Disability / Life / Long Term Care / Employee Benefits / Suggested Reading / Wonderful Things / Financial Calculators / John's Blog

title
Strategies For Competitive Staffing

Click here for a printer friendly version.

Ever wonder how fast life is moving?  Click here and see how we are rapidly changing as a world.  You will see the odds of life right before your eyes.  Births, deaths, injuries, illnesses, etc.  Even fun facts too.

In order to remain competitive, as well as attract and retain top employees, employers are faced with the task of creating a winning compensation strategy that will not only accomplish these objectives, but will also stay in line with corporate budgeting constraints. It's a fact that employee compensation is much more than just a salary. It includes all the "perks," such as vacation and sick time, company vehicles, corporate memberships, and a variety of benefit options designed to provide employees and their families with, at a minimum, health insurance and retirement income. While employers are legally obligated to provide certain state and federally sponsored benefits, the majority of employers also offer, and often contribute to, additional employee benefits for their employees.

Employee benefit plans fall into a number of categories, including:

  • State and Federally Mandated Benefits
  • Group Benefits
  • Retirement Benefits
  • Other Benefits

State and Federally Mandated Benefits. Employers are required, by law, to participate in certain programs, either through paying taxes or making contributions. These benefits include: workers compensation coverage; unemployment insurance taxes; Social Security taxes; Medicare contributions; and state disability laws, where applicable.

Group Benefits. The majority of employers voluntarily offer health-related benefits to employees. In most instances, the cost for employee health­related insurance is shared by the employer and the employees. There are a wide range of group benefits available to employers, including:

  • Group Term Life Insurance - Group term life insurance is generally offered as either a fixed amount, or based on a multiple of salary. For example, an employer might offer employees a fixed benefit of S50,000, or perhaps two times their annual salary.
  • Medical Insurance - Medical insurance is an important part of an employee's overall compensation package. Premiums for medical insurance have historically been very costly, and it is almost prohibitively expensive for someone to purchase outside of an employer-sponsored plan.

There are a number of different types of health insurance plans, including Fee-for-Service Plans, Preferred Provider Organizations (PPOs), Point of Service (POS) Plans, and Health Maintenance Organizations (HMOs). One main difference in each of these plans is the number of participating doctors. In a Fee-for-Service plan, an employee may go to any doctor for treatment, and pay a deductible and coinsurance. In a PPO plan, employees may either go to any doctor of their choosing and pay a deductible and coinsurance, or visit one of the participating doctors in the plan and pay a lower co payment. POS plans offer some of the flexibility of a PPO plan, but the employee must choose a primary care physician within the plan. HMOs allow the employee to see doctors only within their plan, sometimes at an HMO facility.

Whichever plan you choose to offer your employees, you should know that there will be those who insist on seeing their own doctors, and are willing to pay extra premiums and deductibles and coinsurance for them, a Fee-for-Service or PPO plan may be a good fit. Other employees may not have that need, and will appreciate a less expensive, more restrictive plan, such as a POS or HMO. In order to satisfy the majority of their employees, many employers offer their employees a choice of a Fee-for-Service or PPO plan, as well as a POS or HMO plan.

  • Dental Insurance - Dental insurance plans pay for a majority of services offered by dentists, orthodontists, and endodontists. Services are classified as preventive (routine exams and x-rays), restorative (fillings, endodontics, periodontics, crowns, and prosthetics), and orthodontia (braces). Benefits are payable as a percentage, based on the classification of the service. There is usually an annual maximum benefit per insured, and a lifetime limit on orthodontia. Riders are available for services such as adult orthodontia.
  • Disability Income - Disability income insurance replaces a percentage of an employee's earnings, in the event that he or she becomes unable to perform the regular duties of his or her job. Typical benefits range from 50%-70%, up to a monthly maximum benefit. Some disability income plans pay benefits for a number of years, or until age 65. Most offer additional provisions via policy riders, designed to improve coverage, as well as encourage the employee to return to work as soon as he or she is able. Some of these policy riders include residual or partial disability payments and cost-of-living adjustments.
  • Vision Insurance -Vision plans generally provide a benefit for the purchase of eyewear or contact lenses, and may also pay for eye exams

Retirement Benefits. Like health insurance, retirement benefits are an integral part of an employee's overall compensation. There are a number of different retirement options available, such as:

  • Pension Plans (defined benefit, defined contribution, or profit-sharing) - Provide employees with a retirement benefit, payable based on the employee's length of service, salary, and a benefit formula that typically calculates the average of the employee's earnings over a prescribed period of time.
  • 401(k) Plans - Provide employees the opportunity to contribute a percentage of pre-tax salary, with restrictions, into a retirement fund. An employer has the option of matching contributions, up to a predetermined percentage and subject to a maximum.
  • Simplified Employee Pensions (SEPs) - Are a common retirement plan option for employers with 100 employees or fewer. In SEPs, employers utilize Individual Retirement Accounts (IRAs) as a way of providing employees with a pension benefit.
  • Savings Incentive Match Plan for Employees (SIMPLES) -Are also designed for employ­ers with 100 or fewer employees, and utilize either IRAs or 401(k)s to provide a retirement benefit for their employees.

In deciding which type of retirement plan to offer, an employer should consider: ages and compensation histories of employees; level of employer contributions anticipated; the company's profit history; plan administration costs; and the expected length of time the plan will exist. There are a wide variety of plans available to employers, and it makes sense to consult with professionals who specialize in retirement plans for businesses.

Other Benefits. This is a "catch-all" category that includes programs and benefits offered by the employer on either an employer-pay-all or contributory basis. These additional benefits serve to improve the employee's quality of life by offering services and programs that may make the employee's life easier, and hopefully, more pleasant-translating to improved satisfaction levels and employee productivity.

Other benefits are quite extensive and can include, but are not limited to: group automobile insurance plans; flexible spending accounts; dependent care accounts; medical expense reimbursement accounts; paid leave; employee assistance programs; health club memberships; credit unions; company vehicles; and certain non-qualified plans, such as deferred compensation plans which are usually discriminatory in nature, and thus are not tax-favored instruments of employee compensation.

Designing a Plan

When you begin to put together an employee benefit plan, you will likely want to start with a few "core" benefits, such as disability insurance, health insurance, and a retirement plan. These benefits form a base from which your company's benefit plan can grow and evolve in the future. Every year or two, it may be wise to consider the addition of a new benefit plan, for example dental insurance or disability income insurance. Instead of bearing the burden of cost entirely, the employer can contribute a portion of the cost, with the employee paying the balance.

Before you add a new benefit to your existing employee benefit plan, it is always wise to survey the current employee population, to see what benefits they would like added. For example, if your employee population is made up of younger, single employees without dependents, a dependent life insurance plan - one which would provide a benefit in the event of the death of an employee's spouse or child-would be underutilized and, most likely, unappreciated. But, if your employee population is largely made up of "30-somethings," married, and with children, the same dependent life insurance plan might be an excellent addition to your existing benefit plan. Your employee benefit plan is not static. It must change and evolve with your company's growth, profitability, and employee demographics, in order to be effective as a retention/recruitment tool.

Regulations

The majority of employee benefit plans are federally regulated and have strict guidelines to follow regarding nondiscrimination, rights and privileges for terminated employees, continuation of coverage rules for medical insurance, and rollover and distribution requirements for defined benefit and defined contribution plans.

In order to avoid discrimination (and the potential for legal action), a benefit offered to one employee should be offered to all employees, regardless of race, age, gender, disability, and whether they are hourly or salaried individuals. Employers must design employee benefit plans to comply with a number of legislative acts, including: Employee Retirement Income Security Act of 1974 (ERISA); the Age Discrimination and Employment Act; Older Workers Benefit Protection Act; Civil Rights Act; Consolidated Omnibus Budget Reconciliation Act; and Equal Pay Act. While employers may offer discriminatory benefits to, for example, their key employees, these benefits will be classified as "non qualified" benefits and the cost of providing them will not be deductible to the employer, as other "qualified" benefits might be under the Internal Revenue Code.

Create a Win-Win Relationship

As an employer, you have the opportunity to create an employee benefit plan that will improve the satisfaction of current employees and enhance recruitment efforts, as well as provide tax incentives for your company. A professional experienced in designing health, welfare, and pension plans can assist you in creating a plan that's right for you and your employees, and that fits in with your overall budgetary requirements.

Back To Top