Benefits

1. Benefits • Importance of indirect compensation • Factors which influence indirect compensation • Major types of employee benefits • Costs and containment of benefits • Administrative issues

2. Benefits Goals • Attract and retain good employees • Help employees meet security needs • Motivate employees • Reduce operating costs • Enhance corporate image

3. Benefit Planning • Employee objectives: Demographics, FMLA • Organizational objectives: Strategic & Financial • Union objectives • Legal obligations: ERISA • Regulations: Include employees over 21, working 1000 hrs. /yr, funding and fiduciary liability • PBGA

4. Cost Containment Strategies • Raise deductibles and co-payments • Managed care (HMO, PPO) • Limit services • Second opinion • Cap on coverage • Self-insurance

5. External Influences • Wage controls • Expansion of social security • Union bargaining • Federal tax policies • Social legislation • Inflation • Competition

6. Internal Influences • Employee wants: Demographics and economic class of workers • Management needs: Containing costs • Business objectives: Strategic considerations

7. Major Categories of Benefits • Pay for time not worked • Security plans • Health plans • Employee services

8. Pay for Time not Worked • Rest periods, lunch breaks, coffee breaks • Sick leave • Leave of absence, Family Leave - Mandated • Holiday and vacations

9. Security Plans • Retirement plans • Unemployment insurance • Severance pay • Life insurance • Disability pay

10. Retirement Plans • Defined benefit : Benefits vary by age and length of service according to a formula. Set amount received. Funded mostly by employer • Defined contribution: Each employee has an account to which personal and/or corporate contributions are made. Funded jointly

11. Defined Contribution Plans • 401K • ESOP • Matched savings • Simplified employment pension

12. Defined benefits 20 % of new plans Must meet ERISA control Guaranteed level of income but may not be enough to maintain standard of living May be underfunded, but contributions are tax deductible to employer Defined contributions 80 % of new plans No set funding requirement No set income, based on profitability of investments Value can go down Less costly for employer, but contributions go up with income Comparison of Plans

13. Social Security • Mandated • Cost is 7.65 % of pay for employee and employer (including medicare) • Currently on first $65,000 of pay for social security, no limit on medicare • An income supplement not a pension plan • Pay as you go puts future stress on system

14. Other Security Plans • Unemployment insurance - Mandated • Severance pay • Life insurance • Disability

15. Health benefits • Hospitalization • Physician services in hospital • Major medical • HMOs, PPOs • Workmen’s compensation: Mandated • Prescription, eye glasses, dental plans • Medical spending accounts • Medical savings accounts

16. Employee Services • Subsidized food (cafeterias) • Subsidized child care • Tuition aid • Credit unions

17. Administration • EEO issues • Costing benefits:Annual cost for all, Cost per employee, Percent of payroll, cents/hr. • Cafeteria plans • Communicating benefits • Regulations: Civil rights, Age discrimination, Fiduciary

18. Backwards & Forwards • Summing up: We’ve covered benefits from strategy to a menu of security and health benefits to issues in the administration of benefit programs. With benefits being a substantial part of the cost of labor, it is important for organizations to manage and communicate the programs well. • Looking ahead: Next time we’ll consider employee motivational strategies available to management and human resources.