methods; they evaluate factors on a defined measurable scale and provide a score as a result that is a measurable comparison of one job to another
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Job Evaluation EXAM TIP
- ranking and classification job evaluation systems are considered non-quantitative whole-job systems because they do not produce a specific numerical score; rather, they measure the position of the "whole job" as compared to other jobs
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Job Ranking Method
- called a whole-job comparison because it is a comparison of the whole job compared to another whole job rather than a comparison based on each job's measurable factors
- quick and easy but not very precise
- easy to explain'
- leaves unanswered why one job is worth more than anitherm as well as how much of a "gap" exists between jobs
- worth of a job usually based on skill, effort (mental and physical), responsibility, working conditions
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Job Classification Method
- non-quantitative job evaluation method
- the result of grouping jobs into a predetmined number of grades or classifications
- grade level determines the pay level
- classes can be further identified by using benchmark jobs that fall into each class
- characteristics of benchmark jobs: the essential functions and knowledge, skills, and abilities (KSAs) are established and stable; they represent the entire range of jobs in each class; a significant percentage of workers are employed in these jobs; external market rates for these jobs are an acceptable basis for setting wages
- the results of a job classification analysis are designed to create parity in job titles, consistent job levels within the organization hierarchy, and salary ranges that are determined by identified factors (including market pay rates for people doing similar work in similar industries in the samr region of the country; pay ranges of comparable jobs within the organization; the level of knowledge, skill, experience, and education needed to perform each job
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Point-Factor Method
- most commonly used job evaluation method
- uses specific compensable factors as its reference points to measure relative job worth
- significant job characteristics that contribute to the value of the work and the organization as a whole
- 2 ways to identify compensable factors:
- the Hay plan, which uses a standard criteria comprising 3 compensable factors: know-how, problem-solving, and accountability
- the factor-evaluation system (FES), which determines levels of duties and responsibilities using a point rating system to evaluate selected positions; uses weighted factors to address the major position characteristics of responsibility, education/experience, job conditions, physical requirements, supervision, training, etc.
- 5 steps in this method: identify key jobs, identify the compensable factors, weight the factors according to their overall worth, divide each job factor into degrees that range from high to low, final resule will be a table that gives a complete range of points from 50 (the least number) to 200 (the most number); points usually determine pay grade to which the job will be assigned
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Factor Comparison Method
- more complex than ranking, classification, or point-factor methods, and only occasionally used
- involves ranking each job by each compensable factor and then, as an additional step, identifying dollar values for each level of each factor to develop an actual pay rate for the evaluated job
- most often used in union negotiations as part of a labor contract and in limited cases where wages are steady over a period of time and the organization uses a flat rte for each job
- breaks down a job into a small number of key factors, such as skills, effort, knowledge, and responsibilities; identify benchmark jobs, which are well-known positions that retain consistency across different companies and organizations; assign each job a salary, which is further broken down for each factor
- advantages: broad application; can be applied to a wide range of job roles and industries, and can also be applied to new roles in order to compare them to similar positions
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Hay Group Guide Chart/Profile Method
- proprietary point-factor job evaluation methodology developed by the Hay Group and used by organizations to map out their job roles in the context of the organizational structure
- enable organizations to map and align their roles/jobs
- steps: train reps from major departments and HR functions in the use of the method; revise all job descriptions across the organization with HR assistance; create job evaluation board, which includes a mix of line management, HR, and experts deciding on the plotting of jobs; HR works with senior management to put together a banding proposal expressed in Hay points by grading staff and describing the benefits that will be attracted by each band; once the jobs are all rated and mapping is completed, the company board of directors reviews the summary, the banding proposals, and cost (if any) with the company and recommends for the activities to go life, if approved the project manager then moves to implement the changes
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Pricing and Pay Rates
- compensation surveys are essential tools for establishing the pay level of positions and staying competitive in the marketplace
- focus of compensation surveys has shifted to calibrating pay levels primarily with the external market, and that in turn has created enormous pressure to obtain and ensure the data is accurate, timely, and "apple-to-apple" in terms of usefulness
- there are millions of organizations (large and small) un the US, yet a very low percentage participate in compensation surveys
- more employees use compensation survey data than contribute to the surveys as participants
- those companies participating are normally participating in multuple surveys, causing data to be 2-dimensional
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Pay Grades and Ranges
- pay grades, or job groups, are the way an organization organizes jobs of similar values
- jobs of the same or comparatively same value, even though dissimilar in function, are paid within the same pay grade
- no fixed rules apply to creating pay grades; rather, the number of pay grades and their structures are more a reflection of organizational structure and philosophy
- issues to consider: the size and structure of the organization; the "distance" between the lowest and highest jobs in the organization; the organization's pay increase and promotion policy; the grouping of nonexempt and exempt jobs as well as job families (e.g., clerical, technical, professional, supervisory, and management); creating sufficient grades to permit distinguishing difficulty levels but not so many that the difference between adjoining grades is significant
- pay ranges establish upper and lower boundaries for each job
- the range spread reflects the equal dispersion of pay on either side of the midpoint to the lower and upper range boundary
- range spread calculation: (maximum-minumum)/minimum
- typical spreads: nonexempt: 40%, exempt: 50%, executive jobs: 60%
- jobs at a lower level tend to be more skill-based, which provides for more movement opportunity than higher levels where jobs are more knowledge-based and progression is slower
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Broadbanding
- a recent concept that combines several pay grades or job classifications that have narrow range spreads with a single band that has a wider spread
- a way to simplify their pay levels and reduce management oversight requirements
- more popular in large organizations than smaller ones
- in some cases, does not work well with organization's compensation philosophy, particularly in organizations that focus on promotional opportunities
- can also be used against an organization in equal pay analysis: if it is assumed that all jobs are equal within a broadband, the government has claimed that all jobs should be paid the same - excesses can be claimed to represent illegal pay discrimination
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Compa-ratios
- indicators of how wages match, lead, or lag the midpoint and are normally an indicator of market value
- compa-ratios are computed by dividing the worker's pay rate by the midpoint of the pay range (pay rate/midpoint)
- less than 100% means the worker is paid less than the midpoint; more than 100% means the worker is paid more than the midpoint
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Compa-ratios
Compa-ratios can be used for budgetary controls as well as to investigate discrimination in that a difference between one group and another can indicate the possibility of discrimination
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Variations in Pay
- must be periodically evaluated and adjusted to reflect organizational and market changes
- red circle rates, green circle rate, and cost-of-living adjustments are some of the techniques used to adjust these ranges
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Red Circle Rates
- a method to increase an employee's pay to a new rate higher than the maximum for the assigned pay range
- occurs more often in smaller organizations where promotional opportunities may be limited
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Green Circle Rates
- when a new employee is hired at a pay rate lower than the minimum rate for the applicable pay grade
- can also happen when a "fast track" employee is promoted to a new job in a high pay grade under circumstances where the percentage pay increase needed to reach the new grade is excessive and might create an unwanted precedent
- should be avoided whenever possible because they can create serious morale issues and create an arguable case of pay discrimination
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Base Pay Systems
- after an organization has analyzed, evaluated, and priced its jobs, as well as designed its pay structure, the next step is to determine a type of base pay system that will help attract, motivate, and retain employees
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Base Pay Systems - Single or Flat-Rate System
- each worker in the same job as the same rate of pay regardless of seniority or job performance
- most often found in elected public-sector jobs or a union setting
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Base Pay Systems - Time-Based Step Rate System
- bases the employee's pay rate on the length of time in the job
- increases occur on a predetermined schedule
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Base Pay Systems - Automatic Step Rate System
- pay range divided into several steps, each a predetermined range apart
- at the prescribed time interval, each employee with the required seniority receives a one-step pay increase
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Base Pay Systems - Step Rate with Performance Consideration
- similar to Automatic Step Rate System, except performance can influence the size or timing of the pay increase
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Base Pay Systems - Combination Step Rate and Performance
- employees receive step rate increases up to the established job rate
- above this level, increases are granted only for superior job performance
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Base Pay Systems Performance-Based Merit Pay System
- based on an employee's individual job performance
- employees are typically hired at or near minimum and pay increases are awarded on an annual basis, influenced by the individual's overall job performance
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Productivity-Based Systems
- determined by the employee's output
- mostly used on an an assembly line in a manufacturing environment
- straight piece-rate system: employee receives a base rate of pay and is awarded additional compensation for the amount of output produced
- differential piece-rate system: employee receives one rate of pay up to the production standard and a higher rate of pay when the standard is exceeded
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Person-Based System
- employee capabiliities, rather than how the job is performed, determine the employee's pay
- knowledge-based systems: a person's pay is based on the level of knowledge he or she has in a particular field
- skill-based systems: paid for the number and depth of skills they have that are applicable to their job
- competency-based systems: pay is linked to the level at which an employee can perform in a recognized competency
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Financial Incentives
- monetary benefit offered to organizations, employees, and consumers to encourage behavior or actions that otherwise could not take place
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Financial Incentives - Differential Pay
- additional compensation paid to an employee as an incentive to accept what would normally be considered adverse working conditions usually based on time, location, or situational conditions
- the same pay differential is paid to all employees under the same circumstances or conditions
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Financial Incentives - Overtime Pay
- the FLSA requires employers to pay nonexempt employees one-and-a-half their regular rate of pay when they work more than 40 hours in a single workweek
- some employers pay more than the 1.5x required
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Financial Incentives - Regular Rate of Pay
- when an employee in a single workweek works at two or more different types of work for which different straight-time rates have been established, the regular rate for that week is the weighted average of such rates
- the earnings from all rates are added together, and this total is then divided by the total number of hours worked at all jobs
- when noncash payments are made to employees in the form of goods or facilities, the reasonable cost to the employer or fair value of such goods or facilities must be included in the regular rate of pay
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Financial Incentives - Hazard Pay
- when employees are called to work under adverse conditions either caused by the environment or due to the circumstances
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Financial Incentives - Shift Pay
- time-based differential pay that rewards the employee who works hours normally considered undesirable such as a night shift or hours that are in addition to the employee's regular work schedule
- except for overtime, federal law does not legally require employers to pay a differential rate of pay, although state requirements may differ
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Financial Incentives - On-Call Pay
- an employee who is required to remain on his or her employer's preferences or so close to the employee's work location that he or she cannot use the time effectively for his or her own purposes is working while on call
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Financial Incentives - Callback Pay
- when employees are "called back" to perform work beyond regularly scheduled hours
- it applies to any situation where the employee performs work outside his or her regular working hours, is guaranteed pay for a minimum number of hours, an ddoes not work the number of hours covered by the guarantee
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Financial Incentives - Geographic Differentials
- differences in pay for similar or identical jobs that are based on variations in costs of living in labor markets in particular geographic regions
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Financial Incentives - Weekend and Holiday Pay
- an employer is required to pay hourly employees only for itme actually worked
- however, exempt employees who are given the day off must be paid their full weekly salary if they work any hours during the week in which the holiday falls
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Team and Group Incentives
- designed to encourage and reward exceptional levels of professional achievement
- motivations for staffers to work collectively to earn monetary and nonmonetary rewards
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Organization-Based Pay
- referred to as pay-for-performance plans; they tie compensation directly to specific business goals and management objectives
- most commonly used variable components are profit-sharing and gainsharing plans
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Organization-Based Pay - Profit Sharing
- deferred profit-sharing plan
- plan that gives employees a share in the profits of the company
- company contributes a portion of its pretax profits to a pool that will be distributed among eligible employees
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Organization-Based Pay - Gainsharing
- a system of management in which an organization seeks higher levels of performance through the involvement and participation of its people
- as performance improves, employees share financially in the gain
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Employee Benefits
- benefit programs, referred to as indirect compensation, are designed to promote organizational loyalty, reward continued employment, enable employees to live healthy lives, help them care for their families, and help provide for retirement benefits
- help employers attract and retain talent, increase an employee's loyalty and commitment to the organization, provide tax-advantaged health and welfare benefits to the employees
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Employee Benefits - most significant employee benefits
- leave-of-absence benefits
- social security
- workers' compensation
- unemployment compensation
- healthcare benefits
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Employee Benefits - paid holidays
- most small businesses have 6-7 holidays
- most common paid holidays: New Year's Day, President's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, Christmas Day
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Employee Benefits - paid vacation
- no law requires employers to give their workers paid vacation days, but most companies do pay for some vacation days
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Employee Benefits - paid sick leave
- momentum for federal paid sick leave requirements is growing
- currently only a few states where employers are required to pay sick leave to qualified individuals
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Employee Benefits - paid personal leave
- requirements vary from state to state, but some leaves of absence are required by federal law
- examples of legally required unpaid leave: allotted by FMLA or USERRA
- examples of paid leave of absence: bereavement time and jury duty
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Employee Benefits - sabbaticals
- long-term employees take a paid leave of absence as a way to complete a course of study, do research, or engage in other learned pursuits
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Employee Benefits - jury duty
- any action or other proceeding of a judicial nature (but not an administrative proceeding - summons or subpoena to serve as a witness from an administrative law judge)
- service is mandatory, person summoned must attend
- employers cannot fire an employee for being called to jury duty, but they are typically not required to pay wages during this time
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Employee Benefits - bereavement leave
- policies that provide for paid time off to attend a funeral of a family member
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Employee Benefits - union activities
- employees covered by the National Labor Relations Act (NLRA) are afforded certain rights to join together to improve their wages and working conditions, with or without a union
- employees have the right to attempt to form a union where none currently exists or to decertify a union that has lost the support of employees
- employee rights re: unions: forming or attempting to form a union in the workplace; joining a union, whether or not the union is recognized by the employer; assisting a union in organizing fellow employees; refusing to do any or all of these things; being fairly represented by a union
- employees who are not represented by a union also have rights under NLRA: NLRA protects the right of employees to engage in "concerted activity," which is when 2 or more employees take action for their mutual aid or protection regarding terms and conditions of employment
- protected concerted activities: 2+ employees addressing their employer about improving their pay; 2_ employees discussing work-related issues beyond pay, such as safety concerns, with each other; an employee speaking to an employer on behalf of one or more coworkers about improving workplace conditions
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Employee Benefits - recognition and achievement awards
- rewards for reaching specific goals or producing high-quality results in the workplace
- meant to encourage repeat actions through reinforcing the behavior you would like to see repeated
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Employee Benefits - social security
- social insurance program consisting of retirement, disability, and survivors' benefits
- to qualify for most benefits, most workers pay SS taxes on their earnings; the claimant's benefits are based on the wage earner's contributions
- SSI is given based on need
- primarily financed by taxes that employers, employees, and the self-insured pay annually
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Employee Benefits - workers' compensation
- a form of insurance providing wage replacement and medical benefits to employees injured in the course of employment in exchange for mandatory relinquishment of the employee's right to sue his or her employer for the tort of negligence
- pays hospital and medical expenses that are necessary to diagnose and treat the injury
- also provides disability payments while the employee is unable to work (~2/3 regular salary)
- may pay for rehab, retraining, other benefits
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Employee Benefits - workers' compensation EXAM TIP
- the basic concept behind workers' compensation is that the basis of workers' compsenation laws is "liability without fault;" that is, the injured employee is entitled to reasonable compensation regardless of who causes the accident
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Employee Benefits - unemployment compensation
- UI provides workers whose jobs have been terminated through no fault of their own monetary payments for a given period of time or until they find a new job
- based on a dual program of federal and state statutes
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Healthcare Benefits
- healthcare items or services covered under a health insurance plan
- covered benefits and excluded services are defined in the health insurance plan's coverage documents
- marketplace plans under the ACA are required to cover: ambulatory patient services; emergency services; hospitalization; pregnancy/maternity/newborn care; mental health and substance use disorder services, including behavioral health treatment; prescription drugs; rehab services and devices; lab services; preventive and wellness services and chronic disease management; birth control coverage; breastfeeding coverage; pediatric services, including oral and vision care; medical management programs for specific needs such as weight management, back pain, diabetes
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Healthcare Benefits - managed healthcare plans
- a type of health insurance
- contracts with healthcare providesr and medical facilities to provide care for members at reduced costs
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Healthcare Benefits - fee-for-service plans
- a payment model where no services are unbundled and paid for separately
- gives incentive for physicians to provide more treatments because payment is dependent on quantity of care, rather than quality
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Healthcare Benefits - preferred provider organization (PPO)
- one of the most popular types of plans
- allow members to visit any in-network physician or healthcare provider without first requiring a referral from a primary care physician
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Healthcare Benefits - point of service (POS)
- benefit levels varying depending on whether a member receives care in or out of the health insurance company's network of providers
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Healthcare Benefits - health maintenance organization (HMO)
- offer a wide range of healthcare services through a network of providers who agree to supply services to members
- will likely have coverage for a broader range of preventive healthcare services than they would through any other type of plan
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Healthcare Benefits - group health cooperative
- nonprofit healthcare organization based in Seattle
- provides coverage and care for about 600,000 people in WA and ID, and is one of the largest private employers in WA
- patients who receive care at its medical centers are provided web access to their medical records, secure emailing with docs and nurses, and the ability to fill prescriptions online that are mailed to homes without a shipping charge
- acquired by Kaiser Permanente in 12/2015
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Healthcare Benefits - consumer-driven healthcare
- refers to third-tier health insurance plans that allow members to use health savings accounts (HSAs), health reimbursement accounts (HRAs) or similar medical payment products to pay routine healthcare expenses directly, but a high deductible health plan protects them from catastrophic medical expenses
- high-deductible policies cost less, but the user pays medical claims using a prefunded spending account, often with a special debit card provided by a bank or insurance plan
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Healthcare Benefits - flexible spending account (FSA)
- a special account you put money into that you use to pay for certain out-of-pocket healthcare costs
- don't pay taxes on this $
- limited to $2600 per year per employer
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Healthcare Benefits - health reimbursement account (HRA)
- an IRS-approved, employer-funded, tax-advantaged employer health benefit plan that reimburses employees for out-of-pocket medical expenses and individual health insurance premiums
- not insurance
- allows the employer to make contributions to an employee's account and provide reimbursement for eligible expenses
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Healthcare Benefits - health savings account (HSA)
- tax-advantaged medical savings account you can contribute to and draw money from for certain medical expenses tax-free
- can be used for out-of-pocket medical, dental, vision
- not for health insurance premiums
- can be used only with high-deductible health plans that count as minimum essential coverage (MEC)
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Employee Benefit Account Administration
- benefits administration is the process of establishing, maintaining, and managing benefits for the employees of an organization
- a good benefits administration program creates and maintains an enrollment profile for every employee, keeping track of information such as the date hired, marital status, number of dependents, total hours worked, and attendance records
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Retiree Benefits
- over time, the share of large employers (with 200 or more employees) offering retiree health benefits has declined, and employers that continue to offer benefits have made changes to manage their costs, often by shifting costs directly or indirectly to their retirees
- fewer than 1 in 5 workers today are employed by firms offering retiree health benefits
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Benefits - legal compliance
- 2 categories of employee benefits: taxable and nontaxable
- taxable: direct compensation (base pay, differential pay, severance pay, paid time off), indirect compensation (disability benefits where employer pays the premium, life insurance when employee pays with pretax dollars, gifts/prizes/awards over certain dollar amounts, personal use of a company vehicle, sick pay)
- nontaxable: direct compensation (wages paid after death in a new year); indirect compensation (work-related expense reimbursements, childcare (subject to limitations), company vehicle use (only work-related), de minimis ($25 or less), group life insurance plans ($50,000 or less coverage), educational expenses (subject to annual limits), medical/dental/health plans (employer contributions), employee-paid disability benefits when purchased with after-tax dollars
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Effectiveness of compensation and benefits program
- Should be able to answer the following questions:
Is the system in legal compliance?
Is the system compatible with the organization's mission and strategy?
Does the system fit the organization's culture? Is it appropriate for its workers?
Is the system internally equitable?
Is the system externally competitive?
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Measurements and Analysis needed to determine whether an organization's compensation and benefits program is meeting its goals and objectives
- does it meet ERISA nondiscrimination requirements?
- is there an adverse impact on protected groups?
- are the organization's EEO and affirmative action objectives supported?
- is the system compatible with the organization's mission and strategy?
- does it meet the organization's mission, goals, and objectives?
- does it help the organization attract and retain employees?
- does it motivate employee performance?
- does the system fit the culture? is it appropriate for the workers?
- is the organization entitlement oriented or contribution oriented?
- does the system support the organization's orientation?
- does the system have programs that meet employee lifestyle needs?
- is the system internally equitable?
- does the mix (fixed vs variable, cash vs benefits, retirement vs health/welfare) fit?
- do the employees understand the system?
- do employees perceive the system to be fair and adequate?
- what is the organization's turnover rate?
- is the system externally competitive?
- how does this system compare to the competition?
- are dollars spent generating a meaningful return?
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Benefits: Communication Requirements
- ERISA-required reporting and communicating requirements that must automatically be distributed to every employee include the following:
- summary plan descriptions (SPD): contains information on what the plan provides in layperson terms; distribution is required within 120 days after the plan's establishment or 90 days after eligibility; SPD must be updated no less frequently than every 5 years
- summary annual report (SAR): contains financial information about the plan; distribution is required within 7 months after the end of the plan year
- summary of material modifications (SMM): required whenever any of the plan's features have been significantly changed or within 201 days after the end of the plan year
- other required or highly recommended communications include: FMLA policy statement in all employee handbooks (for employees with 50+ employees); general notification of federal (and state if applicable) COBRA rights (employers with 20+ employees); notice of special HIPAA enrollment rights and privacy rights
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