Sherri’s teaching includes middle school through college. Degrees include bachelor’s marketing education, master’s adult education and doctorate in curriculum instruction.
Compensation & Benefit Policies
Companies provide a variety of compensation and benefits to employees for performing their jobs. These compensation and benefit strategies should be clearly defined and communicated to employees within the employee handbook or company policies and procedure manual.
Assume you are the compensation and benefits manager at Synergy Corporation. You are responsible for researching, developing, communicating, and continuously evaluating the company compensation and benefit policies. These policies should provide employees with clearly defined and equitable strategies.
They should also define company compensation and benefit opportunities. The policies should comply with legal and tax requirements for compensation and benefits. Additionally they should communicate the value of the benefits to current employees as well as in recruiting future employees.
You decide to update Synergy Corporation's employee handbook to highlight details on compensation and benefits available for employees. You explore direct financial monetary wages, indirect financial compensation, and benefits for use in developing effective company policies.
Defining Financial Compensation
Employees receive direct financial compensation, or monetary compensation, as wages in paychecks as well as indirect financial compensation for their work at a company. Monetary compensation strategies as well as policy and compliance considerations are identified as follows:
In regards to salary, it is important to identify salary ranges and the pay increase process for specific job descriptions, in order to communicate how the employee is paid and how he/she can advance personal income. Documentation can demonstrate compliance with the United States Department of Labor non-discrimination and equal employment opportunity laws. Additionally, it is important to document the payment schedule, for example, weekly or bi-monthly paychecks, to inform employees on how they will be paid.
In regards to hourly wages, assure the hourly wage meets or exceeds the state minimum wage requirement as designated in the Fair Labor Standards Act (FLSA). Also, be sure to comply with FLSA to pay hourly employees time and one half of their rate of pay for overtime hours. Document the payment schedule for hourly workers as well, for example, weekly or bi-monthly paychecks, to inform employees on how they will be paid. For cost of living increase, define how the company increases the percentage of salary or hourly wages based on increases in cost of living. Regarding commissions, establish how commissions are earned for those employees that are paid based on sales incentives. For bonuses and incentives, communicate bonus or incentive additions to pay. Examples include sign-on for new employees, performance pay based on criteria, and company stock options for sharing profits.
The United States Internal Revenue Service (IRS) and state tax departments require taxes to be paid on monetary compensation received by employees in the year the money was earned. As the compensation and benefits manager, you will also need to identify the indirect financial compensation available for your employees.
These are strategies that do not directly add monetary value to the paycheck. These strategies are defined, and policy and compliance considerations are identified as follows:
For vacation, sick, paid holidays, jury duty, and bereavement leave, provide details on how vacation and sick leave time is earned, for example monthly or a designated number of days annually. Also, identify paid holidays. Define jury duty leave in accordance with state requirements. Identify what relationships are covered for bereavement leave. In regards to family medical leave, state the Family Medical Leave Act requirements in the policy indicating that employees may have a maximum of 12 weeks unpaid annual leave for birth of a child, as well as employee or immediate family member health care. States may have additional policies. For workers compensation, inform employees of Workers Compensation requirements for workplace injuries and illnesses, the procedures for filing claims, and the percentage withheld from their paycheck.
Benefits provided beyond the employee wage cost employers on average an additional 30%. For example, if an employee earns about $15.00 an hour, the company may provide benefits at an additional cost of $4.50 for a total value of $19.50 per hour. In reality, the employee earns more than $15.00 per hour. You need to communicate this value to your employees at Synergy Corporation in your employee handbook.
Your company may decide to offer choices of benefits and/or charge employees percentages of the total cost. These benefit strategies are defined and policy and compliance considerations are identified as follows:
For insurance, define the medical, dental, vision, life, and disability insurance coverage options with percentage of premiums paid by the company and the employee's responsibility. Be sure to comply with the Affordable Care Act (ACA) requirements aligned with the number of employees in your company. Identify compliance to the federal Employment Retirement Income Security Act of 1974 (ERISA) law that establishes standards to protect employees by assuring pension and health plans are compliant.
Regarding retirement and pensions, define the retirement and pension options with the percentage of employee contribution and employer dollar match. Also, identify compliance with ERISA law.
For fringe or perks, describe any other benefits and include any costs charged to the employee. Examples may include flexible work days, fitness center membership, continuing education assistance, training programs, employee discounts, discounted travel, or child care.
This lesson explored compensation and benefit strategies to include in your company's policies for the employee handbook. The purpose of policies is to define strategies, comply with legal requirements, and communicate the value of compensation and benefits for employees. We examined financial and indirect financial non-monetary compensation strategies, as well as benefit strategies that companies can provide to employees.
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