ch 13

• Total Rewards


  The sum of all rewards employees receive in exchange for their time, efforts, and performance
• Total Rewards


  • Financial compensation
  • Nonfinancial compensation
• Financial compensation


  • Fixed pay
  • Variable pay
  • Benefits
• Many employees are willing to accept lower pay in exchange for valued other rewards
• People will give up a higher pay for better benefits
• Please go to PollEV.com/doreenmatthes784 to take a brief survey. Take notes of the results. What are some general tendencies you see?
• Social security


  Old Age, Survivors, Disability, and Health Insurance (OASDHI) program covering more than 90% of U.S. employees
• Social security tax


  • 12.4% on the first $168,600 earned (as of 2024)
• Medicare (Part A) tax

  • 2.9% on all earnings
• Additional Medicare tax


  • 0.9% on adjusted gross income exceeding $200,000 for single filers ($250,000 for married filers) - paid by employee
• Retirement age


  • Depends on the year in which the worker was born
  • Early retirement is possible between age 62 and full retirement age, at a permanent reduction of benefits (by 22.5%)
  • Full retirement age for workers born in 1960 or later is 67
• Social security benefits


  • Benefits amount depend on earnings history
  • Max. $3,345 per month (as of 2023) unless retiring late; yearly adjustments for inflation
  • At full retirement age, typically free from federal tax; free from state tax in about half of the U.S. states (incl. Louisiana) (given that any other income earned falls below a certain level)
• Unemployment insurance


  Objectives: To offset lost income during involuntary unemployment, to help unemployed workers find new jobs, to provide an incentive for employers to stabilize employment, to preserve investments in worker skills by providing income during short-term layoffs
• Federal unemployment insurance tax

  • 0.6% on the first $7,000 of wages
• State unemployment insurance tax


  • Depends on the employer's industry and experience rating (i.e., history of layoffs)
  • Taxable wage base in Louisiana is $7,700 (as of 2023)
• Eligibility for unemployment benefits


  • Has prior attachment to the workforce (often 52 weeks of work)
  • Is available for work and actively seeking it
  • Was not discharged for cause, did not quit voluntarily, and is not out of work because of a labor dispute
• Unemployment benefits


  • Typically around 50% of the worker's earnings
  • Payouts for up to 26 weeks, with possible extended benefits for up to 13 weeks
  • Taxed as ordinary income
  • In Louisiana: Maximum weekly benefit is $275 (as of 2022)
  • Payouts for up to 26 weeks per 12-month period
• Workers' compensation


  • Covered are job-related injuries and death
  • Not covered are self-inflicted injuries or injuries stemming from intoxication or "willful disregard of safety rules"
  • No-fault liability of the employer
  • Employers are immune from lawsuits (unless the employer intentionally contributed to a dangerous workplace)
• Workers' compensation benefits


  • Paid by the employer and depends on: Nature of the occupations and their attached risk, State in which the work is located, Employer experience rating
  • Compensation benefits include disability income, medical care, death benefits, and rehabilitative services
  • Disability benefits, calculated based on pre-disability earnings, are tax free
• Medical insurance


  • Employees can purchase insurance at employer (group) rate rather than individual rate
  • Typically cover hospital expenses, surgical expenses, physicians' visits
  • Other benefits options: dental care, vision care, birthing centers, prescription drug programs
• COBRA


  Employers must permit employees to extend health insurance coverage at group rates for up to 36 months following a qualifying event
• Disability insurance


  • Short-term disability plans provide benefits for up to 6 months
  • Long-term disability plans potentially cover the worker for life
  • Median salary replacement rate of 60%
  • Benefits are not taxed if fully funded by employee, but are taxed if the employer contributed
• Defined benefit plans


  • Guarantee a specified retirement benefit level
  • Typically based on years of service, age, and earnings level
  • As of 2023, the maximum annual benefit to be provided through defined benefit plans is $265,000
  • Investment risks are borne by the employer
  • Pension Benefit Guaranty Corporation (PBGC) guarantees employees a basic retirement benefit in the event of financial difficulties forcing the employer to reduce or terminate pension benefits
• Defined contribution plans


  • Guaranteed size of employer contribution to individual retirement accounts
  • Investment risks are shifted to employees
  • Different types of plans: Money purchase plan, Profit-sharing plan and stock ownership plan, Section 401(k) plan
• Pension Protection Act (PPA) of 2006


  • Requires defined contribution plans holding publicly traded securities to provide employees with: The opportunity to divest employer securities, At least three investment options other than employer securities
• Automatic enrollment in 401(k) plans


  Employers may enroll employees in a 401(k) plan automatically and increase a worker's contribution to the plan to coincide with a raise or work anniversary
• Cash balance plans


  • Employer sets up and funds an individual account for each employee and contributes a percentage of the employee's salary
  • Account earns interest at a predetermined guaranteed rate
  • Funding, communication, and vesting requirements
• Vesting rights


  Employees who participate in a pension plan and work a specified minimum number of years earn the right to a pension upon retirement
• Paid time off


  Typically includes either one or several of: paid holidays, paid vacation, paid sick time
• Paid time off is not legally mandated in the U.S. (on the federal level)</b>
• Federal contractors paid sick leave requirement

  • Executive Order 13706
• State and local paid sick leave requirements


  • As of 2023, 15 U.S. states, the District of Columbia, and various localities across the nation require private employers to offer paid sick leave for workers
• Access to paid time off in private industry


  • In March 2023, 77% of private industry non-union workers had access to paid sick leave and 79% had access to paid vacation plans
• Paid time off policies


  • 'Use it or lose it'
  • Rolling days over into the next year or banking them for later
  • Paying out days not taken
• Family and Medical Leave Act (FMLA)


  • Applies to employers with 50 or more employees
  • Requires employers to up to 12 weeks of unpaid leave after childbirth or adoption, to care for a seriously ill child, spouse or parent, or for an employee's own serious illness
  • Does not cover employees with less than one year of service or who work less than 25 hours per week
  • Restrictions apply to employees who are among the 10% highest paid employees
• Paid family leave


  • As of 2020, 55% of employers offer paid maternity leave and 45% offer paid paternity leave, according to a SHRM and Oxford Economics report
  • As of 2023, 13 states and D.C. mandate paid family and medical leave
  • Wage replacement rates range from 50% to 90%, or employees are paid a lump sum
  • Length of leave varies between 4 to 12 weeks
  • Federal employees covered under Title 5 receive up to 12 weeks of paid parental leave upon birth or placement (adoption/foster care) of a child, as per the Federal Employee Paid Leave Act
• Family-friendly policies


  • Family leave
  • Childcare
  • Workplace flexibility
• Other types of benefits


  • Company-paid snacks and beverages
  • Life, pet health, and divorce insurance
  • Parking
  • Professional memberships, certification fees, tuition cost coverage
  • College savings plans
  • Student loan repayment programs
• per the Federal Employee Paid Leave Act
• Dr. Doreen Matthes – MGT 3320


  Spring 2024