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
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