NATURE OF SUPPLEMENTARY COMPENSATION

Different forms of supplementary compensation have a variety of

titles in industry. Some
Service Program, Non-wage Payment, employee benefits, Hidden
Payroll, are often referred to as fridge benefits. Fringe benefits is an
expenditure designed to benefit employees over and above regular
base pay and direct variable compensation related to output. As major
categories, such benefits can include the following

1.Payment for time not worked.

This include paid rest periods, paid lunch periods, wash-up time
,clothes-change time ,get-ready time, vacations ,holidays ,sick
leave ,personal leave, voting time, and jury duty. Perhaps the
ultimate is a newly negotiated "to-hell-with-it" benefit: a certain
number of days are provided for the occasion when the
employee simply doesn't feel like going to work.

2.Hazard protection. Hazard protection is designed to protect

against the hazards of illness ,injury ,debt ,unemployment ,
permanent disability ,old age, and death. A work related injury
or disease.

3.Employee services. Services offered and given to employees

such as housing, food, advice ,recreation ,and so on. The trend
toward the organization's providing such routine and ordinary
services is exemplified by such fringe-benefit programs as
cafeterias, paid legal services, career counseling ,educational
tuition, aid in housing, medical services ,low-cost loans ,use of
organization vehicles for personal reasons ,day-care centers for
children ,and paid memberships in certain private organizations.

4.Legally required payments .Our society, through its

government ,has decreed that certain minimum levels of
company expenditures will be made in the area of protecting
employees against the major hazards of life. Thus ,regardless of
company policy ,organizations covered by federal and state
laws must pay for unemployment compensation ,workers'
compensation insurance, old-age and survivors' insurance under
social security, and Medicare.

Predictions for the future indicate greater expenditures and efforts in

such fields as group purchasing of all types (for example, group
automobile insurance and legal services),longer vacations, no
employee expense for major medical coverage, increased dental
coverage ,increased coverage for psychiatric difficulties ,pension
portability ,cost-of-living adjustments of pension after
retirement, .annual physical examinations, earlier retirement ages, and
possible retraining when severed from the organization. We appear to
be limited only by our ingenuity one firm provides a free jet flight
anywhere in the world on the tenth anniversary d service with the
firm. Unusual benefits have been noted such as facelifts for executives
and spouses, off-track-betting breaks, adoption fees, no-smoking pay,
paternity leave, well pay, weight-loss pay, and self-defense
training. When provided for executives, benefits as the following:
chauffeured limousines, home security systems, referred to as
perquisites or "perks." Among such "perks" are found such aircraft
and yachts, tax assistance, financial counseling, company apartment
near the office, club memberships, company credit card, home
entertainment expenses, kidnap and ransom insurance, and no-interest
loans.
Particular employee benefits will produce varying values. Paid
vacations are presumed to provide a mental and physical respite that
generates increased interest and activity on the job. Life insurance
reduces worry about one's family security and thus leads to greater
concentration upon work. Company cafeterias promote the eating of
balanced meals, thus reducing fatigue in the late afternoon. Medical
services help to keep the employee in good health, thereby reducing
absenteeism. All of these are logical, but cost benefit analyses of
fringe benefits are rare indeed.

A PHILOSOPHY OF

EMPLOYEE BENEEITS
The growth of employee benefits has been rampant, particularly since
World War Il, and apparently no end is in sight. It will be recalled that
the period of the 1920s, labeled the "era of paternalism," saw a
widespread adoption of such benefits as company housing and
company stores. The paternalistic approach fell into disrepute,
supposedly as a result of the employee's desire for "industrial
adulthood." The Depression of the 1930s also served to eliminate
many employer-financed services. Since World War Il, we have
entered the era of the "new paternalism." The services of the 1920s
pale into insignificance when compared with those of the present. The
attitudes of both employees and the general public toward service
programs have changed considerably. The tremendous amount of
social legislation of the 1930s, particularly the Social Security Act,
has led many to believe that the private firm is morally responsible for
the lives of its employees. It is no longer a service initiated by a
fatherly, benevolent employer, but a requirement imposed by
government, competition, or the labor union.

In summary, the rapid growth of such programs can be traced to

such sources as: (1)a changed employee attitude,(2) labor union
demands, (3) governmental requirements,(4)competition that forces
other employers to match benefits to attract and keep labor, and (5)
periodic wage controls that freeze wages but permit the offering of
services as a substitute for wage increases. High company income tax
rates have also stimulated the offering of services, since they can be
brought with cheap dollars.
 What should be the philosophy of the manager in the realm of
employee services? Ina private-enterprise economy, the basic guiding
principle should be that no employee benefit should be undertaken
unless there is some return to the organization that is at

least equal to its cost. This is not to say that government should not
it is for the general interest and welfare. The manager must,

service with possible tangible and intangible returns to the company.

The returns of employee benefits to the company can take various

forms, many of which are not subject to quantification. Among the
values often cited are:

1.More effective recruitment

2.Improved morale and loyalty

3.Lower turnover and absenteeism

4.Good public relations

5.Reduced influence of unions, cither present or potential

6.Reduced threat of further government intervention

The dollar return from employee benefits is almost impossible to

measure. It is safe to state that the overwhelming majority of all
employee benefits are taken on faith ,rather than justified in dollars
and cents. The correct management philosophy should have an
economic orientation, modified by the influences of government and
labor unions. We should prefer to be able to prove a positive return to
the organization; but we cannot deny that fear of present or potential
unions and of possible governmental interference has led many
managers further into the area of employee benefit programs .

PRINCIPLES OF EMPLOYEE

BENEFIT PROGRAMS
The cardinal principle of employee benefit programs has been set
forth above; that is, the benefit must make a contribution to the
organization at least equal in amount to its cost. In addition to this
basic guide, there are several other generalizations that applicable.
Among these principles are the following:

1.The employee benefit should satisfy a real need.

2.Benefits should be confined to activities in which the group is

more efficient than the individual.

3.The benefit program should be characterized by sufficient

flexibility to enable adaptation to varying employee needs.
 4.If the firm is to receive values from providing employee
services, it must undertake an extensive and well-planned
communication program.

5.The cost of the benefit should be calculable, and provision

should be made sound financing.

The first principle, that of satisfying a real need, would appear to

need statement. However, many times benefits have been installed,
only with employee apathy or outright resistance. The ego in some
manager has led them to believe that they know what is best for their
employee. In one case, a company managers company manager

PAYMENT FOR TIME NOT WORKED

The two most costly types of payment for time not worked are
vacations and holidays.

There has been constant trend toward lengthening the annual

vacation in most organizations. A typical schedule would be as
follows:

·One week after 6 months to 1 year of service

·Two weeks after I to 5 years of service

·Three weeks after 5 to 15 years of service

·Four weeks after 15 years of service

·Five weeks after 25 years of service

Some firms give as much as 6 weeks of vacation for certain

groups. Just as some universities provide for a sabbatical leave for
their faculties, Xerox has established a years paid leave of absence for
employees with an approved project that will contribute in some
manner to improving society.

Most organizations provide 7 to 12 holidays with pay for their

employees. The most commonly observed holidays are New Year
Day, Good Friday, Washington’s Birthday, Memorial Day,
Independence Day, Labor Day, Veterans’ Day, Thanksgiving, and
Christmas. A few permit the employee to take a paid holiday on her or
his birthday. Many firms now grant “floating” holidays taken either at
the employee’s option or designated for all employees by
management, such as an extra day at Christmas time to make a longer
“weekend.” In most firms, eligibility for holiday pay for those
working is contingent on having worked scheduled days before and
after the holiday .Most pay time and a half for holiday work, though a
few will award double time.

There are also a number of miscellaneous types of nonworking

times that companies sometimes underwrite. These would include jury
duty, death in family, civic duty, military obligations, and marriage. It
is quite common to pay for a minimum of 4 hours if the employee
reports in and finds no work available. Employees engaged in
grievance processing are also paid their usual salaries for the time so
spent. There are also paid rest periods, lunch periods and wash up
time.

ECONOMIC PROTECTION AGAINST HAZARDS

Aside from the insurance and unemployment compensation

there were few more programs designed to help employees when
faced with adversity. Among this are the (1) Guaranteed Annual
Wage, (2) Life Insurance (3) Health Insurance (4) Medical Services
(5) Credit Union.

Guaranteed Annual Wage

Most of the private annual wage plans have 3 basic

characteristics (1) they guarantee a number of weeks of employment
and/or wages. (2) they restrict the number of employees covered

(3) they suspend the operation of the plan under condition of extreme
emergency, such as fire flood, explosion, and strikes.

Life Insurance

The oldest form of company sponsored employee benefit and may be

smaller than those of insurance purchased by the individual. Life
insurance plans include all employees regardless of physical condition
and provide conversion to individual policies without physical
examination when leaving the organization.

Health Insurance

Accidents and other related disease growing out of the job are
compensable in every workers which is provided and financed in
every employee. There are different types of insurance provided by
different firms

1. Hospitalization
2. Surgical expense
3. Accident and sickness insurance
4. Maternity benefits
5. Vision care
6. Dental care
7. Psychiatric care, alcohol and drug addiction
8. Chiropractic coverage
9. Major medical
 Medical Services

Health maintenance organization (HMO) is an alternative option

to health insurance if one is available in the community . they
provide clinical and hospital services for fixed monthly fees. It is
estimated that 180 HMOs in the nation covers 6 million people. The
accent is on preventive medicine: one is free to go to the clinic at
anytime at little or no charge per visit.

Credit Union

A credit union is an organized group of people who pool their

money and agree to make loans to one another . One value of
fostering a credit union is the relief from worry over short term
financial insecurity. Second value is the reduction in employee
compensation garnishments by loan agencies when the employee
fails to meet loan obligations

FACILITATIVE EMPLOYEE SERVICES

Is an activity that employees must normally take care of themselves

in everyday living. The trend is in the direction of providing regular
employees with special assistance with some of the routine portions
of life which are listed below.

Recreational Program

This may be divided into two types (1) sports and (2) social
events. This establish a broad base of participation, but it may return
values in improved public relations and employee pride. This also
improved morale, discovered relationship between productivity and
participation.

Cafeterias

Improper eating may result to greater fatigue and reduced

productivity during working hours so proper nutrition is needed in
every employee.

Relocation Assistance

The home life of the employee has a considerable performance at

work. Employees wish to retain the flexibility of moving key
employees to new job assignments to enhance effectiveness of both
individual and organization. There are various services provided such
as the help in sale of present home, shipping household goods,
temporary living and travel expenses, job finding assistance to the
employees spouse, information and advice concerning the new area
such as medical facilities, school routes, work and so on.

Vanpooling

Because of the rising cost of gasoline some companies organized

and finance vanpooling program. For convenience the company
provide vans and a driver in which the employee pays 2 dollars per
day which also benefit from preferred parking place at work.

Child Care
Half of the women with children under the age of six are in the
work force. For families both parents working it is estimated that day
care expenses for children average 1O percent of gross income,
ranking behind only housing, food, and taxes. In addition, the old
family support networks of relatives and neighbors caring for children
are rapidly dissolving.

It has been projected that employer provision of some form of child

care will be the benefit of the future. As stated by one executive, “by
1990, you’ll see the child care benefit as often as you see group
medical insurance today.” The child care can also benefit from the
provision of counseling. And to those employees who do not have
children can be solved through the cafeteria benefit program,
permitting the parents to choose the child care benefit while
remaining employees can spend their portion in other selected
benefits.

Employee Purchase

When an employee purchase their products discount prices are

given. This provide returns in morale and also stimulates the
employee to use and “identify with” the products on which he or she
works at. But a potential danger are outweigh in this value, among
this are (1) the employee holds the company responsible for any
deficiency or malfunction in the product purchased (2) he or she
request installment financing of the purchase (3)the company incurs
the ill will of the community retailers who sell the same product
brought through the purchasing agent.

Educational Tuition

Another fringe benefit that is offered is the educational assistance

through tuition refunds. The most common stipulations for approval
of educational assistance are (1) the course taken should be related to
the job (2) the course should be applicable toward a degree and (3)the
worker must still be in the company’s employ at the time of the
refund.

Educational tuition is a fringe benefit in which the foundation has a

mutual benefit. The employee gains additional knowledge while the
organization gains when the skills are put to use in the job.

Employee Assistance Program

The final catch-all type of services, various firms providing advice

and assistance for a wide variety of personal troubles, this includes
alcohol, rehabilitation, marital and family counseling, emotional
counseling, and drug abuse program.

Summary
Employee fringe benefits can be compared to the mythological
animal that grew two heads when one was chopped of. There seems
to be no end to the number variety, and adaptations of such service
programs. As an example, one local union demanded that when a
retired company employee dies, a representative of the department
be given time off with pay to attend the funeral. The limit on this
arrangement is 4 hours time off.

One could reason that the forces governing the determination of

wages and other compensation will result in a certain size of
compensation package. If the employee desires to take 30 percent of
this package in the form of guaranteed annual wage, pensions,
insurance, and the like, that is her or his privilege. This presumes that
the compensation package can be scientifically determined and that
the employee is actually substituting a fringe for a portion of the
base wage. Such a precision of measurement is, of course,
impossible.

The typical approach to the problem of what employee benefits to

offer is to attempt to prove or deduce specific and general values to
the organization as well as to the employee participant. In general, all
such plans should conform to such principles as the following: the
benefit should provide organizational value at least equal in amount
to its cost; it should meet a real need; group effort should be more
efficient than individual, maximum employee participation should be
engendered; special efforts should be made to communicate the
value and content of the fringe-benefit package; the costs of te
benefit should be calculable and provision made for sound financing.

Nonwage payments take a variety of forms, including pay for time

not worked. economic benefits to protect against major life hazards,
and facilitative services to improve the quality of life. Society through
government appears to be most concerned about protecting against
major economic hazards issuing from interruptions or stoppages of
employment, as judged by passage of such laws as the Social Security
Act and Employee Retirement Income Security Act. There is obvious
great concern with employment heath.

PA 206

PUBLIC AND PERSONNEL

ADMINISTRATION

PUBLIC AND PERSONNEL

MANAGEMENT CHAPTER
14

SUBMITTED TO:

TAGO, ESTITA C.

SUBMITTED BY:

SERAFIN, MERRY ROSE G.