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Choosing discretionary benefits.

Choosing the best benefits package for your company and your unique group of employees can be a difficult, but vital task. There are many options, all with their benefits, so how do you prioritize them and create the most effective package for your specific situation?

According to this week’s lecture, there are three main categories of discretionary benefits: protection programs, paid time off, and services (Lecture: Discretionary Benefits). Simply based off of these broad categories, the most important and non-negotiable set of discretionary benefits, in my opinion, are the protection programs, and the most disposable (least necessary) are the services.

The following is the order in which I would eliminate discretionary benefits:

  • Outplacement counseling (services)
  • Transportation services (services)
  • Tuition reimbursement (services)
  • Family assistance (services)
  • Paid time off
  • Employee assistance programs (services)
  • Disability and life insurance (protection programs)
  • Retirement (protection programs)

I would eliminate outplacement counseling first because, although it is a decent thing to do from an employer standpoint, it will not have a direct impact on your current employee productivity or morale. It is also not guaranteed that the program set by the former employer will align with the needs or timeframe of the former employee, and thus, may not be beneficial. Next, I would eliminate transportation services because remote jobs are becoming increasingly more prominent so transportation needs are limited, and there are legal restrictions that control an employer’s options within this benefit. I would next eliminate tuition reimbursement from my company’s benefits package because it is very costly and there is an increasing amount of free learning resources that employees can access to add similar value that they would get gaining a new degree. Next, I would eliminate family assistance programs because, although they can greatly improve an employee’s work-life balance and reduce life-stress, there are other ways in which they can receive this support that are not costly to the employer (Textbook: Strategic Management). Next, I would eliminate paid-time-off because the last three discretionary benefits will have a more direct impact on employee satisfaction and company culture.

The top three most important discretionary benefits, in my opinion, are Employee Assistant Programs (EAPs), Disability and Life insurance, and retirement. Of these, the third to last benefit that I would eliminate is EAPs. Unlike some of the other benefits, this one directly impacts the wellbeing of the employee and tackles factors that may be negatively influencing their performance in the workplace. It focuses on the personal needs of each employee and creates actionable solutions and support for them, directly impacting their performance and wellbeing. The second to last benefit that I would eliminate is Disability and Life insurance; investing your limited funds into Disability and Life insurance will not only create a safe and open environment for employees, but it can also save you from potential lawsuits. Lastly, the most “important” discretionary benefit to me is retirement. Having a sufficient retirement plan is increasing in importance in recruiting and retaining employees and can also improve satisfaction in current employees. There are also many options to choose from that vary in cost, goal, and strategy.

The demographic composition of the company’s workforce would greatly impact the desired benefits package and adjust the overall priorities regarding compensation. Each employee has different values, priorities, and needs, so adapting your benefits package to suit the overall needs of your workforce is vital to effectively motivate, ensure satisfaction, and increase productivity. For example, employees with families have different needs than singles, and employees who are closer to retirement may care more about the specifics of the retirement plans. Additionally, those who work remotely may care less about transportation services and family assistance, but care more about EAPs and tuition reimbursement. Overall, it is important to match your benefits package to the needs and priorities of both the employees and the organization.

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Job-Based Pay or Person-Based Pay?

For Target, a large corporation with thousands of employees and a very structured and hierarchical job system, a job-based pay structure is likely the best move. While some aspects of the person-focused pay strategy could be beneficial for many layers of Target’s job structure, a job-based pay structure may be the easiest to implement company-wide and prove most effective.

According to this week’s lecture, job-based pay structures are based on both job performance and average market pay and are evaluated by thorough job analyses (Lecture: Contrasting Person-Focused Pay with Job-Based Pay). This strategy would work well for Target because it sets clear job expectations, guides promotion and raise conversations, and controls labor costs. By identifying benchmark jobs and clearly defining compensable factors and degree weights, Target would have clear expectations for each position and could streamline their compensation process. For such a large corporation with many varying levels within the organization, Target needs a well-established pay structure that is fair, transferrable, and cost-effective.

However, one aspect of the person-based structures that could potentially be beneficial for Target is incorporating skill-based pay bonuses and increases for additional certifications and skill acquisitions into their job-based pay structure. This could allow more opportunity and motivation for departmental cross-training for all store-level employees and allow store executives to develop their skills and learn new specialties. These changes could have a positive effect on company-wide motivation, help link pay to performance, and overall add value to how they compensate their employees. However, adopting a full skill-based pay structure would not be ideal for Target due to the increase in costs, potential for bias, and employee resentment (Lecture: Person-Focused Structures). While this is not a traditional combination of pay strategies, some aspects of the person-based pay strategy could be a useful addition to a traditional job-based pay strategy for Target and many other companies in a similar position.

Overall, after assessing Target’s current pay strategy, organizational goals, and company culture, it is clear that a job-based pay strategy would be the most effective. Whether or not they should incorporate aspects of a skill-based structure is up for debate, but what Target needs is a pay structure that is clear-cut, expectation-based, and properly aligned with their job analysis.