Design Tips

Motivation of Benefits (Benefit Tips ® - © 2001)

An effective compensation program attracts new staff, retains productive staff and motivates behavior that achieves corporate objectives.

Components of compensation include base pay, variable pay (dependent upon achieving specific results), work environment, career development, health benefits (medical & dental), income replacement benefits (death, disability, retirement) and stock purchase plans/options.

The motivational effects of compensation components are dependent on many factors including the employee’s age, gender, dependent status, occupation and tenure.

For more information on this check out a report titled “Key Findings from Business, People and Rewards”, recently published by The Economist Intelligence Unit of The Economist Group and written in co-operation with Towers Perrin.

The report shows how employee within age ranges respond to various aspects of compensation differently. The motivators for high job performance are compared to motivators for commitment to stay with the employer.

The ideal compensation program is flexible and empowers employees to modify their compensation structure over time to satisfy their changing personal needs.

Initial Benefit Plan Design (Benefit Tips ® - © 2001)

Companies introducing an employee benefit program today often reject the traditional plan design of previous decades in favour of one that addresses current issues.

The following plan design balances the need for income security with flexibility and stable costs.

Medical and Dental Spending Account

1% of earnings for every year of service ($100 minimum and $250 maximum per month) deposited to a Health Spending Account to reimburse employees for any expenses permitted by Revenue Canada.

Any expense that can be covered by a group medical and dental plan is reimbursed during the calendar year with contributions made during the prior or current calendar year.

This relieves the employer from the effects of health inflation and empowers employees to make personal health care decisions.

In some provinces catastrophic drug claims are paid by the provincial plan.

Cost = 3-5% of earnings.

Long-term Disability Insurance

Pays 67% of earnings to age 65 while totally or partially disability after 17 weeks of disability.

Relieves both employee and employer from concern over income replacement during a prolonged illness or injury.

Cost = 1-2% of earnings

Profit Sharing Plan

Deferred profit sharing with the employer matching (50-100% based on performance) employee's contribution to a structured group RRSP.

Employee contribution of up to:

  • 1% during the first year or participation
  • 2% during the second year
  • 3% during the third year
  • 4% during the fourth year
  • 5% after 4 years of participation.

Employees are encouraged to save for their retirement.

Employees benefit from positive performance.

Cost = up to 5% of earnings depending on participation and performance.