Employee Benefits

1. Employee Benefits The Challenges of Human Resources Management

2. Chapter ObjectivesAfter studying this chapter, you should be able to Explain why companies offer their employee’s benefits and are concerned about their costs. Describe the elements that have to be considered when developing a strategic benefits plan. Identify and explain the employee benefits required by law. Discuss the strategies companies utilize to control the costs of employee health care programs. Describe benefits that involve payment for time not worked. Discuss the recent trends in retirement policies and programs. Describe the different types of pension plans employers offer and the regulations related to them. Describe the types of work/life benefits that employers may provide. LEARNING OUTCOME 1 LEARNING OUTCOME 2 LEARNING OUTCOME 3 LEARNING OUTCOME 4 LEARNING OUTCOME 5 LEARNING OUTCOME 6 LEARNING OUTCOME 7 LEARNING OUTCOME 8

3. 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

4. Strategic Benefits Planning

5. Competitive Benefits Information Communicating Employee Benefits Information Allowing for Employee Involvement Flexible Benefits for a Diverse Workforce Administering Benefits Elements of a Successful Benefits Program

6. 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

7. 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

8. 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.

9. 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.

10. 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

11. 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.

12. 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)

13. 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

15. 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.”

16. 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).

17. Workers’ Compensation (cont.) Injury is a cost of doing business Covers Employers Covers Employees Assumed employment risk Cost of injury Temporary, Permanent, Partial or Total Disability Negligent co-workers Contributory negligence Survivor’s Insurance

18. 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

19. 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

20. 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

21. 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.

22. Going Abroad for Medical Procedures

24. Payment for Time Not Worked • Payment for Time Not Worked • Vacations with Pay • Paid Holidays • Sick Leave • Sabbaticals • Severance Pay • Supplemental Unemployment Benefits

25. Federally Recognized Holidays in the U.S.

26. 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

27. Contributory plan Contributions to a plan are made jointly by employees and employers. Noncontributory plan Contributions to a plan are made solely by the employer. Defined-benefit plan The amount an employee is to receive upon retirement is specifically set forth. Defined-contribution plan The basis (amount) an employer contributes to the pension fund is specified. Types of Pension Plans

28. 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. Types of Pension Plans (cont.)

29. 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.

30. 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.

31. 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.

32. Other Benefits

33. 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

34. Chapter 11 - Learning Outcomes