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Determining how much to pay an
employee in terms of base salary is a decision with far-reaching impact.
Base salary strategy (paying more for salaries and less for benefits out
of a set payroll budget; or the reverse, paying more for benefits) is the
heart of benefit and compensation strategy and management. Most
organizations' benefit plans and coverage are affected by the salary level
decision. For example, Salary Reduction plans (125 cafeteria plans
reportable on Form 5500s) are benefit plans with which every benefit
consultant/agent works. It’s essential to shape these plans so individuals
can realize sufficient take-home pay. 401(k) and defined benefit plans
leverage off the salary decision. Most pension plans now utilize a "final
years' average" salary base to calculate benefits. Salary levels set the
values for a host of coverage options: group life, accidental death and
dismemberment, long-term disability, Workers’ Compensation, and short-term
disability are all tied directly to the salary levels paid to employees.
Organizations paying 20% more for salary skills in areas such as San Jose
or New York need to adjust potential benefits to match competitive
practices. Today's group insurance agent acts as a consultant to many of
his or her clients. Not understanding salary administration, the salary
decision, and the impact they have on benefit coverage cripples a
consultant's ability to serve clients. Not to mention that a lack of
understanding of salary administration and the salary level decision can
severely affect the internal management (staffing and payroll) of an
agent/consultant's own practice. |
