Employee Compensation and Benefits Mike Otis, Associate Director Human Resource Services Employee Benefits 3770 Beardshear Hall Human Resource Services.

Employee Compensation and Benefits

Mike Otis, Associate Director

Human Resource Services

Employee Benefits

3770 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

Employee Benefits



Typical HR Structure

Employee Benefits



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 Benefits



Employee Benefits



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 Benefits



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 Benefits



Employee Benefits



Compensation Structure

Job Classifications

Rewards/Recognition

Compensation Philosophy

BenefitsBenefits

Employee Benefits



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 Benefits



Employee Benefits



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 Benefits



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 Benefits



Core vs. Non-Core Benefits

Employee 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

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 Benefits



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 Benefits



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 Benefits



Vacation• May be provided under separate program or combined under a PTO (paid time off) plan with sick days

Employee Benefits



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 Benefits



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 Benefits



Employee Benefits



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 Benefits



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 Benefits



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 Benefits



Closing Thoughts

Employee Benefits



• 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 Benefits



Employee Compensation and Benefits Mike Otis, Associate Director Human Resource Services Employee Benefits 3770 Beardshear Hall Human Resource Services.

Documents

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