LO1 - The Objectives of Benefits

• Direct compensation


  • Pay​
  • Based on critical job factors or performance
• Indirect compensation


  • Benefits and services extended as a condition of employment​
  • Not directly related to performance​
  • Approaching 25 to 40% of annual payroll expenses
• Role of benefits

  • Societal objectives
  • Organizational objectives
  • Employee objectives
• Societal Objectives ​


  To solve social problems and provide security for interdependent wage earners
• Social objectives


  Employers can deduct the costs of benefits as a business expense
• Social objectives


  Employees receive most benefits tax-free
• Benefits and services 


  give many employees financial security against illness, disability, and retirement
• Organizational Objectives


  • Must offer benefits to recruit and retain
  • Help reduce fatigue and may enhance productivity (e.g., rest breaks, vacations)​
  • Discourage labour unrest​
  • Satisfy employee objectives​
  • Aid recruitment and reduce turnover​
  • Minimize overtime cost
• Employee Objectives​


  • Lower costs and availability​
  • Lower income taxes​
  • Partial protection from inflation​
  • Primary objective may be to obtain benefits and services (e.g., supplemental health and life insurance)