Human Resources - Benefits based on Microsoft - Case Study Example

? Human Resources - Benefits        Affiliation     with more information about affiliation, researchgrants, conflict of interest and how to contact Human Resources - Benefits Part 2: Statement of the issue Microsoft is popularly recognized as a leading company for offering one of the best and most inclusive compensation and benefit packages in the country. Microsoft provides compensation as well as benefit packages to its employees to an above average limit. But considering the past five years, it can be seen that many benefits have been cut short. One of the main benefits taken away was the Employee Stock Purchase plan. Another benefit issue includes decreasing annual bonuses, cutting off maternity leave from 12 months to six months and making short the vacation time. In this plan, “the firm lends the employee funds to purchase the stock at fair market value “(Bhagat 1984 pg 197). The purpose of the plan is to offer eligible employees a chance to become shareholders in the company. It is assumed that employee participation in the ownership of the business will lead to common benefits for both the employees and the company. The company grants stock-based compensation to directors as well as employees. They issue new shares of Microsoft common stock to assure exercises of awards approved under all stock plans. They also have an employee stock purchase plan for all eligible employees. Shares of common stock will be purchased by employees at intervals of “90% of the fair market value” (Intricon Corporation 2011 pg 2) on the last day of each period. Employees might acquire shares having a value not exceeding 15% of their gross compensation during a proposed period. But the company has announced it will reduce the discount employees that are to be given when they buy Microsoft stock. These benefit changes were made in order to decrease their operating costs and also increase the long-term value of the company. The employees will be able to acquire Microsoft stock at a 10 percent discount through Microsoft's Employee Stock Purchase Plan, compared with the current 15 percent discount. They will also be able to acquire stock through the plan each quarter, rather than twice a year. Microsoft needs to increase the stock purchase benefit plans as they facilitate the recruitment & retention of talented staff, promote an industrial environment and also offer a device for the arrangement of interests between employers and employees. For the growth of successful companies, these plans are likely to construct sustainable wealth for employees and their communities. Employee stock purchase plans will improve the employee productivity. Part 3: Literature Review Benefits play a significant function for an employer. The employees will work hard to make sure that their benefits replicate the varying needs and wants of the people and that is why most of the companies offer many industry-leading benefits to their employees who help in accomplishing the objectives of the organization. Employee benefits comprise of “all benefits and services, other than wages for time worked, that are provided to employees in whole or in part by their employers” (Beam & McFadden 2001 pg 4). Examples include medical insurance, paid vacation etc. There are various benefits provided by the US government to the employees such as medical protection, retired income etc. These benefits may be long term or short term, financial or non-financial, free of cost or available at concessional rates. They may include educational, residential, medical or recreational facilities. Such facilities maybe offered individually or in a group and within or outside the organization. Therefore, the employee benefits are reassurance along with the facilities provided which allows them to operate in a nourishing and passive environment. Most employers reimburse employees with some blend of cash plus benefits such as health assurance. An employer may decide to include benefits in the company’s compensation package for three primary reasons: “A cost advantage to the employer Recruitment of certain types of workers Tax incentives” (Martocchio 2008 pg 33). Employee benefits are a particularly significant element of every employee’s financial security. It accounts for 37 % of employee’s total compensation. The benefits issues have become gradually more significant as the extent of employee benefits plans has improved not only in terms of the benefits provided, but also in protecting the employed in various situations. Therefore, while devising the plan, an employer should judge what results various purposeful groups of needs and objectives will bring for employees in different situations. A stock option plan gives an employee the right to acquire a certain number of shares in the company at a permanent price for a certain number of years. Its main functions consist of “sending information to investors, attracting employees with a taste for risk and aligning managers with shareholders” (Hyde 2003 pg 205). Employees stock purchase plans made a comparatively unpleasant means for employers to offer stock to employees. The employees who participate in this plan are expected to acquire an “estimated amount withheld from their pay to provide the funds with which to exercise their options at the end of an option period” (Rosenbloom 2001 pg 774). Many researchers have the opinion that the employee stock purchase plan is different from pension and other benefit plans, in which funds are set aside for employee benefits rather than for the use of corporate officials. It is a part of the compensation package of well paid and sophisticated professional and managerial employees. Issue Analysis Benefits program plays an important function in Microsoft. The company’s benefit programs include health care, family programs, employees stock purchase plan and providing and motivating the employees to enhance their productivity. The benefits replicate the changing wants and needs of their employees. Microsoft provides the industry’s leading benefits programs to the employees. The main goals of benefit programs is to empower the employees with incentives, resources and flexibility needed to derive job satisfaction and live life to their fullest. The main problem faced by the employees of Microsoft is that the employee stock purchase plan benefits were cut back. “Employee stock purchase plans (ESPPs) are designed to promote employee stock ownership broadly within the firm and provide another tax-deferred vehicle for individual capital accumulation in addition to traditional pensions, 401(k)s, and stock options” (Engelhardt 2004 par 1). An ESPP is a sponsored plan in which the employees purchase the stocks with the income of after-tax. The offering time period of ESSP is of six months. At the end of the period, the contributions of the employees are used to buy the shares of the owner’s stock at a discount of 15% off the market price either at the start or end of the offering time period. For most plans, the tax advantage primary comes from the fact that the shares are held for long and the discount on stock gets taxed as an ordinary income rather than capital gain. The employees stock purchase plan benefits issues became gradually more important as the extent of employees benefits plans improved in terms of benefits and also protecting the employed in various situations. Microsoft has offered its efficient employees with stock purchase plans, however, it has been the case otherwise since the past five years. The employee stock purchase plan has worked in the company in a very crucial way. An employee contributes to the employees stock purchase plan from 1to 10% of his or her salary. This salary contribution is taken from the paycheck. The contribution is calculated on before tax salary but taken after tax. At the end of the purchase period, every six months the owners will purchase the stock of companies for the employees using their contributions for the purchase period. The employees will get 15% discount on the price of the purchase. The owner takes the price of company stock from the opening of purchase and the price of end period, whichever is less, and the employer gives employees 15% discount from the price. Employees can sell the purchased company stock right away or hold it longer for the preferential tax treatment. “Established under Section 423 of the Code “The purchase price is either less than one hundred percent of the value of the stock on the grant date or is not fixed or determinable on the grant date must furnish to the employee transferring the stock, on or before January 31, 2011” (Incentive Stock Options and Employee Stock Purchase Plans 2011 par 8). Microsoft provides various benefits plans to its employees. All the benefits are above average. The employee stock purchase plans have however, undergone some small changes recently. The company offers other important benefits that includes ride the connector, paid vacation and providing employees with flexible working arrangements. The employees stock purchase plan is different from the pensions plan and such other benefits plans. Issue solutions Most of the international companies adopt the employees stock purchase plan for their employees at 15% discount. “Companies offer Employee Stock Purchase Plans to employees to allow them the opportunity to share the success of the firm. A stock purchase plan enables employees to purchase their company's common stock, often at a discount from the market price” (About Employee Stock Purchase Plans 2012 par 1). The main advantage of employees stock purchase plan is that it is usually convenient and easy to encourage as well as helpful in setting the investment and savings of employees. Company stock purchase period that companies provide are on the basis of contributions from the employees. The taking back of the employees stock purchase plan has helped to realize how much it really benefits the employees. The Microsoft corporation provides various benefits to the people working under its wing. All the benefits provided to efficient employees. This study suggests “Leverage the power of the leading stock plan administration technology Our Full Service Plan Administration solution is delivered through our proprietary web technology, Shareworks” (Share Works Premier 2010 par 2). The employee stock purchase plan has used web based solutions to re-establish this plan. Web based technology helps to better the stock plan administration. It is helpful to the employees. The employer introduces new plans like incentive plans, savings and investment plans, providing support to the employees, reducing employee’s risks for purchasing stocks, improving existing plans or devising new plans for employees and also providing detailed information about these plans. The pay out of employee stock purchase plan is produced every three to six months. “The primary disadvantage of ESPP participation is it concentrates a large amount of personal investment capital in a single risky security” (Janofsky 2005 pg 5). The direct stock purchase plan and restricted stocks have become highly compensating to the employees. There has been an increase in employees stock purchase, the restrictions of stock purchase has reduced and also the purchase amount has been reduced. Reference List About Employee Stock Purchase Plan (2012). Fidelity. Retrieved from Beam, T & McFadden, J (2001). Employee Benefits. Dearborn trade Publishing. Retrieved from Bhagat, Sanjai et al (1984). Incentive Effects of Stock Purchase Plans. Journal of Financial Economics. Retrieved from < http://leeds-faculty.colorado.edu/bhagat/IncentiveEffectsStockPurchasePlans.pdf> Engelhardt, V & Madrian, C (2004). Employee Stock Purchase Plans. The National Bureau of Economic Research. Retrieved from Hyde, Alan (2003). Working in Silicon Valley: Economic and Legal Analysis of a High-Velocity. M.E. Sharpe. Retrieved from Incentive Stock Options and Employee Stock Purchase Plans – IRS Information Statements and Information Returns under The Section 6039 Final Regulations (2011). Cooley LLP. Retrieved from Intricon Corporation Summary of the 2007 Employee Stock Purchase Plan (2011). Retrieved from Janofsky, Alexander (2005). Using Simulation to Determine Optimal Employee Participation in Employee Stock Purchase Plans. University of Pennsylvania Scholarly Commons. Retrieved from Martocchio, J (2008). Employee Benefits. Tata McGraw-Hill. Retrieved from Rosenbloom, S, Jerry (2001). The Handbook of Employee Benefits: Design, Funding, and Administration. McGraw-Hill Professional. Retrieved from Share Works Premier (2010). Solium Capital. Retrieved from Read More