Total Rewards: Health Benefits

Total Rewards is a very important part to a company because it actually is the collective good that keeps its employees happy.  There are many types of Total Rewards, yet the most popular and one that is starting to diminish is the Health Benefits Reward.  This includes Health Insurance, Dental Insurance, Employee Life Insurance, Accidental Death / Dismemberment Insurance, Long Term Disability.  All these Benefits along with the work environment help keep the employee satisfied so they will stay with the company.  

Health Insurance is offered by the employer with many different packages, which include different premiums, deductibles, co-payments, coinsurance, exclusions, coverage limits, out-of-pocket maximums, capitations, In-Network provider, prior authorization, and explanation of benefits.  This can protect against illness, surgery, and some physical ailments. 

Dental Insurance is a dying tradition that most companies do not even practice anymore because it is very expense yet one of the most important. Dental insurance plans are usually supplement an individual health plan or are part of an employer sponsored group health plan. However, dental insurance policies are increasingly being purchased as standalone policies. There are different types of dental insurance plans that are tailored favorably to our available health plans.  

Accidental Death and Dismemberment Insurance will pay benefits in addition to any life insurance held by the client. This is called double indemnity coverage and is often available even when accidental death insurance is merely an add-on to a regular life insurance plan.  Some of the covered accidents include traffic accidents, exposure, homicide, falls, heavy equipment accidents, and drowning. Accidental deaths are the fifth leading cause of death in the U.S. as well as in Canada.  Accidental death insurance is not an investment vehicle and thus clients are paying only for sustained protection. Insurance premiums are expected to rise in time. Most policies have to be renewed periodically (with revised terms), although the client's consent with renewal is often implicitly assumed.  

Finally, Long Term Disability is a benefit that is generally one of the most important parts of a benefits package. While some companies opt to fund a short term disability or don’t even offer one at all, many more employers do offer a long term disability program funded through a third party administrator such as a disability insurer.  If an employee is hurt off the job, worker’s compensation will not cover them. When an employee cannot work for an extended period of time, a long term disability plan can help cover a portion of the employee’s salary. Long term disability usually kicks in after a short term disability policy has run out.

Planning And Implementing a Total Rewards System

According to the Society for Human Resource Management, before implementing a total rewards system into an organization, it is recommended that a balanced project team is assembled to boost the chances of a successful total rewards plan. The SHRM states that the best team leaders are senior HR professionals, because of their experience with project management and total rewards; they can facilitate communication between project teams and top management to lend credibility to the project (Heneman, 2007).

An outside consultant is also recommended for the project team to bring technical expertise to the project from working with similar organizations. The team benefits not only from the added skills and experience from the outside consultant but also the objective view that is gained. The project team should also show employee representation, involving a union official on the project will make it more likely to receive support for the proposed total rewards plan.

According to the SHRM, other team members that should be incorporated in building the project team include people with expertise in:

• Finance
• Employment Law
• HR information
• Payroll systems (Heneman, 2007)

After building a well balanced project team, the organization can now start with the implementation process.

Phase one: Assessment

During the first step , the

project team assesses the current rewards program and finds ways

to improve it. In order to be effective, the

project team has to accomplish several tasks. These

include:

1. Conducting focus groups

2. Carrying out industry benchmark surveys

3. Examining current reward strategies and employee attitudes toward them

4. Reviewing rewards related literature

5. Creating a report documenting the team’s findings and recommendations

(Heneman, 2007)

Phase two: Design

During the design phase, the team identifies

which employee and organizational attributes to reward

and what rewards to offer.

Its best if the team considers all of the reward strategies, including

compensation, benefits, personal and

professional development, and work

environment. (Heneman, 2007)

Phase three: Execution

After the team has completely revised or designed its new

total rewards system, the next step is the execution phase, where the

company actually puts its new rewards system into play.

During this third phase, the team must consider several issues,

including:

• Eligibility
• Top Management Support
• Measurement
• Project Management (Technology? Involve Union? How long? How you will fund?)

(Heneman, 2007)

Phase four: Evaluation

During this last phase, the project team compares

the actual results of the executed

total rewards strategies with the

desired projected results. This phase shows the top management that the

company’s investment in its total

rewards system has paid off. Although this phase is meant to be constructive,

conducting an evaluation can be negative if you fear that

the selected reward strategies are

not delivering as anticipated

(Corby, White, & Stanworth, 2005).

If the project team thoroughly records the results and conducts adequate research on the the finished total rewards program, this last phase can be really helpful to a company.

References

Corby, S., White, G., & Stanworth, C. (2005). No news is good news? Evaluating new pay systems. Human Resource Management Journal

Heneman, R. (2007, July 01). Implementing total rewards strategies. Retrieved from http://www.shrm.org/hrdisciplines/benefits/Documents/07RewardsStratReport.pdf

A Look Back In Time

During the early years of employee based compensation, employers and mangers focused on a one shoe fits all approach when it came to employee benefits and compensation. Strategies were based on what the company could afford and no effort was made to distinguish themselves from others. Employees had few options, if any, when it came to choosing their benefits package and often time's practices were based on formulas that served the entire employee population in an organization (WolrdatWork, 2008).

In the 1970s and 1980s, organizations first began to realize that implementing a comprehensive and creative total reward strategy could potentially put them ahead of other employers and give them an advantage in attracting and retaining the best employees. When deciding what to include in their benefits package, employers were responding to rapidly changing environment, including:

1970's and 1980's
Global economicdevelopment and the emergence of multinational firms
•A much morecompetitive business environment
•Diversification of thework force to include workers who didn't fit the sole breadwinner,
head-of-household model of the '50s and '60s
•New government mandates related to employee benefits
•Rapidly risingbenefits costs that prompted flexibility in programs to reduce costs

After the relatively simple compensation and benefit programs were implemented, more creativity, and consolidations was required by employers. The 90’s and 2000’s brought along a whole challenges for employers to consider.

1990's and 2000's
•Dramatic changes inthe workplace, including increased awareness of conflicts caused by family,
home and work demands.
•Workforce demographicchanges that challenged the traditional working-father, stay-at-home-mother model of previous decades.
•Fewer resources available for pay increases.
•Astronomical increases in health-care costs in some countries.
•Rapid decline of defined-benefit pension plans as a financially viable retirement model.
•Tremendous advances in technology and the emergence of new business opportunities.
•Geographic movement of many manufacturing and service roles.
•Advancement of pay-for-performance practices.
•Unprecedented mergers, acquisitions and global competition

As the world becomes more technological advanced total reward will continue to grow and become more complex. It is important that organizations keep up with a rapidly changing environment to make sure they do not fall behind.

References:

World At Work: http://www.worldatwork.org/waw/aboutus/html/aboutus-whatis.html

Total Rewards Strategy by Cabot Brown

Total rewards are the ultimate driving force in today’s workplace by ultimately serving as the motivation for employees to perform. Finding the perfect balance between allocating shareholder profits to serve as a monetary reward for bottom level employees is something that every Human Resource department and office executives are trying to balance in order to maintain happy employees and satisfied shareholders. This posting analyzes company research pertaining to total rewards packaging and the implementation of a pay for performance approach in the workplace.

A key element for a successful pay-for-performance approach requires the implementation of a total reward strategy. “A total reward strategy should include base salary, variable pay (short-term incentives and long-term incentives), other compensation, perquisites, benefits, and performance management” (Ben-Ora & Lyons, 2002, p. 34). What this encompasses is that for the implementation of a total rewards strategy to exist, a company needs to take a holistic look within the company’s framework and be sure to cover all aspects of rewards, especially those pertaining to employee performance.

To understand the meaning of total rewards, we must first start from the basics of human resource management. Organizations and companies across the country are experiencing a disconnect between employees, managers, and shareholders when it is tied to profit disbursement. Understandably, employees (those doing the majority of the labor) want to receive financial compensation and perquisites from upper level management while shareholders (those taking the financial risk) want to keep monetary gains to themselves. Studies have shown however, that the sharing of these profit margins from a total rewards aspect to employees increase the overall financial growth of a company based on a three year and five year study (Ben-Ora & Lyons, 2002). “We correlated the three and five-year financial performance of several publicly traded companies offering variable pay programs (approximately 100) against several variable pay plan design parameters. Our research showed that those that provided a variable pay plan using measures tied to specific individual employee performance showed a better overall financial performance and rate of return over both a three and five year period” (Ben-Ora & Lyons, 2002, p. 34). So if the companies are seeking financial gain, why are total rewards still a gray area in the workplace?

The major issues of total rewards within an organization start with the basic foundation of a strategy and a pay for performance structure. An organization must look at the big picture and answer the following self questions: “can your organization define and effectively communicate key individual measures to all eligible employees, can your organization embody a pay-for-performance philosophy, what is your desired competitive pay position, and what is your employee population make-up” (Ben-Ora & Lyons, 2002, p. 36). Answering the aforementioned questions will allow an organization to understand the total rewards strategy within their framework and identify the best practices for rewarding their employees.

As we can see, total rewards play a large role in the overall financial success of a company. In order for a company to thoroughly reap the benefits of increasing total rewards to its employees in an effort to maximize the overall financial growth, the company must evaluate its structured framework. From there, the managers and shareholders can capitalize on its management to employee relationship. As critics will call it impossible, utilizing total rewards to a company’s advantage just might make everyone happy.

References:

Ben-Ora, D. & Lyons, F. (2002). Total Rewards Strategy: The Best Foundation of Pay for Performance. Compensation & Benefits Review, 34, 34-40.

The Future of Total Rewards

           Companies and workforces will need to make positive changes if they seek good financial performance. Fewer talented people are being sought after, instead companies have chosen to “grow to greatness” instead of emphasizing cost reduction. Getting the right people in the right roles is vital for a business to thrive. To attract the people they want, many companies are just cranking up their pay levels. However, paying more can lead to an imbalance between what people are paid and how much their skills are worth in the long term.                                                                                                                                    The future belongs to companies that can successfully enter into a better workforce deal with they people they need. It is important for them to make people the priority for the future. Total rewards are part of the formula for success. The modern workplace is transforming rapidly. Speed is critical, placing intense pressure on what we do, how we do it, and how fast we do it. Companies do not have the time to spend years designing bureaucratic, costly, and time-consuming HR solutions. The easiest thing to do is to pay people more, but this is not always possible or practical.

Changing total rewards and the deals companies make with their employees has a more powerful effect. If total rewards have not been changed to align with the business goals of the company, there has been no true change. Total rewards continue to prove helpful in communicating what is expected and in gaining workforce acceptance and commitment. All companies must eventually face two major workforce revolutions: the realities of the better workforce deal and the migration to total rewards. (Zingheim & Schuster, 2011)

According to Stephen Covey, there is either a win-win or “no deal workplace,” (Zingheim & Schuster, 2011). This means that if both the enterprise and the people do not come out winners, neither should make the deal. In the better workforce deal, the company and the workforce meet halfway. The business invests in people, and people meet it by learning new skills and competencies and performing to reach organizational goals. People want to grow, add value, and make a difference. A wise company will recognize this and will invest more heavily in people’s growth and success. People want a deal where they win when the business wins and where they are stakeholders in the future of the business.

Reference

Zingheim, P., & Schuster, J. (2011). Winning the talent game: Total rewards and the better workforce deal! Schuster-Zingheim and associates, Inc., 17(3), 33-39. Retrieved from http://www.schuster-zingheim.com/docs/Winning_the_Talent_Game.pdf