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Benefits and Compensation Analysis with Revisions

Benefits and Compensation Analysis with Revisions

Elizabeth Baker

Southern New Hampshire University

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Final Project



The population explosion prevalent in most parts of the world as well as the increasing complexity and cost of health care services has necessitated many companies to provide retirement benefits and health benefits for their employees. The aim is to enable the employees tolead better lives upon retirement and access quality health care services and treatment plans in the event they become ill without incurring higher costs. Medtronic, which is based in Minneapolis is no exception. The facility has followed suite and has launched Definity Health based in Minnesota to offer a consumer-driven health plan consisting of a health reimbursement account (HRA), Comprehensive Health Coverage and other health resources and tools that support member health and wellness decision making. The plan seeks to encourage individuals to receive immunizations and physical examinations in order to identify and treat the diseases as early as possible (Schwerin-Wenzel,Kol, Moore &Wood, 2004).

Issues and concerns of the employees based on the provided qualitative data

Most employees confront various issues in their quest to access better health insurance plans to guarantee them accessibility to better medical care. One of the issues according to Medtronic is the cost of the health plan. Most employees due to the other needs they have to satisfy are unable to access the existing health insurance plans because they were costly. Consequently, Medtronic facility launched a cost-effective health insurance plan and to date, the results are stunning as the plan currently accounts to about 80% of the coverage offered by the facility.  The number of enrolled participants increased steadily from 1,300 during its launch to 4,040 participants during the subsequent years.

Furthermore, some employees were unable to make decisions concerning their personal health care until the new health plan, Definity Health, was introduced. The existing health plans then recommended health care facilities and health professionals for their members. Unlike the middle aged or older employees, young employees usually hesitate signing up for health insurance programs. As a result of the new health plan, Definity Health, a smaller number of young employees enrolled for the plan contrary to the expectations of Ness who thought that the program would be more appealing to the younger generation. Also, contrary to the Ness’s anticipations, a higher percentage of male employees enrolled for the program at first whereas he expected a 50/ 50 enrollment. The higher number of male turn up may be relative to the female employees due to the fact that men are always the family heads and sometimes breadwinners for most families and most of them signed for the family coverage package.

The most consistent and prominent issues from the employees

The issues that were consistent from the employees included the need for career development initiatives, mentoring programs, education, leadership awareness programs, and the establishment of on-site child care centers. Medtronic offered regular training to their employees to keep them current with their job requirement. Additionally, the organization empowered their employees by regular compensations which resulted to the increased employees’ retention and reduced the employee turnover rate to about 15.3 percent. Another issue from the employees included the worries about their health and children, which in some cases prevented them from performing their jobs well. Some of the employees were not involved in the management of their chronic diseases as the existing plans limited them on the doctors to seek medication from (Schwerin-Wenzel,Kol, Moore &Wood, 2004).

Furthermore, another issue consistent from the employees was that their employers would not allow them to manage their retirement funds, which they contributed to various mutual funds. However, the revolutions in the defined-contribution/ benefit plans allowed employees to invest their money, which drastically increased the number of individuals who invested in the stock market. Health care cost increases is yet another consistent issue that affected the employees. Most enrollees disliked the new HMOs because it was unable to control the costs of their health care services and also it had many bureaucratic policies (Huddart, 1999).

Key issues/ concerns of employees that should be addressed

Based on the provided qualitative, the key issues that should be addressed include the cost and quality of health care services provided by the physicians who the insurance plans recommend for their members. The existing plans requires that employees pay on his own if he opts to seek quality health care services from a qualified physician who the plan has not recommended. Accessing quality treatment at the lowest cost possible will allow the employee to quickly recover from his/her illness and resume his/her duties. Consequently, the cost of employee training and orientation will be reduced due to the reduced rate of employee turnover.

Comparison of the provided quantitative data about the current benefits andcompensation system with the external benchmarking data from other organizations.

Unlike the traditional systems, the current system, Definity Health, provides detailed price information to employees, which allows employees to choose their preferred physicians and generic drug options. The system also allows patients to use nurse lines and substitute brand name for drugs more than the traditional systems in other organizations. The Definity Health plan involves monthly deductible of $1,500 for a single employee to $7,000 for family insurance. However, the other systems HealthPartners and Medical Choice involved deductible of $146 per month and $15 to $100 for every visit to a doctor.

Comprehensive Health Coverage
       This is one of the aspects of benefits and compensation package offered by Medtronic Company to its employees. Employees are deducted at three level and can choose, ranging from $1,500 (low) to $3,000 (high) for these employees who are single and $3,000 and $7,000 coverage for those with families. 

Health Tools and Resources
         This is resources meant to support member health and wellness. The program is made available online and can also be used by phone. Members are allowed to research providers across many criteria, review pricing for medical services or conditions, inquire with nursing Professionals and pharmacist 24/7, and get medical information. This plan paid for all preventive care to encourage participants to receive periodic physical exams, immunizations and other services designed to maintain health and to ensure early detection and treatment as necessary.
                This plan has enabled employees to make more decisions regarding their health care. Employees are able to contribute to their HRA accounts and employees use the money to pay for their health care. Funds remaining in the HRA at the end of the year were rolled over to the next year. Preventive care was 100% paid for by the plan and was not charged against the employee’s HRA balance.

Qualitative and Quantitative Data
       Currently Medtronic self-insures the majority of its health care plans and contributes from 75% to 80% of the cost of coverage, depending upon the plan. Although costs were not major concerns of this plan, they were an important factors and it was expected that over the long term, health care costs under this plan would reduce compared to traditional plan offerings.
        The first initial enrollment performance was good because it showed that a significant number of employees were interested in participating in an entirely different type of health care plan. A total of 1,300 employees chose the Definity option.  Enrollment for the previous year was 4,040 participants. In the first year, approximately 10,500 employees were offered the Definity Health option and 13% enrolled for the plan.
            Although Ness expected that Definity would appeal to younger employees who may not be very concerned about their health insurance, enrollment statistics were almost identical to Medtronic’s other more established plans when comparing coverage levels, pay rates and job types. The enrollment data did, however, indicate a higher than expected percentage of males registering during the first year. In the second year, the distribution among males and females was as expected, approaching 50% each.

Occupational Differences
        One of the gaps in this health plan is the lack of concern to occupational difference of the company’s employees. This plan ignores this factor and seems to treat all employees in the same level in terms of positions they hold in the company. The driving factors of the gender wage gap are that men and women, on average, work in different industries and positions. Women are always clustered in just a few occupations, with nearly half of all working women than men.

Differences in Working Hours
         Women on average work lesser hours in the workplace: 35 minutes less per day than men, among full-time working men and women. This is partly due to work maternity leave entitled to women in addition to normal work leave. This difference in working hours should be considered in determining the amount of benefits each employee should receive.

Unexplained Drivers of the Wage Gap
          The existence high pay gap between men and women is 41 percent. This is an aspect that cannot be easily measured since they go beyond things like occupation, educational attainment, and years of experience.  Some of the causes of this pay gap are due to discrimination at the work place. Combining gender and caregiver pay, discrimination, is a critical challenge facing many companies including Medtronic. The reason laws such as the Equal Pay Act of 1963 and the Lily Ledbetter Fair Pay Act of 2009 are crucial to help address this gap.

Key Areas Misaligned
      The major key areas that are misaligned include lack of concern on different in working hours to help determine the benefits every employee should receive. Wage gap that exist among the company’s employees should have also been analyzed so as to help determine the basis in which they receive health care benefits.

The New Proposed Changes

        Degree of existing population that will be affected by the proposed changes is high since majority of the population already consuming the health cover plan is very high and this number would likely translate to higher population switching to the new plan without a second thought. The impact of the proposed change is that it will introduce a new improved health care plan that is also likely to lead to increase in the number of enrollment.

Weakness and Strengths of Current Compensation System
Lack of well-structured compensation program that addresses the compensation gaps is a weakness of the current compensation plan. The ability to come up with appealing compensation and benefit plan is a strength.

Reward component that should be increased/ Reward Component that should be Reduced
The deductibles; $3,000 (low) to $7,000(high)for family coverage should be increased to $4000 (low) to $10,000 (high)since some of this employees have larger families that may consume large amount of health package due to their large families.  The amount deductible for single employees should be reduced from $1,500 (low) to $3, 500 to $1,000 (low) to $3,000 (high). This is because they do not have additional families.

Recommended Changes

The recommendations for accommodating the potential financial as well as procedural together with the legal constraints with regard to the revised benefits and compensation benefits are:  Medtronic’s health insurance options are recommended to conduct a focused analysis for the identification of a fair as well as a competitive benefits and compensation plan for the workers. It should continue to allow its workers to use an accrued paid leave with the inclusion of a sick leave and bereavement leave under a single policy. The health insurance options should develop a reliable Human resource metrics to assess how well the health insurance company benefits system is working and maintain an aggressive edge for the recruitment and retainment of the workers. The facility should also make improvements to the state administered income continuation insurance program. Due to the view that the health insurance facility acknowledges the provisions in fair labor requirements, it is recommended that the leave system should be a reflection of the personal as well as social need that are related to leave. The health insurance should minimize the difference in the policy it offers in order to produce better consistency as well as fairness in the human resource practice. There should be the practice of minimizing the difference of how the workers are treated to enable swift service delivery.

The changes that I will make to the current benefits and compensation plan include provision of base salaries as well as annual incentive plans for the workers and an equity based plan to emphasize the performance of the employees. Provision of equal employment opportunity should also be a change that should be made in the current benefits and compensation plan. To reflect on personal life, the health insurance facility should introduce a work-balance system to its current benefit and compensation structure. This will enable workers to have a balance in both work and life together with paid off time and statutory holidays in some occasions. Setting new policies that will cover the injured workers and disabled in a fair system.

The financial costs of proposed changes to both direct and indirect changes are; for the proposed health partners, employees only are to pay $49 for full-time and $153 for part-time. Employees plus one are to pay $99 for the fulltime and $310 for part-time and the employees plus two or more is $146 for fulltime and $458 for part-time. For medical, the employees only are to pay $78.25 for those who are fulltime and $195.63 for the part-time, the employees plus one are to pay $156.75 as full-time and $391.88 as part-time. The employees plus two or more are to pay $242.75 as full-time and 606.88 as part-time. For Definity health, employees only are to pay $44 for fulltime and $165 for part-time and low deductible and this is a decrease because they have a PCA with low, medium and high deductible amounts. The medium deductible pays $28 and $151.88 for fulltime and part-time respectively and the high deductible pay $11.45 as fulltime and $143 as part-time The Employees plus one pays $83.4 and $347.5 as fulltime and part-time for the low deductible. The medium deductible pays $51.10 as fulltime and $319.38 as part-time while the high pay $24.04 as fulltime and $300.63 as part-time. for the employees plus two or more, the low deductible pays $115.2 as fulltime and $480 as part-time, the medium deductible pays $70.6 as fulltime and $441.25 as part-time while the high deductible pays $33.2 as fulltime and $415 as part-time.

The cost of each benefit and compensation element are; for Definity health, an employee is deductible and the lowest cost is estimated to be to be $1500 with the medium being $2500 and the highest being $3500. For an employee who has a personal care account, the charges are constant for both the low, medium and high and they stand at -$1000. For an employee who is deductible and not covered by PCA the charges are $500 for low as well as $1500 for medium and $2500 for high. For employee+1 who is deductible, the costs are $2250 for low and it increases to $3750 for medium and $5250 for high. The PCA employee+1 have a figure of $-1500 for both and the deductible but not covered is $750 f0r low as well as $2250 for medium and $3750 for high. The cost for benefit and compensation for family is $3000 for a low deductible and $5000 for medium as well as $7000 for high out of network. the PCA under family has a figure of -$2000. The deductible and not covered under family is $1000 for low and $3000 for medium as well as $5000 for high.


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