In this video, learn about the different components of a benefits program.
- Benjamin Franklin said, an ounce of prevention is worth a pound of cure. Providing health insurance and other benefits for employees allows them to take preventative measures to stay healthy and balanced, which in turn helps the employer. A healthier employee is less likely to cost the employer money through lost productivity. Benefits are also used by employers to attract new talent into the organization. But what goes into creating a robust benefits program? To determine what's best for your organization you should begin with a benefits needs assessment, also known as benchmarking.
Benchmarking is comparing your company's benefits to similar companies in the external market. Another way to gather data needed to build a competitive benefits program is to simply ask employees what they want. If employees don't find the benefits offered to be of value then those benefits won't support the retention of high performing employees or the attraction of new ones. Finally, benefits programs must be compliant with the Fair Labor Standards Act and other relevant state, federal and local laws.
For example, although private employers aren't required to offer retirement plans, like a 403b or 401k, if they do those plans must be in compliance with the Employee Retirement Income Security Act and the Securities and Exchange Commission. Benefits may be statutory or voluntary. Statutory refers to a benefit created by law or one that's regulated by a law.
Voluntary means the benefit is offered by choice by the employer. Examples of statutory benefits include participation in Social Security, Medicare, healthcare benefits offered through the Patient Protection and Affordable Care Act, also known as Obama Care, and Workers Compensation. Some voluntary benefits that are regulated include life insurance, and participation in credit unions, leave under the Family Medical Leave Act, military leave and time off to vote or serve on a jury are also regulated and unpaid.
Some employers pay employees during these kinds of leave but they're not required by federal law to do so. Paid time off, holiday pay and bereavement are some other common benefits that are not regulated. Some companies have introduced unlimited time off and have initially reported positive returns with respect to employee engagement. Most companies offer retirement benefits and there are several types. They include pension programs that may either be contributory or non-contributory.
Contributory means that both the employer and employee pay into the retirement plan. Non-contributory means that only the employer pays into the retirement plan on behalf of the employee. Once an employee is vested in a non-contributory plan they own the employers contribution and have portability rights if they end employment with the company prior to the designated retirement age. A defined benefit plan is an example of a non-contributory pension plan where an employee can expect to receive a certain amount of money at a specified future date.
A deferred compensation plan is an example of a contributory plan that has the additional benefit of tax deferrals until the employee is in a lower tax bracket. Some examples are individual retirement accounts, or IRAs, and 401k plans. There are many components to employee compensation. When used properly benefits programs help employers position themselves uniquely in the market both attracting top talent and retaining high performing employees.
- Modeling ethical standards
- Managing legal risks
- Finding and interviewing candidates
- Designing training and measuring its effectiveness
- Designing total rewards
- Promoting diversity and inclusion
- Employee engagement strategies
- Managing complaints and grievances
- Implementing workplace programs