Employee Benefits 3770 Beardshear Hall

Human Resource Services

Employee Compensation and Benefits

Mike Otis, Associate Director Human Resource Services

Employee Benefits 3770 Beardshear Hall

Human Resource Services

Agenda
Typical HR Organization
Compensation Goals Compensation Approaches Benefits Exercise Employer Challenges General Benefit Concepts Health Benefits Welfare Benefits Retirement Benefits Closing Thoughts

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Typical HR Structure
Employee Relations
HR VP Workers Comp
Leave of Absence Equal Opportunity Diversity

Payroll

Compensation Benefits Employee Assistance Recruiting

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Human Resource Services

Goals of Compensation Plans

Employers are able to attract and retain employees who will contribute to the organizations success Employees feel they are compensated/rewarded fairly/equitably for their efforts and contributions to an organizations success

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Total Compensation
Employee Satisfaction Supportive Corporate Culture Executive Sponsorship

Rewards
Bonus Salary Increases Promotions

Benefits
Health Plans Retirement Plans Vacation/ time off

Equity Offerings
Awards Recognition New job assignments Pay

Salary
Overtime (if in non-exempt
classification)

Paid Training Working Hours

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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

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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

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Rewards/Recognition
Benefits Benefits

Job Classifications

Compensation Structure

Compensation Philosophy

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Human Resource Services

Compensation Structure Example

Grade 12 11 10 9 8 7 6 5 4 3 2 1 Minimum $93,500 $81,800 $71,800 $65,300 $57,200 $52,000 $45,600 $40,000 $37,800 $34,300 $31,200 $28,800 Midpoint $131,000 $114,500 $100,500 $88,200 $77,400 $67,600 $59,300 $52,000 $47,200 $42,900 $39,000 $36,000 Maximum N/A $147,200 $129,200 $111,000 $97,200 $88,400 $73,000 $64,000 $60,500 $51,500 $46,800 $43,200 Midpoint Progression 14% 14% 14% 14% 14% 14% 14% 10% 10% 10% 8% N/A Range Width N/A 80% 80% 70% 70% 70% 60% 60% 60% 50% 50% 50%

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Utopia Enterprises Your Employer of Choice!

We provide a buffet of benefit choices to meet your individual needs!!

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Human Resource Services

Benefits Offered
Source: 2005 Iowa Employer Benefits Study, David P. Lind and Associates

Offered by Employers with 250 or more Employees 97.7% 95.4% 94.4% 94.1% 86.5% 84.1% 83.7% 75.1% 73.8% 73.1% 36.7% 32.8%

Rank 1 2 3 4 5 6 7 8 9 10 11 12

Health Insurance Life Insurance Retirement Plans Paid Holidays Pre-Tax deductions for Employee benefit contributions Long Term Disability Insurance Paid Vacation Educational Assistance/Tuition Reimbursement Sick Leave Employee Assistance Program (EAP) Fitness Center or Gym subsidy Long Term Care Insurance

Flextime
Casual Dress (every day, not just Fridays) Retiree Health Insurance (post age 65) Telecommuting Child Care Assistance (on or off site) Subsidized employee meals Free Coffee/Soda Pet Insurance

32.5%
32.2% 25.6% 18.9% 7.4% Not on list Not on list Not on list

13
14 15 16 17 18 19 20

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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 timeconsuming. 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

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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

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Core vs. Non-Core Benefits

Core Benefits (Traditional)
Health Insurance Prescription Drugs Basic Life Insurance Vacation Holidays Sick Pay Disability

Non-core Benefits (Voluntary Elective)

Dental Vision Supplement Life, Dependent Life Long-term care insurance Auto-homeowners insurance Mortgage services/discounts On-site daycare Tuition reimbursement Yes, even Pet Insurance

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Health Benefits
General types of health coverage
Medical Prescription Drugs Dental Vision

Most health benefit employee contributions will be deducted from pay pre-tax

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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

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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)

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

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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

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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

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401(k), 403(b) Illustration - saving $100/month - average 5% annual return - retirement @ age 65 # of years to save 40 25 Opportunity Loss - with employer match of $50/month 25 40 40 25 Opportunity Loss $228,903 $89,326 $139,577

Age 25 40

Balance @ Age 65 $152,602 $59,551 $93,051

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Conflicting Priorities for Savings/Retirement

Car payments/car insurance
Mortgage/rent/student loans Utilities Food/beverages Clothing Entertainment Life expenses in general

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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

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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

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Closing Thoughts
How employees are compensated takes many forms salary,

benefits, working conditions, challenging/stimulating work, coworkers, 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 employers 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

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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 employers matching contribution