Employee benefits are compensations given to employees in addition to regular salaries or wages. These compensations are given at the entire or partial expense of the employer. Benefit packages usually make up between 30 and 40 percent of an employee's total compensation for employment, which makes them an important aspect of the terms of employment. While some employee benefits are required by law, many employers offer additional benefits in order to attract and retain quality workers and maintain morale. Some types of benefits are also used as incentives to encourage increased worker productivity.
Legally Required Benefits
While some benefits are offered as incentives to attract workers, some are legally required. For example, employers must provide workers' compensation insurance, which pays the medical bills for job-related injuries and provides an income for employees who become disabled because of a job-related injury. Social Security must be paid by the employer (in addition to the amounts deducted from employee's pay) to help meet employees' retirement needs, and employers must pay for unemployment insurance to compensate workers in the event that their job is eliminated. The Family and Medical Leave Act, passed by Congress in 1993, requires large employers to provide workers with unpaid leave for family or medical emergencies (up to 12 weeks of unpaid, job-protected leave per year). Under this law, employees are guaranteed that they can return to the same or a comparable position and that their health care coverage will be continued during the leave.
Traditional Types of Employee Benefits
Because of continually rising health care costs, one of the most desirable types of benefits for employees to have is a health insurance plan. These plans can be set up to cover the individual worker and, in many cases, the worker's family as well; they may or may not include such options as dental, eye, chiropractic, hospital, and other types of health care. Health insurance plans may be provided at no cost to employees, or they may be made available at a more desirable rate than employees could get on their own. The health insurance aspect of a benefit package is often the major deciding factor in whether a person accepts a position with a company. The degree of health insurance is often more important to a potential employee than the salary level; especially when children are an issue.
Most benefit plans also include a certain number of paid sick days, personal days, and/or vacation days. Many companies are finding ways of increasing the flexibility of employee benefits. One way to increase flexibility is to group sick, vacation, and personal days into a certain amount of paid time off (PTO). PTO allows employees to take days off—for example, to care for a sick child, observe a religious holiday, or go on vacation—without having to explain why. The PTO benefit helps employees because their time is more flexible, and it helps employers by maintaining morale and reducing unanticipated absenteeism.
Life insurance and retirement options are another type of benefit many companies offer their employees. These types of benefits often encourage employees to remain with the same company because they do not want to cash in their life insurance or retirement plans. This tends to make employees more loyal to the company because their future is invested with the company. It also gives the employee a feeling of power by having some control over planning for retirement.
Expanded Types of Employee Benefits
While health care, paid time off, and retirement plans are the most common types of benefits employees receive, some companies offer even more types of benefits to help attract and retain employees as well as increase employee morale and improve job performance. One example of this type of benefit is tuition reimbursement, which allows employees to further their education while working. Motivating employees to better themselves at the employer's expense, helps the company keep knowledgeable employees.
With the growing number of single parents and dual-career couples in the work force, many companies have opened day-care facilities in the workplace where employees can feel safe about leaving their children. On-site child care is obviously a very desirable benefit for parents because it allows them to check up on the children, cut down on travel time, and be available in case of an emergency. However, some childless workers feel that this benefit discriminates against them because they get no use out of the day-care facility. One way many companies are handling this type of concern is through a cafeteria plan. While there are several different ways to set up a cafeteria plan, such as setting aside pre-tax dollars for medical expenses, one of the most useful ways is to give employees many different benefit options to choose from. Each employee is given a set allowance that can be used toward any benefit the employee chooses, allowing the employees to pick the options that will most benefit them. The cafeteria plan is one fair way to handle benefits for everyone concerned.
Another characteristic of the work force is its increasingly older age. As a result, there are an increasing number of workers with aging parents who need care. Many companies recognize the need for elder care and are providing benefits to help, such as referral services for quality nursing homes and flexible work hours and/or days off so employees can care for aging parents.
Other benefits provided by some employers include credit unions to help employees with financial needs, gym facilities to allow employees to fit exercise into their busy schedules, cafeterias that sell reduced price meals to working employees, and on-site laundry services where employees can have laundry done while they are at work. Making the work environment seem more like a family helps boost employee morale and improve working relationships. Many companies provide uniforms for their employees, so that workers do not have to worry about ruining their own clothing. The uniforms also help with the feeling of unity because everyone in the company is dressed similarly. Because transportation can often be a problem for employees, some companies are even providing transportation options as a benefit to employees. Disney World, in Orlando, Florida, has a shuttle that picks employees up from their living quarters and takes them to work. Corn detasslers meet in a central location and a bus takes them to the site. Sales people are often provided with a company car.
While these types of benefits are meant to attract and retain employees as well as create a positive work environment, some types of employee benefits are used to encourage increased performance. The following are the four main types of benefits used as incentives to encourage employees to exhibit superior performance:
- Profit sharing gives the employee a portion of the company profits. Profit sharing is often done through making shares of company stock part of the employee benefit package. Employees receive a certain number of shares of stock each year, which provides employees an incentive to help the company succeed. This might also be accomplished through a yearly profit-sharing bonus.
- Gain sharing rewards employees for exceeding a predetermined goal by sharing the extra profits. If profits exceed the goal, employees share in the extra profits.
- Lump-sum bonuses are a one-time cash payment based on performance. Lump-sum bonuses may be an annual reward, such as a Christmas bonus, where the purpose is to share profits with the employees, and thus motivate them.
- Pay for knowledge rewards employees for continuing their education and/or learning new job tasks. The more education or experience an employee has, the higher he/she moves up on the pay-for-knowledge pay scale. Pay for knowledge is an incentive for employees to continue their education because it results in immediate rewards on the job.
Perks
In addition to what we typically think as employee benefits, many employers also offer "perks " to their employees. Typically limited to employees in management positions, these perks include such benefits as country club or health club memberships, a company car, special parking privileges at work, tickets for sporting events, first-class travel accommodations, and generous expense accounts. However, certain types of perks are also being extended to employees in many different types of positions. One type of perk that is common in many retail stores is an employee discount on merchandise bought from the place of employment. For example, Dayton Hudson's Target stores offer a 10 percent discount to employees and their immediate families when purchasing merchandise from any Target store. Employees of local movie theaters often receive free movie tickets as a perk, while many restaurant employees receive free or reduced-price meals. By offering employees such perks, the company is providing a strong incentive for employees to continue working there.
Flexible Work Plans
A flexible work plan is another type of employee benefit that has been proven to have a positive influence on employee productivity, attendance, and morale. A flexible work plan allows employees to adjust their working conditions within constraints set by the company and may include such options as flex-time, a compressed work-week, job sharing, and home-based work. Flex-time involves adjusting an employee's daily time schedule; it can be as simple as allowing a worker to come into work an hour earlier and leave an hour earlier than the normal 8-to-5 workday. Usually there are some time constraints set up by the company, but employees who work within those constraints can basically set their own schedules. A compressed workweek involves working longer hours each day for fewer days than the normal Monday-through-Friday work-week. For example, at many businesses employees work ten-hour days, four days a week.
Job sharing allows two or more people to divide the tasks of one job. It allows the same consistency as a full-time person, because the work is simply divided among the people who share the job responsibility. Job sharing is popular among people who only want to work part time but want a job with full-time responsibilities. These types of people include older workers, retirees, students, and working parents. Home-based work programs allow employees to perform their jobs at home instead of in an office setting. These people are often know as telecommuters, because they "commute" to work through electronic mail, faxes, and other types of telecommunications. Home-based work is popular with disabled workers, elderly workers, parents with small children, and workers who have had to relocate far away from the workplace because of a spouse's job change. Through home-based work, all of these types of employees are able to take care of personal and family responsibilities while maintaining and enjoying their job and/or career.
Conclusion
Finally, it should be noted that the various types of benefits offered to employees can depend greatly on the size and type of the business as well as its geographic location. For example, a small business might be unable to afford to provide complete health care coverage for employees because there are not enough employees to divide the risk. This would cause the cost of the insurance to be high. On the other hand, a large company may not want to give all 1,000 employees a turkey for Thanksgiving because of the enormity of the undertaking. A video store would be more likely to give employees free movie rentals, while a restaurant would offer employees free or reduced-price meals. Employee benefits may be the major deciding factor for many people when choosing a company for employment. In order to attract and retain the best-quality employees, companies must be willing to offer flexible and extensive types of benefits to meet various employee needs.
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[Article by: MARCY SATTERWHITE]
