Employee Compensation and Benefits

Employee Compensation and Benefits

Mike Otis SPHR, CEBS Associate Director

Human Resource Services

Employee Benefits3770 Beardshear Hall


Agenda• Typical HR Organization• Compensation Goals • Compensation Approaches • Benefits Exercise• Employer Challenges • General Benefit Concepts• Health Benefits• Welfare Benefits• Retirement Benefits• Closing Thoughts



Typical HR Structure



HR

Employee Relations

Equal Opportunity

Diversity

Workers Comp

Leave Programs

Payroll

Benefits

Compensation

Employee Assistance

Recruiting

HRIS

Goals of Compensation PlansWhy do companies care about how much

they pay?



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



Is Pay the Only Important Factor?





Supportive Corporate CultureExecutive Sponsorship

Rewards• Bonus• Salary Increases• Promotions• Equity Offerings• Awards• Recognition• New job assignments

Salary• Pay• Overtime (if in non-

exempt classification)

Benefits• Health Plans• Retirement Plans• Vacation/ time off• Paid Training• Working Hours

Employee Satisfaction

Total Compensation

What Factors Determine 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



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





How to Build a Total Compensation “House”



Compensation Philosophy



Compensation Structure





Job Classifications





Job Classifications

Rewards/Recognition


Benefits




Job Classifications

Rewards/Recognition


BenefitsBenefits



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%

New Employee Exercise

“It’s good for the heart!”



Utopia Enterprises – Your Employer of Choice!

We provide a “buffet” of benefit choices to meet your individual

needs!!





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



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



Core vs. Non-Core Benefits



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

Laws Affecting Employee Benefits and Compensation

• Patient Protection and Affordable Care Act (PPACA) (new) • 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



Closing Thoughts



• 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



Questions??



Employee Compensation and Benefits

Documents

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