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Are employees more likely to favor defined contribution plans over defined benefit plans?
Defined benefit plans provide benefits for the retirement which are established by a certain formula. The formula includes calculations based on the number of years a person spent working for the company multiplied by the monthly sum equal to the percentage of their pre-retirement payment (Martocchio 222). This way, the annual benefits are composed by the years of service, retirement age, and final average salary. Defined contribution plans require the employees to contribute a certain percentage of their salary every year.
The employers use this money to make an investment of some kind on behalf of the employees (federal government bond funds, stock market funds, or company stocks). This benefit plan is more attractive for the employers since it provides them with an opportunity to make investments and have larger capitals to use. At the same time, this plan is not as convenient for the employees since it does not provide guarantees for the final benefits. This way, the employees would be more interested in defined benefit plans.
Three types of executive compensation
Base pay
Base pay stands for the annual cash compensation that is fixed (Martocchio 267). Normally the companies create their compensation structures based on a variety of pay grades and pay ranges. The employees of better value who occupy the jobs of higher level are given more opportunities for promotion. This way they can remain in the higher pay grades for longer.
Bonuses
Bonuses are the non-regular rewards that are provided based on the successful performance of certain employees. When an employee achieves specific and valuable goals they are granted financial bonuses for that. There are discretionary, performance contingent, predetermined allocation and target plan bonuses. All of these types of payments are designed to reward the employees for achieving goals of different kinds.
Short-term incentives
Short-term incentives for the executives are different from those for lower-level management employees. When a worker of lower level is granted a short-term incentive it is to reward their achievement of one of the major goals. At the same time, in the case with executive employees short-term incentives are given to appreciate their progress on the way towards a major goal, a so-called milestone.
The challenges when determining compensation and benefits for flexible and/or contingent employees
Among the challenges that the employers face hiring part-time employees there are the issues of equity, the difficulty to decide whether the part-time workers are supposed to be paid hourly or monthly salaries, and the question considering benefits for the part-time workers. Telecommuting carries a lot of advantages, for example, it helps the employers to save the costs of office as all of the employees work from homes. Besides, telecommuting attracts a lot of workers willing to perform their professional duties without leaving their homes (Martocchio 304).
At the same time, telecommuting is not suitable for the businesses requiring a lot of personal communication between the workers and the customers, or among the employees. Total compensation is a good way for the company to communicate with the employees and let them know how much the company really spends to care about them.
Total compensation exceeds base pay significantly and includes all of the benefits provided for each worker. The description of the benefits and bonuses such as health, dental insurances, perks, or retirement plans makes jobs more attractive. The creation of better workplace conditions helps to retain the employees.
Considerations when determining compensation and benefits for expatriates, and managing international activities and challenges
Expatriates are the citizens of the United States who are employed by the United States companies for the work abroad (Martocchio 317). Staff mobility, equity and the terms of international assignment are the three main factors that compose the basis for the creation of the international compensation packages. Expatriates may be paid home country, host country or headquarters-based payments.
Service premiums are the bonuses granted to the employees to encourage them to obtain expatriate tasks, such premiums may compile 10 to 30 percent addition to their base pay. The extra pay is not provided after the expatriate assignment is over, which often may create a conflict between the employee and the employer.
Hardship allowances are to cover for the sacrifices of the employees working abroad. Such allowances are offered only for the assignments in the severe locations with difficult living conditions. Mobility premiums are granted to attract workers to move from one location to another abroad or in the native country; such payments cover the travel costs and are given in a single piece.
The challenges facing compensation professionals
The compensation-productivity gap has been growing during the last three decades. This means that while the overall productivity increased a lot, the compensation rates did not happen to follow it. This is explained by the rate of unemployment which made people agree to accept less paid jobs, and the losses of profits experienced by the companies.
Employee benefits also have been impacted by the growing demographic diversity enforced by the globalization, aging of baby boomers, and the growing numbers of working women. Growing workforce diversity makes it difficult for the compensation professionals to assign benefits suitable for all groups of employees.
Some states demand that the companies provide domestic partner benefits for the employees, yet various employers treat this concept differently. The coverage may be provided to heterosexual unmarried couples with children or limited to same-sex couples only (Martocchio 360). In both cases, the long-term partnership needs to be proved.
Works Cited
Martocchio, Joseph J. Strategic Compensation-A Human Resource Management Approach. 8th ed. 2014. Upper Saddle River: Pearson Education. Print.
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