NON-MONETARY EMPLOYMENT INCENTIVES

January 28, 2008
Written by Aina DeViet
A paycheque is only one ingredient in the total workplace rewards package that employees value.

Last month, this column talked about monetary incentive plans and some of the variables to keep in mind when developing an effective incentive pay plan. While compensation is obviously important to employees, it’s a fact that pay – both fixed and variable – is only one part of ‘total rewards’ people consider when assessing a job opportunity.  

Where does compensation rank relative to other factors? What other things do people consider important? A recent Deloitte paper cites a study that identified the top five job-satisfaction factors according to what employees identify as important. Included are:

1) Benefits.

2) Compensation.

3) Work/life balance.

4) Job security.

5) Feeling safe in the work environment.

There are many different types of benefits, but identifying which ones to offer employees can be challenging since you’ll need to consider:

• What benefits would employees value?

• What is the competition is offering? Increasingly, benefits are being offered to the part-time workforce.

• What can we afford? What are potential tax implications?

When designing benefits packages, some of the following are commonly considered:

(i) Health insurance including medical and dental coverage.

(ii) Life insurance and disability insurance.

(iii) Group retirement plans (e.g., registered plans such a RRSP/RPP are tax deferred).

(iv) Sick days, vacation time.

In addition to the “benefit aspect,” offering these benefits may represent a potential tax windfall to employees – some of these benefits may be non-taxable to the employee (e.g., certain forms of medical and dental coverage) or the benefit is not immediately taxable to the employee (e.g., group RRSP/RPP) and the cost of offering the benefit is a deductible expense to the employer.
Some employers reward employees and teams who’ve gone ‘above and beyond’ or exceeded certain targets with a variety of rewards. For example:

• Gifts.

• Prizes or awards related to sales or other work performance.

• Trophy/plaque.

• Seasonal celebrations.

• Celebrations to mark achievement of particular goals / objectives such as the end of a project, season or sales campaign.

From an income tax perspective, CRA has indicated it will not seek to tax the recipients of these “rewards” where the fair value, when measured by objective standards, is nominal (i.e., as in the case of a small gift or trophy, or end of season celebration costing less than $100 per employee participant). If there is doubt as to whether a “reward” is of nominal value, it is always prudent to consult with your professional advisor to confirm the tax treatment to both the employee and employer.

Job security is also mentioned above as one of ‘top five’ factors considered by employees. The days when people had a “job for life” are long gone, but employers can help ensure key employees feel valued by ensuring their skills are up to date.

Offering an ‘education benefit’ program for management or technical courses directly related to some aspect of an employee’s position, either through a forgivable loan or paying tuition fees in full or in part, will provide benefits to both employers and employees. Because there are a number of variables which will affect the level and timing of employee taxation, if any, you should consult with your professional advisor when structuring an ‘education benefit’ program.

When assessing changes to the compensation package you offer your employees, think about ‘total rewards’ and design a comprehensive compensation package that integrates the key variables mentioned in this series.

• Make them consistent with your business strategy, values and the results you want to achieve – reward what is important. Companies that align behaviour and goals tend to be more successful than those that do not.

• Ask employees what they want. Tools like Deloitte’s Rewards Dialogue can help keep employers informed about employees’ expectations/changing preferences and external factors.
With reward expenditures for many firms approaching 40 per cent of their revenues, it important to start looking at rewards as an investment in your business, rather than a cost to your business.

Aina DeViet is with Deloitte’s Southwestern Ontario Consulting practice. • 519-640-4653, This e-mail address is being protected from spambots. You need JavaScript enabled to view it

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