The ABC's of Paying Employees and Providing Benefits

Whether you are a small, medium or large-scale entrepreneur, you need to learn about the basics of paying employees and providing benefits. The minute you post an opening for a job position for your company, you are already sending a message that you will be providing benefits and compensation to those you will hire. The question on each applicant is “how am I going to be compensated.” Prospective employees are looking-out for their own good in return for their years of dedication and devotion they will give your company, while the employer is looking to maximize profits while retaining quality, dedicated employees.

As a accountable employer, it is your responsibility to see to it that your employees are receiving a fair salary, the full set of benefits required by law, and enough fringe benefits to ensure you will be able to retain your employees; you want to ensure their job satisfaction and keep them happy in return for helping make your company successful.

Money isn't Everything

Contrary to popular belief, money is not the sole reason some employees choose to apply for a job position at a company, or leave it, for that matter. Sure, having an attractive salary dollar figure is important, but there are other reasons why highly-skilled individuals choose to leave their jobs.

These reasons include job security, career advancement, career challenge, appreciation for their work, lack of benefits, a lack of communication with peers or superiors, and general dissatisfaction with the job itself.

Balancing Employee Expenses with Employee Happiness

How will you ensure that you are not spending "too much" on employee salary – and you are getting your money's worth from each employee as an investor? One warning here, be careful choosing to frame your employees entirely from an investment perspective, your perception will eventually be conveyed to your staff and they may feel exploited.

Just as it is with every other aspect of running your business, there is a need to control company costs in terms of the expenses in relation to your employees' salaries/benefit packages.

The Two Primary Ways to Manage Your Personnel's Pay

Direct Pay Method

If you choose this method you are basically placing all of your ability to entice, retain, and build employee loyalty and dedication on the maximum salary potential. This limits your ability to minimize expenses on salary by obtaining reduced employee retention potential on a scope of benefits that you may be able to leverage for a lower overall cost.

Leveraging the Employees' Pay with Benefits

This is the method where you get creative and offer a combination of salary and benefits that allow you to reduce overall employment enticement and retention expenses. Here you make sure your employees understand the extent of what they are getting in terms of the entire benefit package combined with actual pay. You can obtain overall less comparable, total employee retention power by combining salary with benefits such as medical, dental, employer 501K contributions, pension plans, profit sharing, increasing vacation leave and so forth.

Benefits to Employees?

First, take a look at some key statistics regarding employee benefits, according to the Bureau or Labor Statistics in the United States:

• 61% of private industry employees had access to paid retirement benefits.
• 89% of state and local government employees had access to pair retirement benefits.
• 86% of government employees participated in retirement plans.
• Employers paid 83% of the premium costs for a single coverage medical plan and 71% for family coverage for workers.
• Access to paid holidays and paid vacations are greater in the private industry.

As you can see, having a comprehensive benefit package is crucial to the success of the company if you want to retain highly-skilled employees. So what are the types of benefits which business owners commonly provide for their employees?

First, there is the usual health and welfare plan. This includes medical insurance, dental plans, prescription drug plans, life insurance, and orthodontic plans, wellness plans focusing on preventative care and similar health-related benefits packages.

Retirement plans are fantastic incentives and provide a means for employees to have a comfortable retirement. Employers can take their pick from pension plans or defined benefits plans and 401 K plans. The latter is the more popular retirement option used by employers today.

Stock plans are popular with employees, especially in high-tech and venture capital startups where there is a potential for tremendous company growth. There are several types of stock offerings including stock option plans and direct employee stock purchase plans.

Additional benefits such as life insurance, disability insurance, paid time off, increasing duration paid vacations and so on can contribute substantially to employee satisfaction and overall appreciation. It’s up to you to weigh the benefit/expense/retention, happiness factors to create a package that will produce the absolute best company survival potential.

In addition to all of these, there are the government mandated benefits you will need to be sure to include such as Social Security, unemployment benefits, as well as.

By determining the right type of compensation and benefits package you can make well-defined and effective Human Resource and company resource management decisions, balancing employee satisfaction with your overall business success.

Article Custom Written/compiled for Job Service Help by Mabelle Sese of The Filipino Worker Company. Added April 2009