Compensation And Strategy: Controlling Benefits Costs Free Sample


The system of healthcare in the United States is characterized by complexity and diversity. Private and public medical institutions offer medical services to individuals covered by individual-based, government-financed, and employment-based insurance. More recently, however, the discussions started on the issue of rising healthcare costs, which prompted many individuals to skip on paying for individual health coverage.

The government initiated a health care reform and introduced such laws as the Affordable Care Act (ACA) to improve the accessibility of health care by expanding the reach of government-financed insurance. However, with many working individuals not eligible for Medicare and Medicaid programs, the two options available to them are expensive individual insurance or employment-based insurance.

The latter option implies insurance coverage offered by a business to its employees as a part of its benefits package. Due to the rising healthcare costs, more job-seekers are likely to look for employers offering health insurance benefits to help reduce the applicants’ financial burden. Although medical insurance included in the benefits package can be an effective recruitment and retention tool, it also adds to the employee benefit costs (Kwon, Hewitt, & Hein, 2013, p. 32).

This fact highlights the need for the businesses to consider health insurance benefits in their overall strategic goal-setting process and find ways to control benefits costs. This paper seeks to address the issue of health insurance benefit costs in real-life business settings. The impact of employee benefits costs on strategic goal setting and options to control costs are presented, along with practical examples, informed by literature review.

Impact to Strategic Goal Setting

Health insurance offered as a part of the benefits package impacts the strategic goal setting of the company in several ways.

Businesses add health insurance coverage as a part of their overall employee compensation strategy (Christianson & Trude, 2003, p. 358). Health insurance coverage is used as a tool that can help employers attract valuable candidates and retain their best employees. As such, health insurance benefits should be regarded as a reward and be aligned to business objectives (Kwon et al., 2013, p. 33). “Reward systems affect organizational performance and individual behavior largely through the impact they have on people’s beliefs and expectations about how they are and will be rewarded” (Hewitt, 2012, p. 68).

For a company to add health insurance as part of its benefits package, the company’s management has to decide what type of coverage will be offered to the employees, what ancillary benefits will be included, and whether health insurance will be provided to all employees, or individuals in specific positions or departments.

The type of coverage implies general insurance, medical insurance, dental insurance, etc. The management is in a position to choose what types of expenses will be covered and when the coverage will begin. As a part of the company’s strategic goal setting, the health insurance coverage will impact the company’s compensation strategy by introducing health coverage as a tool to attract employees and as a part of the strategy to maintain high employee motivation and engagement. Also, due to the significant costs of health benefits, they will impact the financial strategy of the organization.

For the business to stay profitable and competitive, business owners will have to adjust their financial strategy to accommodate additional expenses, and develop cost-controlling mechanisms (Christianson & Trude, 2003, p. 359). Business owners are in a position to decide, what ancillary benefits, such as eye care or dental insurance will be included. Offering ancillary benefits may allow the company to gain a competitive advantage in the job market and attract employees with the highest market value.

On the goal-setting stage, businesses will have to decide what employees will be eligible for health benefits. Businesses may decide to offer health insurance to all of the employees or keep it as a bonus for top-performing or most valuable workers. Health insurance can be offered to top-performing employees in recognition of their contribution to the company’s performance.

A holistic approach to “assessing the level of contribution and therefore possible rewards” suggested by Armstrong requires the company not only to evaluate what employees are vital to the company’s operations but also to recognize current human resources shortcomings (2010, p. 177). Since a benefits package is not only a retaining tool but also a means to attract new, valuable employees, the company’s strategic goals may include the goal to attract top-performing professionals employing a comprehensive health insurance benefits package.

All of these nuances have to be considered in the wider context of the company’s payroll costs.

Controlling Costs

It is general knowledge that healthcare costs have been rising for the past decade, and offering health insurance can lead to a significant increase in the company’s payroll expenses (Danis, Goold, Parise, & Ginsburg, 2007, p. 236). Business owners have to calculate the appropriate amount of financing allocated to health benefits and implement cost-reduction strategies to improve profitability.

There are various ways businesses can control health insurance benefits package while being able to use it as a recruitment and retention tool:

  • Adjusting employees’ wages to accommodate higher benefits costs. Successful implementation of the health insurance benefits package requires business owners to consider the profitability of such an effort. Businesses can keep total compensation unchanged by reducing wages and increasing compensation through health benefits. If such an adjustment process “occurs relatively quickly, increases in health care costs have only a minor, short-term negative impact on firm profits. (Christianson & Trude, 2003, p. 359).
  • Cost shifting from employers to employees (Danis et. al., 2007, p. 236). This cost-control strategy implies reducing benefits and offering high deductible plans. By shifting costs to the employees, employers may minimize the effect of rising healthcare costs.
  • Employee wellness programs. Such programs may include setting up a company’s gym or developing a smoke-free environment (Shope, 2004). If the employees are healthier, they are more likely to have lower medical expenses.

Practical Examples

Top-performing companies successfully implement health insurance benefits to attract new talent and retain their employees. One such company is Microsoft, which offers one of the most comprehensive health and wellness programs for its employees. Their health insurance benefits include not only general medical coverage, but also vision and dental care, physician house calls, free on-campus screenings and flu-shots, and 24-hour health line (Benefits and perks, n.d.).

While such health benefits provide great value to the employees, they also allow the company to control costs by educating its employees through health line and offering medical services directly at the campus. PricewaterhouseCoopers identified rising physician and hospital costs as one of the factors which contribute to high health benefits costs (Shope, 2004). Offering physician services on-campus allows the company to directly control the number of medical services offered to the employees.


Armstong, M. (2010). Armstrong’s Handbook of Reward Management Practice: Improving Performance Through Reward. London: Kogan Page Publishers.

Benefits and perks. (n.d.).

Christianson, J., & Trude, S. (2003). Managing Costs, Managing Benefits: Employer Decisions in Local Health Care Markets. Health Services Research, 38(1), 357-373.

Danis, M., Goold, S., Parise, C., & Ginsburg, M. (2007). Enhancing Employee Capacity to Prioritize Health Insurance Benefits. Health Expectations, 10(3), 209-305. doi: 10.1111/j.1369-7625.2007.00442.x

Hewitt, A. (2012). Total Rewards Survey.

Kwon, J., Hewitt, A., & Hein, P. (2013). Employee benefits in a total rewards framework. Benefits Quarterly, 29(1), 32-38. Web.

Shope, D. (2004). Area Employers Get Advice on Lowering Health Care Costs.

The Psychology Of Physical Attraction


Psychologists have demonstrated increased interest in understanding the factors that come into play for people to admire and like others. The general consensus is that people have different conceptualizations of what they find attractive, hence the need to understand how they arrive at decisions on what is admirable or not (Swami & Furnham, 2008). The present paper discusses some of the factors that are thought to predict why we are attracted to another person.

Main Body

Attraction is defined as the “desire or inclination to approach another individual or object” (Swami & Furnham, 2008, p. 5). The variables that will be discussed in this section include physical beauty, similarity, proximity, and familiarity.

Physical beauty is described as the extent to which an individual’s physical characteristics are perceived by others as aesthetically attractive or desirable (Myers, 2013). Research on physical beauty has found that physically attractive individuals are not only perceived as more likeable and friendly, but are also favored more in work contexts than less attractive individuals (Stockemer & Praino, 2015).

Some physical beauty characteristics such as facial symmetry and waist-to-hip ratio are associated with attractiveness, good personality traits and successful life outcomes, though researchers are yet to validate some these perceptions (Swami & Furnham, 2008). For example, people find women with a balanced facial composition more attractive and knowledgeable than those with unbalanced composition despite research showing that facial symmetry and cognition are not related (Stockemer & Praino, 2015).

Similarity is described as any resemblance or likeness of character, values, or beliefs (Myers, 2013). Research is consistent that people show “stronger attraction to objectively similar others (i.e., actual similarity) that to those with whom they share fewer traits, beliefs, and/or attitudes” (Tidwell, Eastwick, & Finkel, 2013, p. 199).

The similarity-attraction effect acknowledges that people tend to be attracted to strangers with whom they share similar values, attitudes, personality, interests and world views than to friends with whom they share few of these characteristics. Research has also found that perceived similarity is a strong predictor of romantic attraction than actual attraction, though actual similarity in external characteristics such as age and hairstyle is more predictive of preliminary desirability than likeness in psychological characteristics such as cleverness and confidence (Tidwell et al., 2013).

Proximity can be described as closeness in space, moment in time or affiliation, while familiarity is the status of demonstrating adequate knowledge or understanding about something. In proximity, research shows that people tend to be attracted to those who are near them due to factors such as convenience, familiarity, identity, availability, visibility, and comfort (Myers, 2013).

Studies have also found that patterns of friendship and love are mostly determined by physical proximity due to its importance in the development of social relationships (Swami & Furnham, 2008). In familiarity, available evidence shows that people tend to be attracted to what they know or understand better due to the elements of predictability and similarity (Myers, 2013). Additionally, it is clear that repetitive exposure to certain individuals increases our attraction toward them through a subconscious process that is dependent on the level of congruence in factors such as personality traits and interests.


Drawing from this discussion, it can be concluded that the variables of physical beauty, similarity, proximity, and familiarity play a significant role in predicting why we are attracted to other people. Although these factors are not conclusive, they provide an insightful indication of the dynamics of attraction in psychological contexts.


Myers, D. (2013). Social psychology (13th ed.). New York, NY: McGraw-Hill Education.

Stockemer, D., & Praino, R. (2015). Blinded by beauty? Physical attractiveness and candidate selection in the U.S. House of Representatives. Social Science Quarterly, 96, 430-443. doi: 10.1111/ssqu.12155

Swami, V., & Furnham, A. (2008). The psychology of physical attraction. East Sussex, England: Routledge.

Tidwell, N.D., Eastwick, P.W., & Finkel, E.J. (2013). Perceived, not actual, similarity predicts initial attraction in a live romantic context: Evidence from the speed-dating paradigm. Personal Relationships, 20, 199-215. doi: 10.1111/j.1475-6811.2012.01405.x

Workforce Diversity: Sociopsychological Aspects


Phenomena of diversity and inclusion observed in the workplace can be discussed with references to such social psychological perspective as the social identity theory. The reason is that interactions in the workplace are associated with the social nature of a person, and diversity, as well as the idea of inclusion or exclusion from work groups, is explained with references to the social identity of employees. Although relations in the workplace are usually complex, it is possible to discuss them focusing on the principles of the social identity theory because it explains how people perceive each other’s differences and why individuals can be excluded from particular social groups in the workplace.

Social Identity Theory

As a psychological approach, the social identity theory explains what social structures can influence the person’s identity. According to this theory, people perceive each other as belonging to certain social groups that are meaningful to them because the members of these groups share the same socially important and distinguishing features as race, age, gender, or status (Mor Barak, 2008, p. 245). If people regard their social group as superior, they can focus on excluding the representatives of other social groups. The process of the social identification depends on analyzing what groups are socially significant with references to rather stereotypical visions regarding the racial or gender identity (Escartín, Ullrich, Zapf, Schlüter, & Van Dick, 2013, p. 183). Having analyzed the social status of the certain group, people try to refer themselves to categories with the positive identification that can be based on the individual perception or stereotypical visions.

Connections of the Theory to Diversity and Inclusion in the Workplace

In the workplace, the social identity theory is used to explain discriminative relations when persons with certain distinctive features can be excluded from work groups because of their differences and set stereotypes. For instance, there are stereotypes that African Americans are less qualified workers than white Americans (Pearce, 2013, p. 498). This stereotype leads to the situation when employees can focus on their ‘whiteness’ and try to exclude African Americans from the project team to avoid the project failure. In this case, accepting the fact of diversity in the workplace, persons also focus on social comparisons and intend to demonstrate their superiority.

Having a particular social identification, employees can perceive other workers as different from them with the focus on any feature, including race, age, gender, or abilities. As a result, employees with similar features are inclined to demonstrate the greater understanding and ability to cooperate. In this case, these people can also show their superiority over the other groups while excluding or discriminating them (Mor Barak, 2008, p. 245). The results of such approach based on the idea of the social identity theory are observed when female employees collaborate more with each other because they are not included in teams in which male employees work. The problem is in the fact that male professionals are often inclined to perceive themselves as more skilled workers when female workers can be regarded as untrustworthy. This example of exclusion is typical for many companies operating in predominately ‘male’ industries.


The social identity theory is effective to explain the variety of relations in the society when people are inclined to perceive the representatives of the same social groups positively and develop negative relations toward representatives of other groups. In the workplace, this attitude leads to comparisons made by employees against each other and to the following exclusion of individuals belonging to the other social category.


Escartín, J., Ullrich, J., Zapf, D., Schlüter, E., & Van Dick, R. (2013). Individual‐and group‐level effects of social identification on workplace bullying. European Journal of Work and Organizational Psychology, 22(2), 182-193.

Mor Barak, M. E. (2008). Social psychological perspectives of workforce diversity and inclusion in national and global contexts. In R. Patti (Ed.), Handbook of human service management (pp. 239-254). Thousand Oaks, CA: Sage Publications.

Obschonka, M., Goethner, M., Silbereisen, R. K., & Cantner, U. (2012). Social identity and the transition to entrepreneurship: The role of group identification with workplace peers. Journal of Vocational Behavior, 80(1), 137-147.

Pearce, J. A. (2013). Using social identity theory to predict managers’ emphases on ethical and legal values in judging business issues. Journal of Business Ethics, 112(3), 497-514.

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