Developing an Employee Benefits Plan
For an organization total wage of an employee is much more than the pay rate. For employee also the take home is more than the pay rate. The ‘extras’ which the
organization pays for and employee receives are benefits. It is pretty complex for the organization to administer and manage compensation, from deciding compensation
strategy to implementing the chosen plan. Since wages and benefits together make up wage cost for organization, there is a trade-off between direct pay and benefits
(“Employee benefits…, n.d).
Benefits have a major role in compensation administration as their proportion in total compensation is increasing. A good employee benefits plan is vital for any
organization to keep its workforce motivated and attract talent from external environment. Beyond tangibles like salary and bonuses and intangibles like great working
environment, an organization can shape employees lives by providing a generous benefits plan. However, to offer good benefits, there should be careful planning from
the company. Usually benefits packages come at a huge cost to the company because of which it is important to work out the financial part.
Planning and Designing Benefits Program
In designing benefits plan companies typically focus on external equity so that their plans are competitive with other companies. Employee perceptions of benefits are
equally important as these determine success or failure of plan. Employee benefits are critical when employees make a decision to stay with a company or take up a new
The process of benefits planning involves following steps:
? Determining goals and objectives
? Assessing and selecting benefits
? Designing benefits package
? Monitoring the plan
Determining goals and objectives
Benefits are important part of any compensation plan and hence it is important to consider all relevant information which will influence determination of goals and
objectives. Every organization has different composition of workforce and their needs and desires are different. Benefits plan should seek demographic information.
Costs of benefits are important for the organization to sustain in the long run. Hence it is important to evaluate financials under different circumstances.
Assessing and selecting benefits
Existing benefits need to be evaluated based on different factors and new benefits may be required.
Legislation- There is legal requirements on employer to make expenditures for health and safety of employees. Laws also determine how organization would develop and
operate certain specific benefits like retirement plan. The expenditure on these benefits has to be made whether organization wants or employee desires.
Competition- information which is important in benefits planning is prevailing customary benefits in the industry. It is necessary to remain competitive by knowing
which benefits are offered by other companies.
Organizational benefit plan analysis- Internal organizational analysis of benefits would focus on comparison of current benefits and needs and preferences of
Organizational Financial analysis- To remain in control, financial analysis would determine organizations’ ability to pay
Collective bargaining- In organizations where there is union decision making is done at bargaining table. Here demands raided by union should be analyzed by the
organization rather than just agreeing for all benefits.
Receiver for benefits
Based on types of benefits, another design problem is to finalize who would receive benefits. Based on receiving set of employees, organization can consider having
different benefits packages for different groups of employees.
The area of benefits keeps on changing due to which it is important for organization to keep track of what is happening internally and externally. Taking employee
opinion should be done on regular basis to take information on employee needs and preferences. Legislation should also be monitored for changes in tax laws, labor
Employee benefits program. (n.d). Retrieved from http://dlc.erieri.com/index.cfm?fuseaction=textbook.chpt20
Study of employee benefits: Today & beyond. (n.d). Retrieved from http://www.prudential.com/media/managed/StudyofEmployeeBenefits_TodayandBeyond6th.pdf