Compensation and

Benefits
MBA Sem 4
 Module 6
Employee Benefits

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What are Benefits?
 Consider the kinds of things that are common in companies that
made the Fortune magazine list of “100 Best Companies to Work
for in America.”
 These companies recognize the importance of taking care of
employees’ needs as a key factor in attracting and retaining the
best employees.
 A first-class benefit plan includes some mix of the following
benefits:
◦ education reimbursement
◦ employee training;
◦ on-site child care services
◦ Financial counseling
◦ concierge services
◦ retirement benefits
◦ Non-costly benefits such as casual-dress policies

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Corporate examples
 Container Store: This retail box store ranks second on the best
employer list for 2 straight years. Amongst benefits offered are
domestic partner benefits, free yoga classes at distribution centers,
chair massages, and a 100 percent match for 401(k) for up to 4
percent of salary.
 JM Smucker: Not only does Smucker make great jam and ice cream
toppings, but it is a great employer too. Smucker offers such added
benefits as health care for retirees and their spouses, on-site stop-
smoking classes, and unlimited paid time off for volunteer work in
the community
 Wegmans Food Markets: Bob and Danny Wegman treat their
employees right! Employees of this supermarket chain receive time
off to volunteer and to care for sick pets. They are especially proud
of the paid-time-off program for the mentoring of school children,
which has helped more than 1,000 kids graduate from high school.

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Benefits - Definition
 Employee benefits are that part of the total
compensation package, other than pay for
time worked, provided to employees in whole
or in part by employer payments (e.g., life
insurance, pension, workers’ compensation,
vacation).
 It is a financial but not cash component of

compensation

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Objectives and ranking

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Benefits Planning and
Design
Key Issues to be addressed

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Four important questions – No.1
 Who should be protected or benefited? (full-
time vs. contingent)

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Four important questions – No.2
 How much choice should employees have
among an array of benefits? (fixed vs.
cafeteria style)

AE* - Avg. earnings

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Flexible Benefits

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Four important questions – No.3
 How should benefits be financed?
◦ 1. Noncontributory (Employer pays total costs.)
◦ 2. Contributory (Costs are shared between
employer and employee.)
◦ 3. Employee financed (Employee pays total costs for
some benefits—by law the organizatio must bear
the cost for certain benefits.)

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Four important questions – No.4
 Are your benefits legally defensible?
◦ Benefits have to comply with hundreds of arcane
sections of the tax code. Because there are so many
rules and regulations, benefit administrators should
develop a compliance checklist and regularly
conduct audits to ensure that they are complying
with the avalanche of new and existing
requirements.

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Factors influencing choice of benefits
package

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Administering Benefits program
 Communicating about the program
 Claims processing
 Cost containment

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Benefit Options
 Legally Required benefits (US system)
◦ Workers’ Compensation
◦ Social Security
◦ Unemployment Insurance
 Retirement and Savings plan payments
 Life Insurance
 Medical and Medically related payments
◦ General Health Care
◦ Short- and Long-Term Disability
◦ Dental Insurance
◦ Vision Care
 Miscellaneous benefits
◦ Paid Time Off during Working Hours
◦ Payment for Time Not Worked
◦ Child Care
◦ Elder Care
◦ Domestic Partner Benefits
◦ Legal Insurance

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Benefit Surveys
 Survey of employee expectations, what they
value the most and those that will motivate them
the best
 Questionnaire method is most commonly used
method of benefit survey
 Employee Benefit Research Institute (USA) –
www.ebri.org
◦ Facts on employee benefits
◦ Data without lobbying
◦ Explores breadth of financial and health security issues
◦ Supported by organizations in all industries and sectors

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An example – Pfizer Corp

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Current trends
 Attracting and retaining employees with
unique benefits and perquisites are the order
of the day
 Start-ups attracting executives with equity

options
 MNCs turning around their HR systems into

HCM systems
Benefits @ Google
 Free food for breakfast, lunch, and dinner.
 On-site haircuts.
 A fully equipped gym and swim-in-place pool.
 Game rooms with video games and tables for ping pong,

billiards, and foosball.

 Laundry facility and dry cleaning services.
 On-site medical staff.
 Death benefits where spouses of employees receive 50% of

the employee’s salary every year for a decade. Children

also receive a $1,000 monthly payment until they reach 19.
 Maternity benefits of 18 weeks paid leave and paternity

benefits of six weeks of paid leaves

Benefits @ SAS
 Three weeks of paid company vacation and
unlimited sick days.
 Healthcare centers at many offices.
 Subsidized on-site child care centers.
 Recreation and fitness centers at the main

headquarters and reimbursements for those

at regional offices for fitness memberships.
 College scholarship program for children of

employees.
 No dress code.
Benefits @ Zappos
 Above-average medical, dental, and vision
insurance coverage.
 On-site wellness service.
 Pet insurance.
 Pre-paid legal.
 40% employee discount for those who love shoes

and accessories.
 Free food for breakfast, lunch, snacks, and breaks.
 Monthly team outings.
 Nap rooms so you can rest and rejuvenate for the

remainder of the workday.

Benefits @ GoDaddy
 Healthy living coaching programs.
 Healthy lunch & vending machine options.
 A variety of services including flu shots,

health fairs, and biometric screening.

 Tuition reimbursement.
 Adoption assistance.
 GoDaddy cares community service.
 Holiday parties, picnics, and team building

retreats.
Trending Benefits
 Life after Death (Google)
◦ Should one of the U.S. Google team die while still employed by the
company, the employee's surviving spouse or partner will be given 50%
of his or her salary for ten years after his or her death
 Go Green (David Evans & Associates)
◦ Staff can claim up to $6 a day if they commute to work by walking,
biking, carpooling or riding the bus.
 Shopping loans (Umpqua Regional Bank, Oregon)
◦ With a loan of up to $1,000 a year, repayable through payroll
deductions, at this bank there's certainly no reason to look scruffy.
 Unlimited vacations (Red Frog Event Co.)
◦ Taking vacation at Red Frog is encouraged, and even celebrated. It's not
abused. If unlimited vacation is not incentive enough, after five years of
working for the company, employees are rewarded for their loyalty with
a four-week, full-paid trip to Africa, Asia, Europe or South America for
them and a friend. It's no wonder they only hire one in every 750
applicants who apply to work there.
Trending..
 Option to work remotely
◦ We allow all staff members to work from wherever they want.
This gives us access to a much larger talent pool, and allows
employees to get more creative – Hubstaff.com
 House Cleaning
◦ No more stressing about the tasks awaiting you at home. Your
house will be spotless with free twice-monthly housecleaning –
Evernote
 No Official work hours
◦ So as long as you get your work done well, they don’t really care
whether you’re in the office during the standard 9-to-5 – Netflix
 New baby fund
◦ Facebook gives employees $4,000 in cash when they have a
child.
End of Module 6

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