Employee Compensation and Benefits

1. Employee Benefits • 3770 Beardshear Hall Human Resource Services Employee Compensation and Benefits Mike Otis, Associate Director Human Resource Services

2. Employee Benefits • 3770 Beardshear Hall Human Resource Services Agenda Compensation Goals Compensation Approaches Benefits Exercise Employer Challenges General Benefit Concepts Health Benefits Welfare Benefits Retirement Benefits Closing Thoughts

3. Employee Benefits • 3770 Beardshear Hall Human Resource Services Goals of Compensation Plans Employers are able to attract and retain employees who will contribute to the organization’s success Employees feel they are compensated/rewarded fairly for their efforts and contributions to an organization’s success

4. Employee Benefits • 3770 Beardshear Hall Human Resource Services Supportive Corporate Culture Executive Sponsorship Employee Satisfaction • Rewards • Bonus • Salary Increases • Promotions • Equity Offerings • Awards • Recognition • New job assignments • Benefits • Health Plans • Retirement Plans • Vacation/ time off • Paid Training • Working Hours • Salary • Pay • Overtime

5. Employee Benefits • 3770 Beardshear Hall Human Resource Services What Factors Determines Pay Employer considerations Where employers compete for talent – local or national What talents an employer competes for – the skill/knowledge level How strongly the employer wants to compete Lead the market Meet the market Lag the market

6. Employee Benefits • 3770 Beardshear Hall Human Resource Services What Factors Determines Pay What job duties will be performed determines classification as either Exempt or Non-exempt Non-exempt employees. Eligible for overtime pay for hours worked in excess of 40 Employer must record time worked Governed by Fair Labor Standards Act (FLSA) Exempt employees Typically executive, professional, or administrative positions Must meet minimum weekly pay guideline Not entitled to overtime Must meet both salary test and duties test

7. Employee Benefits • 3770 Beardshear Hall Human Resource Services Compensation Structure Example

8. Employee Benefits • 3770 Beardshear Hall Human Resource Services Compensation Structure Example

9. Employee Benefits • 3770 Beardshear Hall Human Resource Services Rewards/Recognition Job Classifications Compensation Structure Compensation Philosophy

10. Employee Benefits • 3770 Beardshear Hall Human Resource Services New Employee Exercise“It’s good for the heart!”

11. Employee Benefits • 3770 Beardshear Hall Human Resource Services Utopia Enterprises – Your Employer of Choice! We provide a “buffet” of benefit choices to meet your individual needs!!

12. Employee Benefits • 3770 Beardshear Hall Human Resource Services

13. Employee Benefits • 3770 Beardshear Hall Human Resource Services Employer Challenges Large employer/small employer Private employers/public employers Structuring employee benefit packages that meet the needs of a diverse workforce – one size does not fit all Benefits that help with recruiting and retention efforts Helping existing employees understanding the “value” of their benefits Administering benefit programs – costly and time-consuming. Not a profit-making venture! Continued rising health care costs Limited budgets – Benefits average 25 - 40% of Payroll in most organizations Government restrictions/legislation/public policy

14. Employee Benefits • 3770 Beardshear Hall Human Resource Services General Benefit Concepts Core (traditional) vs. Non-core (voluntary) Employee Benefits Pre-tax benefits/after-tax benefits Cafeteria Plan concept The value of a “Hidden Paycheck” Total-Compensation approach (cash and non-cash compensation)

15. Employee Benefits • 3770 Beardshear Hall Human Resource Services General Concepts Publicly traded companies will tend to structure pay/benefits that incorporate more equity (stock options, savings match in company stock, bonus tied to company performance, etc) Non-publicly traded companies/organizations will spend more on non-cash incentives Governmental organizations will on average spend more on benefits in lieu of salary Large organizations may choose to “self-insure” insurance (medical/dental) – take on risk to save $$

16. Employee Benefits • 3770 Beardshear Hall Human Resource Services Core vs. Non-Core Benefits

17. Employee Benefits • 3770 Beardshear Hall Human Resource Services Health Benefits General types of health coverage Medical Prescription Drugs Dental Vision With larger employers, employee costs for coverage are usually paid under a “cafeteria plan” approach where employees will receive benefit dollars/credits to use to pay for benefits and will be able to select the level of coverage (i.e., single coverage/family coverage) Most health benefit employee contributions will be deducted from pay pre-tax

18. Employee Benefits • 3770 Beardshear Hall Human Resource Services Wellness Programs Many employers are starting to see the value from incorporating wellness initiatives into their work places disease management health risk assessments fitness programs on-site clinics and pharmacies Prevention vs. Payment Improve productivity/reduce absenteeism/presenteeism Difficult to measure the Return on Investment (ROI) of wellness programs

19. Employee Benefits • 3770 Beardshear Hall Human Resource Services Welfare Benefits Provide safety and monetary security beyond health Typical benefits Basic life Supplemental (optional) life Accidental Death and Dismemberment (AD&D) Dependent life insurance Short-term disability (STD) Long-term disability (LTD)

20. Employee Benefits • 3770 Beardshear Hall Human Resource Services Flexible Spending Accounts Includes a Health Care Spending Account (HCSA) and a Dependent Care Spending Account (DCSA) Allows participants to use pre-tax dollars to reimburse themselves for medical and dependent care out-of-pocket expenses – great tax advantages!! IRS limits annual reimbursement amounts Use-it-or-lose-it provision – need to estimate expenses wisely

21. Employee Benefits • 3770 Beardshear Hall Human Resource Services Vacation May be provided under separate program or combined under a PTO (paid time off) plan with sick days May be earned monthly or provided on an annual basis Many employers require all vacation to be used in a year – no carryover (balance sheet accrual) If carryover allowed, typically subject to an accrued maximum number of days or hours

22. Employee Benefits • 3770 Beardshear Hall Human Resource Services Retirement Benefits Defined Benefit Plans (traditional Pension) Based on a formula that determines a future benefit Defined Contribution Plans (think 401(k)) future value depends on contributions from employee and/or employer 403(b)/ 457 Not-for-profit employers 401(k) For-profit employers Required plans Supplemental plans Hybrid Retirement Plans Deferred Compensation Plans IRS restrictions

23. Employee Benefits • 3770 Beardshear Hall Human Resource Services Comments on Retirement Defined Benefit (Pension) plans are the exception rather than the rule Many employers now will automatically enroll employees in 401(k)/403(b) plans Understand the time-value of money – compounding Employees encouraged to save early – the pain will be much less later Employees should take full advantage of any employer match to retirement plans “DIVERSIFY” investments – Many employees are too conservative or too risky Asset allocation models and retirement calculators are offered by many providers

24. Employee Benefits • 3770 Beardshear Hall Human Resource Services

25. Employee Benefits • 3770 Beardshear Hall Human Resource Services Conflicting Priorities for Savings/Retirement Car payments/car insurance Mortgage/rent/student loans Utilities Food/beverages Clothing Entertainment Life expenses in general

26. Employee Benefits • 3770 Beardshear Hall Human Resource Services Other Voluntary Benefits Offered as optional benefits – typically employee pays full cost Voluntary benefit programs typically offered at a discount price resulting from group purchasing power Employer may offer the option of payroll deduction Examples are auto/homeowners insurance, pet insurance, computer purchase discounts

27. Employee Benefits • 3770 Beardshear Hall Human Resource Services Laws Affecting Employee Benefits and Compensation Fair Labor Standards Act (FLSA) Employee Income Retirement Security Act of 1974 (ERISA) Age Discrimination and Employment Act (ADEA) Family Medical Leave Act (FMLA) of 1996 Economic Growth and Tax Relief Reconciliation Act (EGTRRA) of 2001 Health Insurance Portability and Accountability Act of 1996 (HIPAA) (and amendments) Pension Protection Act of 2006 many, many others

28. Employee Benefits • 3770 Beardshear Hall Human Resource Services Closing Thoughts • How employees are “compensated” takes many forms – salary, benefits, working conditions, challenging/stimulating work, co-workers, etc. The right “mix” for each person is different • Pay policies will differ for every employer – some will focus on cash compensation and some will focus on Total Compensation • The employer’s main goal is structuring compensation and benefit programs is to be able to attract and retain the right employees needed to help the employer be competitive

29. Employee Benefits • 3770 Beardshear Hall Human Resource Services Closing Thoughts Employee benefits have huge budget impacts to employers Benefits are the “hidden paycheck” for employees Employees need to understand the “total compensation” an employer provides – not just the “salary.” Employers need to sell Total Compensation – not just salary Employees need to be “educated consumers” of benefit programs – especially health care and retirement programs Employees should take advantage of retirement plan offerings and save early (time value of $$) – and always save enough to at least take advantage of employer’s matching contribution

30. Employee Benefits • 3770 Beardshear Hall Human Resource Services Questions??