Last Updated 16 Jun 2020

Differences between the Compensation and Benefits Programs used in U. S. and Germany

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Compensation refers to the salary and/or wage structures and programs such as job descriptions salary, bonus-based benefits programs, merit based programs and commission-based programs (Patricia & David 125). Compensation and benefits are provided either as variable pay and/or base pay. Stock option plans In Germany, stock option plans are only available for leading employees and German board members. These are usually in the form of phantom stocks, stock appreciation rights or convertible bonds (Ohle 1). At the moment of their exercise, these stock options are taxable.

In German stock options are granted in two forms whose difference is primarily based on the tax treatment on them. Stock options in U. S encompass Non-Qualified Stock Options, Put Options and Incentive Stock Options. However, a great percentage of these stock options are not exercisable immediately and are non-transferable thus making it impossible to readily determine their fair market value. This implies that stock options are not taxable when granted in the context of U. S (Patricia & David 127). Operational retirement provisions

Unlike U. S, Germany has operational provisions for its retirement pension plans through which employers make it possible for their workers to change some of their wages into retirement operation plans. This revolves around various models such as the assistance funds, direct insurance, pension funds and direct benefits. U. S lacks such provisions which are not bound to taxation. In German’s case, the most common retirement operational provisions encompass plans such as the 401 (k) and the cash balance plans (Ohle, 1).

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On a different note, the pension program of US was not made such as to offer old age insurance by itself while that of Germany is considered to be primarily a grant for a basic insurance. Thus private and operational retirement plans are very vital to American retirees unlike for Germans. Private retirement provisions In Germany, there are a social security programs to which employees’ payroll taxes account for half of the contributions while the employers contribute the other half.

These include long-range nursing care, unemployment benefits, pensions and health insurance and are the four major German social security parts (Ohle 1). Other social security programs cover social indemnity catered for by the government and the accident insurance handled by the employer. The U. S system on the hand comprises of: the state program for children’s health insurance, supplementary security income, temporary assistance for needy families, health insurance for the disabled and aged, unemployment benefits, state grants for medical assistance programs (DOL 1).

The U. S social system is majorly funded through payroll taxes and the overall program is divided into three main parts: survivors, retirement and disability insurance. Unemployment benefits The unemployment program in U. S is funded by the federal and state unemployment taxes paid by employers. Unemployment benefits in Germany are divided into two categories: the unemployment insurance (UI) applicable to previously employed workers who were insured during their tenure; and the unemployment assistance (UA) which comes after UI and has no time limit. The U.

S unemployment benefit system differs from the one in Germany in that it covers a wide range of areas not covered by the German program (DOL 1). This is because the U. S program includes a self employment assistance package for the re-employment period, trade readjustment allowance, extended benefits, and assistance for the unemployment due to disasters. Heath care insurance The compensation and benefits program in Germany encompasses a mandatory contribution towards social security in terms of payments to the legal state health care insurance program.

However, big salaried employees can opt to join a private health care system rather than the state health care system which is also considered a benefit to some extent. On the other hand, U. S. has a different health care program known as the Federal Employees’ Health Benefits (FEHB) that enables eligible employees to be part of a group plan for health insurance (Patricia & David 131). U. S also has two other options contributing to health insurance unlike Germany. These include: life insurance under the standard additional and family options and the long-term care insurance paid for fully by the employees. Leave and public holidays

The terms of employment in German usually include a minimum of twenty-four paid leave days annually for those employees working six days a week on full time basis and 20 days to those working 5 days a week (Ohle, 1). Public holidays however vary form state to state. This includes other paid and protected leave days such as sick leave and maternity leave. U. S on the other hand has different terms when it comes to leave and public holidays. For instance, the U. S Family and Medical Leave Act does not entitled employees to any leave provides for a job-protected 12 weeks unpaid leave per any twelve month period incase of care emergencies.

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