Employee Benefits

Employee BenefitsChapter 13Learning ObjectivesDiscuss growth and its reasons in benefits costs.Explain provisions of employee benefits programs.Describe the effects of benefits management on cost and workforce quality.Explain how employee benefits in the U.S compare with other countries.Explain the importance of effectively communicating the nature and value of benefits to employees.Describe the regulatory constraints that affect the way employee benefits are designed and administered.

Introduction

Benefits are unique because:more regulation of benefits than direct pay.almost obligatory for employers to provide. complex for employees to understand.

Reasons for Benefits GrowthLaws mandating benefits passed during and after Great DepressionWage and price controls instituted during WWII and labor shortagesTax treatment of benefits programsMarginal tax rate is % of an additional dollar of earnings that goes to taxesLarge group V. individual insuranceOrganized laborEmployer differentiationBenefit Programs

Private GroupInsuranceSocial InsuranceRetirementPay for TimeNot WorkedFamily-FriendlyPoliciesSocial Security

REPUBLICACTNO.8282SicknessMaternityDisabilityRetirementDeathFuneralUnemployment InsuranceObjectives of Unemployment Insurance: offset lost income during involuntary unemployment help unemployed workers find new jobs provide an incentive for employers to stabilize employmentpreserve investments in worker skills by providing workers with income during short-term layoffs.No state imposes the same tax on every employer.Unemployed workers are eligible for benefits if theyhave a prior attachment to the workforceare available for workare actively seeking workwere not discharged for cause, did not quit voluntarily and are not out of work because of a labor dispute.

Workers CompensationWorkers' compensation laws cover job-related injuries and death. Categories of Benefits:disability incomemedical caredeath benefitsrehabilitative services.

13th Congress Senate Bill No. 1979WORKERS' COMPENSATION ACT OF 2005

Private Group Insurance

Offered at employers discretion; plans not legally required.2 major types: medical insurance and disability insurance.Medical insurance -most important benefit; most full-time employees get such benefits.Disability insurance includes short-term and long-term plans.

Managing Benefits:Employer Objectives and StrategiesSurveys and BenchmarkingCompany should know what competition is doing.Surveys information is available from private consultants, Bureau of Labor Statistics (BLS) and Chamber of Commerce.

Cost controlLarger the benefit cost, greater the savings possibility. Growth rate of may result in serious future costs. Cost containment efforts work to extent that the employee has significant direction in choosing how much to spend in a benefit category.

Healthcare: Controlling Costs and Improving QualityHealth-care expenditures have risen from 4.3 % of GDP in 2011 to 4.4 % in 2012Based on the latest data released by the Philippine Statistic Authority (PSA), social insurance grew the fastest at 32.3 percent, or from P39.2 billion in 2011 to P51.8 billion in 2012.In terms of percentage share to the total health expenditures, private sources accounted for the largest share at 69.6 percent, followed by government with 18.5 percent, social insurance with 11.1 percent, and the rest of the world with a 0.9 percent share.Cost control attempts by employers such as managed care, fall into six major categories: plan designuse of alternative providersuse of alternative funding methodsclaims revieweducation and preventionexternal cost control systemsTrend - to shift costs to employees through use of deductibles, coinsurance, exclusions and limitations and maximum benefits.

Healthcare:Controlling Costs and Improving Quality

Health Maintenance Organizations (HMO) focus on preventive care and outpatient treatment.require employees to use only HMO services and provide benefits on a prepaid basis.physicians and health-care workers paid a flat salary to reduce incentive of raising costs.Preferred Provider Organizations (PPOs)contract with employers and insurance companies to provide care at reduced fees. do not provide benefits on a prepaid basis.employees often are not required to use just PPOs. less expensive than traditional health care but more expensive than HMOs.

Employee Wellness Programs

Focus on changing behaviors on and off work time that could lead to future health problems.

2 Classes of EWPs:Passive -use little or no outreach to individuals and provide no ongoing motivational support. Active- assume that behavior change requires not only awareness and opportunity, but also support and reinforcement.

3 Types of Employee Wellness DesignsHealth educationPhysical fitness fitness facilitiesFollow-up model

2 Phenomena in Cost Control Efforts

Staffing Responses to Control Benefits Cost GrowthBecause benefit costs are fixed, benefits cost per hour can be reduced by having employees work more hours.Classify employees as exempt, since they can reduce their benefit costs per hour without having to pay overtime.Classify workers as independent contractors rather than employees, eliminating the employer's obligation to provide legally required benefits.

Nature of the Workplace

Assessing employee benefits preferences is essential.Use market research methods to assess employees preferences same way consumers demand for products and services are assessed.Care must be taken not to raise employee expectations regarding future changes.