Compensation and Benefits Strategy

Total Rewards Compensation and Benefits Strategy – GGI-AZ

Gary J. Addis

HRN/531

November 14, 2016

Professor Pamela Jones

Total Rewards Compensation and Benefits Strategy – GGI-AZ

GGI-AZ has a fairly comprehensive compensation and benefits package based primarily on the “Cafeteria Plan” concept; permitted under Section 125 of the Internal Revenue Service Code and incorporating Flexible Spending Accounts(FSAs) and Health Savings Accounts (HSAs).  The firm has found that allowing employees to choose from a variety of benefits permits customization matching benefit needs of a diverse demographic of employees.  Simply stated; employees with families have benefit needs that differ greatly from those of a single person.  The cafeteria plan allows employees to choose qualified benefits that are not subject to the Federal Insurance Contributions Act (FICA) tax, the Federal Unemployment Tax Act (FUTA) taxes, Medicare taxes, and pay for them with pre-tax dollars that are not subject to income tax withholding. Such a plan also eliminates much of costs of these taxes to the firm itself, thus allowing a larger direct compensation pool, as well as increased profits for the firm.

A Section 125 plan also has significantly reduced reporting requirements to various governmental entities which results in cost savings to the firm.  An additional benefit of such a plan is that it allows the firm to provide base compensation above the local market with monies that would otherwise have allocated to benefit costs; thus assisting in recruitment.  The firm participates in an employer group that can provide a comprehensive Section 125 qualified package of benefits, broader than the firm itself could offer; again aiding in recruitment.

The firm also offers paid time off, education reimbursement, profit sharing, and annual bonuses.  

Total Rewards Strategies

According to Heneman (2007), the Total Rewards Strategy is comprised of three major elements: compensation, benefits, and personal growth.  These are broken down as follows: (Heneman – 2007; p.3)

Compensation:

• Base Pay – wages and salaries.
• Merit and Incentive Pay – additional compensation based on performance.
• Promotions – base pay increases related to a new job.
• Longevity – pay increases based on length of service.

Benefits:

• Health and Welfare – healthcare, disability, and wellness insurance and non-insurance programs.
• Paid Time Off – paid vacation, family leave, and sick time.
• Retirement – compensation after employment cessation based on length of service and/or compensation levels.

Personal Growth

• Training and Career Development– education and skill development both on and off the job.
• Performance Management – Overall goal setting and feedback.

In order to establish and implement such a transformational organizational change, a team needs to be created, probably incorporating the services of an outside consultant and involving a four step process of assessment of need, design of the plan, implementation, and on-going evaluation.