PEOPLE.IDEAS.PERFORMANCE

107 (03/2<((6 %(1(),76 0$1$*(0(17 EB plan is developed for three main reasons: to meet legal obligations, to meet the reward strategy of the company and to meet contractual obligations. By satisfying union bargaining demands in the most effective manner company can maintain good harmonious industrial relations. The reward strategy of the company is essential to safeguard the commitment and sense of belonging of employees to the organization that she or he works. In addition, it serves as a tool to provide incentives for above average performance. Employers need to design a total compensation system that is internally equitable among employees. Thus, employees could realise that money spent by the employer on the system is cost-effective. The plan should contain employee benefit cost as much as is feasible, consistent with the other compensation objectives. Thus, EBneed to be spent as effectively as possible in meeting employee needs and desires. Some EB need to be offered to fulfil the needs of the employees which he himself cannot provide, such as protection against accidents and hazards. The EB plan also could provide employees with such benefits which are prevailing in similar organizations. Special privileges could be extended to the employees for holding a special position in the organization. While some special allowance provided to the employees to enhance their standard of living so as to increase their quality of working life. The EB could also be reflected through companies’ spending on the training and development of the employees f or improving the working conditions and employees’ skills. Employee benefits are key to managing risks such as talent and the ageing workforce, yet the costs of insured benefits are rising, forcing multinational companies to seek new solutions. Insured employee benefits, such as life, disability and medical insurance are a significant cost to organisations.In addition to designing a suitable benefits program for employees, the nature and value of the benefits need to be carefully explained to employees (Yee, 2006). Thus, a sound communications method needs to be realised from employers to employees without flaws. Since the term EB refers to compensation other than an hourly wage or salary, it represents an important component of total compensation packages offered by employers.Arokiasamy (2013) confirms that there is a positive relationship between compensation, rewards, and employee satisfaction. EB represents both the intrinsic and extrinsic rewards to employees. The intrinsic compensation simply reflects the employees’ psychological mind-set that result from performing their jobs. Whereas, the extrinsic compensation includes monetary (core compensation) and non-monetary rewards. Thus, total compensation represents both the monetary and nonmonetary rewards. Total compensation includes core compensation, adjustments to core compensation, legal required benefits, and discretionary benefits.Nonmonetary rewards include protection programs (for example, medical insurance), paid time off (for example, vacation), and services (for example, day-care assistance) (Martocchio, 2014). Most compensation professionals refer to the nonmonetary reward as employee benefits. The EB in the context of the total compensation concept (extrinsic)in Malaysian companies can be depicted in Figure 1 below (Tan, Tolos & Manab, 2014). Legally required benefits (mandatory benefits) are mandated by laws. In other words, the benefits are compulsory benefits that the government mandates, or requires, that employees receive from employers as a matter of law (Martocchio, 2014). Mandatory benefits are provided to employees as a social safety net. These include retirement benefits, disability benefits and unemployment benefits.The EB in Malaysia is bound by laws such as The Employment Act 1955, which covers manual workers and non-manual workers, provide minimum benefits and rights of employees.