Question

Often people, and in particular younger people, will look to direct pay as an indicator of how “good” a job is. However, indirect pay can be of even greater importance depending on an individual’s circumstance.  

Explain what forms of indirect pay, including benefits, would be most appealing to you. Why is this the case?

Also, comment on those forms of indirect pay that you feel are increasingly in demand and those that may be less appealing than in the past.

Answer 1

Answer- Indirect pay refers to the incentives or bonus other than basic salary. Today a youth generation always seek a job with huge basic pay rather than looking at other incentives too.

Let us just take the example of stock based compensation scheme - In this scheme an employee will get incentive in the form of stocks of the company in which he is working. In this he will get incentive in the form of shares at low price i.e an employee can buy the shares of its own company at a low price as compared to market price.

Why this option?

As this option is directly link the goals between company and employee. Generally, an employee will get this incentives when he achieve desired level of sales. He can exercise this option after number of years. This scheme links a goal in a way that on one hand, the sales of the company increases and on other hand an employee will get the shares at very low price.

And the stock price is calculated through various valuation methods which is directly linked to profit. If the profit of the company increases, more investor will buy the shares and thus the price will increasing. In this way an employee will earn more return than market because he get shares at low price and sells at high price.

In this an employee knows that stock price will rise only when the sales of the firm increases and net profit as well. So in order to generate higher returns, more sales will be generated.This balances the goal of company and employee as well

FORMS OF INDIRECT PAY

1. STOCK BONUS
2. INSURANCE ( LIFE AND HEALTH)
3. RETIREMENT BENEFITS
4. HOUSING BENEFITS
5. OVERTIME BONUS
6. COMPANY CAR
7. CHAUFFEUR
8. SOCIAL SECURITY BENEFITS
9. INTERNATIONAL HOLIDAYS
10. RENT ALLOWANCE
11. CHILD EDUCATION BENEFITS
12. POWER AND ENERGY BENEFITS
13. LOAN BENEFITS
14. TRANSPORTATION ALLOWANCE
15. EXPENSIVE GIFTS

Few years ago there is point system which is less appealing to employee. In this system every point is attached to sales of desired level of product and the point an employee earns is very low. From this point an employee can purchase his own company products which is still no use for an employee sometimes. So this is one of the indirect incentive which is less appealing.