Innovative Compensation Practices One of the determining factors in choosing an employer is the value of their compensation, or benefits packages. There is an increasing need for specialized benefits to meet our society’s changing needs. Our Nation’s increasingly diverse workforce requires more variety in benefit choices to meet the growing demands of their employees.
The Basic Compensation Package
In the beginning, companies would offer a basic benefit package to its employees. This package was a very fundamental offering that included what was considered attractive to a potential employee.
The most important part of this package was a salary with yearly increases based on job performance. This would guarantee that at least once a year, if not more often, the employee would receive a raise in pay for their efforts.
Health benefits were the next most important issue for employees. Many had families to provide for, so having health benefits was very important. Most companies used to pay 100% of the insurance premium and include dental benefits and life insurance with the package.
Profit sharing and retirement plans (401K) were offered as a way of getting the employee to invest his efforts in the company. If the company made a profit, the employee would profit also. If the employee wanted to contribute to a retirement account, the company would match their contribution as an act of good faith for continued service.
If there was a layoff due for any reason, the company would make sure that the employee had a severance package. The severance package would usually include pay from a few weeks for up to 6 months and COBRA insurance for a specified amount of time.
Things have changed a lot since then, so there had to be changes made to the compensation benefits to meet the employee’s changing needs.
Innovations in Compensation
Companies now strive