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How Employee Compensation Works

Other Benefits and Policies

There are many other benefits you can offer your employees that will both give your company an edge in recruiting and retaining talent, and provide your employees with some of the things that make work a little more rewarding. Added benefits make your organization more effective on many levels. Issues like childcare, education assistance, adoption assistance and flexible schedules can help your company gain an advantage over the competition and find and retain your most important resource. Good benefits and company perks can improve employee morale and, in turn, have a very positive affect on your bottom line. Let's go over some of the other benefits you can offer your employees that will give your company a competitive edge in recruiting.

Dependent Care Assistance

According to a study by WorkLife Benefits in Cyprus, California, 20 percent of non-working mothers of young children do not work because they see quality childcare as unaffordable or unavailable. Dependent Care Assistance is not limited to childcare. It can be elder care, or care for any family member. Employers can offer flexible working arrangements, care resources and referrals, financial-planning assistance, long-term care insurance, and dependent-care assistance accounts. You can also provide educational services for your employees to help them learn more about their options.


You may also consider opening a company-sponsored childcare center. There are many benefits, including a boost in your company's ability to recruit and retain employees. Company productivity will be increased because your employees have reliable childcare and fewer absences. It also helps give your company more of a family-oriented reputation, which in today's workplace is a definite plus. The downside to a company-owned childcare center is the fact that you have to keep the center going even if your employees have few children. You'll also be paying up to one-third of the expenses of the center if you want it to be affordable for your employees. For some companies, this is the perfect solution; for others it isn't. But most who have existing centers believe they have definitely saved money over the long run.

Adoption Assistance Programs

An adoption-assistance program for your employees can range from simply providing resources and recommendations, to paid maternity or paternity leave, to providing financial assistance for your workers who are trying to build families through adoption. Many companies are now beginning to provide adoption assistance services.

You can set it up in any number of ways. You can offer paid or unpaid leave, contract out for referral services, or pay a lump sum or a percentage of the actual cost of the adoption and related fees. For many employees, just having the leave available and the emotional support of the company is the most important thing. There are also many families who could never hope to adopt if it weren't for the financial assistance and support of their employers.

Think of your adoption assistance as simply an equitable alternative for employees who choose adoption. If you've always provided good maternity benefits, then this evens out the score for everyone. It is also not an expensive benefit to offer simply because there aren't that many employees who will take advantage of it. But, for the employees who do, it is priceless.

Once again, this is another way of building a stronger, more loyal workforce. You'll reap the benefits as a company through lower turnover and higher productivity.

Outplacement Services

Outplacement services are services a company offers to assist their employees quickly find new job opportunities when drops in revenue, reorganizations, and other reasons force a cut back in staff. This assistance can come in the form of group programs, support programs and one-on-one consulting with an external consulting group. Fees for these outside services range about 15% to 20% of the terminated employee's salary (plus bonus).

Education Assistance Programs

Many employers offer assistance for employees who want to gain additional education or degrees. If you think about it, your employees' skill levels are what make your business successful -- or not. Investing in job related training and education for your employees will not only improve the abilities of your employees to do their jobs, but -- as we've mentioned a few times already -- it will improve their morale and perhaps make them stick around a little longer.

But, you're probably now saying, "What if they get the training or degree and then leave anyway!" That may happen too, but most likely you'll experience just the opposite. In fact, by acting as a mentor to your employees and supporting their efforts to gain more education, you'll probably see a large payback for your efforts.

If you decide to implement an education assistance program, take some time to think through what you want to offer. Some questions you should ask yourself include:

  • How much money will the company offer in assistance? (The IRS will allow you to contribute a maximum of $5,250 tax-free.)
  • Will you pay varying percentages of the tuition based on the grades the employee gets for the course?
  • Should it be limited to courses related to the employee's current position, or other positions within your company? (Usually, this is required by most employers.)
  • Will all of your employees be eligible? (Will it be offered to part-time employees as well as full-time?)
  • Will you have a contract in place that the employee must sign guaranteeing they will stay with your company for X months after they complete the training?

Employee Achievement/Merit Awards

Honoring your employees who have high achievements is not only a good way to improve morale and loyalty, it's just a nice thing to do. Often all employees really want is just a verbal acknowledgement of a job well done. Of course, throwing in some monetary thanks is also appreciated.

Golden Parachutes

Golden parachutes are not for when your executives go on that skydiving retreat that costs the company thousands! They are contracts you set up with your top executives that will provide them with special benefits in the event they lose their jobs due to takeovers or acquisitions by another company. These benefits are typically quite generous and come in the form of a large severance package, a large one-time bonus that only comes when employment is terminated, and/or stock options.

Now, your executives won't be rolling in the dough forever, remember they have to get back out there and pound the pavement. They just might not have to pound it as quickly as they might have before. Some more generous hearts also use some of their funds to help others. They will, however, have to pay a 20% tax on the total amount of their payment.

Cafeteria Plans and other Flexible Benefit Plans

No, we're not talking about banana pudding specials and Meatloaf Mondays. Cafeteria plans are a type of flexible benefit plan that let your employees choose from a list of benefits they wish to participate in. Choosing to participate will often allow the employee to reduce their taxable income because they are paying or contributing with pre-tax dollars.

There are five main types of these flexible benefit plans. They include:

  • Premium-Only Plans - With this type of plan, employees can pay their portions of the insurance premiums with pre-tax dollars.
  • Spending Accounts - This plan allows your employees to put aside pretax money into accounts to be used for dependent care or medical bills.
  • Full Flexible Benefit Plans - These plans give employees both a choice in selecting from the menu of benefits, as well as an allowance to spend on those benefits. Any benefits they want to add that will be more than their allowance would be paid for with pre-tax dollars in some cases and post-tax in others.
  • Variable Credits - This option allows you to base the employee's allowance on their performance or certain health aspects such as smoker vs. nonsmoker, seat belt use, and other criteria. Credits are given based on these factors.
  • Modular Plans - This type of plan puts your employee's choices into packages. Usually the packages are set up with specific groups in mind so they can target their needs. They are divided into groups based on demographics such as young single workers, families, and older couples.