Employee Benefits

Employee benefits typically refers to retirement plans, health life insurance, life insurance, disability insurance, vacation, employee stock ownership plans, etc. Benefits are increasingly expensive for businesses to provide to employees, so the range and options of benefits are changing rapidly to include, for example, flexible benefit plans. Benefits are forms of value, other than payment, that are provided to the employee in return for their contribution to the organization, that is, for doing their job. Some benefits, such as unemployment and worker's compensation, are federally required. (Worker's compensation is really a worker's right, rather than a benefit.) Prominent examples of benefits are insurance (medical, life, dental, disability, unemployment and worker's compensation), vacation pay, holiday pay, and maternity leave, contribution to retirement (pension pay), profit sharing, stock options, and bonuses. (Some people would consider profit sharing, stock options and bonuses as forms of compensation.) You might think of benefits as being tangible or intangible. The benefits listed previously are tangible benefits. Intangible benefits are less direct, for example, appreciation from a boss, likelihood for promotion, nice office, etc. People sometimes talk of fringe benefits, usually referring to tangible benefits, but sometimes meaning both kinds of benefits. You might also think of benefits as company-paid and employee-paid. While the company usually pays for most types of benefits (holiday pay, vacation pay, etc.), some benefits, such as medical insurance, are often paid, at least in part, by employees because of the high costs of medical insurance.

Planning an Employee Benefits Program (Various Perspectives)

Benefits Planning and Outreach BenefitsLink (search for "plan" in the search window on that page) Planning a program in Canada 5 Atypical Employee Benefits

Buying an Employee Benefits Program

About.com's many resources Buying Life Insurance -- Small Businesses Health Benefits, Retirement Standards, and Workers Compensation: Employee Benefit Plans

General Resources
Employee Benefits Links We Like, by Topic Guide To Salary / Compensation And Human Resource / Personnel Sites BenefitsLink(tm) - The National Employee Benefits Website Benefits - Human Resources Net Links (search for "benefits" in the search window at this site)

Additional Information About Employee Benefits for Nonprofits

Nonprofits Can Complete for Employee Benefits

Employee Compensation
Compensation includes topics in regard to wage and/or salary programs and structures, for example, salary ranges for job descriptions, merit-based programs, bonus-based programs, commission-based programs, etc. (Also see the Related Info (including Benefits).) Compensation is payment to an employee in return for their contribution to the organization, that is, for doing their job. The most common forms of compensation are wages, salaries and tips. Compensation is usually provided as base pay and/or variable pay. Base pay is based on the role in the organization and the market for the expertise required to conduct that role. Variable pay is based on the performance of the person in that role, for example, for how well that person achieved his or her goals for the year. Incentive plans, for example, bonus plans, are a form of variable pay. (Some people might consider bonuses as a benefit, rather than a form of compensation.) Some programs include a base pay and a variable pay. Organizations usually associate compensation/pay ranges with job descriptions in the organization. The ranges include the minimum and the maximum amount of money that can be earned per year in that role. Employees have certain monies withheld from their payroll checks, usually including federal income tax, state income tax, FICA (social security) contributions, and employee contributions to the costs of certain benefits (often medical insurance and retirement). Exempt and Non-Exempt Jobs in organizations have two classifications, exempt and non-exempt.

Professional, management and other types of skilled jobs are classified as exempt. Exempt jobs get a salary, that is, a fixed amount of money per time interval, usually a fixed amount per month. It's not uncommon for exempt positions to receive higher compensation and benefits than non-exempt jobs, although nonexempt jobs often can make more money than exempt jobs simply by working more hours. Unskilled or entry-level jobs are usually classified as non-exempt. Non-exempt jobs usually get a wage, or an amount of money per hour. Non-exempt jobs also get paid over-time, that is, extra pay for hours worked over 40 hours a week or on certain days of the week or on holidays. Each job must have the same pay range for anyone performing that job, that is, one person can't have a higher maximum pay than someone else doing that same job.

General Resources About Compensation

Compensation: Outline and Definitions Compensation Planning for your Employees Developing a Strong Compensation Philosophy Merit Pay: Is It Really the Best Way to Reward Employees? 7 Hidden Perks Not In Employee Paychecks Can You Be Fired For Asking For a Raise? Also see Rewarding Employees

Salary Surveys
It is extremely useful to reference salary surveys when determining salaries. The surveys lend tremendous credibility and fairness to the process of determining compensation. Be sure that surveys are somewhat current. Reference them to find the salaries for the job roles that are the closest match to the roles you are deciding the compensation for. The closer you can match the role to the type of services, locale and job title of the role you are deciding compensation for, the more useful the survey is likely to be to you, especially if the survey was generated in the past five years or less. Compensation is an important motivator when you reward achievement of the desired organizational results.

It is said "that money is a powerful source of motivation." But it is also said that salary increase can only motivate until the next pay increase is due. Imagine what the impact is if an employee is at the maximum point of his or her salary range. Achievement of the desired behaviors is important in order to enhance your organization's effectiveness. In turn, this increases the possibility of success. Compensation strategy can reinforce the organizational culture that you desire. This is an enabling organizational culture under which pay is linked to performance. Your compensation policy must reflect your strategic business objectives. This becomes all the more important when determining CEO compensation. You must clearly define the objectives of your organization so that you can achieve them by using compensation strategy. These are communicated to everyone soon after a decision is taken. It can happen that good decisions fail to achieve results due to poor communication. By providing the right combination of benefits which are non-cash compensation your organization can motivate employees and make them stay to help in its progress. What is the strategy that we are talking about and how do HR strategies fit in? Click here to see the hierachical levels of strategy by Jack Welch. Types of Rewards There are two types of rewards, monetary and non-monetary. Monetary rewards include salary, bonus, commissions, medical and health benefits, holidays, and retirement benefits. Among the non-monetary rewards are meaningful and challenging works, recognition and career advancement, safe and healthy working environment, and fair treatment. How You Can Make Good Use of Compensation Strategy You can use compensation to attract and retain competent people. This objective requires you to offer a salary that is not lower than the market rates.

When you want better customer service, reward employee behaviors that produce superior service. Do not harp on the amount of salary you are paying yet at the same expect good performance. Your people may conclude that there is insincerity on the part of management. Match the written policy with the right and appropriate actions that demonstrate to your employees that you are a fair and just employer. Equitable Compensation Like employees working elsewhere in other organizations, your people are concerned with compensation equity. Take this into consideration in drawing up your compensation strategy. When people notice inequities, their morale and motivation will suffer. Do not make it worse by maintaining pay secrecy. This indicates that you may not have an objective and defensible compensation system. Researches had shown that pay secrecy generates mistrust, and reduces motivation and organizational effectiveness. Of course, you are concerned about competitors inducing your people to leave. These competitors may have the financial capability to pay better salaries and benefits. But by adopting a compensation strategy, you don't have to worry about your good people resigning. If they believe in yourmanagement's fair-handedness, it is very probable that they will not go away. Decision to leave an organization requires considerations other than or in addition to dissatisfaction with compensation. Determining Rates of Pay Compensation strategy involves considering to adopt any of several ways in setting rates of pay.

Pay increase based on employee's length of time spent on the job. This is seniority-based pay that is a good motivator in employee retention. But here, you are not rewarding performance. Performance-based pay is intended to motivate employees to perform better. Such a plan is becoming more common whereby the manager and employee agree on the job goals and performance criteria at the beginning of a

specified period, usually at the beginning of the year. The effect of this as a motivator can vary from time to time and from situation to situation. You can give pay increases based on job-related skills and knowledge. This is intended to motivate your people to gain additional skills, acquire new competencies and knowledge. Under this method, you do not pay employees for the job they are-doing, their job title or seniority. This is competency-based pay.

The second method appears the most reasonable. But you can include the elements of seniority and competence. An effective executive compensation is an important area of your organization's pay program. Executives are among your key employees. Salary Increases Your compensation strategy needs to align your compensation objectives to your organizational business objectives. Salary increases are part of this plan. By this, you are recognizing employees' contribution to the accomplishment of your organization's objectives. Salaries are normally reviewed annually and an increase is given if the employee merits it. There are times when you feel your organization cannot afford to give any pay increase. So what do you do in order not to de-motivate your people? Consider implementing a policy whereby employees are given salary increases when your organization can afford to give them, in arrears. This ensures that good performers will continue to perform. They know that they will get what is due to them. In order to ensure that this is done properly, ensure that the annual performance appraisal is done as usual. You need the employees' performance data. Giving salary increase to an under-performer is not justified. There are organizations who have implemented a policy that employees who are in the last five percent of the performancebracket will have to go. Size of Merit Increase This usually consists of payment in respect of performance level. A merit increase that is perceived as significant by employees can motivate them to perform better.

Make sure that your best employees are duly rewarded, the amount being sufficient enough to motivate. Ensure that your performance review is effective to reduce any possibility of wrong or biased decisions made. Pay Increase on Promotion When an employee is promoted, you may or may not give a significant pay increase. It is not justified to pay an overpaid employee a significant promotional increase. Consider all relevant matters before you make a decision. One important thing to consider is the pay parity with people in the same category and performing similar tasks. General Salary Adjustment In performance-based pay, do not give across-the-board increases. Differentiate between outstanding, average and non-performers. If not, your employees will lose trust in the system, resulting in little or no motivational impact. Paying the right salary has impact on employee performance and organizational effectiveness. Automatic Salary Progression This has no relationship to performance. Avoid it as it does not encourage your employees to improve their performance. This is fairly common in the public sector. But there are now significant changes made in accordance with sound human resource management principles. The only occasion where you can consider giving some salary increase that is unrelated to performance is in respect of increase in the cost of living. Anomalous Salary If you have any employee whose salary is below the minimum for the job or too low in relation to the employee's performance and experience, make the necessary adjustment. This is in addition to an increase based on performance merit. On the other hand, you may have an employee who is paid above the maximum point in the salary range for the job.

You may freeze further salary increases until the relevant pay level is reached. Then give merit increase based on performance. Don't give increase if performance is unsatisfactory. Be careful in handling the situation where you do not see the reason for increasing an employee's salary. Conduct a salary survey whether your range maximum is lower than the markets rates. If so, you may want to adjust the maximum range. Communicate the results to the affected employees. It is also good if other employees know why this is being done. Do all of these as part of your compensation strategy. Salary Reviews Compensation strategy requires that the appropriate salary review method is adopted.

Fixed-date

Reviews Compensation strategy requires that the appropriate salary review method is adopted.

Fixed-date Reviews Such reviews are usually on 1st January each year. A modified version is to fix the reviews every quarter for different groups of employees whose appointment fall within the respective quarter. For example, 1st January review for those who joined the organization between 1st January and 31st March. Under this method, there is widespread comparison of salary among employees. In many cases, this creates dissatisfaction. And it can affect employee morale.

Anniversary Reviews Here, you review employees' salary at 12-month intervals from the date of their appointment. This is a good method to reward good performance. But it is time-consuming and needs a lot of effort.

Flexible-date Reviews The interval can range from nine months to eighteen months. You can use this method to adjust the salaries of high-performing employees whose salary is low, say after nine months. You can give an under-performer less frequent salary increases, say after eighteen months. A non-performer gets no pay increase. Issue a letter cautioning the employee to improve his or her performance. This is required under the law. If this continues, issue a show cause letter for poor performance.

Compensation and Strategic HR Management None of the compensation systems is perfect. Human judgment remains an important element. Try to reduce the subjectivity as much as possible. Provide the necessary skills training for assessors. Use compensation strategy to:

monitor cost-effectiveness Are you getting good returns from the compensation methods that you have adopted? verify legal compliance Are there legislation that may prohibit the way your organization is managing its compensation scheme? determine pay equity Are you using strategy to minimize or eliminate pay disparity in order to achieve maximum employee motivation? and link pay to performance Is a performance-based pay implemented in your organization?

Corporate Transformation and Compensation Strategy It is stated in a Report "Strategic Compensation: How to align performance, pay and rewards to support corporate transformation" that it involves four strategic elements in a closed loop, or continuous process. These are:

translating business issues into compensation or HR interventions designing and delivering them with key objectives leading the resultant change process, and reviewing or evaluating the outcomes." (www.business-intelligence.co.uk)

The Report finds that strategic compensation is a significant contributor to different forms of competitive advantage, including

better business results more effective performance stronger capability higher staff attraction and retention levels heightened motivation, and employee satisfaction.

But it cautions on the repercussions if it is poorly managed.If so, it can "demotivate, is divisive, create upheavals among employees or force good performers to leave." In addition, you may find help from Martocchios' book ""Strategic Compensation: A Human Resource Management Approach". He mentions criteria in determining employee compensation, design of compensation system, among other things. Necessity to Rethink Approach to Compensation Strategic compensation is the type of compensation that can achieve its intended purpose. Compensation strategy is the course of action taken to ensure that this purpose is attained. There is no excuse in paying salaries that make no difference in the performance of your employees. Brent Longnecker,a leading authority on compensation trends, planning and strategy in his book "Rethinking Strategic Compensation" believes we need to rethink our approach to compensation. He provides "all facets of attracting, retaining, and motivating employees through a robust compensation plan."

Forces Affecting Compensation

Effects of Market Forces on Compensation Strategy Organizations operate in a dynamic market environment. There are times of plenty and there are lean years.

This matter does not fail to catch our attention especially the effects of economic downturns. Many people particularly corporate heads and leaders ask important questions how their organizations can continue to exist. One question that they cannot evade is on compensation. You want your organization to continue in existence. And reducing the headcount will quickly reduce your overheads. You need people in order to survive. However, maintaining the same number of employees can lead to bankruptcy. So what do you do? This is a difficult question to answer. Further, you need to ensure that your organization does not lose talent and needs to engage talent that you need to help during the hard times. You also need to pay attention to the retained employees so that they remain committed and focused. Thus, the importance of preparing a compensation strategy. You can consider the following:

Differentiate between top performers and non-performers and even average performers. And reward them accordingly. Reward top performers only. This may motivate mediocre performers to contribute more. Check the market whether your compensation system is competitive. Clearly communicate to employees what their compensation package is worth. Then negotiate on possible reduction for certain heads such as noncash compensation. Don't say demotivating words like "You are lucky you still have jobs." Make plan to achieve continued employee motivation at least in the shortterm. Terminate non-performers, not good performers in sectors that are no longer profitable due to the downturn.

We read from publications or hear from broadcasts that some people are not too happy that organizations continue to pay incentives to executives during downturns. Some suggest that cost-cutting is not the answer but implementation of compensation strategy. We need to remember that whatever the economic situation or your organizational financial performance is, formulating andimplementing a compensation strategy will ensure the ever-readiness of your organization.

Once in place, it is necessary to review the strategy at least yearly and whenever there is a need to do so as dictated by events. Compensation Legislation and Compliance It is necessary for people in HR and those in managerial positions to know and understand that the law affects your compensation and benefits system. In the public sector, practically every aspect of employee compensation is governed by legislation. In most cases, there is not much room for innovative ideas in formulating compensation strategy. The one good things about this is that the results are predictable at most times. But it can lead to a lot of dissatisfaction. Legislation specify job grades, salary band or range, salary increases, promotion, allowances, benefits and so on. When there are needs for changes, the legislation concerned is amended. Before any incentive or a new allowance is given or paid the law must allow it. If not, nobody will or dares to take the risk to go against the stipulated rules. Some government agencies are usually given some authority under a subsidiary legislation allowing their respective Board of Directors to make decisions. Such decisions must not go against the provisions of the incorporation instrument. Role of Legislation in Private Sector Compensation Organization in the private sector are "free" to determine the levels and components of their compensation package. They are "free" to determine their own compensation strategy subject to legislation. Private entities are not free to follow their whims and fancies in compensation matters. National governments may enact laws forcing private organizations to change their compensation system and practices. This can happen during times of economic recession when sensitive matters such as compensation come under close public scrutiny. This will also happen in response to sensible public opinion. If this happens private organizations may not have much choice but to follow. This can bring both positive and negative results. Some argue that self-regulation is better and preferable. But some sort of basic framework is necessary.

An example in which legislation may determine private entities compensation policy is when a minimum wage is imposed. Here, organizations are "forced to agree". This affects you compensation strategy. This is a controversial issue. Employees at the lowest level and their unions look forward to it. Employers Associations orFederation dread it. Government officers may not know what further action they need to take. They are responsible for implementation in which case they cannot go against against government policies. Another real possibility where governments may intervene is when employees, unions, community leaders, commentators and others believe that the cost of living (COLA) is getting exceptionally high and they appeal for government intervention. Your organization may want to offer salary increase to help people cope during hard times. In this way, COLA become one of the factors in deciding the quantum of compensation. Further, anti-discrimination laws have impacts on compensation. We know that market forces impose "unwritten rules" on the compensation systems and thus compensation strategy. Accepted norms such as in salary systems affect decisions of organizations. Apart from the enacted laws, the "common law" can shape compensation decisions. When cases come before the law courts, judges interpret the law and refer to decided cases in deciding whether compensation is payable or not. And if payable, the courts will also rule on the quantum payable by the employer. A lot of these cases are on unfair dismissal or constructive dismissal. In many of these cases "compensation" specifically refers to the amount of back pay that the employer must pay to the former employee. The law courts will seldom award economic loss as compensation. The courts may also rule that the employer take back the former employee to resume duties in the same position and drawing the same salary. This may pose problems to the employer and other employees.

Compensation Strategy and HRM An HR executive like you, will understand "how compensation plans must align with organizational design and corporate strategy." Whatever you decide to do, it is good to remember that compensation and compensation strategy are essential parts of a strategic human resources

management plan.
Intel Philippines's comprehensive compensation and benefits package is designed to attract, retain, and reward the people necessary to create Intel's longer-term growth and profitability. Wherever possible, we provide the ability for employees to participate in a range of compensation programs, which allow employees to share in Intel's financial success through profit-sharing and stock programs; and innovative benefits that help employees and their families achieve improved quality of life and financial security. Click on a tab above to learn more about opportunities available to employees of Intel Philippines. NOTE: The information on this website is a general summary of benefits available in this location. It is not intended to take the place of or change official plan documents in any way. In the event of any discrepancy between the information in this presentation and official plan documents, the plan documents will prevail. Intel reserves the right to modify, change or discontinue any benefit at its sole discretion at any time.

COMPENSATION AND BENEFITS

Business Challenge
Is it time to redo your benefits?

In a sluggish economy, the compensation system gets a new focus by rewarding star performers more than the rest of the pack. In this seminar we look at how an organization develops a motivating and rewarding incentive plan. Despite the widespread use of incentive pay, there is limited evidence about what factors influence its organization-wide, broad-based application. Research in incentives has focused on performance measures and pay-performance sensitivities but has largely ignored the performance standard, which generates important incentives whenever plan participants can influence the standard-setting process. Get ahead in your profession and know the latest trends in compensation and benefit planning. Is it worth it to win the talent war? Highly recommended to:

HR practitioners Administrative officers involved in compensation planning Entrepreneurs who would like to know how to manage employee benefits

Learning Objective

Attending this seminar will ensure that you:

Explore the art of developing your compensation plan Learn the new trends in incentive planning

Gain an insight on how your compensation plan affects your employees Find the easiest, most practical ways to win in the talent war Uncover the best formulas for creating team based incentives

Human Resources Management - Benefits & Compensation In a sluggish economy, compensation system gets a new focus by rewarding star performers more than the rest of the pack 3-P Compensation: Pay for Performance In this article we look at how an organization develops a motivating and rewarding incentive plan. An executive perspective on employee Executives say employee benefits help benefits companies compete but have an incomplete understanding of benefits and how they perform. Results of a McKinsey Survey. pdffile. 2006. Article starts at page 12 An Overview of Recent Trends in This article examines recent trends and Incentive Pay Programs developments in an increasingly popular HR practice--incentive pay programs. Pdf-file Analyzing Compensation Data Guide describes three approaches that TOP Federal contractors may use to analyze their compensation systems; analyses may be useful in determining if there are patterns of discrimination in the workforce; focus is on analyses of salaries or wages, procedures can be used to analyze other forms of compensation as well. Are Higher Pay Increases Necessarily This study investigated the relationship Better? between pay increase percentages and pay satisfaction among 118 MBA students and found that pay satisfaction had the largest increase between three percent and seven percent and appeared to level off between seven percent and eleven percent, suggesting that there may be a point at which high pay increases may not necessarily lead to more satisfaction. In addition, it was found that pay increases between six and eight percent are the minimum amounts needed for pay increase satisfaction. Finally, we suggest that employees may not need as high of a pay increase to experience satisfaction with their pay increase when providing those employees with a signal, such as an average pay increase. pdf

Best Practice Guidance to Managing Compensation Prior to an IPO

Building a Better 401(k) Compensation Planning: The Key to Profitability

Compensation Plans Explaining Executive Compensation Glossary Is Your Long-Term Incentive Plan Really Performance-Based?

Labor Statistics Misc. Issues

IPOs have been with us for a long time. new There is nothing really new about the process, be it in the United States, the United Kingdom, or elsewhere. What is changing, in general, is the attention organizations give to corporate governance issues. In particular, organizations focus on how to handle executive compensation issues during the IPO process so that they are better prepared to deal with the public scrutiny post-IPO. The period leading to the IPO provides a unique opportunity for an organization to review its compensation programs and to make dramatic changes, if needed, without all the public scrutiny. It is an opportunity that will not occur again. pdf 401(k) plan sponsors are taking steps to make their plans more attractive to employees in 2003. January 2003 This book can help brokers create effective individual company compensation plans by giving them a better understanding of how changes to existing compensation schedules affect the company finances as a whole. Pdffile 3.6 MB An overview, article provided by Salary Source Managerial Power vs. the Perceived Cost of Stock Options. Working Paper. Pdf-file Of Employee Benefit Terms Long-term incentive plans (LTIPs) typically provide the largest component of senior executives compensation, most often through one or more of three equity-based types: stock options, restricted stock, and what are often called performance shares. This article focuses on performance shares, an increasingly common form of performance-based LTIPs, and their importance as a major component of executive pay. We believe that performance shares establish the strongest link in tying compensation to performance. The article also presents data on the increasing prevalence of these types of plans. pdf Extensive compilation of statistics and data Overview on some compensation- and benefits-related issues: pay equity, variable pay systems, stock plans, retirement plans, health and welfare plans, paid time off, government mandated benefits

Offer a Choice of Compensation Plans to pdf-file 2003 Gain a Competitive Advantage

Organizational Pay Mix

The Implications of Various Theoretical Perspectives for the Conceptualization and Measurement of Individual Pay Components. Pdf-file Organization-wide Broad-based Despite the widespread use of incentive pay, Incentives: Rational Theory and there is limited evidence about what factors Evidence influence its organization-wide, broad-based application. Pdf-file Paying for Performance: An Overlooked Sales force deployment and compensation Opportunity are among the most powerful means a company has to improve growth, market share, and profitability. Yet few companies take the time to align their payout systems with current strategy. The author explains how to design a successful compensation plan that is precise, fair, and simple. pdf-file Performance based Pay The Value of Performance-Based Pay in the War for Talent, pdf-download version Performance Standards in Incentive Research in incentives has focused on Contracts performance measures and pay-performance sensitivities but has largely ignored the performance standard, which generates important incentives whenever plan participants can influence the standardsetting process. Working paper. pdf-file Promise and Peril in Implementing Pay Despite the popularity of pay for for Performance: A Report on Thirteen performance programs, very little research Natural Experiments has examined the dynamics and dilemmas associated with implementing these programs. We studied the implementation of thirteen experiments in pay for performance that were initiated by local management in a high-commitment company (Hewlett Packard). We examined Hewlett Packard documents and interviewed managers to understand their experience with implementing these programs. Managers reported a relatively unfavorable cost-benefit assessment of programs and difficulty in designing and maintaining them, especially in a fast changing business environment. Managers at each site eventually concluded that they could attain greater performance benefits through alternative managerial tools like effective leadership, clear objectives, coaching or training, and therefore discontinued their pay for performance programs. Finally, we discuss implications for

management and for future research. pdf

Team Based Incentives - Do They Work? Includes 5-step example of how to create a compensation plan. Time To Redo Your Benefits? Know the key factors that should trigger a re-evaluation of your benefits package. Voluntary Employees Beneficiary Benefits of Forming a Voluntary Employees Association Beneficiary Association. September 2003 When Stock Options Fail to Motivate Attribution and Context Effects on Stock Price Expectancy.

Executive Compensation and Benefits October 13, 2006 9:00PM

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Finding senior executives capable of motivating people, communicating a vision, and leading a company to the top can be challenging. And with concerned investors closely monitoring company performance, businesses are under enormous pressure to retain qualified executives once they hire them. Obviously, a company with a clear vision, unique ideas, or a novel product has a much better chance of attracting the best candidates at all levels. But to keep the momentum going, it's crucial to secure top talent at the executive level. Generally, executives are swayed by a unique and challenging opportunity not just an attractive compensation package.

However, overall compensation is still important. In today's job market, qualified candidates enjoy more negotiating power than ever. This means you need to be flexible and consider the compensation packages your competitors offer. Since candidates know they can command a high salary, extra incentives can make the difference in an executive's decision to join a company. Consider the following types of alternative compensation when you negotiate with executives and senior-level employees. Equity. Many times, executives ask for equity in a company instead of cash. The amount of stock options you give senior-level employees will depend on your industry and the valuation of your stock. To get an idea about what you might offer, take a look at the proxy statements of a few public companies that are comparable to your own. These documents usually list executive compensation. Some companies offer executives a higher percentage of equity each year, based on company performance or shareholder return.
Flexible schedules. A flexible work schedule can be extremely effective in enticing top talent. Employers who offer flexible scheduling in flextime or compressed workweeks, in geography (telecommuting or satellite workplaces), in time off (floating holidays or vacation carryover), and in career paths (job sharing or part-time work) have an advantage in attracting top candidates. Deferred compensation. Stock options and other deferred compensation plans are effective tools for retaining employees because they reward employees based on the company's performance over time (typically three to five years). Deferred compensation plans are an investment vehicle that allows people to defer taxation of both the initial contribution and the earnings on the deferred assets. Performance incentives. Performance incentives are special incentives shares of stock, cash, vacations, or other bonuses tied to the performance of the department or business area that the executive manages. Performance incentives linked to long-term goals create vision that can inspire an executive to remain committed to a company. Other types of compensation. Be creative when you develop executive compensation plans. Consider all types of options, including car allowances, life insurance, relocation payments, flexible start dates, signing bonuses, use of company-owned vacation property, health-club membership, tuition reimbursements, and other compensation that will make your package competitive and attractive. Offering nonmonetary incentives like these will tempt talented candidates and help you retain them.

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