Handbook: Employee benefits

A significant and changing expense

Wages and salaries are typically the largest component of employee benefits, but they are not the only component. There are myriad other types of benefits – from compensated absences such as vacation days to retirement plans that cover large groups of employees – and the accounting can be complex.

The approach to compensation packages can change rapidly to match movements in the marketplace. The prevailing trend when we first published this Handbook in 2021 emphasized offering incentives to retain and attract employees. In only a few years, economic and social factors, including low attrition, have moved the focus to termination benefit packages as companies downsize and restructure. The changing economic landscape also finds companies changing their retirement benefit plans.

And then there are the fluctuations in financial markets that can make it more difficult to project the cost of benefits promised to employees in the future. This too can lead companies to consider changing benefit plans to lessen earnings volatility. More and more companies are moving to a defined contribution retirement plan model, such as a 401(k), to reduce the exposure and uncertainty around funding defined benefit plans.

Amidst this changing landscape of employee benefits, we hope you use this Handbook as a reference. We’ve organized it in a Q&A format that makes it easy to identify the answers to both the common and the more uncommon questions.