Human Resource Management
Session 8
BENEFITS, NONFINANCIAL
COMPENSATION, AND OTHER
COMPENSATION ISSUES
Benefits (Indirect Financial
Compensation)
All financial rewards that
are not paid directly to
the employee
2
Payment for Time Not Worked Paid Vacations
• Provide workers with opportunity to rest, become
rejuvenated, and more productive
• Encourage employees to remain with the firm
• Increases with seniority
• American workers are giving back 415 million
vacation days a year
• 35% of U.S. workers feel stressed about work even
while on vacation
3
Payment for Time Not Worked - Sick
Pay and Paid Time Off
• Many firms allocate each employee a certain
number of days of sick leave
• Some managers are very critical of sick leave
programs
• Paid time off (PTO) - Certain number of days
off provided each year that employees can use
for any purpose
4
Payment for Time Not Worked Sabbaticals
• Temporary leaves of absence from
organization, usually at reduced pay
• Used for years in academic community
• Some companies are now using
• Helps reduce turnover and prevents burnout
5
Factors Contributing to the High
Cost of Health Care
• Aging population
• Growing demand for medical care
• Increasingly expensive medical
technology
• Inefficient administrative processes
6
Major Medical Benefits
Plans provide for major
medical benefits to
cover extraordinary
expenses that result
from long-term or
serious health problems
7
Dental and Vision Care
Employers
typically pay
entire costs for
both types of plans
except for a
deductible
8
Life Insurance
Group life insurance
commonly provided
benefit to protect
employee’s family in
event of death
9
Retirement Plans
• Defined benefits plans
• Defined contribution plan
• Cash balance plan -
10
Defined Contribution Plans
• Requires specific contributions by an employer
to a retirement or savings fund established for
the employee
• Has been a shift from defined benefits to
defined contribution pension plans
• Amount of retirement income from a defined
contribution plan will depend upon the
investment success of the pension fund
11
Cash Balance Plans
• Plan with elements of both defined benefit and
defined contribution plans
• Pension Benefit Guaranty Corporation usually
insures cash balance plans
• Employer contributes to each participant’s
account annually, and investment earnings are
at a set amount
12
Disability Protection
Provides monthly
benefit to
employees who,
due to illness or
injury, are unable
to work for an
extended period
13
Supplemental Unemployment
Benefits (SUB)
• Provide additional income for employees
receiving unemployment insurance benefits
• Usually financed by company
• Tend to benefit newer employees
14
Employee Services
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Relocation
Child care
Educational assistance
Food service/subsidized
cafeterias
• Financial services
• Legal services
• Scholarships for Dependents
15
Premium Pay
• Compensation paid to employees for working
long periods of time or working under
dangerous or undesirable conditions
• Hazard Pay - Pay for work under extremely
dangerous conditions
• Shift Differentials - Pay for inconvenience of
working less desirable hours
16
The Job Itself as a Nonfinancial
Compensation Factor
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Answering following questions can provide
considerable insight into value of job:
Is job meaningful and challenging?
Is there recognition for accomplishment?
Do I get feeling of achievement from doing job?
Is there possibility for increased responsibility?
Is there opportunity for growth and advancement?
Do I enjoy doing the job itself?
17
Illustration of Flextime
Flexible Time
6 a.m.
Core Time
9 a.m.
Flexible
Time
(Lunch)
Noon
Core Time
Flexible Time
3 p.m.
6 p.m.
Bandwidth
18
Job Sharing
• Two part-time people split duties of one job in
some agreed-on manner and are paid according
to contributions
• Partners must be compatible, have good
communication skills and trust must exist
between job sharers and their manager
19
Telecommuting
• Work arrangement whereby
employees, called
teleworkers or
telecommuters, are able to
remain at home, or
otherwise away from office,
and perform work using
computers and other
electronic devices that
connect them with office
20
Other Compensation Issues
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Severance pay
Comparable worth
Pay secrecy
Pay compression
21
Pay Secrecy
• Some organizations keep
pay rates secret for
various reasons
• If firm’s compensation
plan is illogical, secrecy
may be appropriate
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