Question 1
A deferred benefit retirement plan is one which involves the submission of contributions by the employer to a kitty set aside to benefit the employee upon retirement. This plan is an works by the logic of the employer holding back some of the earnings made by the employee and holding them in trust on their behalf. A traditional approach to the defined benefits plan is one where workers accrue a promise of monthly remuneration starting the day of their retirement up to their the date of their death. Some plans cover both the employee and their spouses and as such the remaining spouse gets compensated until his/her demise. The promised annual deferred compensation is calculated using the rubric of, the number of years the employee has served the organization, and their corresponding annual wages. A formula is then applied to these constants and the compensation due to the employee determined. The amount is commonly expressed as a percentage of the yearly annual wages the worker is credited with. Annual inflation might be factored in these calculations while most firms opt for the calculation of the average annual earnings over the period of years worked. This plan has advantages such as:
- Employers are under regulation against termination of benefits due to prohibitive taxing regimes
- Their pension is guaranteed even after insolvency of the sponsoring company by agencies monitoring pension benefits.
This system also has its drawbacks such as;
- The shift from the employer to the employee and there is no defined amount of money to be received at retirement.
- The plan is disadvantageous to the employer as it requires time and resources to manage
- Employees bear the inflation risk. In high inflation instances, the employee loses value on their pension.
The defined contribution pension plan is characterized by the employee’s accrual of funds in individual accounts administered by the plan sponsor. The benefit is not fixed as in the defined benefit plan. The contributions are an even percentage of the salary over the employment period rising to a consistent rise in benefits over time. This plan however is plagued by the disadvantage that the employee shoulders the risk of inflation. The employers on the hand are not comfortable with these plans as they are time consuming and difficult to plan.
The hybrid between the defined benefits and the defined contribution pension plans involves the provision of a guaranteed direct benefits payment coupled with a non guaranteed defined contributions amount. This method is the best shot at both the employer and employee perspective as these plans complement one another. The client for instance gets the chance to maximize on high potential DC plan with the as surety of a guaranteed DB plan.
Question 2
Legally required benefits are benefits required by law to be afforded to the workers these include.
- Social security
- Medicare
- Federal and State unemployment insurance which provides compensation to workers who lose job through no fault of their own.
The state and federal unemployment insurance was the most surprising to learn of its existence. It never occurred that a corporate organization would be forced to compensate an individual who lose their job through restructuring and downsizing as these are some of the most common they employ in sacking people.
This concept of rewarding people when they lose their jobs should be enforced as a statute with amendments proposing the reward of talent and skill in future for skilled and qualified individuals who cannot be absorbed by the system. This would help in motivation to pursue skills even without the guarantee of employment. This would ensure a steady supply of skilled labor over the generations
Question 3
Flexible work force constitutes of the modern worker who has to work nontraditional hours in order to balance professional obligations and personal issues such as affording their family time. The compensation of the flexible workforce has to be adjusted into a fitting pattern as their work schedule. Pay as per man hours expended can be a good method for this. The use of targets is another great way to evaluate the amount of work this workforce puts in and the appropriate remuneration required. After achieving a target for a specific time period, the worker can be considered to have earned a certain amount and so on.
References
Martocchio, J. J. (2001). Strategic compensation: A human resource management approach. Upper Saddle River, NJ: Prentice Hall.
