Discretionary Benefits

Human resource practitioners are aware that motivation of their manpower leads to increased productivity, increased loyalty to the organization, effective recruitment and reduced labor turnover. To get these desirable qualities in workers, employers have realized that they need to go an extra mile and provide discretionary benefits. These are additional benefits, not legally required, that are given by employers. In spite of not being a legal requirement, the government provides regulation for the provision of some voluntary benefits such as leave, group health coverage, and retirement savings among others. The regulation is meant to ensure fairness, non-discrimination and continuation of benefits (Pynes, 2007).

A vast majority of employers provide the 'payment for time not worked' benefits. These include paid vacations, paid holidays, sick leave etc. The mode for providing paid vacations depends on the industry in which one works. For one to qualify for a paid vacation of three, four or five weeks, one might need to work for about seven, fifteen and twenty years respectively. All American employees are entitled to a minimum of ten days off for holidays. These include internationally celebrated days such as Christmas Day, New Year's Day, Labor Day, Memorial Day, Independence Day and the like. Most employers even add an extra day or two after such holidays for employees to spend at their discretion. Such holidays are counted as normal working days.

Employers provide payment during periods of absence due to illness. Both private and public sector companies set apart a number of days as sick leave for each employee. Where such days are not used, they accumulate and can be used to cover prolonged absences. Some employers even provide group insurance as income protection during a long term disability. Maternity leave is also provided under this category. Another vital income that is not earned is severance package. This is a one-time payment given to employees who are being terminated. The amount paid depends on factors such as the reason for termination, pay grade of the employee, number of years worked etc. Employers that are downsizing use this payment to lessen the effects of termination and maintain a positive public image of the company.  

Pensions provide retired and physically disabled people with income for the rest of their lives. In the public sector, pensions are provided according to the different classes of workers. Teachers, firefighters and police have separate pension plans from the general employees. Police and firefighters can retire at a younger age than others with full benefits. Pension plans could be contributed by the employer alone or by a contribution by both the employer and employee. The pensions of nonprofit and private sector employees are safeguarded by the Employee Retirement Income Security Act of 1974(ERISA). The act sets minimum standards to be employed to ensure that the pension scheme is financially sound. The pension scheme should ensure that the employee's lifestyle will not change materially after retiring.  

A number of employers are also providing insurance to their workers. The main forms of insurance provided include health insurance, life insurance and long-term care insurance. The number of people without health insurance rose to forty six million in 2007(DeNavas-Walt, Proctor, & Smith, 2008). The cost of health care is said to have increased twice as fast as the employee wage rate. This only makes it fair for employers to chip in and help in health care benefits. Majority of public sector employers grant retirement health benefits. This was traditionally a preserve for the highly ranked employees but the trend has changed. Mental health care is highly emphasized so as to encourage more people to seek mental treatment. The Mental Health Parity Act of 1996 provides that health insurance plans should treat mental disorders as the physical illnesses are treated. The group insurance plans should also cater for mental illness.

Changing demographics and needs of the community has led to the emergence of new trends in provision of domestic partnership benefits. This means extension of discretionary benefits to unmarried heterosexual or gay couples. This is aimed at making the employees feel respected, recognized and to gain trust in the organization. To qualify for the benefits, the couple must be living together and be jointly responsible for each others welfare.

Employees face a lot marital conflict, drug related problems, stress and other issues that could significantly reduce their productivity and lower their morale. To avert such a problem, organizations have come up with employee assistance programs that mainly offer guidance and counseling to their employees and their families. It is not uncommon to find alcohol support groups in organizations.  Employers require drug testing for many employment positions. This is in line with the Drug Free Workplace Act of 1988 which requires that all federal employees and non profit organizations that receive above twenty five thousand dollars should maintain a drug free workplace or face suspension and sanctions from the government (Bohlander & Snell, 2009).

Organizations have considered the changing family structures and their needs and have come up with very flexible work policies. These include the provision of part time jobs, work at home opportunities, voluntary shifts and job sharing. This has helped to give staff adequate time with their families thus motivating them. During harsh economic times when layoffs are unavoidable, organizations play a vital role by helping employees to develop resumes, giving skill and aptitude tests and referring them to employment agencies.

As a result of the numerous discretionary benefits, employees face really huge costs. According to a 2007 United States Chamber of Commerce study, the cost of employees averaged 42.7 percent of the total payroll. The average distribution of the benefits was $21527 per employee per year. This has forced employers to adopt certain measures to control this huge figure. When the persistent rise in employee discretionary benefits was noted in the eighties, most employers began capping the fund in order to control costs. Fund capping is a technique whereby employees are asked to collectively choose the benefits that are most important to them within a specified monetary allowance. This method stresses shared responsibility and employee accountability. The benefits they choose will be adequately provided for by the employer.

Another popular method for reducing cost of discretionary benefits is through sharing of the cost between the employer and the employee. This could be done through copayments or having higher deductibles. As a result of this method, the employee contribution for their medical care went up by seventy percent from the period between 2000 and 2006. The contributory pension plans or 401k as they are popularly known is a cost- saving technique for employees. The plan requires employees to contribute the larger share of their pension. According to the 401k pension plan, employees have the choice to deposit a sum of money in their pension fund and have it exempted from income tax until the time of withdrawal. The employer is expected to match the sum as that made by the employee by fifty cents for each dollar (Condrey, 2010).

The fund capping and personal responsibility techniques have been criticized in many instances since employees are put at a greater risk of benefit payouts. Most employees are wary of the pension scheme and live in fear that they might not get their pensions. Most employees are also not financially capable making investment decisions regarding their future pension as is expected in the 401k pension plan.