Employer benefits and compensation structures

Employer Benefits

Process and Practices of Employer Offered Benefits

Employer offered benefits are often a major element of hiring packages that keep the best employees and keep the compensation packages of those employees competitive. Yet, "historically, there has been no requirement that any employer provide benefits to its employees (with the exception of statutorily required benefits such as workers compensation, disability in several states and unemployment" (Macpan Media 2012 p 3). Employers are not always forced to provide a number of the benefits that are popular within the contemporary work environment. However, in a very competitive market place, where the best employees demand higher levels of benefits, contemporary employers are finding it a necessity to include a number of benefits in order to keep their arsenal of employees beneficial to the health and productivity of the organization as a whole. From this concept, "in general, if an employer drops coverage, better-paid workers will be worse off" (Volsky 2011 p 1). To keep the best workers it is imperative for employers to provide competitive compensation packages that often include a wide variety of benefits. Essentially, "the bottom line is that most workers' firms will be dominated by workers who will receive better benefits and, through the tax system, better subsidies through employer coverage than through newly created insurance exchanges" (Volsky 2011 p 1).

Yet, there is an intricate process employers must go through to determine what benefits will be offered and to what workers. According to the research, "before a determination is made regarding how employee benefits are handled, an employer needs to undertake a comparative analysis of non-tax considerations as well as the tax advantages and disadvantages offered by different entities" (Macpan Media 2012 p 1). Employers need to create and maintain a plan to avoid a scenario where they are overpaying in terms of what they pay out to employees with lower value levels. Thus the services offered must be in accordance with keeping up employee value. There are a number of elements that have varying costs depending on state and location. Typically, employers often have to pay FICA tax for employees, offer contributions to federal and state unemployment and worker's Compensation. These go along with offerings of medical and dental contributions, 401(k) plans for retirement, and sick, vacation, and holiday pay (Southern Administrators & Benefit Consultants 2005). A typical employer pays fees for benefits that typically equal up to 49.2% of a worker's annual salary (Southern Administrators & Benefit Consultants 2005). Offering more than this decreases employee value and places the employer in a vulnerable position.

An employer also has to choose benefit plans carefully, as to ensure that they are receiving the greatest tax advantages. Fully taxable benefits involve the holiday and paid vacation benefits that are taxable. On the other hand, tax exempt benefits are often much more beneficial from an employer stand point. These "generally mean that the benefit is not considered taxable income to the individual" and can include medical benefits, educational funding, child-care services, and other fringe benefits (Macpan Media 2012 p 2). Additionally, there are also tax deferred benefits that include pension and other retirement plans. Each of these structures play into the cost of providing benefits to employees differently, and thus have to be carefully weighed and balanced in order to keep employee value high while also providing competitive benefit plans.

Different types of benefits that may be offered to keep employees satisfied with a more competitive compensation plan. Medical benefits are the benefits most offered by employers to full-time employees. In fact, 86% of full-time workers receive medical benefits from their employers, whereas only 26% of part-time employees had access to these same medical benefits (United States Department of Labor 2010). According to the research, "an increasing number of firms also utilize wellness (76%) and disease management (68%) programs for their employees" (HC Statistics 2010). Thus, there are a number of wide options provided within medical coverage offered by most employers. Additionally, 74% of full-time workers receive some sort of employer-provided retirement plans (United States Department of Labor 2010). Most employers offer retirement benefits through a 401(k) program. Thus, "when 401(k) benefits are offered, half of companies allow employer contributions to vest immediately and the other half allow 401(k) contributions to vest within 3 years" (HC Statistics 2010). Life insurance is another potential option, along with paid sick leave that is offered to 76% of full-time workers according to a 2010 report (United States Department of Labor 2010).