Are Compensation and Benefits Earned or Entitled?


When does a benefit earned become a benefit entitled? In many businesses, all employee benefits start as earned. That can include healthcare coverage, time off, annual increases, savings plan contributions, and bonuses, even work schedules.  

It appears that all of these are becoming an entitled benefit. For larger companies, healthcare is required. Smaller companies don’t have to provide healthcare, but it could be essential in recruiting and retaining employees – which becomes what some see as an entitlement. 

The cost of benefits is shouldered, for the most part, by the company. When there are increases in the cost share of these benefits it creates an undercurrent of discontent because the wages might not be staying up with the cost of living (interest rates, for example). The cost of providing benefits goes up anywhere from 8% to 16% per year, and when most companies’ cost share is at an 80-20% ratio there has to be at least a little pain with the cost share. 

The increases in benefit costs mostly come from incidents for which the employees have filed claims. Additionally, medical providers consider the demographics of the program participants and increase costs based on the potential for more claims. 

Most employees don’t appreciate the expense that a company goes through unless they understand what the company is providing in dollars and cents – often hundreds of thousands of dollars. For example, after recently working with a small business, it was determined that the employees had an 85-15% cost share with healthcare expenses. But after looking at the total benefit that they were getting including healthcare, savings contributions, etc., it went from an employee share of 15% to 9%.  Some employees don’t care about that and will always expect that the business will provide this benefit, which in most cases is very true. But it may not need to be at the cost share they are currently getting.

Wage increases are another area. Employees feel they are entitled to an automatic annual increase whether it is called a cost-of-living or merit increase. Just because you show up for work doesn’t mean that you deserve to have a wage increase.  There are a lot of factors that should go into this process, including where your salary stands within the business and the market competition. Also, your overall performance should be the final determination as to any increase. Without completing a performance review to let people know where they stand, it would be hard to differentiate between individuals. 

Over the years, a performance review has changed from a technical evaluation of overall performance to more of a behavior review. Why look at behavior? It’s easy – someone could be the best technical person around but if they can’t communicate, be a team player, or simply get along with people, their technical skills don’t matter. It took many years to convert from the technical side mainly because we were in the engineering world where technology was king, and we thought we needed those technical experts to design products. But when there were no repeat clients and discontent within the rank-and-file, we decided to “change the people or change the people” who wouldn’t or couldn’t change. 

Bonus payments are similar. When they occur year after year, it becomes expected.  Interestingly, if you could ask all the employees in that environment what and why they were paid the amount or even if they know why they were included, the majority will say they didn’t know and didn’t care. People need to know to some extent why bonuses are paid and what are some of the factors behind it so that the company gets full advantage of giving a bonus. In most cases, bonuses are determined by the profitability of the business and individual performance. Some businesses don’t like transparency and I agree that not all facts about performance must be disclosed. But consider a program outline that states parameters for bonuses – perhaps the company must reach at least 80% of goals including financial, safety, growth, etc., for there to be a payout. This program is completely discretional and can be stopped or changed at any time by the company.

Using an effective performance management program that defines and shows what you get and why you get it is essential to make a difference with individuals. You won’t change everyone, but you should focus on the ones that “get it” and it in turn will make a difference in the overall business.

The entitlement even gets to the level of time off. It is not so much the amount of time off people get, since that is set by policies. The entitlement comes from the company’s accommodating time off without proper notice. Some people say, “It’s my time and I should be able to use it as I want to.” This is true, but a company shouldn’t put itself into positions where someone gets time off with little or no notice. Then the company has to move people around to accommodate an employee’s wish and still get the product out the door. There will always be situations that arise, but when this becomes the norm it must be addressed.

There is an exception to every situation. But by having policies and procedures in place that include performance management, you should maintain the earned mentality of the workforce.  Saying “NO” on occasion won’t create a poor working environment.