The document discusses strategies for managing employee compensation and benefits during an economic downturn. It recommends reviewing all aspects of the total rewards package, including base pay, incentives, health insurance, retirement benefits, and time off. Employers should evaluate how their benefits compare to market standards and communicate the total value of the rewards package to employees.

2. Severance: 2009 According to About.com, the typical severance package is two weeks for every year of service. Some executive level packages are 3- 9 months, but have taken a hit with the recent negative publicity for top execs. My experience says these numbers are actually high and that the typical package is two weeks + a week for every year of service. Execs will get two to four months unless they have a signed agreement. First Things First The task of reviewing a company reward system seems daunting at best. There are a lot of moving pieces, but it can be done in a systematic way. The best way is to start is to look at the distinct elements of your total reward system. Base Pay A simple way to look at base pay is to determine how many distinct job titles you have in your company. For each title you should have a corresponding job description or at least of list of corresponding competencies and responsibilities. The job content allows you to compare your job title and the content of your job with positions out in the market. You can usually find free salary statistics from your state department of labor and there are many online salary survey companies that charge by the job or block of jobs. Do a quick comparison of your incumbents against the public and private salary data. This will give you a good picture of your base pay in the competitive landscape. Are your folks at the high, mid or low end of the data? Knowing this data will allow you to make a good case for where your people are paid in the market. Your base pay may be lower, but this is justified if you offer higher end health insurance. Incentive/Bonus Pay This is a good time to tie incentives to productive and tangible results. Too many incentive programs have evolved into entitlements that are paid to people for doing their jobs. Incentives should be paid for specific and measurable returns to the company. Disconnect bonus or incentive pay for jobs that cannot produce tangible returns. Your receptionist, facilities manager or accountants are probably not in a position to increase revenue or even increase prospects for higher revenue so why would you pay them a bonus. Re-justify your bonus programs based on the company’s need to increase sales, revenue and profits. Health Insurance Let me give you a formula for success on this one. 60% of premiums are paid by the company and 40% are paid by the employees. If you are not at this level yet, you should move in this direction. The 60/40 rule still makes the company primary payer of the premiums. This also makes the employee a major stakeholder in the insurance scheme – they will respond to approaches and recommendations that lower or contain medical and dental costs. The government will soon become more directly involved in the management of healthcare and the conservative 60/40 rule puts you in a good position to respond to the new legislation once it is approved and implemented. If you work with a broker, this is a great time to “turn up the volume” and have them negotiate aggressively on your behalf. Make sure that their negotiations with the carriers are transparent to you. Disability Insurance In my view, highly paid employees and executives have “shot themselves in the foot on these plans”. As costs have risen, the decision makers have allowed the caps on these plans to exclude them from the plans. You have to ask yourself why? Typically STD and LTD pay a percentage of your pay to a stated cap. When you examine the caps – they frequently do not deliver the stated percentage to employees over certain salary levels. The actual cost is not typically high and yet the executives themselves have allowed this to happen. If your STD and LTD plan are supposed to cover 60% of salary – then make it cover that for all of your employees. This is not a great time to leave the higher paid employees exposed. Given that just about every benefit for highly paid employees is in question/under attack – this fundamental benefit should align and provide the same level of support for all employees. Direct and Supplemental Life Life insurance is a fairly low cost benefit and there should be some upside to providing this as an employer. There should be a good return for a group if you can pool your rates. This should be true for both direct insurance and supplemental insurance covered by employees. In this market, a fixed insurance amount such as 1X or 2 X salary makes the most sense. The incremental amounts beyond the basic coverage can be provided with the employee paying the cost of the premiums. Benefits Renewals for 2010? If you have been meaning to adjust your benefits cost sharing to reflect market trends – this may be the year. Employees are happy to be employed and most expect to see the nature of their benefits and pay modified. With increased rumors about changes in health care, company trends are to move cost sharing to the employee. Employers who have covered 70% or more of premiums for health insurance are moving fast to 60%. There is a rise of the high deductible HSA plan which drives a high level of consumer behavior from employees and makes them a partner in managing health care costs. The moves in both of these directions will be more dramatic in 2010. Total Rewards – Building the Program