BENEFITS AND OTHER COMPENSATION ISSUES 1 Benefits Indirect

BENEFITS AND OTHER COMPENSATION ISSUES 1

Benefits (Indirect Financial Compensation) All financial rewards that are not paid directly to the employee 2

Benefits in a Total Compensation Program External Environment Internal Environment Compensation Financial Direct Non-Financial Indirect (Benefits) The Job Environment 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 3

Mandated Benefits (Legally Required) Social security § Unemployment compensation § Worker’s compensation § Family and Medical Leave Act of 1993 (FMLA) § 4

Social Security Created system of retirement benefits § Federal payroll tax to fund unemployment and retirement benefits § § Amendments included disability insurance, survivors’ benefits, and Medicare 5

Unemployment Compensation Laid off individual receives compensation for up to 26 weeks § Administered by states § Payroll tax paid solely by employers § 6

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 § 7

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 § 8

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 § 9

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 10

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 11

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 § 12

Nonfinancial Compensation § Very powerful factor in compensation equation 13

The Job as a Total Compensation Factor § Central issue in many motivation theories § Vital component of total compensation program 14

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 § 15

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 § 16

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 17

Other Compensation Issues Severance pay § Comparable worth § Pay secrecy § Pay compression § 18