The goals of compensation and benefits planning

Posted on Posted in 401(k), Employee Benefits, Small Business, Tax Planning

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It occurred to me over this weekend that over more than three decades I’ve produced hundreds of recordings, articles,  columns and radio spots on various technical aspects of compensation and employee benefits planning, but that I’ve never talked about the basic primary goals that we all share in this work.

There are four primary goals of compensation and benefits planning:

  1. Control employer costs – Wages and benefits are a huge cost of doing business. The goal is to maximize production per unit of labor. We want to avoid having costs dictated by insurance companies, government or other factors outside of our control. Much of our success in this area will be determined at the outset by the way we design this part of the business.
  2.  Reduce taxes – Compensation arrangements and employee benefits design have always been primarily driven by income tax considerations.
  3. Maximize government benefits – This goal is politically sensitive but small business employers, in particular, know that it is important to maximize the benefits government offers through Medicare, Medicaid, Social Security, unemployment compensation, worker’s compensation and tax credit programs.
  4. Stretch employe paychecks and increase employee satisfaction – This is arguably the most important goal. We know that the working class is financially squeezed by rising taxes, health care costs and cost of living that outpace wage growth. This means that it is important to do more with less dollars. Without employee appreciation from the workers, a business is basically paying for it own bad PR and employee backlash. Employee education and access to high quality personal assistance on demand are the keys to achieving this goal.

I would welcome a discussion on how your firm handles these goals and what room is left for improvement.

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