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mod_13.pptxManaging Employee Benefits
CHAPTER 13
14e
Human Resource
Management
Robert L. Mathis | John H. Jackson | Sean R. Valentine
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Learning Objectives
Define a benefit and identify four strategic benefits considerations
Analyze the differences between employee benefits in the U.S. compared to those in other countries
Distinguish between mandated and voluntary benefits and list three examples of each
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Learning Objectives
Discuss the trend in retirement plans and compare defined benefit and defined contribution plans
Explain the importance of managing the costs of health benefits and identify some methods of doing so
Describe the growth of financial, family-oriented, and time-off benefits and their importance to many employees
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits
Indirect reward given to an employee or group of employees for organizational membership
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Employer Provided Benefits
Absorb social costs for health care and retirement
Average over 30% to 40% of total payroll costs
Figure 13.1 - Employer Compensation and Benefits Costs Per Hour
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits and HR Strategy
Benefits approach adopted as part of total rewards depends on many factors
Size of the organization
Workforce competition
Organizational life cycle
Employee demographics
Corporate strategic approach
Employees’ life stages
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits as a Competitive Advantage
Benefits are offered to:
Aid recruiting and retention
Improve organizational performance
Meet legal requirements
Reinforce the company philosophy of social and corporate citizenship
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
8
Benefits as a Competitive Advantage
Benefits can influence employees’ decisions about:
Which employer to work for
Looking for another job
Retirement age
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Tax-Favored Status of Benefits
Most benefits are not taxed as income to employees
Except for paid time off
Gross-up: To increase the net amount of what the employee receives to include the taxes owed on the amount
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Global Benefits
Benefits differ across the globe
Total hourly compensation
Retirement and health insurance plans
Amount of paid leave and vacation time
Paid time off for childbirth and medical disability
Paid sick leave policies
In many countries, employers and employees are taxed heavily to pay into government funds
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Global Benefits
Multinational companies must determine how to compensate both host-country nationals and expatriates
So that all employees will feel that they are being treated fairly
Decisions about compensation impacts global attraction and retention of employees for international employers
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Public-Sector Benefits
Public sector workers
Enjoy more benefits than those in the private sector
Belong to labor unions at a much higher rate than nongovernment workers
Their union contracts include:
Free health care
Traditional defined benefit pension plans
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits Management Components
Benefits design
Benefits administration
Technology administration
Benefits measurement
Cost control efforts
Communication to employees
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Figure 13.4 - Benefit Design Decisions
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Flexible Benefits Plan
Allows employees to select the benefits they prefer from groups of benefits established by the employer
Challenges faced when providing choices
Employees may choose an inappropriate benefits package
Younger employees may decide not to participate in the retirement plan
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Flexible Benefits Plan
Adverse selection: Only higher-risk employees select and use certain benefits
Higher administrative costs for the organization
Part time employees:
Are most likely to receive paid time off and retirement benefits
Are least likely to receive health and life insurance benefits
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Domestic Partner Benefits
In states where gay marriage is legal:
Companies must treat same-sex partners in the same manner as traditional married couples
Same-sex domestic partners are:
Entitled to coverage on company medical insurance plans
To be recognized under retirement plans as a surviving spouse
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Domestic Partner Benefits
Offering same-sex domestic partner benefits shows that organization:
Is compassionate, progressive, and respectful of all employees
Can be a competitive advantage in the search for talent
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Older Workers Benefit Needs
Benefits attractive to older workers
Modified work schedules
Part-time benefits
Simplified seasonal travel and wellness programs
Annual financial planning counseling
Phased retirement programs - Allow employees to:
Work part time
Withdraw some retirement funds at the same time
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits Administration and Technology
Open enrollment: Time when employees can change their participation level in various benefit plans and switch between benefit options
Outsourcing benefits administration
Many organizations must make coordinated efforts to administer benefits programs
Third-party administrators (TPA): Vendor that provides administrative services to an organization
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits Administration and Technology
Technology and employee self-service
Internet and computer-based systems are being used to:
Communicate benefits information
Conduct employee benefits surveys
Facilitate benefits administration
Decrease expenses
Increase positive communication
Effectively connect people across many HR functions
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits Administration and Technology
Self-service: Technology that allows employees to:
Change their benefits choices
Track their benefits balances
Submit questions to HR staff members and external benefits providers
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Figure 13.6 - Frequently Used Benefits Metrics
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Benefits Cost Control
Reducing or dropping benefits
Cost sharing with employees
Sponsoring wellness programs
Fostering employee health education
Changing prescription drug programs
Consolidating of benefits packages
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits Communication
Employers create a clear communication strategy using:
Benefits website
Social media
Information to be communicated:
Value of the plans offered
Reasons changes have to be made
Fundamental costs of the plan
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Benefits Communication
Benefits statement - Personal statement of benefits that translates benefits into dollar amounts
Give the employee a snapshot of the total compensation they receive
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Types of Benefits
Cafeteria benefit plan: Employees are given a budget and can purchase the bundle of benefits most important to them:
From the menu of options offered by the employer
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Figure 13.7 - Types of Benefits
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Figure 13.8 - How the Typical Benefits Dollar is Spent
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Legally Required Benefits
Social Security Act of 1935
Provides old age, survivor’s, disability, and retirement benefits
Federal payroll tax (6.2%) on both the employer and the employee
Medicare taxes are 2.9%
Benefit payments are based on an employee’s lifetime earnings
Administered by the social security administration
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Workers’ Compensation
Security benefits provided to persons who are injured on the job
Concepts that balance the rights of employers and employees under workers’ compensation:
No-fault insurance: Injured workers receive benefits even if the accident was their fault
Exclusive remedy: Workers’ compensation benefits are the only benefits injured workers may receive to compensate for a work-related injury
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Figure 13.10 - The Three Legged Stool of Retirement Income
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Retirement Plan Concepts
Vesting: Right of employees to receive certain benefits from their pension plans
No pension rights accrue if they have not been employed long enough to be vested
Portability: A pension plan feature that allows employees to move their pension benefits from one employer to another
Once workers are vested they can transfer their fund balances to other retirement plans
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Retirement Plan
Retirement program established and funded by the employer and employees
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Types of Retirement Plans
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Figure 13.11 - Comparison of Defined Benefit and Defined Contribution Retirement Plans
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Common Defined Contribution Plans
Profit-sharing plans
Employee stock ownership plans (ESOPs)
401(k) plans: Agreement in which a percentage of an employee’s pay is withheld and invested in a tax-deferred account
Auto-enrollment: Employee contributions to a 401(k) plan are started automatically when an employee is eligible to join the plan
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Legal Requirements of Retirement Benefits
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Figure 13.12 - Key Provisions of the Affordable Care Act
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Controlling Health Care Benefit Costs
Increasing deductibles and copayments
Instituting high-deductible plans
Increasing employee contributions
Using managed care
Limiting family coverage; excluding spouses
Switching to consumer-driven health plans
Increasing wellness efforts
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Increasing Employee Contributions
Types of programs that attempt to reduce health care costs paid by employers
Managed care: Approaches that monitor and reduce medical costs through restrictions and market system alternatives
Spousal exclusions - Limit access to a company’s health plan when employee’s spouse works for another company that offers health insurance
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Consumer-Driven Health Plans
Provides employer financial contributions to employees to help cover their health-related expenses
Gives employees ownership of their health care dollars
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Overview of COBRA Provisions
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Figure 13.13 - Timeline of COBRA Notification Requirements
Source: Adapted from https://www.goigoe.com/Employers/COBRATimelines.aspx
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Health Insurance Portability and Accountability Act (HIPAA) of 1996
Allows employees to switch their health insurance when they change employers
Regardless of pre-existing health conditions
Requires employers to:
Provide privacy notices to employees
Not disclose of health information without authorization
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Figure 13.14 - Common Types of Financial Benefits
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Insurance Benefits
Common Types of Insurance Benefits
Life insurance
Typical level of coverage is one and one-half or two times an employee’s annual salary
Disability insurance
Provide continuing income protection for employees who become disabled and are unable to work
Long-term care insurance
Allow employees to purchase insurance to cover costs for long-term health care in a nursing home, an assisted-living facility, or at home
Legal insurance
Employees (or employers) pay a flat fee for a fixed number of hours of legal assistance each month
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Family Medical Leave Act (FMLA)
Coverage
Employers with 50 or more employees who live within 75 miles of the workplace
Employees who have worked at least 12 months and 1,250 hours in the previous year
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Family Medical Leave Act (FMLA)
FMLA leave provisions
Maximum of 12 weeks of unpaid, job-protected leave during any 12-month period for the following situations:
Childbirth and new born care within one year of birth
Adoption or foster care placement of a child
Caring for a spouse, child, or parent with a serious health condition
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
Family Medical Leave Act (FMLA)
Serious health condition of the employee: Health condition requiring in-patient, hospital, hospice, or residential medical care or continuing physician care
Military family members who must handle the affairs for military members called to active duty
26 weeks leave to care for a military service member injured while on active duty
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Family Medical Leave Act (FMLA)
Impact of the FMLA
Significant percentage of employees have taken family and medical leave
Employers have to cover the workload for employees on family leave
Placed significant demands on HR professionals to ensure compliance with FMLA provisions
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Figure 13.15 - Guidelines Regarding FMLA Administration
Source: http://www.dol.gov/whd/fmla
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Family-Care Benefits
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Paid Time-Off and Other Benefits
© 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.
