Non-Monetary Compensation

Non-Monetary Compensation and the Essentials of Developing a Total Compensation PolicyThey say cash is
king, but in today’s economy employees know that there is more to the story than cash alone. Today’s job
seekers and your employees have become more savvy about non-monetary compensation. And there is a
good reason they are paying attention to it. Good health insurance and a generous retirement plan benefits
are becoming more and more elusive. Employers who offer these non-cash rewards stand out among their
peers.

Non-Monetary Compensation and the

Essentials of Developing a Total Compensation
Policy
They say cash is king, but in today’s economy employees know that there is more to the story than
cash alone. Today’s job seekers and your employees have become more savvy about non-monetary
compensation. And there is a good reason they are paying attention to it.

Good health insurance and a generous retirement plan benefits are becoming more and more elusive.
Employers who offer these non-cash rewards stand out among their peers.

The Value of Non-Monetary Compensation

Non-monetary compensation can equal 20-60% of the value of the cash compensation that an employee
receives. For the current job seeker, starting salaries have barely increased, frozen or actually dropped. So,
finding non-monetary benefits in an offer can be essential when an employee evaluates it. These added
perks can sweeten (and seal) the deal.

Types of Non-Monetary Compensation

Non-monetary compensation can include many different elements – from free coffee to a company
picnic or discounted parking. Most frequently, though, it refers to the value of more traditional
benefits. These benefits can include the mandatory benefits such as Social Security and Medicare,
unemployment and worker’s compensation. These are the items that 95% of employers in the United
States must provide. However, it also can include the voluntary benefits such as health, dental and
vision insurance. And, it usually includes some type of retirement plan, as well.

One reason employees place a high value on the non-cash compensation parts of a total
compensation package is because they can greatly reduce household expenses. For example, getting
an employer’s help with health insurance premiums can save a family many hundreds of dollars a
month, not to mention savings from the better medical coverage likely provided by a group plan.

Beyond the employee getting material value from their benefits, there are non-material perks, as
well. Companies who offer benefits, such as a rich retirement plan, send a message that they value
their employees and want to promote long-term relationships with their employees. These employers
are becoming more and more sought after. Workers are looking for those organizations that invest in
their employees and want to provide a fair wage, and a fair benefits package. Savvy workers will
wait to work for a company that offers a total compensation package rather than work for a one that
provides high pay with little in the way of benefits.

The Benefits of a Non-Monetary Compensation Plan for Employers

As an employer, there are many different reasons to look at increasing the value of the non-monetary
elements of your total compensation package. First, more employees are asking companies to
provide good benefits. Second, the government offers companies many tax incentives for certain
types of benefits offered to employees. For example, when employers offer tax-deferred benefits,
such as retirement accounts or Section 125 flexible benefit plans, the employees and the employers
save taxes on the amount that the employee defers. Often times the tax savings to the organization
can offset or greatly reduce the cost of administering the plan.

Finally, offering benefits can help to increase retention among your employees. When you give
employees more cash per paycheck the reward is immediate but short-lived. When you give
employees a match in their retirement plan with a vesting schedule which only gives employees the
full value of that contribution after a few years, you increase the likelihood that employees will stay
with you. This investment can mean savings for you, as an employer, because of lower employee
turnover and a more experienced, committed workforce.

Non-Monetary Compensation Attracts Top Talent

Taking this one step further, many top performers are looking for an organization that goes even
further than just cash compensation and basic benefits. They’re looking for flexible work schedule,
employee training or education benefits, and well-trained managers to work for. These elements are
often even more important than the traditional “what do I get when I work for you” benefits. The
value of a well-trained manager who has an excellent reputation for helping individuals reach their
full potential and increase their likelihood for promotion can be invaluable to employees. Often
employees will stay with an organization or take less money to work for the right people at the right
place.

If you’re looking to stay at the top of your industry by nabbing top talent, it’s important to think
about non-monetary compensation in the context of what you offer to your employees in all areas of
their career and quality of life. In these tough economic times – where it’s hard to give more money
or richer benefits – you can win the war for talent by playing up the strengths that you have as an
organization or figuring out what you can offer that will be unique and valued in the market.

Consider All of Your Non-Monetary Compensation Options

There are a host of benefits that companies can offer to attract and retain top talent. Here is a list of a
few for you to consider.

 Flex-time schedules
 On-site childcare
 Free or discounted parking
 Free or discounted food and drinks
 Gym membership discounts
 In-office massage or yoga
 Casual Fridays
 Mentoring programs for career advancement
 Free or discounted educational and training opportunities
 Work opportunities in multiple locations
 Cross-training in other areas of the business
  Annual or quarterly company parties

Differences Between Monetary and Non-

Monetary Incentives
Money doesn't grow on trees, but you're thinking about extending a branch from your desk. It could
“grow” from there, in the form of monetary and non-monetary incentives to your employees. As a
small-business owner, you well know: No matter how driven an employee is, there's nothing like an
incentive to light the fire of motivation. Incentives can improve employee morale and bolster
productivity, leading to improved customer service, efficiency, sales and profits.

If you're new to the concept of incentives, what you may not know is that there's a difference
between monetary and non-monetary incentives. They obviously differ in form, but they also differ
in how they're perceived by employees. These differences are worth considering before you put a
pair of hedge clippers next to your desk.

Learn About Monetary Incentives

If you want to get technical about it, as human resource professionals are prone to do, monetary
incentives are designed to reward employees for outstanding job performance or longevity.

As its name implies, a monetary incentive has an explicit monetary value; an employee knows
exactly what one is worth. In addition to cold, hard cash, monetary rewards can take the form of:

 Bonuses.* Commissions.
 Merit pay.
 Profit sharing.
 Stock options.
 Vacation time (beyond an employee's normal paid time).

Learn About Non-Monetary Incentives

Non-monetary incentives are designed to recognize a special achievement or the completion of

something that enhances an employee's job performance or value to a company. Such a meritorious
category might include the attainment of a sales goal, the culmination of a special research project or
graduation from a training program that leads to a desirable certification.

A non-monetary incentive does not take the form of cold, hard cash, but this doesn't mean an
employee cannot discern its monetary value. Some traditional favorites among employers include:

 Healthcare benefits.
 Life insurance.
 Promotion.
 Vehicle or vehicle allowance.

Expand Upon Traditional Non-Monetary Incentives

If you're considering using non-monetary incentives as a motivational tool, it's fair to say that they're
limited only by your imagination, and maybe the needs or wants of your employees.
If you're looking for ideas, employers are known to turn to non-cash incentives such as:

 Charitable donations made in an employee's name.* Concert tickets.

 Gift cards.
 Luxury gifts, such as designer clothing, watches and laptops.* Vacation packages, including airfare
and accommodations.

Study Reveals Strong Preference

Despite the differences, there are no hard-and-fast rules governing the use of monetary and non-
monetary incentives. In other words, who's to say that you can't write a bonus check to an employee
who just finished an intensive training program? Or that you shouldn't surprise an employee
celebrating his 10th anniversary with your company by gifting him a weekend getaway package?

You're the boss, so it's up to you to decide how best to incentivize your employees. However, if
you're interested in knowing how other business owners are lining up on the topic, then you might
cast your lot with non-cash incentives. Between 1996 and 2016, the number of businesses that rely
on non-cash rewards increased from 26 percent to 84 percent, according to The Incentive Research
Foundation.

How does the foundation explain such a dramatic increase? Two possible influences in the world of
work may account for it:

 CEOs play a more hands-on role in the day-to-day operation of businesses, putting them in the same
realm as employees more frequently than in the past. This greater insight compels CEOs to reward
employees more often.* Many employees' roles have expanded well beyond their basic job
description, and CEOs feel duty-bound to acknowledge employee contributions, beyond their usual
paycheck.

Assess the Advantages of Monetary Incentives

Before you officially cast your vote, you may wish to assess the advantages and disadvantages of
monetary and non-monetary incentives. Some of them may surprise you, especially if you think
nothing “talks” more persuasively than money. Monetary incentives:

 Are instantly recognizable and simple for employees to comprehend. Hold universal appeal. Are
favored by employees who prefer to add them to their annual salary. Do not require personalization
in the way that a non-monetary incentive requires forethought. Can solve a financial dilemma for a
small-business owner who may want to give an employee a pay raise but cannot afford to do so.

Assess the Disadvantages of Monetary Incentives

You would be hard-pressed to find an employee who would say, “No thanks, boss; I don't care much
for money.” Remember that in this context, as an incentive, money might talk, alright. It just might
speak a different language. It's wise to consider that maybe – just maybe – the monetary benefits you
hope to reap could backfire if:

 Employees don't see a clear and direct correlation between the benchmark and the incentive. These
employees could undercut even the most lucrative incentive program unless they view it as
worthwhile.
 They create a sense of inequality. Since “top” employees often get monetary rewards, those who
are left out may become a drag on employee morale and teamwork. They lead to a sense of
entitlement among top employees, who may even turn up their noses to the non-monetary incentives
 you offer. They “supercharge” cut-throat, competitive employees to sabotage the work of their
colleagues to attain the incentive.* They are unfairly distributed among a group. This is why many
business owners get ahead of this approaching storm cloud and either establish individual incentives
or distribute incentives to all team members.
 You include them as an addendum to an employee's paycheck. In this case, the incentive doesn't
stand out; it's simply absorbed in an employee's earnings and probably goes to pay the rent or
mortgage and other monthly bills – and is quickly forgotten.

Assess the Top Advantages of Non-Monetary Incentives

The businesses that The Incentive Research Foundation found are turning to non-monetary
incentives may be on to something: Employees seem to ascribe a greater value to gifts, even if they
can place a dollar value on them. As an employer, you may see little difference between, say,
writing a $1,000 bonus check and bestowing a $1,000 laptop on a deserving employee.

But the employee? Multiple research studies show that employees show greater enthusiasm and
appreciation for tangible things they can use (like a laptop), enjoy (like a vacation) or show off
and brag about to others (like jewelry and clothing). And the more they can use or show off these
incentives, the more likely they are to think of the employer in a favorable light.

If this still doesn't compute to you, try relating non-monetary incentives to the burgeoning gift card
industry. Give someone $50 in cash and they will surely appreciate it – before putting it promptly in
their wallet and probably forgetting about it. But give them a $50 gift card and they will regard it for
what it is: A gift, and something they can redeem for something pleasurable. Gift cards are stamped
with a dollar amount, just like cash. But somehow, they signal greater thought and consideration on
the part of the giver.

Assess the Other Advantages of Non-Monetary Incentives

Research also shows that the psychology of offering non-monetary incentives intensifies when
employees are given a choice – _or are at least asked about their preference_s. This is no small
insight for any small-business owner who hopes to incentivize her staff.

In addition to being tangible items that hold bragging rights, non-monetary incentives:

 Serve as a lasting reminder of an employee's accomplishment.* Can serve as an in-house marketing

tool, especially if you photograph the employee with the incentive and post it on your business
website.
 Can be used as a recruiting tool if you “advertise” the incentive in the same way.* Can be deducted
as a business expense.

Assess the Disadvantages of Non-Monetary Incentives

It would be wrong to say that non-monetary incentives have no drawbacks. They exist, but they seem
to be mostly self-inflicted by the business owner who neglects to:

 Ensure that the incentives are _appealing t_o employees. A weekend ski package or a Las Vegas
getaway may be up your alley but not necessarily so for an employee who has never snapped on ski
boots or who doesn't like to gamble.
 Do his homework when selecting employee incentives.
Like many business owners, you might need to experiment with monetary and non-monetary
incentives, until you find the right offering for your employees. But compared to the other dilemmas
you face, this task might be one of the most fun – with or without the hedge clippers.

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