12 employee benefits
TRANSCRIPT
Chapter 12
Employee Benefits
Chapter 12, slide 2
Employee Benefits - Introduction
legislation, unions, and a changing workforce have
expanded benefit offerings
have grown in importance and variety
are typically membership-based rewards offered to attract and
keep employees
do not directly affect a worker’s performance, but inadequate
benefits lead to employee dissatisfaction
benefit and service offerings add about 30% to an
organization’s payroll cost
benefits become the focus of negotiations with employees
when large wage and salary increases are not feasible
Reward management
Contemporary Benefits Offerings benefits today reflect a diverse workforce
challenge – designing a benefits package that is lawful
and attractive
Types Of Benefits
4
Chapter 12, slide 5
Legally Required Benefits
Social Security
financed by equal employee and employer
contributions, based on a percentage of
earnings
provides income for retirees, disabled workers
and surviving dependents
provides some health insurance coverage
through Medicare
SS was never intended to be sole source of retirement income. Watch: http://www.youtube.com/watch?v=aVZijG4WSOw
Chapter 12, slide 6
Legally Required Benefits
Workers’ Compensation
paid for by the organization
rates based on likelihood of
accidents, past history, and the
type of industry
benefits pay expenses and/or
compensate for losses
resulting from work-related
accidents or illness, regardless
of fault
Chapter 12, slide 7
Legally Required Benefits
Family and Medical Leave Act
requires employers with 50 or more employees to allow up to 12 weeks of unpaid leave for family or medical reasons
specifies record-keeping and communication requirements
12–8
Employee Preferences for Noncash
Incentives
Figure 12–1
*The survey polled a random nationwide sample of 1,004 American adults. Among those polled, 851
were working or retired Americans, whose responses represent the percentage cited in this release. The
survey was conducted June 4–7, 1999, by Wirthlin Worldwide. The margin of error is 3.1%. Responses
total less than 100 because 4% responded “something else”.
Source: Darryl Hutson, “Shopping for Incentives,” Compensation and Benefits Review, March/April 2002, p. 76.
Chapter 12, slide 9
Voluntary Benefits
Health Insurance
increases in healthcare costs have made health
insurance a critical benefit
healthcare costs are growing faster than wages
purpose is to protect employee from catastrophic loss should a serious illness
typically has the fewest coverage limitations for the employee
usually the most expensive
Health Maintenance Organizations (HMOs)
broad comprehensive care provided by physicians who are “in network”
employee incurs small co - pay
health care choices significantly limited
Chapter 12, slide 10
Voluntary Benefits
Preferred Provider Organizations (PPOs)
member health care providers agree to provide services
at a fixed fee
employees are encouraged by lower rates to use member
or “preferred” providers
combine best of HMOs and traditional insurance
Point-of-Service Plans (POS)
require primary care physicians
employee can go out of network, but pays up front and
seeks reimbursement herself
Chapter 12, slide 11
Retirement Benefits
Employee Retirement Income Security Act (ERISA) of 1974
vesting rights – right to pension benefits even if one
leaves the company
sets up Pension Benefit Guaranty Corporation (PBGC)
claims corporate assets to cover inadequately
funded pension plans
Defined Benefit Plans
plan specifies the dollar benefit workers receive at
retirement
usually based on some formula of years of service and
average final compensation
used more in government and unionized industries
Chapter 12, slide 12
Retirement Benefits
Defined Contribution Plans
employee and employer may contribute to account based on rules established for contributions
amount of benefits depends on success of account
investments
Regular
pension plans
profit-sharing
plans
IRAs 401Ks
Chapter 12, slide 13
Retirement Benefits
Regular Pension Plan
type of defined contribution plan
organization commits to depositing fixed
amount of money or percentage of
employee’s pay annually
Profit-Sharing Plans
variation of defined contribution plan
company amount contributed depends on
profit level in the organization
contribution is optional, not required
Chapter 12, slide 14
Retirement Benefits
Individual Retirement Accounts (IRAs)
1. employer makes contributions
2. can defer taxes on amount deposited and
interest earned in retirement account
3. two types exist for small businesses and self-
employed
401(k)s: 1. permit workers to set aside specified amount
of income on tax-deferred basis
2. employers may match employee contribution
Chapter 12, slide 15
Paid Time Off
Vacation and Holiday Leave
vacation time is usually related to the
length of time on the job
some companies also allow personal days
that can be used for any reason
Chapter 12, slide 16
Paid Time Off - Leave Entitlements
In addition to the 14 days of annual leave with pay, the
Factories Act, 1934 provides that every worker is
entitled to 10 days casual leave with full pay and
further 16 days sick or medical leave on half pay.
Casual leave is granted upon contingent situations
such as sudden illness or any other urgent purpose. It
should be obtained on prior application unless the
urgency prevents the making of such application. As a
customary practice, causal leave is approved in most
cases. Sick leave, on the other hand, may be availed
of on support of a medical certificate. Management
should not refuse the leave asked for if it is supported
by a medical certificate.
Chapter 12, slide 17
Paid Time Off - Leave Entitlements
In addition to the leave entitlements, workers enjoy
festival holidays as declared by the Federal
Government. The Provincial Government under section
49 of the Factories Act, 1934, states all festival
holidays, approximately 13 or as further declared, in
the Official Gazette. Additionally, every worker is
entitled to enjoy all such holidays with pay on all days
declared and notified by the Provincial Government. If
however, a worker is required to work on any festival
holiday, one day's additional compensatory holiday
with full pay and a substitute holiday shall be awarded.
Chapter 12, slide 18
Paid Time Off
Disability Insurance Programs
provides salary continuation for: short-term disabilities (sick leave)
long-term disabilities (coverage usually effective after 6 months)
some companies provide financial incentives to employees to not use their sick leave
long-term disability plans usually replace a portion of the employee’s salary, often 60%
Chapter 12, slide 19
Survivor Benefits
Group Term Life Insurance
benefit is usually based on one’s annual rate of pay
supplemental insurance increases coverage to two to
five-times the employee’s salary
Travel Insurance
life insurance for business travel-related deaths (not
including normal commuting)
Chapter 12, slide 20
Survivor Benefits
The Service Side of Benefits
1. Social and recreational events
2. employee assistance programs
3. credit unions
4. housing
5. tuition reimbursement
6. uniforms
7. company-paid transportation
8. parking
employers often can provide services at no cost or
at a significant reduction from the usual cost
Chapter 12, slide 21
An Integrative Perspective on Employee Benefits
These programs allow employees to choose which benefits they want and help to keep costs down.
Flexible Benefits
Chapter 12, slide 22
An Integrative Perspective on Employee Benefits
Flexible Spending Accounts Employees can set aside a designated dollar amount
before taxes for specified services such as
1. health-care premiums
2. medical expenses
3. dependent child or elder care
4. group legal services
IRS (UK) requires that accounts for different purposes be separate and that all money be spent during the year or forfeited
not subject to federal, state, and social security taxes
Chapter 12, slide 23
An Integrative Perspective on Employee Benefits
Modular Plans
employees choose a pre-designed package of
benefits from several options
Core-Plus Options Plans
employees given core coverage (e.g. medical, life,
disability) with option to select other benefits
Instructor: Usman Ali
Asif Chap 11 - 24