Pin Me

Prepare an FAQ: Communicate Compensation Plans Effectively

written by: N Nayab•edited by: Jean Scheid•updated: 5/28/2011

Compensation structures serve as a major motivator for employees, and lending clarity to compensation structures through effective communication mechanisms ranks as a major task of Human Resources. One way to lend clarity is by preparing a FAQ to publish in employee handbooks and via the intranet.

  • slide 1 of 5

    Employees Seek Answers

    FAQ Most employees, both new and old invariably have confusion and doubts regarding different aspects of compensation schemes. The onus is on the Human Resources team to dispel such doubts, convince employees of the benefits they accrue out of the compensation plan, and the desired behaviors to gain most out of the available plans.

    One good way to clear employee doubts and lend clarity to the compensation scheme is by preparing a FAQ that explains the most frequently asked employee compensation questions. Employees can refer to such a FAQ first before contacting the Human Resources Department for clarification. This preempts rumors or false information that invariably circulates in the absence of clarity. The Human Resources team also saves time by not having to repeat the explanation to the many employees who may have such doubts.

  • slide 2 of 5

    Basic Salary Structures

    When preparing a FAQ on compensation details, cover general questions or common questions related to the basic compensation structure first. Some such questions follow:

    1. The pay dates.
    2. The pay period. Many companies allow a few days of time to process pay and, therefore, have a pay period around the 25th of the month or other dates assigned.
    3. Whether it is possible to change the mode of payment, such as opting for a different bank, or opting for a check instead of direct bank deposit.
    4. The rate of tax deduction, clarification on order of deductions, the methodology of computation. Include an illustrative example to lend clarity.
    5. Details on other statutory deductions such as FICA, Unemployment tax (FUTA) and any other deductions. How such deductions are made, and the rate.
    6. Details on payments eligible when quitting jobs or when terminated.
    7. Rules on overtime payments.
    8. How to make requests for voluntary deductions such as club memberships, loan repayments and for other purposes. Maximum limits allows, procedures, time required for processing.
    9. If salary offered is as a cost to company (CTC); explanation on the amount deducted from CTC to arrive at salary levels.
    10. Overview on garnish wage laws.
    11. Policy on fines and deductions.
    12. Who to contact in cases of discrepancies in payroll.
  • slide 3 of 5

    Specific Compensation Schemes

    The second major group of questions relates to specific compensation schemes, usually concerning incentive schemes. Some possible questions for inclusion include:

    1. Details of any incentive schemes such as commissions or profit sharing offered by the company. An overview of the scheme, the rate of payouts, and who is eligible?
    2. Whether the company offers stock options, or deferred stock options. Eligibility for the same, and details of potential benefits.
    3. An overview of ERSIA, 401(k) plans, and any other deferred compensation plans. How to avail, details of computation, and potential benefits with illustrations.
    4. Details of bonus programs, eligibility, rates, and the structure of the schemes.
    5. Overview of the pension plans offered by the company. The company’s contribution to such pension plans, and the quantum of employee's payroll deductions for such schemes.
    6. Information on severance pay, if any.
  • slide 4 of 5

    Employee Benefits

    Most of the employee compensation questions related to employee benefits are a usual gray area for most employees. Some common questions in this category include:

    1. The benefits available to employee mandated by law, and how the company offers such benefits.
    2. Overview of any additional benefits offered by the company.
    3. The quantum of sick time, vacation time, and holidays provided, when such benefits start to accrue, how much they accrue, and how to avail of such benefits.
    4. Overview of cafeteria plans, if offered by the company, the range of benefits offered, and how to avail the same.
    5. The possibility of cashing in unused vacation and sick time, and if so, how and when.
    6. Overview of educational and training benefits offered by the company, how they accrue, who becomes eligible, and how to avail.
    7. Overview of voluntary schemes offered by the company.
    8. Health insurance coverage offered by the company, whether the premium is deducted from paycheck, and what to do in order to include family members in the scheme.
    9. Restrictions and limitations of the health insurance coverage, and how the insurance treats existing conditions.
    10. Short-term and long-term disability coverage offered by the company.
    11. Workers’ compensation benefits offered by the company. Who pays the insurance premiums, eligibility conditions, considerations when choosing medical care, method of raising disputes, how disputes are handled, limitations.
    12. Information and procedures related to COBRA health insurance, when employees quit, or are terminated from the company.

    There are no standard answers to the questions mentioned in the FAQ. Answers depend on specific company policies and the relevant legislation applicable to the company. Make sure to refer to the company handbook, the stated HR policy, and relevant federal and state legislations when preparing answers to such questions.

  • slide 5 of 5

    Reference

    • Frequently Asked Questions. http://www.iowaworkforce.org/wc/faq.htm. Retrieved May 24, 2011.
    • Business.com. "Employee Benefits and Compensation" http://answers.business.com/answerquestions.aspx?categoryIds=4&. Retrieved May 24, 2011

    Image Credit: freedigitalphotos.net/nuttakit