Employee Benefits Chapter 15

1. Employee Benefits Chapter 15

2. Chapter Outline • What Are Employee Benefits? • Growth in Employee Benefits • Legally Required Benefits • Retirement-Related Benefits • Insurance-Related Benefits • Payment for Time Not Worked • Other Benefits • Employee Preferences among Benefits • Why are Flexible Plans Attractive • Some Problems with Flexible Plans

3. Employee Benefits • Definition: Rewards that employees receive for being members of the organization and for their positions in the organization. • Usually not related to employee performance (unlike wages, salaries ,and incentives ) • Most benefits apply to all employees of the organization, however ,Some are reserved solely for executives • Certain benefits are often extended to spouses (ex. health insurance )

4. Growth in Employee Benefits • Prior to passage of Social Security Act in 1935, employee benefits were not widespread. Social Security Act • Mandated certain benefits • Greatly increased general public’s awareness of employee benefits • Unions had grown in strength and had begun to demand more benefits in their contracts • 1930s are generally viewed as birth years for employee benefits • Productivity increased throughout and after World War II, and more employee benefits came into existence

5. What are Employee Benefits? • Can be grouped into five major categories, which are not all mutually exclusive: • Legally required • Retirement related • Insurance related • Payment for time not worked • Other

6. Examples of Common Benefits, by Major Category

7. Legally Required Benefits • The law mandates certain benefits • Social security • Unemployment compensation benefits • Workers’ compensation benefits

8. Social Security • Definition : Federally administered insurance system designed to provide Funds upon retirement or disability or both as well as Hospital and medical reimbursement to people who have reached retirement age. • Under current federal laws, both employer and employee must pay into the system ,and a Certain percentage of employee’s salary is paid up to a maximum limit

9. Self-employed persons – Required to contribute to social security at a rate Higher than that paid by a typical employee, but lower than combined percentage paid by both employer and employee. • Payments distributed under social security can be grouped into three major categories: • Retirement benefits • Disability benefits • Health insurance

10. Unemployment Compensation Definition : Form of insurance designed to provide funds to employees who have lost their jobs and are seeking other jobs.

11. Workers’ Compensation • Definition :Form of insurance that protects employees from loss of income and extra expenses associated with job-related injuries or illness. • Since 1955, several states have allowed workers’ compensation payments for job-related cases of • Anxiety • Depression • Certain mental disorders

12. Retirement-Related Benefits • Retirement and pension plans, which provide a source of income to retired people, and represent money paid for past services.

13. Insurance-Related Benefits • Health Insurance • Many health insurance plans cover • Normal hospitalization and outpatient doctor bills • Prescription drugs • Dental, eye, and mental health care • Some plans pay entire cost of health insurance for both employees and dependents • Some plans require employee to pay part of the cost for dependents only • Some plans require employee to pay part of cost for both

14. Dental Insurance • One of the fastest-growing types of employee benefits in recent years • Life Insurance • Commonly available from organizations • When provided for all employees it is called Group life insurance .

15. Accident and Disability Insurance • Many organizations provide some form of accident or disability insurance, or both • Accident insurance • Designed to provide funds for a limited period of time, usually up to 16 weeks • Amount of benefit is often some percentage of accident victim’s weekly salary • Disability insurance • Designed to protect employee who experiences a long-term or permanent disability • Normally, a one- to six-month waiting period is required following disability before employee becomes eligible for benefits • As with accident insurance, disability insurance benefits are usually calculated as a percentage of salary

16. Payment for Time Not Worked • Standard practice for organizations to pay employees for certain times when they do not work • Activities that represent times not worked (almost always taken for granted as part of the job) include • Rest periods • Lunch breaks • Recognized holidays • Vacations • Days missed because of sickness and funerals

17. Other Benefits • Organizations may offer a wide range of additional benefits, including • Food services • Exercise facilities • Financial and legal advice • Counseling services • Educational and recreational programs • Day care services • Adoption assistance • Purchase discounts

18. Employee Preferences among Benefits • Providing benefits that employees most prefer garners maximum return in terms of • Motivation • Satisfaction • Low turnover • Good relations with unions • Organizations traditionally have done little to ensure this • Organizations have offered Uniform benefit packages selected by human resource department and top management.

19. Employee Preferences among Benefits • With the increasing diversity of today’s workforce, there really is no such thing as a” typical employee”. • given that the workforce is far from homogeneous, • Factors that influence benefits preference are • Sex • Age • Marital status • Number of dependents • Years of service • Job title

20. Why are Flexible Plans Attractive? • Flexible benefits plan: employee select from several options how they want their compensation and benefits distributed . • Why it is attractive ? 1-Employee benefits are a very significant component of overall compensation 2-Flexible benefits can allow employers to limit their contributions without alienating employees, since Options give employees some control over distribution of benefits 3-Change in lifestyles ,causing Employees reevaluate need for certain traditional benefits 4-Benefits can be useful in recruiting and retaining employees

21. Some Problems with Flexible Plans • A flexible plan requires more effort to administer • Employees may not choose those benefits that are in their own best interests