Should a company drop benefits

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Earlier this century, few workers received compensation from their employers, with the exception of direct wages for hours actually worked. Employees and their families were instructed to respond to the needs of old age, sickness and death. Vacations, if this are generally allowed without treatment.

The 1940 years and 1950 saw the increased use and acceptance of benefits as a form of compensation than direct pay. In the last two decades this accelerated growth of new types of benefits are added and existing services have increased. In addition, while employee benefits were fairly standardized. (Burton T. Beam, John J. McFadden - 2004: p.04).

A company source material benefit obligations, pension, health plans, and executive salaries. All these programs are promises that the company paid to employees, and that the buyer is the dollar value of these promises to control. Furthermore, because often provided in a form of tax-favored, they embody considerable debts. If plans are developed or not well served, for lost tax benefits, and the company may have large sums to the state tax. (Ilene H. Ferenczy - 2008: p.04).

Employees as independent contractors who provide personal services to exempt organizations may be compensated in a variety of ways. The most common method of remuneration is the current salary or wage. Many employees also receive deferred compensation - the promise or expectation of receiving money in the future for services rendered in the present. Deferred compensation may be in the form of a qualified employee plan, a pension sharing or profit, income or a deferred compensation plan does not qualify. Also taking non-monetary forms of remuneration, such as occupational health, death or other benefits. "Benefits" is also a personal vehicle, meals or accommodation, personal and family benefits, education, low-interest loans, payment of personal travel, leisure and other expenses, the membership of a sports club or country, and in personal use employer's premises. (IRS GOV)

So we will discuss about:-

"If employees undervalue the cost of benefits, why should a company not drop benefits and simply add more direct compensation".


Before proceeding, it is better to define precisely what is meant by employee benefits. The narrowest definition of the term only applies to employers with benefits for death, injury, illness, unemployment or retirement. (Ilene H. Ferenczy - 2008: p4).

Employee benefits are an extremely important part of almost all financial security. The benefits represent over 40 percent of the total remuneration of an individual. In many companies this percentage is even higher. In addition, many new forms of employee benefits emerged in recent years as employers compete for talent.

Broad overview of the benefits: -

Employee benefits are a part of total remuneration of the employee. Total compensation refers to "all forms of communication and financial services employees receive the benefit, as part of an employment relationship."(Jerry S. Rosenbloom - 2005: p3)

The benefits are indirect ways to compensate employees; these employees receive benefits beyond salary. Unlike disability benefits only favours stability and economic security, ensuring the beneficiaries of uncertain events such as unemployment, illness and injury. In addition, some benefit programs to serve the income and welfare of American families to be protected. A common distinction between direct forms of employee compensation, including salaries and indirect remuneration or benefit is that the former employee believes the standard of living, while the latter protects the standard of living.

The range of benefits including education, salary scales, family, government, health, lifestyle, leisure, retirement, savings and benefits of transport. Despite some benefits, such as those sanctioned by the government are necessary, others are more or optional at the discretion of employers. The availability of these additional benefits, health insurance and a pension plan, in particular, depends on several factors, but primarily on the size of the company, according to quarterly results. (Reference for Business)


Employee and other independent contractors, who provide personal services to exempt organizations, can be compensated in a variety of ways. Many employees also receive deferred compensation - the promise or expectation of receiving money in the future for services rendered in the present. Deferred compensation can be in the form of a pension plan as a qualified employee plan or profit sharing, annuity or a deferred compensation plan ineligible. Compensation is also non-monetary forms such as workers' health, death or other benefits. "Fringe Benefits" is also a personal vehicle, food, housing, personal and family educational benefits, low interest loans, payment of personal travel, entertainment and other expenses, join a sports club or country and property personal employer.

What is a compensation package?

It's easy to think "dollars per hour" when thinking about compensation.

But the success of the profits go much further and can be considered as global systems of non-monetary benefits, direct and indirect elements.

Non-monetary compensation: No benefit to the employee receives from their employer or a job that does not involve tangible value. This includes career and social rewards such as job security, flexible work schedules and opportunities for worship, growth and recognition, enjoyment of work and friendships.

Direct Compensation: An employee on the basis of salary, an annual salary or hourly wage, which may in any performance-based compensation that workers receive incentive awards.

Indirect compensation: costs more varied, ranging from the legal obligation to protect public programs like Social Security to health insurance, retirement programs, paid leave for child care, or moving. All types of compensation are important. Employers have a variety of items to choose and pay are limited both by their own prejudices about the compensation packages, as well as by budget cuts. By combining several of these options for compensation, progressive managers can create packages that are as individual as the workers receive. (Texas Agricultural Extension)

Direct Compensation: -

Base Pay: Cash compensation for the worker, which pays a salary is a common practice, competitive advantage can only come by paying a higher amount.

Performance Pay: A bonus paid if certain performance targets are achieved incentives can encourage employees to set and achieve higher levels of performance and motivate them to his farm.

Stock options: The right to a piece of the company, which may be granted to an employee to reward excellent service to an employee who has a part of the company is now much more likely to go beyond to the farm.

Bonus: A gift for the opportunity to reward exceptional performance or for special occasions

The bonds may show a pattern values ​​its employees, ensure that good performance is rewarded. (Texas Agricultural Extension)

Indirect Compensation: -

• Flexible working hours

• Reform programs

• Removal

• Insurance (health, eye, dental)

• Social housing

• Paid leave (vacation, sick leave without pay)

• Tickets to events (ball games, concerts)

• Magazine subscriptions

• Laundry

• Wellness Programs

I disagree with the above statement which is "If employees undervalue the cost of benefits, why should a company not drop benefits and simply add more direct compensation" because benefits are more important than compensation.


The companies offer their employees and a variety of benefits. These benefits are fundamentally the forms of security or services provided by an employer to its employees for their contribution to organizational performance. These benefits are an important part of the compensation package for a company to attract and retain employees. The benefits of incentives to serve the workers and encourage them to work harder for the organization. They also help increase employee satisfaction at work.

Social benefits are an important part of each company to offer its current and future employees. There can be many advantages of establishing a system of employee benefits, not only for the employee, which would be useful for non-cash benefits received, in addition to or instead of a portion of their salary, but also the largest employer's part of their wages to provide additional benefits to their employees. (All Experts)

Employer Advantages:-

An important advantage for employers is to facilitate its own cash flow. This is especially true if you enter a treatment system of sacrifice, where employees donate a portion of their salary in exchange for other benefits. You may be able to obtain the benefit of suppliers to negotiate if your team is great, and the provision of non-monetary benefits can be cheaper than a portion of the salary the employee must sacrifice. In addition, there are potential tax benefits, but are limited and potentially complex. More information about the tax consequences of employee benefits which are available elsewhere on this site. (All Experts)

Employee Advantages:-

Some of the benefits of a plan of employee benefits are obvious. At first, if the benefits are attractive, then you will have access to useful properties, such as a pension or a car without those same agreements. It is mainly used for public services such as mobile phones, which can be supplied as non-payment by the employer. In addition, if certain activities or services you should pay for it are available as benefits, receive a clearer picture of its cash position and no money aside for these things.

Finally, the tax benefits granted to employees and employers. Working with your employer, you should be able to package an advantage of a tax benefit to be negotiated, such as your employer pays for the mobile phone is considered a non-taxable benefit. Several articles like this can be a significant tax savings for a year. (All Experts)

Some Organizational Examples:-

Example No 1:- (TESCO)

Tesco is committed to the benefits that appeal to its 275,000 employees, many of them low wages.

All employees are entitled to the same basis of performance, including a defined benefit plan, savings plan, discount card, personal, and a range of voluntary benefits. Louise Pocock, Tesco in the UK is the manager, said: "Our way of life of the best options can be adapted to all conditions of the workers on behalf of Tesco offers a defined benefit plan for all employees, benefits more deadlines for each team member, regardless of income. and adapted to each support staff member, once it stopped working. "The retailer uses a wide range of communications to all parts of the business information benefits. For example, in November issued an annual report on their personal benefits and individual contributions to pensions. (Employee Benefits 2009)

Example No 2:- (INTEL)

Intel employees who work full time or part-time 20 hours per week may enroll in the company and individual family doctors, medications, vision, dental care, long term disability and long term. Intel helps employees to cover health reimbursement through the pocket of Health (HRA), health savings accounts (HAS), accounts and health flexible spending (FSA). Intel removed from above and below the age of 65 have access to some of the same benefits as current employees, including women and medical history, prescriptions, vision care coverage and long term. Intel also announced a retirement account for retired employees eligible for housing where you can buy specific medical services. (Best Employers 2009)

Example No 3:- (MICROSOFT)

Microsoft is widely recognized as a leading company that offers to pay the benefits of the largest and most comprehensive in the country. We start with a competitive salary, bonuses and stock awards to eligible employees based on individual performance. (Microsoft)

Example No 4:- (GOOGLE)

We strive to be innovative and unique in all the services we offer to customers and employees, including our services and benefits offered. We recognize and celebrate that our employees have different needs and that this diversity requires flexible and focused support. Our priority is to offer a varied program that can be tailored to the specific needs of each individual offer, if you like ice climbing in Alaska, wants to retire at age 40. Google offers, you can find a thread that shows how Google sees its staff as a family. Thinking about the care and support they provide to their workers and the needs for the object, is the glue that their employees happy, healthy and financially responsible. (Touch of Business)

Example N0 5:- (HEWLETT PACKARD)

HP employees with the opportunity to choose the benefits they want. So if there's an advantage that, in most cases, buy it and give you cash instead. (Hewlett Packard)

Some of these benefits include:

Auxiliary pension scheme

25 paid holidays

Sports and social clubs

Health Care Plan

Dental coverage

Life Insurance

Retail Bulletin

HP Employees Stock Purchase Plan

Example No 6:- (CANON)

Canon employees are entitled to certain fundamental results are included in the contract, but working for Canon also has a number of additional benefits such as discounts on our products and services. (Canon)

Example No 7:- (INTEL)

Intel's goal is to pay cash compensation above the global average. Components of cash compensation are as follows: (Intel)

• Base salary

• Bonus

Moreover, based on the work and function, employees can also benefit:

• Committee

• Rewards and shifts or overtime

Example No 8:- (BMW)

BMW has a new approach to increase sales, trying to encourage more of its own employees to buy cars. The automaker than 7,000 cards distributed to workers in Germany driving a BMW or Mini, so that the windscreens of vehicles used by competing brands in the staff parking lot. (Employee Benefits 2009)

Example No 9:- (SCHLUMBERGER)

Schlumberger, the oil and gas company has paid an official gym of a maximum of 250 pounds a year for many years. On July 1, 2010 was filmed Gymflex, and through it, so that the 2500 health clubs in the UK and Ireland available to the 3,000 employees eligible for the eight years of flexible benefits. (Employee Benefits 2010)

Example No 10:- (ASDA)

Asda offers its employees a discount card for 10% after three months of service. The card can be used in all Asda stores in Britain and around the world in all Wal-Mart, Asda's parent company. Using the card Asda 175,000 employees to save more than £ 60 million per year. (Employee Benefits 2011)

Example No 11:- (XAFINITY)

A leading provider in the UK services and retirement benefits for employees, Xafinity, announced an investment of several million pounds in Northern Ireland. (BBC News 2010)

Example No 12:- (NHS)

Bradford and Airedale NHS Primary Care District has a number of appropriate systems to support 17,000 employees in achieving a healthy balance between work and family. (Employee Benefits 2011)

Example No 13:- (KPMG)

KPMG has renewed parental leave and pay provisions of 11,000 British workers. Delivery of maternity leave, previously organized into four tiers based on seniority was modified so that each worker has more than 26 weeks service at the relevant date will receive full pay during the first 18 weeks of maternity leave Followed by 21 weeks of salary. (Employee Benefits 2011)


Satisfaction of employee benefits can result in net profit by increasing worker productivity and commitment. Work also consultants should also understand that the value provided by the benefits creative and can help identify the most profitable. Employee benefits are an important part of each company to offer its existing and future staff. There may be many advantages to establishing a system of employee benefits, not only for the employee, which would be useful non-cash benefits received in addition to or instead of a portion of their salary, but also to employers who most of their wages to provide additional benefits to their employees. As an employee, it is important to remember that you may feel pressured to accept a salary sacrifice scheme. You must accept that the benefits are good, and you're happy with the price offered (for example, the portion of your salary that you specify, in exchange for benefits). As my point of view benefits are more important as direct compensation because most of the organization provide benefits to their employees it's up to the organization whether he provide add more direct compensation but as I say in this assignment benefits are so important for the employers for example part time off, insurance, education reimbursement, retirement funds, social functions and incentive programs.