Managing Human Resources 15e.

Report
Employee Benefits
The Challenges of Human Resources Management
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1–1
Chapter Objectives
After studying this chapter, you should be able to
LEARNING OUTCOME 1
Explain why companies offer their employee’s benefits and are concerned
about their costs.
LEARNING OUTCOME 2
Describe the elements that have to be considered when developing a
strategic benefits plan.
LEARNING OUTCOME 3
Identify and explain the employee benefits required by law.
LEARNING OUTCOME 4
Discuss the strategies companies utilize to control the costs of employee
health care programs.
LEARNING OUTCOME 5
Describe benefits that involve payment for time not worked.
LEARNING OUTCOME 6
Discuss the recent trends in retirement policies and programs.
LEARNING OUTCOME 7
Describe the different types of pension plans employers offer and the
regulations related to them.
LEARNING OUTCOME 8
Describe the types of work/life benefits that employers may provide.
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The Chief Objectives of Benefits Programs
• Improve employee work satisfaction
• Meet employee health and security requirements
• Attract and motivate employees
• Reduce turnover
• Maintain a favorable competitive position
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Strategic Benefits Planning
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Elements of a Successful Benefits Program
Competitive
Benefits
Information
Communicating
Employee Benefits
Information
Administering
Benefits
Allowing for
Employee
Involvement
Flexible
Benefits for a
Diverse
Workforce
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Competitive Benefits Information
• Competitive Benefits Information






Chamber of Commerce
Bureau of Labor Statistics
Society of Human Resource Management
HR Consulting Firms
Competitors Web Sites
Internal Information
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Allowing for Employee Involvement
• Need should be determined through consultation
with employees.
• Surveys show that employees who are satisfied
with their benefits are more likely to be satisfied
with their jobs.
• How to do it..



Committees
Opinion Surveys
Focus Groups
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Flexible Benefits for a Diverse Workforce
• Flexible Benefits Plans (Cafeteria Plans)

Benefit plans that enable individual employees to
choose the benefits that are best suited to their
particular needs.
– A basic or core benefits package of life and health
insurance, sick leave, and vacation ensures that
employees have a minimum level of coverage.
– Employees use “credits” to “buy” whatever other
benefits they need.
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Administering Benefits
• Administering an organization’s benefits program
can be both costly and time-consuming
• Fortunately, online employee benefit systems
have become mainstream for both large and
small employers.
• Often referred to as employee self-service
(ESS) systems.
• They can result in a significant cost savings in
benefits administration.
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Communicating Employee Benefits Information
• Methods to communicate benefits to employees









In-house publications (employee handbooks, organizational
newsletters, and postings on bulletin boards)
Brochures and enrollment information mailed to employees
Employee meetings and information sessions
Employee meetings with benefits providers such as the
representatives of health care companies, the investment
company that manages a firm’s pension, and so forth.
E-mails with benefit information and enrollments reminders
Blogs
Social media
Payroll inserts and pay stub messages
Benefits hotlines
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Communicating Employee Benefits
Information (cont.)
• Pointers for designing benefits information




Avoid complex language when describing benefits.
Clear, concise, and understandable language is
a must.
Explain the purpose behind a benefit and the value it
offers employees. Be up front about the pros and cons
of different benefit plans.
Use graphics whenever possible to make the
information understandable at a glance.
Provide numerous examples to illustrate how a benefit
choice might affect different types of employees,
depending upon their personal circumstances.
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Employee Benefits Required by Law
• Legally required employee benefits






Social Security Insurance
Unemployment Insurance
Workers’ Compensation Insurance
COBRA Insurance
Benefits Provided by the Patient Protection and
Affordable Care Act (PPACA)
Benefits Provided under the Family and Medical
Leave Act (FMLA)
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Employee Benefits Required by Law (cont.)
Social Security Act (1935)
A payroll tax on both employees and employers
Old Age and Survivors Insurance (OASI)
Provides long-term disability benefits
Must work 40 quarters in an occupation
covered by Act to qualify for benefits
Benefits paid are determined by an
individual’s life-time earnings
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Unemployment Insurance
• Federal payroll tax on employer and employee

Tax is refunded to states which individually administer
unemployment compensation programs.

Benefit weekly amounts vary from state to state.

Involuntarily unemployed workers were originally
eligible for up to 26 weeks of unemployment benefits.

Benefit is based on an employee’s recent earnings.

Unemployed workers are required to seek
“suitable employment.”
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Workers’ Compensation
• Federal- or state-mandated insurance



Funded by an employer payroll tax
Provided to workers to defray the loss of income and
cost of treatment due to work-related injuries or illness.
Factors influencing the employer’s insurance rate:
– The risk of injury or illness for an occupation
– Each state’s level of benefits for injuries sustained by
employees varies.
– The company’s frequency and severity of employee
injuries (the company’s experience rating).
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Workers’ Compensation (cont.)
Injury is a cost of doing business
Covers Employers
Covers Employees
Assumed employment risk
Cost of injury
Negligent co-workers
Temporary, Permanent,
Partial or Total Disability
Contributory negligence
Survivor’s Insurance
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COBRA and HIPAA
• The Consolidated Omnibus Budget Reconciliation Act
of 1986 (COBRA)


Mandates that employers make health coverage—at the same
rate the employer would pay—available to employees, their
spouses, and their dependents on termination of employment,
death, or divorce.
The coverage must be offered for between 18 and 36 months
depending on qualifying guidelines.
• Health Insurance Portability and Accountability Act
(HIPAA) of 1996

Grants employees the right to switch medical insurance between
former and present employers with no gap in coverage regardless
of preexisting health condition once the employees have earned
twelve service credits at the former employee
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The Family and Medical Leave Act (FMLA)
• Provisions:

An employer must grant an eligible employee up to 12
workweeks of unpaid leave in a 12-month period for
the following reasons:
–
–
–
–


Birth of and care for a newborn child.
Adoption or foster care placement of a child.
Care for an immediate family member
Serious health condition of the employee.
Employees retain their health benefits and have the
right to return to their job or an “equivalent job.”
Those caring for service members are entitled to up to
26 weeks of leave
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Major Discretionary Employee Benefits
• Health Care Benefits







Medical Benefits
Dental, optical, and Mental Health Benefits
Value-Based Health Initiatives
Wellness Programs
Disease Management Programs
Employee Assistance Programs
Counseling Services
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Healthcare Cost Containment
• Health Maintenance Organizations (HMOs)

Organizations of physicians and health-care
professionals that provide a wide range of services to
subscribers and dependents on a prepaid basis.
• Preferred Provider Organization (PPO)


Is a group of physicians establish an organization that
guarantees lower healthcare costs to the employer.
Allows employees to select their doctor of choice from
a list of participating physicians.
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Going Abroad for Medical Procedures
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Payment for Time Not Worked
• Payment for Time Not Worked






Vacations with Pay
Paid Holidays
Sick Leave
Sabbaticals
Severance Pay
Supplemental Unemployment Benefits
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Federally Recognized Holidays in the U.S.
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Other Major Discretionary Benefits
• Life Insurance
• Long-Term Care Insurance
• Retirement Programs

Preretirement and Phased Retirement Programs
• Pension Plans



401(k) Savings Plans
Cash Balance Pension Plans
Federal Regulation of Plans
• Domestic Partner Benefits
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Types of Pension Plans
• Contributory plan
– Contributions to a
plan are made jointly
by employees and
employers.
• Defined-benefit plan
– The amount an
employee is to receive
upon retirement is
specifically set forth.
• Noncontributory plan
– Contributions to a
plan are made solely
by the employer.
• Defined-contribution
plan
– The basis (amount)
an employer
contributes to the
pension fund is
specified.
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Types of Pension Plans (cont.)
• 401(k) Savings Plans
– A tax-deferred
savings plan.
– Employees save
through payroll
deductions.
– Employers may
match a portion of
employee savings.
• Cash-Balance Pension
Plans
– Employer contributes a
percentage of employee’s
pay each year.
– Account balance earns
interest each year.
– Experts predict it will
replace traditional pension
plans.
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Federal Regulation of Pension Plans
• Employee Retirement Income Security Act
(ERISA)

Private pension plans are subject to ERISA
regulations that provides standards and
controls for pension plans:
– Plans must comply IRS tax standards to qualify.
– Plans must meet actuarial standards to qualify for
Pension Benefit Guarantee (PBGC) insurance.
– Plans must meet Department of Labor standards
for treatment of plan participants.
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Work-Life Balance and Other Benefits
• Employee Assistance Programs (EAPs)

Services provided by employers to help workers cope
with a wide variety of problems that interfere with the
way they perform their jobs.
– Typically provide diagnosis, counseling, and referral for advice
or treatment for problems related to alcohol or drug abuse,
emotional difficulties, and financial or family difficulties.
• Child and Elder Care

Care provided to a child or an elderly relative by an
employee who remains actively at work.
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Federal Regulation of Pension Plans (cont.)
• Vesting


A guarantee of accrued benefits to participants at
retirement age, regardless of their employment status
at that time.
ERISA requires that plans must provide that
employees will have vested rights in their accrued
benefits after certain minimum-years-of-service
requirements have been met.
• Pension Plans and Underfunding

Inadequate funds to cover retirement obligations along
with pension plan failures could overwhelm the PBGC.
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Other Benefits
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Key Terms
•
•
•
•
•
•
•
•
•
•
backup care program
contributory plan
defined benefit plan
defined contribution plan
disease management
programs
elder care
employee assistance program
(EAP)
flexible benefits plans
(cafeteria
plans)
health maintenance
organization (HMO)
• high-deductible health
insurance plan (HDHP)
• noncontributory plan
• phased retirement
• preferred provider
organization (PPO)
• sabbatical
• severance pay
• supplemental
unemployment
• benefits (SUBs)
• vesting
• wellness programs
• workers’ compensation
insurance
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Chapter 11 - Learning Outcomes
Learning Outcome Statements
Related Outcomes from Body of the Text
1
Explain why companies offer their employee’s
benefits and are concerned about their costs.
If your employer offered you money instead of benefits, would you take it? Do you see any
drawbacks to doing so?
2
Describe the elements that have to be considered
when developing a strategic benefits plan.
If you were a small business owner, how would you decide what benefits to offer your
employees?
3
Identify and explain the employee benefits required
by law.
4
Discuss the strategies companies utilize to control
the costs of employee health care programs.
To lower costs, some companies fund their own health care programs (self-insure) rather than
use outside insurance companies. What do you think the drawbacks of self-insuring are for
employers? What types of organizations are likely to self-insure?
5
Describe benefits that involve payment for time not
worked.
In most countries around the world, employees get many more paid days off than they do in
the United States. In your opinion, should employers have to offer U.S. workers more time off?
Or would this be an additional burden that could hurt the competitiveness of these firms?
6
Discuss the recent trends in retirement policies and
programs.
Did you know there is a mandatory retirement age for airline pilots? Research some of the
other jobs in the United States for which there are mandatory retirement ages.
7
Describe the different types of pension plans
employers offer and the regulations related to them.
8
Describe the types of work/life benefits that
employers may provide.
Some businesspeople and economists believe that U.S. companies are at a disadvantage
because they pay for many worker benefits that in other countries are provided by the
government. Do you think the U.S. is at a disadvantage because of this? What advantages
does the U.S. system offer companies?
The text mentions several kinds of pension plans. As an employee, which type would
you prefer?
What types of benefits that employers do not traditionally offer would most attract you as an
employee? Discuss your preferences with classmates to see if their answers are similar or
different than yours. Make a list of the benefits discussed and have everyone vote for the three
benefits they would most want on the list.
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