Retiree and Employee Benefits

Surname 1 Executive Summary Retiree and employee benefits were not considered as an important compensation for a good number of employees until mid-20th century. The percentages of these benefits in relation to total payroll figures vary from one country to another. Developing countries are leading the pack of those economies offering a generous compensation to their employees and retirees with their compatriots, the third world countries, not doing well. With the financial uncertainty crippling the world, most companies are aiming to cut down their costs and the immediate casualty program is the employee and retiree benefits scheme. It is apparent to mention upfront that employee benefit plans greatly affect the operations of a company. Therefore, a company seeking to attract and retain employees needs to be sensitive on how it handles the benefits issue.

This paper seeks to critique management decisions to do with the reduction of retiree and employee benefits.

Surname 2 The Basis for Management Decisions to Cut Retiree and Employee Benefits Introduction Retirement and employee benefits are highly valued in the 21st century. In the contemporary society, benefits are administered and advanced by institutions i.e. big organizations and governments. Often, there are institutions established with a specific purpose to monitor the benefits of employees and retirees. Benefit plan is a common term used to describe the earnings extended to employees, often referred to as a last salary plan for a retiree.

The term postulates that the benefits advanced are catering for the man-hours used by an employee in a firm. Traditionally, the benefit plan reflects the accrued amount extended to individual employees as a pension i.e. on monthly basis. Many scholars have advanced different definitions of the term benefit. A benefit is a monetary compensation extended to an employee after duly completing his engagement with an institution (Chorafas 119). The plan often factors in the initial pay of the employee, number of years in service and his/her retirement age.

Employee benefits are often indirect rewards advanced by employers to their workers/employees as a gesture of a sound employment relation. Often, the compensation is used to attract and retain employees. Employees tend to move to firms that show much concern to their welfare, their after employment future included. On the other hand, employers seek to maximize their profitability and stay ahead of their competitors. To achieve this, they need the best employees who can deliver at all levels and the only way to attract those types of employees is to display a sense of concern i.e. in their welfare. Traditionally, firms could only extend lucrative salaries to employees but that has changed with the coming into being of the generation Y employee. Generation Y employee is the 21st century worker who wears flip-flops to work.

They are keen to not only making positive changes in a company position they occupy but also to leave a mark in their life. To do this, their welfare comes first in any quest of success. Treat them well and you will be certain of good results in a firm. However, most employees are keen to balance between the demands of these employees and those of company stakeholders. A firm has a lot of individuals to satisfy and regulations to meet in the course of its operations. Failure to meet the least requirements of a stakeholder may dent the image of a company in a bad manner. To satisfy these costs without jeopardizing its quest for increased revenues, a firm opts for tactful measures. These measures include the slashing of benefits advanced to retirees or employees. Firms often back their actions on prevailing economic downturns. This often cushions them from trade unions’ wrath although only in the short run. From the aforementioned, it is evident that the issue is a delicate balance that can cost the firm performance and reputation in the future (Yamamoto 297).

Cutthroat competition between employers in their search for the right employees is evident in the 21st century. To beat other firms, a company needs to advance not only a good pay i.e. salary but also a competitive benefit plan. The 21st century employee is keen be absorbed by a company that has well packaged benefits program for its workers. Since time immemorial, employees have been exposed to a good number of lessons and have come up to age to learn the importance of a sound benefit scheme. Firms that seek to cut down employee/ retiree benefits are disadvantaged as most employees expect generous advancement from their employers. In addition, being accustomed to the need for a good benefit scheme makes employees expect nothing less than a generous program.

Firms worldwide have adopted employee and retiree benefit programs, but these benefits enjoyed then to vary from one country to another. The differences in the levels of advanced benefits vary in terms of the economic state of a given country i.e. a developed and a developing

Surname 3 country schemes differ in a large manner. Employees in developed economies tend to enjoy generous programs compared to their colleagues in developing countries. This is simply because of the ability of their firms to harness more in terms of revenue than a firm in a developing economy is. However, a number of scholars challenge the above assertion. Employee benefit programs vary greatly between firms in developed countries. This implies that employers compensate employees differently i.e. in relation to industry or the prevailing market conditions.

All firms are keen to reduce company cost at all times and benefits schemes as a necessary evil need to be contained. Most industries that to thrive in most of the times i.e. even during times of recessions are able to be consistent in availing a competitive pension program to its employees. However, apart from nature of an industry, other factors contribute to benefit program variation. First, the level of government intervention in the operation of a company dictates the amounts advanced to a scheme. A government policy may be strict or lenient depending on countries. Strict governments may dictate the level of benefits advanced to employees either directly or indirectly. Direct involvement is evident in a case where the government passes legislations that seek to postulate the amount in percentages a firm needs to advance to its benefit program. On the other hand, indirect effect of government operatives are experienced when the government benefit scheme program is used as a bench mark by other firms i.e. those in the private sector.

Governments have often been accused of being insensitive to the plight of their workers.

However, some governments are doing remarkably well in rewarding their retirees by running generous benefit schemes. Countries using government benefit schemes as a benchmark either have superseded expectations or are lacking behind in term of generosity. For example, in a country where the government schemes are low, other companies tend to extend low benefits to their employees, although slightly above the government figures. On the other hand, governments that reward their workers well have set a bar to other players in the economy who have replicated the same in their employee/retiree reward schemes (Bovbjerg 23).

Trade unions have played a significant role in containing employee/retiree exploitation. A trade union is a body responsible in checking the interests of workers. The body often represents employees (their members) in negotiations with employers i.e. in matters pertaining salaries and remuneration, workers safety and other issues touching on the welfare of their members. The body has been dynamic in the 21st century as employees are realizing the need to bargain for their needs in one voice. Trade unions lambast insensitive benefit programs and their voices have shaped both the retiree and employee benefit schemes. Workers under the umbrella of a radical and dynamic trade union are well protected from employer exploitation. In addition, they are enjoying generous reward and benefit schemes. On the other hand, workers not covered for by a trade union often survive at the mercy of employers and as a result, they are often exploited.

Apart from bargaining for improved salary and benefit programs, trade unions advocate for vocational days. Companies are established with the sole aim of making profits and increase revenues by minimizing costs. One of the way of minimizing costs is to use available resources i.e. employees fully. This has seen most firms expose their workers to long working hours without necessarily increasing their salaries. Therefore, workers unions come in handy in such situations to ensure that enough workers are employed to meet the demands of the firm and to minimize exploitation of existing workers (Reilly 86).

Lowering firm Costs Retirement benefit programs are on the rise in the contemporary business world. Most companies are employing the programs to check and reduce their costs of operations. There are a

Surname 4 number of reasons behind this move. First, senior long serving employees are seen as liabilities rather than assets to a firm. This to some extent is true. Employees with decades of existence in a company are making a kill when it comes to the figures in their pay slips when compared to the younger employees. In trying to cut down on costs, firms look to employ young and dynamic people to replace the long serving employees. The younger employees’ salary scale will be lower than that of a long serving worker. Having done a cost benefit analysis, the replacement of a decade or so serving employee with a younger employee is feasible as the company is better placed to reduce the level of salary extended to those fellows. In such a situation, a retirement benefit program comes in handy. Senior employees are enticed to relinquish their positions by offering them a generous benefit of retirement. Another reason behind the adoption of retirement programs by firms is to address the firm overstaffing issues. Employees are advised to retire early to enjoy sound and lucrative benefit plans. Experts view the two issues as critical undertakings that can help a company bring down its costs in the short run. However, the issues have negative effects to a firm that can attract critique from both the government and workers’ representatives. For instance, the replacement of senior employees by young workers may dent company image. Long serving employees are well versed with the firm than their new colleagues and firms have an advantage in utilizing their expertise. The non-monetary benefits to be accrued by a firm by engaging the skills of long serving members is more than the monetary benefits realized by the firm by cutting down on costs. Address the issue of overstaffing using the benefits program is a good initiative that saves company millions of shillings that could otherwise be used for other productive purposes. However, increase in employees must have been in line with the need for a company to increase its production and meet the consumer demands. Reduction of manpower using costs as a disguise may disadvantage a firm in the long run. Before a firm adopts the radical surgery on its human resource, it is important that the benefits brought by an employee be weighted with the costs. This will cushion a firm from insensitive actions that may otherwise bring it down or compromise its productivity (Reilly 632).

Reduced Layoffs Retiree and employee benefit scheme is a sound humanly method used to send home workers voluntarily. Workers are humans and any advanced program should look to protect their basic rights. Traditionally, the fate of workers rested with the firms’ management. For example, the management was responsible for the hiring and firing of employees i.e. without notice. Many workers were relieved off their duties without any serious course. When management saw it fit to fire an employee, it could do so without advancing any rewards to the affected party. The coming into force of benefit programs in the modern society has helped contain reckless dismissals. This is because firms are responsible for the plight of their workers and any action undertaken has a grave effect to the firm. The advancement of voluntary retirement program has been hailed as a prudent mode of sending off employees. This is because an employee is given a chance to leave a position rather than facing a sack. In addition, the program alleviates insensitive firings and forced layoffs, methods that were employed prior to the formulation of sound retirement packages. Mass firings are expensive to a company (Reilly 341). In addition, no management is willing to loose skilled and competent employees through an inhumane manner. This is because a firm might need to recall the same employees in the future to help clean up company messes.

Moreover, the retirement program seeks to contain the pain brought about by radical company surgery by extending a program to those senior employees or other workers keen on leaving a company for their private projects of even other greener pastures. Rewarding employees well through voluntary benefit packages boasts the company ability to retain competent employees as

Surname 5 no prudent manager dreams of losing a delivering workforce. Therefore, cutting down the benefits funds to solve short term hitches is insensitive and an action that will curtail the achievements of a firm in the future.

Employee Morale Firms exist with the sole aim of making profits. To make profits firms need to lay down sound policies that align to the objectives of a company. In addition, a firm needs to attract and retain workers who are able to push for the achievement of a firm’s objective. To achieve that, a company needs to hype the morale of its employees to ensure that they all stay on course.

Workers with high morale are able to deliver to the most of the abilities. There are of ways a firm can improve the morale of employees. First, a company needs to advance a sound organizational culture. With a sound culture, employees are able to relate well with their colleagues at all levels. In addition, the relationship between employees and consumers will be enhanced.

Another important aspect of improving the morale of employees is offering a voluntary retirement scheme. From experience, firms which involuntary lay off employees or fire them face acute problems in dealing with those left behind who often see themselves as immediate casualties in the future. Workers are left in a world of uncertainty during such times and their morale negatively affected. Generous retirement benefits to those who voluntary leave the firm help boost the morale of the remaining employees who will strive to achieve their best without fearing the future. The advancement of a sound voluntary retirement and compensation plan helps contain employee uncertainties relating to their future. In addition, given the exiting employees are offered generous benefits, the remaining employees will appreciate the nice gesture advanced by the company and may extend their stay with the company that they view as sensitive to their welfare (Rosenbloom 106). Moreover, they may tend to shelve their ambitions of searching greener pastures in other firms that may otherwise be competitors of their employer.

Advancing cuts to worker benefits is an insensitive move that may otherwise negatively affect employee morale. Therefore, firms that are seeking so psyche up their employees need to consider sound measures that are rewarding to the firm in both the short and the long term.

Conclusion Retiree and employee benefits are arguably the largest compensation employees receive and benefit from after offering unrelenting service to an institution. Cutting down benefits to benefit a firm is insensitive as it deprives off the employee of his reward for offering unmatched service to a company. Despite there being reasons that warrant the benefits cuts, it is prudent to weigh them together with associated costs. Global financial crisis brought most firms to their knees. Likewise, the employees equally faced the wrath of the downturn. Therefore, employing the issue to punish employees and retirees is insensitive as they spend a lot of energy improving the standing of a firm in the past that warrant them a fair treatment by their employees.

Governments and trade unions need to be applauded for their role in defending retiree and employee schemes. From the discussion, it is evident that employers are profit-oriented individuals and will go to any length to protect their interest. The aforementioned is not limited to the reduction of employee benefits. That is acceptable to any profit oriented body that it seeks to increase its profitability by cutting down costs through the reduction of benefits accrued by employees.

Firms are the immediate casualties of policies. Given that the benefit program is intertwined to employee morale, any negative policy will ruin the firms’ relationships with its employees. Cutting down the employee benefits equals cutting down the profitability of a company. This is because employees tend to observe the sensitivity of a company to their plight

Surname 6 and overall welfare. Therefore, companies that are seeking to cut down the benefits accrued by the retirees and employees need to relook into their move to curb losses associated with those policies. Finally, worker bodies need to be proactive in containing such initiatives to deprive employees off their deserved benefits. On the other hand, governments need to harmonize the benefits extended to employees by their employers. This will prevent the exploitation of citizens and ensure that each employee equally benefits and is not discriminated, courtesy of his/her country of origin or even the industry. Finally, companies that have advanced generous reward programs to their employees and retirees have been able to attract and retain competent employees. This has helped them stay ahead of their competitors. In addition, they have continually boosted the morale of their workers.

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Reilly, David. Employee benefits and executive compensation. New York, NY: Kluwer Law International, 2010.

Rosenbloom, Jerry. The handbook of employee benefits: Design, funding, and administration.

New York, NY: McGraw-Hill Professional, 2001.

Yamamoto, H. Dale. Fundamentals of retiree group benefits. Winsted, CT: ACTEX Publications, 2006.