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Compensation and Benefits
Compensation is the
actual salary paid to an employee. Whether intended or not, employee earnings
are common knowledge. That is why it is important to develop a structure
that promotes fairness, improves morale, and increases productivity. Afterall,
the objective is to attract, retain, and motivate qualified employees.
Start with a job description, then wage surveys (internal and external).
Wage surveys can be obtained from many sources externally. Keep in mind
the source and any personal interests it may have. Once each position has
been described and compared within your market, rank each position monetarily.
Give ranges and allow for flexibility as the company expands. Update atleast
yearly to stay abreast of any changes. Performance Evaluations should be
tied in as well.
To be competitive and stay in business, do not
offer more than you can afford. Today's downsizing of large companies makes
the small business look secure. The small business also offers flexibility.
Most small businesses offer the following benefits:
- Vacation: one to two weeks after one year of service.
- Holidays: New Years, Memorial Day, Independence Day, Labor Day, Thanksgiving (some also give Thanksgiving Friday as well), and Christmas.
- Sick Leave: five to twelve days annually.
- Health Insurance: employer finances 80 - 100% of employee and family medical coverage.
- Retirement (if offered): mainly 401K plans, but SIMPLE is worth a look.
Mandated benefits include:
- Social Security - federal level and applies to all employers. Employee contributes 7.65% of earnings and the employer matches the funds.
- Workers' Compensation - at state level. Some states allow a company to opt out and provide their own plan. Benefits are paid to employees with on the job injuries or death.
- Unemployment Compensation - federal and state level, and applies to all employers. Experience ratings determine state fund amount. Therefore, it is important to keep reliable and thorough records to challenge claims. Keep facts on each layoff, termination, and resignation in writing.
- COBRA - federal level, applies to companies with 20 or more employees. Allows an employee to continue health insurance under certain circumstances.
- FMLA - federal level, applies to companies with 50 or more employees. A company must allow and employee up to 12 weeks off for certain medical reasons if an employee has been employed for atleast one year or worked 1250 hours.
- HIPAA - The Health Insurance Portability and Accountability Act applies to all employers who provide a health plan. Employees receive credit for prior health coverage, thereby reducing/eliminating limitations of pre-existing condition when an employee changes employers.
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