IndexNarrativeThe Basics of Employee BenefitsFICAWorkers' CompensationDisability (Workers' Compensation)UnemploymentThe Family Medical Leave ActCost Comparison Between the Public and Private SectorsPrivate Industry Cost SharingCost Sharing State and Local GovernmentReasons Behind the Compensation GapFederal Workers' Compensation and Its ProblemsCongressional Budget Office StatisticsStatistics Office for Analysis EconomicPossible ReformsAlphabet: Unprecedented Compensation and StructuresAffordable Google BenefitsFighting Poor HealthSalaryHealth CarePensionDeath BenefitsPaid LeaveAim for Big CompensationCan't afford Google-sized benefits? No problemThe importance of health, dental and vision valueHealth insurance is the most expensive cost for employersThe importance of other benefitsA more mobile workforceJob searchComparison between two companiesPersonal importance scaleConclusionNarrativeFrom large companies like Alphabet Inc. to small ones businesses, employee benefits are what attract and retain employees most admirable employees. Employees are becoming more and more diverse in the workforce. A diverse workforce means a diverse set of individual needs. Different sets of individual needs are what make employers' recruiting jobs difficult. The inevitability of increasing diversity will force employers to start changing their old ways of compensating towards a new, more customizable way of offering benefits. Diversity isn't just about what people want, it's also about their capabilities. With new technologies and skilled users, the workforce will become increasingly mobile. Offering a more customizable benefits package will likely increase an employee's loyalty, productivity, and overall well-being. There is a constant struggle to find and retain the most talented employees, so employers who implement a better total reward per employee approach will have an advantage. Say no to plagiarism. Get a tailor-made essay on "Why Violent Video Games Shouldn't Be Banned"? Get an original essay In a survey conducted by MetLife (2016) on employers' recruitment struggles, more than half of employers in India, China, Poland, and the United Arab Emirates identified the recruitment process as a difficulty (MetLife, 2016). Illuminating this as the global struggle that it is. In the United States, 91% of employers believe benefits are important for attracting employees, and 96% of employers believe benefits are important for retaining employees (MetLife, 2016). Nearly a third of employees globally said a better benefits plan would convince them to stay at their current company (MetLife, 2016). There is obvious agreement that employers understand the importance of benefits when it comes to attracting and retaining talented employees; as well as understanding that employees weigh benefits much more heavily than they ever have. The real challenge for employers is knowing exactly what to include in these packages. In addition to the difficulties of the recruitment process, there are other problems related to public sector overcompensation. The private sector got rid of nearly all defined benefit pension plans and has since replaced them with defined contribution plans (Baker, 2018). Meanwhile, the public sector continues to use these defined benefit plans, which helps to increase thepay gap between the private and public sectors. According to a study conducted by Joshua Rauh of Hoover Institutions (2017), almost all states or local governments have an unbalanced budget due to uncontrollable pension fund costs. As the report states, total unfunded pension liabilities amount to $3.85 trillion, and state and local government recognized only $1.38 trillion in 2017 (Rauh, 2017). As the percentage of resources that states have to fund future retirees continues to decline, changes need to be made. The Basics of Employee Benefits There are employee benefits that are required by law and others that employers have the choice to include or not. It should be noted that each state has its own version of these required benefits, so this is a generic overview of the basic benefits covered by most employers. FICAA for required benefits, the first is the Federal Insurance Contributions Act (FICA). FICA requires employees and employers to contribute to a federal payroll tax used to fund Social Security and Medicare. Social Security tax is 6.2% of gross compensation, and another 1.45% of gross compensation goes towards Medicare tax. Employers pay the remaining 7.65% for a total of 15.3% (Social Security Administration, 2017). Upon hiring, employees must complete certain tax forms that form the basis for the W-2 form that employers must submit to report wages. Social Security is a federal program that provides an individual with a sense of protection by paying monthly retirement benefits when eligible for retirement. Medicare offers the same sense of financial security in retirement by paying benefits for certain healthcare costs. Workers' Compensation Workers' compensation is another key benefit. Workers' compensation law requires employers to provide benefits to their employees if a loss that occurs is a work-related accident. This law makes the employer absolutely responsible. If an employer decides not to provide workers compensation, it loses the right to use the three common law defenses. These three defenses consist of the contributory negligence doctrine, the fellow servant doctrine, and the assumption of risk doctrine (Beam & McFadden, 2012). Essentially, these three doctrines made it nearly impossible to receive compensation from an employer before the workers' compensation law was enacted. Since they exist, employees have a better chance of winning a workers' compensation case against their employer if the employer has chosen not to provide workers' compensation. In most cases, the employer pays the entire cost of obtaining workers' compensation benefits. Workers' compensation laws include medical care, death benefits, disability income, and rehabilitative services. Medical care under workers' compensation generally has no limits on the cost or duration of benefits in the event of an injury; furthermore, there is no waiting period for benefits to begin covering medical expenses (Beam & McFadden, 2012). Disability (Workers' Compensation) The four categories of disability fall into permanent total or partial and temporary total or partial. Typically, total disability benefits represent 66% of employees' average weekly wages and continue for life or until the employee can return to work (Beam & McFadden, 2012).Partial disability is paid as the difference between the employee's wages before and after the injury. Depending on the classification of the injury, Medical Improvement Possible (MIP), Medical Improvement Expected (MIE) or Medical Improvement Not Expected (MINE), is what will distinguish the period of time in which you can receive benefits (Disability Benefits Help, 2018). Death benefits under workers' compensation cover funeral expenses, as well as cash payments to survivors as part of employees' average weekly wages. Workers who have contributed sufficiently to FICA are entitled to receive disability benefits. Unemployment Unemployment insurance requires all businesses to pay an unemployment tax for each employee. Unemployment insurance provides benefits to employees for a short period in the event of unfair dismissal. There are eligibility requirements such as actively seeking work, the ability to work, and completing a waiting period. The Social Security Act of 1935 required the imposition of a payroll tax on covered employers for the purpose of financing unemployment insurance programs. These programs are funded by federal and state unemployment taxes. The federal tax is 6.2% of the first $7,000 of each worker's gross annual earnings, but this percentage can be reduced to about 90% for taxes paid to the state (Department of Labor, 2017). This is not to say that unemployment insurance solves all the problems of the unemployed. It serves the purpose of partially insuring against massive income shortfalls after being laid off. The Family Medical Leave Act The Family Medical Leave Act (FMLA) allows employees twelve weeks of unpaid but job-protected leave for qualifying medical and family reasons. The FMLA applies to employees of private companies with fifty or more employees (Investopedia, 2017). Companies with fifty or more employees must also make affordable health coverage available, under the Affordable Care Act. Sometimes employees face situations related to their home lives, such as expecting a newborn, children who are get into trouble or suffer an injury, relatives dying, and even personal health problems. These are issues that would pose a threat to an employee under the FMLA in terms of losing their job. FMLA helps employees balance their work duties and family demands. The fundamentals of starting a business and offering compensation require that employers allow time for employees to vote, serve in the military, and complete jury duty. Comply with workers' compensation laws. Withhold FICA taxes from employee paychecks along with your contributions. Pay state and federal unemployment taxes. Contribute to disability programs in states where disability programs exist. And finally, join the Family and Medical Leave Act. Cost Comparison Between the Public and Private Sectors Employer Costs for Workers' Compensation is a statistical investigation and review of how much it costs employers to provide wages and benefits to its employees. The Bureau of Labor Statistics (BLS) conducts these surveys of private industry, state and local government, and civilian workers. For the September 2017 semester, the BLS compiled statistics on nearly 30,000 employees across 6,700 private sector businesses; and 8,100 employees from 1,400 different state and local government organizations (U.S. Department of Labor [DOL], 2018).Private Sector Cost SharingIt costs private sector employers an average of $33.55 for every hour an employee works (DOL, 2018). 69.6% of the $33.55 ($23.3508) is paid as salary and the remaining 30.4% ($10.1992) is paid as benefits (DOL, 2018). These benefits include: paid time off ($2.32/hour), insurance ($2.68/hour), retirement ($1.39/hour), additional pay ($1.19/hour), and legally required benefits ($2.62/hour) (DOL, 2018). Local Government Cost Sharing For state and local government, employers spent an average of $48.78 per labor hour on their employees (DOL, 2018). The $48.78 salary and benefit percentage breakdown is 62.6% of wages and 37.4% of benefits (DOL, 2018). After the $30.54 is paid in wages, the remaining $18.24 is paid in benefits (DOL, 2018). Pension costs $5.56/hour, insurance costs $5.80/hour, paid leave costs $3.68/hour, and legally required benefits cost $2.71/hour (DOL, 2018). Reasons Behind the Pay Gap On average, state and local employees are better paid than those in private industry. Why? Government defined benefit pension plans accounted for 10.6% of total compensation compared to 1.9% for private sector defined benefit pension annuity (DOL, 2018). Public employees also receive higher rates of paid leave and insurance benefits (DOL, 2018). A defined benefit pension is almost non-existent in the private sector, widening the pay gap between the two workforces. Working in the public sector provides stability to employees as the government never fails; which is a difficult to measure benefit that adds even more value to public sector compensation. A working paper by Glaeser and Ponzetto (2013) demonstrating how public sector compensation is influenced by politicians who are opposing each other, trying to win the public sector vote (Glaeser & Ponzetto, 2013). Public sector workers are better informed about their personal compensation packages; this gives them an informational advantage over other voters (Glaeser & Ponzetto, 2013). Salaries in the public sector are accessible to the public, but benefits packages are not easy to find and are much more difficult to interpret. This political system and process causes politicians to offer generous benefits to public sector workers, as opposed to wage increases (Glaeser & Ponzetto, 2013). If a politician decided to reduce public sector benefits, they would lose votes from public sector voters and would not get many votes from other non-public sector voters due to their information disadvantage (not knowing that lower benefits mean fewer benefits) taxes) ( Glaeser & Ponzetto, 2013). Even if the politician tries to increase public sector wages to win back votes, he or she will lose more votes among the nonpublic sector population because they are more informed about wages than benefits (Glaeser & Ponzetto, 2013). Overall, it is essential to understand that politics has a great influence on the economy. State budgets are under severe pressure due to increases in pension and healthcare benefits. If all voters were better informed about the politics behind public sector pay, it's likely that more people would push for logical change. Federal Workers' Compensation and Its Problems Congressional Budget Office Statistics In April, the Congressional Budget Office (CBO) found that federal workers were getting paid 17% more than comparable industry employeesprivate. The federal workforce is made up of 2.1 million civilian workers and places a tax burden of $276 billion on American taxpayers (Edwards, 2017). In 2016, federal employees earned 80% more than private sector employees and 42% more than state and local employees (Edwards, 2017). It's fair to say that federal employees are among them when it comes to having stable, well-paying employment. In an effort to save money, there was a partial federal wage freeze from 2011 to 2013, which saved billions, however, there is still a greater need for additional savings (Edwards, 2017). Our government must shift its focus toward minimizing excessive benefit packages (particularly defined benefit plans) of federal employees, as well as ending low-value programs. Bureau of Economic Analysis Statistics Bureau of Economic Analysis (BEA) data from 2016 shows that federal civilian workers averaged $88,809 strictly in wages, while private sector employees averaged $59,458. When you throw benefits and healthcare into the mix, the gap widens. Average total compensation for federal workers jumped to $127,259, while average total compensation for private workers only rose to $70,764 (Congressional Budget Office [CBO], 2017). The math speaks for itself. $38,450 more in benefits for federal workers compared to $11,306 more in benefits for private workers represents a significant gap. Wage growth is fueled by the movement of federal workers into higher pay ranges despite actual performance (CBO, 2017). Because of the way the General Schedule (GS) pay scale works, federal employees earn a couple of problematic pay raises (CBO, 2017). The first is the annual wage adjustment based on average wage growth, essentially a cost-of-living adjustment (CBO, 2017). The second pay increase is due to federal employees advancing ten steps up the GS level through seniority (CBO, 2017). Deserving longevity over performance is itself problematic. Federal unions actively fight against legislators who attempt to implement a reduction in workers' compensation (Edwards, 2017). Additionally, members of congress who have a plethora of federal workers in their district often lead pay growth efforts (Edwards, 2017). Federal employees receive health insurance, retirement health benefits, and pension plans that protect against inflation, along with a retirement savings plan that also has government coverage (Edwards, 2017). The most important benefit of all is job security. They are supported by civil service protections, and nearly one-third of federal employees are represented by unions (Edwards, 2017). This means that federal employees are rarely fired. It has been found that only 0.5% of federal workers are fired each year for any reason (Edwards, 2017). Possible Reforms Federal workers deserve to be paid adequately and the federal workforce needs talented employees, however, government should not be one of the highest paying industries. Reducing federal pay would promote the layoff of immobile employees, creating space for younger, more creative minds, as well as reducing costs (Edwards, 2017). Cutting overly generous benefit packages, such as defined benefit pension plans, would reduce costs. Privatization is considered onedirty word in local politics, but privatization can often prove to be a success. Privatization of federal jobs is another possible way to reform federal wages. Furthermore, to address budget deficits, policymakers must consider federal compensation reform to reduce the gap between federal and private compensation. Alphabet: Unprecedented Compensation and Structures In 2015, Google became a technology conglomerate by forming a parent company called Alphabet Inc. Fortune magazine named them eleven times on their annual list of the 100 best places to work, and in 2017 they were number one (Fortune, 2017). Google offers the most competitive employee benefits, provides employees with extensive opportunities for internal growth, and ultimately satisfies them by being part of something that will have a positive impact on the world. Affordable Google Benefits Google has an exhausting list of benefits that cost them next to nothing. Some of their on-site perks include oil changes, dry cleaning, massage chairs, nap pods, haircuts, bike repair, ATM, organic grocery delivery, and equal benefits; all negligible costs for Google (D'Onfro, 2015). The reward for providing benefits like these is a boost to morale and efficiency. However, their massages, free food, shuttle service and subsidized childcare impact the company's profits (D'Onfro, 2015). They have offices in North America, Latin America, Europe, Asia Pacific, the Middle East and Africa. Google has a knack for developing its own offices, or "campuses" as many of them are called. Campus is a better word for their offices located in New York City, NY and Mountain View, CA. Their New York City office occupies an entire city block, consisting of 2.9 million square feet of space. So, naturally, they give their employees mobility scooters inside the huge building. The Mountain View campus they call the “Googleplex” is a massive 2 million square feet (Hartmans, 2017). Filled with colorful bicycles and electric cars that employees use to get from building to building, a GARField (Google Athletic Recreational Field), and even organic gardens where produce is used by their chefs. Many of the other offices have putting greens, tube slides between floors, Lego rooms, fire poles and bowling alleys. The sheer aesthetic appeal of working at Google is an invaluable benefit that adds value to the already extensive list of benefits. Fighting Poor Health Poor health and obesity cost businesses $225 billion annually (Centers for Disease Control and Prevention [CDC], 2016). Google combats this problem by offering healthy meals all day, at no cost to its employees. An interview was conducted with Nate Keller, Google's former executive chef before he left in 2008. He stated that in 2008, with 19,000 employees, 675 kitchen workers and serving 40,000 meals a day, Google was spending nearly $80 million a day. year for food (Shontell, 2014). Google doesn't release this information to the public, so the costs today are likely higher. For context, Alphabet Inc. had revenues of approximately $109 billion in fiscal 2017 (ABC.XYZ, 2017). Spending even $100 million on food would cost them just 0.1% of their income. In turn, this small investment helps keep Google employees healthy and productive. By offering free food, this reduces employee food costs tenfold. Employees can also drink beer or wine in the office on Fridays, the attraction to the max. Salary As for salaries, they are not available to the public but there are websiteslike Glassdoor where employees posted their average salaries while working at Google. Glassdoor is a self-reporting data collection website where people can go and post information about their work. The information cannot be entirely credited, even though most of the messages on Glassdoor were posted by actual Google representatives, there is always the possibility that the information is invalid. For research purposes, it's the only source I've been able to get for some aspect of Google's benefits. Glassdoor data compiled from 4,440 respondents states that the average salary for software engineers is $118,958 with a range of $78,000 to $215,000 (Glassdoor, 2018). According to the BLS, the average salary for workers in all occupations in the United States in 2016 was $49,630 (DOL, 2016). Being about $28,000 above the average salary is a good fit for Google. This is just a comparison between the average US worker and a Google software engineer. So $30,000 more for a software engineer might not seem like the steepest salary jump. Keep in mind that this is just the salary, though, when you factor in Google employee benefits, the number will likely increase by another $30,000 in benefits, if not more. Healthcare While Google has seemingly endless built-in benefits, let's take a look at their tough employee benefits. They offer on-site doctors, medical services and provide great healthcare options. They provide employees with travel insurance for personal and work vacations, while also allowing employees to feel safe while traveling (Glassdoor, 2018). Preferred Provider Organizations (PPOs) and Health Maintenance Organizations (HMOs) are options you can choose from for certain health coverages you may choose to join. This applies to most employers who offer any type of healthcare package. HMOs lock you into one primary care doctor and you can't switch without a referral. PPOs offer flexibility in that you can see any primary care doctor you want. If you are in your network, your copay and out-of-pocket costs are constant, but will increase if you leave your network. Retirement For retirement purposes they offer a 50% match 401k up to $8250 with automatic enrollment (Glassdoor 2018 ). In other words, to get the full contribution, you would need to contribute $16,500 to your 401k. The 401k has replaced the pension. Being able to contribute a portion of your salary tax-free (assuming traditional) into a spread of stocks, bonds and money markets is an anchor in itself. 401k retirement plans are a great alternative retirement account. Although maturation periods vary; it creates a sense of loyalty if your company has a sizable contribution plan. Death Benefits Google's death benefits are generous. Surviving spouses of deceased Google employees receive 50% of their salary for the next 10 years. The shares of a deceased employee also acquire immediately; their children receive $1000 per month until age 19, but if the child is a full-time student, those payments continue until age 23 (Casserly, 2012). Unlike most benefits offered by Google, these more than generous death benefits are arguably expensive for the company. Instead of these death benefits increasing the company's efficiency, they establish the company's level of assistance for each of its employees. When a company is this understanding, reasonable and understanding, it's hard not to appreciate their morals. Paid Leave New mothers receive 18weeks of paid maternity leave and an additional four weeks in case of complications during childbirth. Once again, another comprehensive and reasonable plan. They even allow fathers or any type of primary caregiver up to 12 weeks of paid leave. In addition to paid maternity leave, employees also receive an extra $500 to spend on the newborn (Adamczyk, 2015). First-year engineers receive 15 days of paid leave, which increases to 20 days after 3 years and 25 days after 5 years. Employees can also take an unpaid leave lasting 3 months (Adamczyk, 2015). This kind of advantage definitely attracts the attention of top-level engineers. Purpose of Great Compensation Why do companies like Google spend so much money on their benefits? Any competitive company measures the costs of benefits in relation to increases in efficiency and productivity. The goal is to attract, place and retain the right people for the right position. Assuming your satisfied employees lead to happier customers, there will be an increase in profitability and market share in your industry sector. Google equates success with employee satisfaction (Google, 2018). Simple people management practices they implement; for example, narrowing status differences and world-class advantages lead to a surge in innovation and cost reduction. Can't afford advantages like those of Google? No problemLarge holding companies like Alphabet Inc. offer unprecedented compensation packages, unless you work for a comparable company like Facebook or Adobe. As for your average business, you can't offer free food, billion-dollar offices, and generous 401k plans. To be competitive you need to examine how much people actually value benefits. The weight of value for health, dental care and vision An increase in benefits over a salary increase is favored by 80% of workers who took part in Glassdoor's employee confidence survey ( Glass Door, 2015). What are the options for companies that simply can't afford to offer such extensive benefits packages? A study conducted by Fractl (2016) highlights the fact that some of the most desirable benefits for employees are the cheapest benefits. The premise behind this study was to ask 2,000 people which benefits they would give "some consideration" or "heavy consideration" when choosing between a high-paying job that offers lower benefits or a low-paying job that offers more benefits. high (Fractl, 2016). . Health, dental and vision insurance ranked first as the most important benefit. 88% of participants said they would consider having better health, dental, and vision coverage when choosing the lowest-paying job (Fractl, 2016). Health insurance is the most expensive cost for employersKnowing how it works employers are able to provide health, dental and life insurance with the knowledge that health coverage providers will charge small businesses more than small businesses. large businesses. Simply due to lack of purchasing power. According to the National Conference of State Legislatures (NCSL), small businesses pay an average of 8%-18% more for comparable coverages than large businesses (National Conference of State Legislatures [NCSL], 2017). Health insurance is the most expensive insurance that employers offer to their employees. According to the Kaiser Family Foundation (2016), it costs the employer $6,435 for individual coverage and$18,142 for family coverage (Kaiser Family Foundation, 2016). Additionally, depending on an employer's prior health recommendations and the specific industry they operate in, the premiums charged to employers will vary. Because better health, dental and vision coverage is more attractive to employees, small businesses will have to spend extra money to attract and incentivize employees. The Weight of Other Benefits Small business employers will be happy to know that flexible schedules, vacation time, mobile work options, and unlimited vacation are the next most popular benefits among employees (Fractl, 2016). With constant advancements in the technological world, "going to work" has a whole new meaning. The world of technology is full of communication devices that allow people to stay virtually connected. From FaceTime to Skype to screen sharing, employees have found themselves able to work from home more than ever (Collins, 2016). Essentially, depending on your business, this could reduce your overhead costs by up to 100%. This would allow any employer to dedicate more money to popular health, dental and vision plans. A more mobile workforce The amount of money companies are throwing away due to the reluctance of people wanting to take a break amounts to hundreds of billions (White, 2016). It has been estimated that companies are throwing away $272 billion due to people refusing to take time off (White, 2016). An unlimited vacation policy would not only eliminate these unnecessary costs but develop a more preferable company culture. Employees who are treated as trustworthy individuals are likely to become more productive and loyal. Work-life balance is progressively more important to the workforce. Studies have shown that a majority of people would consider a lower-paying job that offers more flexibility even without the “best” benefits package (Fractl, 2015). Ultimately, employers have strategies to compete with large companies that can afford to offer better benefits. Providing the right mix of economic and desirable benefits can give small businesses the competitive edge they need to attract top talent. Job SearchJob search occurs with the knowledge that there will be infinite opportunity costs. As an individual, you need to enter the job search process with an absolute understanding of what you are looking for salary-wise. Benefits often surpass salaries on the scale of importance, so you need to be educated in the benefits field. Comparing Two Companies Just recently I had to make a decision between two job offers. One was with Tarte Cosmetics (Manhattan, NY), a company that gave me the opportunity to work for them as a temporary/permanent employee for three months in their training program. During those three months I will essentially be treated like an intern, paid by the hour and with no benefits. At the end of the interview they responded to my question about benefits with "once you are offered a permanent position, we will talk about your total compensation." Compared to another company called NewDay USA (Fulton, MD), I would immediately become a permanent employee with health, dental, and vision coverage options, a 401k with a fairly low contribution, and a base salary of $60,000 with unlimited commissions . Scale of Importance Among other knowledge, my in-depth knowledge of employee benefit plans helped my job selection. For starters, I'm not entirely concerned with what companies offer in terms.