How can you keep your employees motivated? Running a workforce of employees can be quite a challenging task. In today’s age, it has become common for the employer to provide an array of benefits in addition to the regular salary package. What strategies can you use to attract the best entrepreneurial talent to your company?
In this article, we discuss some of the main types of employee benefit plans, and also the costs that you would likely incur.
Types of Employee Benefit Plans
There are various types of benefits which can be provided to the employee, which may either be in strictly monetary terms, or in terms of other tangible benefits. The benefit plans can largely be divided in to the following categories:
Insurance
As per reports, there are not a lot of Indian companies that provide insurance coverage to its employees. Around 5% of all Indian companies are claimed to offer comprehensive insurance coverage to its employees. However, this is the plan which has the greatest scope of growth. With an increasing percentage of the Indian population being employed in the corporate sector, there is bound to be greater penetration of insurance in the Indian market.
Companies may choose to tie up with established insurance companies in the market to offer health insurance, term insurance, disability insurance and so on.
Profit sharing
This is a strategy which is used by companies specifically to lure high profile, high performance management executives. Profit sharing between the company and the executive is a tool to not just attract top tier talent, but also to retain them. It helps to keep them motivated to perform at very high levels for a consistently long period of time.
If the company is able to achieve super normal profits, the profit sharing compensation would translate into windfall gain for its top executives as well. Of course, an important component of the pay package in this context is the variable pay which has been agreed upon in the contract negotiations. In case the targets are met, or even exceeded, the creation of wealth for the individual executives by means of variable pay is so high that they would churn generational wealth.
Stock options
How many times have you heard recently, that an IPO-bound startup was about to create crores of wealth for its top management persons, holding employee stock options? There was a saying that in the earlier generations, selling real estate or ancestral property was the fastest way to get windfall gains and generate wealth fast. In today’s age, the new alternative is to hold Employee stock options of fast-growing, or high valuation startups.
Early growth companies may sometimes be unable to offer lucrative packages to some of its top tier employees. Instead, they may offer a stake in the growth of the business. The premise is that the employees who are seriously invested in building the company should have an individual stake in it.
Retirement
Retirement benefits typically include the likes of pension arrangements, and these are usually enjoyed by employees of the government sector. The pension benefits are provided by the government, or by the company to reward the lifelong service of the employee to the institution. This is also in order to ensure that they can see out their golden years with dignity, and can live without being financially dependent.
Other components of retirement benefits include the likes of gratuity, travelling allowance, leave encashment, and fixed medical allowance.
Gratuity in the Indian government sector is equal to 1/4th of the emoluments for each 6 month period of completed service during the employment tenure. On the other hand, the employee may be allowed to accumulate a certain number of leaves upon which he is working. These may be exchanged at the time of retirement for cash benefits which would be incorporated along with the pension.
Flexibility of work arrangement
The pandemic has severely tested our assumptions regarding traditional working arrangements. As a result, it has become more acceptable to allow employees to work from home. This has a dual benefit for the employee: not only are they able to save a lot of their earnings, which would otherwise have been paid off in rent, but they are also able to maintain their physical and mental health by staying with their families.
Leave Policy
An effective manager understands the importance of taking time off from work to recharge your batteries. Hence, it is crucial that they have a good policy when it comes to providing for sick leave, family leave, parental leave, floating holidays. It creates the image of an employer who responds to employee requirements, and such an employer is likely to enjoy greater respect from his workers.
Incentives for pursuing higher education
Prestigious government departments, as well as certain companies may offer the employee some support if they desire to pursue higher education, without revoking their employment. For instance, a leave of 1 to 2 years may be granted to the employee for this purpose.
Candidates might also be allowed to pursue a doctorate in a relevant academic field, which would help to improve their understanding of the problems of their chosen field of service. For instance, it is well known that a lot of civil servants are allowed to pursue their PhD studies in the development sector or economics, etc.
Wellness Benefits
In order to ensure that the minds of the employees are fully engaged in productive work, a company might try and ensure the health of their bodies as well. Several multi-national companies such as Accenture, Google and Microsoft provide wellness services and programmes.
These include fitness training, smoking cessation programmes, physical and chiropractic services and so on. The offices might also be equipped with community recreation centres that have basketball or squash courts, and football pitches.
In addition, the company might also have an in-house gymnasium which the employees may avail free of charge in the evenings or after their working shift. Several government as well as private schools also conduct routine medical check up drives, or eye testing clinics for their teachers and other staff. Additionally, a community psychologist or psychiatrist may be employed by the organisation for consultation, and to ensure the welfare of its employees by way of confidential counselling.
Other Compensation benefits
In case the employee is highly valued by the organization, the company may leave no stone unturned to ensure the continued service of the person. This may translate into other material benefits, such as offering to take care of outstanding college tuition debt.
The company might also offer performance incentives, such as paying for a house or a vehicle, upon extraordinary performance in company service. This usually translates into substantial achievement in terms of company targets.
Costs of providing Benefit Plans
Of course, designing a good employee benefit plan is not going to be easy, and the company must accept that it will face certain costs in the process. As per economists, a general thumb rule is that the usual expense that a company is willing to incur on employee benefits is 1.2 to 1.4 times that of the base salary which is paid in total to all the employees combined.
If the company is trying to make an estimate of the cost that it will incur in providing employee benefit plans, it needs to consider the size of the company, as well as the breadth of the coverage of plans.
The company needs to strategically choose which benefit schemes are most popular with the workers and ensure greatest productivity as well as retention. As per research, the most important benefit programs, in ascending order of popularity are - flexible hours, insurance coverage, paid leave, regular remote work and so on.
Tips
- Group Health Insurance: In case the company does not have adequate budget to provide health insurance to all its employees, it can consider the option of group health insurance. A company with a number of 15 employees is allowed to provide group insurance to its workers. Not only are the number of diseases covered under GHI potentially limitless, they can be an affordable option which practically pools funds to protect all the employees.
- Demographic of work force: The general nature of your work force is going to determine which benefit programs are most popular among them. For instance, if they are a younger demographic, they will likely value benefits such as employee discounts, gym memberships, sporting facilities, and streaming subscriptions. An older demographic, on the other will be more focused on maternity leave, family leave, retirement benefits and so on.
- Dialogue with employees: A lot of effort and brainstorming might be invested into considering which benefit program the company wishes to offer. However, it might be pointless if it emerges that the employees are reluctant to use the program, and would actually prefer an alternative program. Hence, the decision must be taken after a dialogue with the workforce, as to what their priorities are.
- Employee education and outreach: Since the company is investing its resources upon providing these benefits, it should be ensured that the employees have a good understanding of the same. They should know how to maximise their utility of the benefits programme.
Conclusion
If an institution wishes to attract the best talent that an industry has to offer, it needs to be serious about its efforts in providing an employee benefit program. No longer do employees only look at the base salary package. With there being ample opportunities, they make their decision based on a careful evaluation of the various perks being available, and their future goals. In this article, we have tried to provide a complete guide to employee benefit programmes.
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