Employee Benefits Strategies

SUMMARY

Direct compensation is only a portion of the total labor cost of organizations. Benefits are an increasing part of the rewards received by employees. In the United States, it's up to the employer to provide a wide range of benefits that offer employees a sense of financial security. This allows them to work without concerns that might get in the way of them concentrating on their jobs. While these used to be called fringe benefits, this term is no longer appropriate, as they are a substantial and growing compensation cost. Unions have found it useful to bargain for benefits when pay increases are harder to obtain. In addition, employers have felt the need to keep up with competing organizations by offering better benefits.

Required Benefits

State and federal government regulations have increasingly demanded that employers provide benefits to employees. Laws affecting benefits require that certain benefits be offered and establish standards for administration of the benefit. Legally required benefits include Social Security, unemployment insurance, and Workers' Compensation. Employers are not required to offer health care insurance or retirement programs. If they do, they must follow the legal requirements established by federal legislation, including ERISA, HIPAA, and COBRA.

Planning Employee Benefits

Once an organization decides to offer benefits, they must decide what benefits to offer. The government requires some benefits, but beyond that, the organization should take into account what competitors are offering and what employees desire. These benefits should then be evaluated based on a cost-benefit analysis. The second decision organizations must make is who will be eligible to participate in the benefits.

Benefits Administration

As benefits programs grow, it becomes increasingly important to administer them carefully. This can be a complex task since different expertise is required for each type of benefit plan. Since employees often do not know what benefits they have or understand them, communication of benefits is an important, but often overlooked, task. Controlling costs is also crucial, as the growth of benefit costs far exceeds the increase of direct compensation.