Abstract

Traditional compensation systems provide organizations with economies in payroll computation and benefit administration. In exchange for these savings the enterprise forfeits emp1oyee awareness of corporate benefit expenditures, an opportunity to reduce turnover and absenteeism, any hope of mitigating future cost increases in fringe benefits, and an effective method of instilling greater employee autonomy. Flexible compensation is not without its problems. The Internal Revenue Service has not clarified its determination of "constructive receipt" in light of flexible compensation proposals. The applicability of flexible compensation is contingent, therefore, upon an evaluation of the relative advantages and disadvantages for each organization. The changeover costs are of special importance. The potential corporate and employee gains from a flexible compensation system cannot be long ignored in the face of rising outlays for benefits. Further underscoring the need for a new approach are trends toward greater employee autonomy.