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BENEFITS AND SERVICES ADMINISTRATION

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  • 1. Benefits and Services Administration Prepared for: Assoc. Prof. Dr Roshidi Hassan Prepared by: Nur Aqilah Radzman (2012238784)
  • 2. OUTLINE  Early History  What is employee benefits & services?  What is Cafeteria Plan  Purpose of employee benefits & services  Categories  Mandated vs Non Mandated  Reason offering benefits  Act related to employee benefits & services  Effect on employees & organization  Managing an effective benefits programs
  • 3. Early History • Employee benefits have had a long history in the United States. • On 1794, the first recorded profit-sharing plan was set up by Albert Gallatin in his glassworks in Pennsylvania. • The first private pension plan was started in the United States by the American Express Company in 1875, and the first group annuity contract was issued in 1921 by the Metropolitan Life Insurance Company. Source: Hallman, Rosenbloom. et al., (1986)
  • 4. Early History • In 1910, the Montgomery Ward Company conceived of group life and accident insurance for its employees and the Company adopted the first group accident & sickness policy underwritten by the London Guarantee and Accident Company. • The first group life insurance policy is said to have been issued to the Pantasote Leather Company by the Equitable Life Assurance Society of the United States in 1911. Source: Hallman, Rosenbloom. et al., (1986)
  • 5. Early History Early History • Social Security Act of 1935 provided the framework for much of the American social insurance system which now provides an underlying layer of protection associated with many forms of employee benefits. Source: Hallman, Rosenbloom. et al., (1986)
  • 6. What is employee benefits and services? • Define as all employer provided rewards and services, other than wages or salaries arising from: Legally required social insurance payments Private insurance Cost of services like subsidized cafeterias, clothing allowances and etc. Source: Dorinda, D. & Terence, M. (2007)
  • 7. What is employee benefits and services? • Employee benefits are all forms of consideration given by an enterprise in exchange for service rendered by employees. • Post employment benefits include: – Retirement benefits e.g gratuity and pension – Other benefits e.g post employment life insurance and medical care Source: Accounting Standard, 15 (2010)
  • 8. What is employee benefits and services? • Refer to forms of non-monetary compensation offered to select employees. • Perk is not strictly necessary for the accomplishment of the employee’s duties Source: Raghuram G. R. et. al. (2011)
  • 9. What is employee benefits and services? • Employee benefits represent virtually any form of compensation provided:  in a form other than direct wages  paid for in whole or in part by the employer, even if provided by a third party Source:Bob M. & Brian H. K. (2011))
  • 10. What is employee benefits and services? • Employee benefits is defined as any form of compensation provided by the organization other than wages or salaries that are paid for in whole or in part by the employer. Source: SoonYew, J., Zaliha, H. et al. (2008)
  • 11. What is employee benefits and services? • Benefits can be defined as indirect financial and non-financial returns for continuous employment with an organization (Dessler, 2008). INDIRECT FINANCIAL COMPENSATION is called benefits and services.
  • 12. What is Cafeteria Plan? A cafeteria plan is a written benefit plan maintained by an employer for the benefit of its employees. The plan must allow employees to choose between two or more benefits consisting of cash (or a taxable benefit which is treated as cash) and certain "qualified benefits.“ (Internal Revenue Service Office) Is an employees benefits plan which allows employees to choose from a list of options, much like they might choose from a cafeteria menu (Thierry and Croonen, 2010)
  • 13. Is benefits & service administration COMPULSORY??   Source: Rodney, M., (2013)
  • 14. Who entitle for benefits & service administration??  All employees except domestic servant. (Travis, W. 2012)  Contract workers is entitle for maternity leave for 60 days.  Part time workers are entitle for EPF & SOCSO.  Benefits are not evenly spread among the workforce, some workers are more likely than others to have access to benefits.  Full-time workers, for example, have greater access to benefits than do part-time workers, and workers in large establishments usually have greater access to benefits than do those in small establishments. Source: Elka, J. (2005)
  • 15. Is benefits automatic given to employees ? • The Employment Act provides many forms of protection. Among the most significant would be : – Automatic entitlement to minimum benefits provided by the Act or existing benefits, whichever is more favorable – Minimum notice period for termination or wages in lieu of notice – Minimum days of work for certain industry – Maternity benefits – Leave, holiday, rest day and payments – Termination and lay-off benefits – Right to seek intervention of the Labour Office for failure of employer to uphold agreed terms of employment . Source: Employment Act, 1955
  • 16. Employee benefits also known as: Fringe benefits Cafeteria plan Perks Contribution plans
  • 17. Purpose of employee benefits? Employee’s perspectives To provide an appropriate standard of living for the employee and his or her family based on the employee’s relative position with and responsibilities to the employer To provide protection against medical expenses for the employee and his or her dependents. To recognise the employee’s performance, perhaps through some kind of incentive compensation To provide protection against loss of income in the event of the employee’s premature death, disability, or unemployment To provide retirement income (and also to continue certain other benefits, such as medical expense and perhaps death benefits, during retirement) Source: Hallman, Rosenbloom, 1986
  • 18. Purpose of employee benefits? Employer’s perspectives Source: Hallman, Rosenbloom, 1986
  • 19. Source:Bob M. & Brian H. K. (2004)
  • 20. Mandated vs. Non Mandated Benefits Non- Mandated Benefits  Annual Leave.  Gazette Public Holidays.  Maternity Leave.  Medical Leave.  Termination & LayOff Benefits.  Long Service Payment.  Housing allowances.  Car allowances.  Medical insurances.  Bonus.  Commission.  Retirement benefits. Source: Malaysia payroll service report, (2009)
  • 21. Mandatory Benefits • Define as types of employee benefits that are mandated by law. • Mandated Benefits Programs: – Unemployment Insurance – Social Security – Workers’ Compensation Source: John M. Ivancevich, (2010)
  • 22. • Unemployment Insurance  Unemployment insurance is compensation provided to workers who are unemployed through no fault of their own. Unemployment provides monetary payments for a specific period of time or until the worker finds a new job.  was set up in United States as part of the Social Security Act of 1935. Source: John M. Ivancevich, (2010)
  • 23.  Unemployment Insurance was designed with several objectives: o to provide periodic cash income to workers during short periods of involuntary unemployment o to help the unemployed find jobs o to encourage employers to stabilize employment o to stabilize labor supply Source: John M. Ivancevich, (2010)
  • 24.  To be eligible for compensation, the employee must have worked a minimum number of weeks, be without a job, & be willing to accept a suitable position offered through a state Unemployment Compensation Commission.  Before benefits are paid, the reason for being unemployed must be assessed.  If voluntary quitting a job can be disqualified
  • 25.  was established under the Old-Age, Survivors and Disability Insurance program  the goal was to provide income to retired people to supplement savings, private pensions and part time work.  the employee & employer were to pay taxes that would cover the retirement payments each employee would later receive in a selffunding insurance program.
  • 26.  SOCSO is a social security scheme for employees. Under the scheme, employees are protected against industrial accident including accident occurred while working, occupational diseases, invalidity or death due to any cause.  paid by the employers & employees
  • 27.  how much to be paid is calculated on the average monthly wage.  if employee dies, a family with children under 18 receives survivor benefits, regardless of the employee’s age.  The Social Security Organization provides social security protection by social insurance including medical and cash benefits, provision of artificial aids and rehabilitation to employees to reduce the sufferings and to provide financial guarantees and protection to the family.
  • 28. • The Employees Social Security Act 1969 covers all workers who earn less than RM3000.00 • This means that all employees under a contract of service or apprenticeship and earning less than RM3,000 per month must compulsorily register and contribute to SOCSO regardless of the employment status whether it is permanent, temporary or casual in nature
  • 29. • Those who are not eligible for SOCSO protections are stated below: – Government servants WILLCOVERED BY PENSION PLAN 1980 – Foreign employers – Self-employed persons – Sole proprietors & Partnership – Domestic servants or spouse
  • 30. • Employees are compulsorily register and contribute to SOCSO regardless of the employment status whether it is permanent, temporary or casual in nature. • The exception is foreign workers who are no longer protected by SOCSO and are protected under WCA 1952.
  • 31. How do we report an accident and what are the documents needed to make a claim? • For accidents at the work place, the employer has to notify SOCSO by filling in the Accident Report (Form 21) and submit a claim form (Form 10), punch cards or attendance records, medical certificate and a copy of the identity card to the SOCSO Office. If the accident occurs while commuting to and from work, these documents must be accompanied by a police report and sketch map of the route taken at the time of accident.
  • 32. • It is compulsory for the employer and employees to contribute toward EPF and that such contributions are payable to the employees in full on reaching the age of 55 years. Effective from 2008, the employer is liable to contribute to EPF for employees who have attained the age of 55 years and above at revised rate. • The employer & employee have to contribute at the prevailing rates set out in the Third Schedule of the EPF Act 1991.
  • 33. • The current rates of contribution are as follow:Share Division Until 55 years After 55 years until 75 years Employer Share 12% 6% Employee’s Share 11% 5.5% Total 23% 11.5% Source: Malaysia payroll service report, (2009)
  • 34.  Employees who are injured or become ill on the job are covered by state workers' compensation laws.  employers pay the entire cost of workers’ compensation insurance.  the cost of premiums is tied directly to each employer’s past experience with job-related accidents & illnesses.  Benefits range from 60% – 70% of the average weekly wage.
  • 35. An employee shall be entitled to paid annual leave as follows: 1. 8 days for every 12 months of continuous service if he has been employed by the same employer for a period of less than 2 years. 2. 12 days for every 12 months of continuous service if he has been employed by the same employer for a period of 2 years or more but less than 5 years. 3. 16 days for every 12 months of continuous service if he has been employed by the same employer for a period of 5 years or more. 4. where an employee has not completed 12 months of continuous service with the same employer, his entitlement to paid annual leave shall be proportioned to the number of completed months of service. Source: Employment Act 1955 (Act 265)
  • 36. Annual Leave Less than two years of service 8 days Two or more but less than five years of service 12 days Over five years of service 16 days Source: Employment Act 1955 (Act 265)
  • 37.  Every employee is entitled to 11 out of any of the following gazetted public holidays and any day declared as a public holiday by the Federal or State Government under section 8 of the Holidays Act 1951 in any one calendar year: Federal Public Holiday • • • • • • • • • • • Hari Raya Puasa Chinese New Year Workers’ Day Wesak Day Birthday of YDPA Hari Raya Haji Awal Muharram National Day Birthday of Prophet Muhammad Deepavali Source: section 8 of the Holiday Act 1951 Christmas Day
  • 38.  State Public Holidays • • • • • • • • • New Year’s Day Federal Territory Day Thaipusam Israk & Mikraj Nuzul Quran Good Friday Pesta Keamatan Hari Dayak Birthday of State’s Sultans / Rulers  Compulsory gazetted Public Holiday • • • • • • National Day Birthday of YDP Agong Birthday of Sultans/ Head of State or Federal Territory Day Workers’ Day Labor Day Malaysian Day Source: section 8 of the Holiday Act 1951
  • 39.  If any of the chosen gazetted public holidays falls within the period during which the employee is absent due to sick leave, annual leave, temporary disablement under the Workmen’s Compensation Act 1952 or under the Employees’ Social Securities Act 1969 or maternity leave, the employee is entitled to another day as a paid holiday in substitution for such public holiday.
  • 40. Maternity Leave.  Every female employee shall be entitled to maternity leave for a period of not less than 60 consecutive days in respect of each confinement. Source: Employment Act 1955
  • 41. Medical Leave  An employee is entitled to paid sick leave only under the following circumstances: – he has obtained a certificate from a registered medical practitioner duly appointed by his employer; or – he has obtained a certificate from a dental surgeon; or – if no such medical practitioner is appointed, or the services of such a practitioner are not obtainable within a reasonable time or distance, then other registered medical practitioners or government medical officers will be accepted; and – he has informed or has attempted to inform the employer of his sick leave within 48 hours of the commencement of the sickness.
  • 42. Medical Leave The number of days of paid sick leave which an employee is entitled to in each calendar year is as follows:  Less than 2 years – 14 days 2 years but less than 5 years – 18 days 5 years or more – 22 days  If hospitalization is necessary, the amount of paid sick leave can be extended by up to 60 days per calendar year.
  • 43. Non Mandated Benefits • Also called as voluntary benefits/optional benefits • Consists: Employees Services & others Health Care Retirement Plans Paid Leave & On Job Paid Time Off Income Protection Source: Milkovich & Newman, 2008
  • 44. Retirement Plans • a plan for setting aside money to be spent after retirement. • Retirement plans covered by Employee Retirement Income Security Act (ERISA) • Pension Benefits consists: – Benefits pension plan – Contribution pension plan Source: Milkovich & Newman, 2008
  • 45. Defined Benefits Plans • Employer provides a specific pension level defined in term of : – Fixed dollar amount – Percentage of earnings amount that may vary with years of seniority • Employer finance this obligation by: o Following an actuarially determined benefits formula and o Making current payments that will yield the future pension benefit for a retiring employee Source: Milkovich, Newman, & Gerhart, (2011)
  • 46. Defined Benefits Plans Defined Benefits Plans • Determination of benefits level: – Average earnings at end of tenure (last 3 – 5 years) or – Average career earnings or – Fixed dollar amount not dependent on earning Source: Milkovich, Newman, & Gerhart, (2011)
  • 47. Defined Contribution Plans • Require specific contributions by employer • Final benefit received by employees is unknown • Dependent on investment success of plan manager • Include savings, profit sharing, and stock ownership plans Source: Milkovich, Newman, & Gerhart, (2011)
  • 48. Advantages of Pension Alternatives BENEFIT PENSION PLAN CONTRIBUTION PENSION PLAN Provides explicit benefit which is easily communicated Unknown benefit level is difficult to communicate Company absorbs risk associated with changes in inflation and interest rates which affect cost Employees assume these risks More favorable to long service employees More favorable to short-term employees Employer costs unknown Employer costs known up front Source: Milkovich, Newman, & Gerhart, (2011)
  • 49. Health Care • Traditionally, defined benefit healthcare plans were a very simple concept. Employers agreed to offer their employees a set dollar amount each year toward health insurance premiums.
  • 50. Income Protection • Pays a monthly benefit for the client if they are unable to work due to incapacity caused by illness or injury. • This benefit can be used in any way the client wishes, for example towards mortgage payments, medical payments, household payments, school fees and much more. • Disability Protection – Non occupational related – Short term – Long term
  • 51. Income Protection: Life Income Protection: Life Insurance Insurance • One of the most common employee benefits • 87% of medium and large companies offer life insurance • Most companies offer term policies – Value of one to two times an employee’s salary – Most plan premiums paid completely by employer – Varying amount of additional coverage often an option Source: Milkovich, Newman, & Gerhart, (2011)
  • 52. Paid Time off during working hours • Rest periods (thirty minutes in the five consecutive hours shall not break the continuity of that five consecutive hours; • • • • • Lunch periods Wash-up time Travel Clothes-change time Get-ready time
  • 53. Paid for Time Not Worked Paid for time Not Work • Paid vacations • Paid sick leave Paid sick leave per calendar year: Less than two years of service : 14 days Two or more but less than five years of service : 18 days Over five years of service : 22 days Where hospitalisation is necessary up to 60 days (inclusive of the : paid sick leave entitlement stated above)
  • 54. Employee Services • Is something of a catchall category of voluntary benefits, including all other benefits or services provided by employers. • Varied programs as cafeterias, sauna, gyms, free parking lots, commuter vans, ability to purchase company products at a discount, death, personal & financial counseling. Source: John M. Ivancevich, (2010)
  • 55. Stock Ownership Plans • Companies encourage employees to purchase company stock to increase their incentives to work, their satisfaction, the quality of their work, reduce absenteeism and turnover. • Allow for payroll deductions • Sometimes the company will agree to buy the stock back if the employee have a significant loss. • When employees become partners in their business, they work harder Source: John M. Ivancevich, (2010)
  • 56. Education Programs • Many organization support off the job general education for their employees. • PETRONAS offer Maryland International Programs in U.S. Source: John M. Ivancevich, (2010)
  • 57. Child Care • Each day, at least 5,000 parents fail to come to work or to find employment because they cannot find adequate & affordable child care. • Alternatives include flexible work hours, establishing workstations at home, offering list of available childcare facilities, & provide on site programs. • This will lead to absenteeism & turnover fall while job satisfaction increase. Source: John M. Ivancevich, (2010)
  • 58. Average Monthly Turnover Rate (June 2009- June 2010) NON EXECUTIVE EXECUTIVE Oil & Gas Industry 1.56% 0.87% Overall 1.97% 1.35% Source : Malaysian Employers Federation (MEF)
  • 59. Year 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013​ Average  Monthly  Recruitm ent Rate  (%) ​ Annual A verage 2.4 2.3 2.8 2.7 2.8 2.9 2.8 2.2 2.8 2.7 2.8 n.a.​ 1st Qtr 2.1 2.3 2.7 2.5 2.7 2.6 2.8 1.9 2.6 2.6 2.7 2.7​   2nd Qtr 2.5 2.2 3.0 2.8 2.9 3.3 3.2 2.1 2.9 2.8 2.9 3.0​   3rd Qtr 2.7 2.5 3.0 2.9 3.1 3.2 3.1 2.5 3.0 3.0 2.8 n.a.​   4th Qtr 2.2 2.4 2.5 2.6 2.6 2.7 2.2 2.4 2.6 2.6 2.6 n.a.​ Average  Monthly  Resignati on Rate  (%) ​   Annual Average 2.1 2.0 2.2 2.1 2.0 2.0 2.0 1.8 2.0 2.0 2.1 n.a.​   1st Qtr 2.0 2.2 2.3 2.1 2.0 2.0 2.0 1.8 2.0 2.0 2.1 2.1​   2nd Qtr 2.2 2.1 2.3 2.2 2.1 2.2 2.3 1.8 2.2 2.1 2.2 2.2​  3rd Qtr 2.2 2.0 2.2 2.1 2.0 2.1 2.0 1.8 2.1 2.1 2.1 n.a.​   4th Qtr 1.9 1.8 1.9 1.8 1.7 1.7 1.6 1.7 1.8 1.7 1.8 n.a.​
  • 60. • The turnover rate for non-executives is much higher than executives & this is linked to low employee commitment. • The employers desire to hop from one job to another seem to be the trend today. • 3 recent surveys conducted in U.S, Canada & Malaysia, it was reported that more than half would abondon their employers if offered comparable jobs elsewhere. Source : McShane,(2009)
  • 61. BENEFITS  Health insurance for you & family Vacation policy Death benefit Quality single or family housing in company community.  Personal effects shipment and excess baggage allowances.  Access to some of the finest social and recreational facilities in United Kingdom.  Free medical care in United Kingdom for you and your family for contract duration.  Excellent educational assistance benefits with family status contracts.  Life insurance Policy.  Maximum and efficient security both in work place and housing Community.  Phones: the employer will provide each employee with one (1) Landline and one (1) Mobile Telephone. This shall have a reasonable credit limit application per month.
  • 62. SHELL BENEFITS • Health Care Coverage • Nationwide coverage • Personal health coach • Dental • Free to choose any dental provider • Participants pay a percentage of the treatment cost (limited) • Dependent Care Account • Disability Account • Shell Sharesave Scheme • Car Parking • Recreation Facilities • Vision • annual comprehensive eye exam, and either lenses/frames or contact lens allowance. Reduced rates for additional contact lenses, glasses, Lasik surgery, and other vision services.
  • 63. SHELL BENEFITS • • • Flexi time Flexible spending account Market aligned levels of annual leave and maternity/paternity leave allowances. • Sports activities: Shell Sports Club, Shell Women’s Network, Shell African Network, Shell Disability Network & etc. • gym facilities, swimming pools, tennis courts, sailing and scuba diving. • Listening to our employees • online surveys, discussion forums or interactive webcasts. For example, we regularly conduct the online ‘Shell People Survey’ on a global basis. This gives everyone a chance to make suggestions on improving the work environment, developing policies or addressing areas of concern. Source: http://www.shell.com.my/
  • 64. DHL • • • • • BENEFITS Pensions Healthcare – Private medical insurance (PMI) offered to about 8,000 employees, with family cover added for certain job grades. – Cash plan available as voluntary benefit. Family-friendly benefits – Childcare vouchers available as voluntary benefit. – Ad-hoc flexible working. Cars – Company cars for business-need drivers. – Choice of cash allowance or car offered to status-perk drivers. Annual leave – 25 days for all employees (excluding public holidays).
  • 65. DHL • • • BENEFITS Group risk – Life assurance (four-times salary) offered to all employees. – Income protection for executives. – Life cover (for staff not in the pension scheme). – Sick pay, which increases with length of service. Staff with more than five years’ service entitled to 26 weeks on full pay, followed by 26 weeks on half pay. – Personal accident cover for all employees. Variable pay and bonuses – Bonuses available to about 8,000 employees, based on job grade. – Incentive stock options for senior executives (by invitation only). Other benefits – Retail discounts.
  • 66. Hewlett Packard BENEFITS • Medical Benefits • HP takes a regional approach to health care • Dental • HP flexible benefits include a choice of dental options that cover preventive and diagnostic, basic, and major services, as well as orthodontia • Most of the premiums are covered by HP • Vision • cover eye exams and eyeglasses or contact lenses • Life & Accident insurance • HP provides employee life and accident insurance coverage of one times your annual pay. • You can choose to purchase additional coverage for yourself, as well as your spouse and eligible children, at group rates.
  • 67. Hewlett Packard BENEFITS • • • • • • • • Short term & Long term disability Flexible spending account HP 401 (K) Benefits • a great foundation for building future financial security • reducing your current income tax bill. Retirement Medical Saving Account Annual Vacation up to 25 days (20 years of service) Vacation But Program Leave of Absence • Family and Medical (FMLA) Leave, Military Leave, parental leave, personal leave, bereavement leave, and jury duty leave Employee Stock Purchase Plan • contribute up to 10% of your eligible pay. • end of each six-month period, entitle to purchase HP shares at a 5% discount
  • 68. Hewlett Packard BENEFITS • • • • • • • Adoption Assistance Program • The Adoption Assistance Program offers financial support for eligible expenses if you’re adopting a child Volunteer opportunities Work/Life employee resource and referral services • How manage stress and work life changing Employee Programs • Credit Union • Employee Discount (from theme park tickets to hotels) • Employee purchase program Insurance Discounts Travel Assistance Program & Employee Assistance Program Equal Opportunities/Non-Discrimination
  • 69. Reason for offering benefits Source: Terry, P. (2009)
  • 70. Interest in & usage of VEBs
  • 71. WORKMEN’S COMPENSATION ACT 1952 • This Act provides for the compensation payment to an injured employee or worker arising out of and in the course of employment or contracting occupational disease. • This Act is administered by the Department of Labour and applies throughout Malaysia.
  • 72. The Compensation  Workmen's compensation is a compensation for injury to an employee or worker arising out of and in the course of employment that is paid to the worker or dependants.  The employer will have to purchase a workmen's compensation insurance for workmen's compensation claims by injured employees or workers.
  • 73. The Compensation • Malaysian workers are no longer covered under the Workmen's Compensation Act 1952 with effective from 1st July 1992. Local workers will be covered under the Employees Social Security Act 1969. • Only foreign workers are covered under this Act in respect of compensation for employment injury as well as nonemployment injury vide Workmen's Compensation (Foreign Worker's Scheme) (Insurance) Order 1993. • This Act applies to foreign workers – whose earnings are not more than RM500 per month and – all manual workers irrespective of the wage
  • 74. Foreign Worker Insured by Employer • Under the Foreign Worker's Scheme, an employer of foreign workers is responsible to pay an insurance premium of RM86 per year per worker. • An employer is not allowed to deduct the earnings of a worker for the payment of insurance premium. An employer found guilty of such action, shall be liable, on conviction to a fine of RM5,000 or to imprisonment for a 1 year term or to both.
  • 75. • There are 11 insurance companies being selected as insurer to issue insurance policy under the Foreign Worker's Scheme. • • • • • • • • • • Amanah General Insurance Berhad Arab Malaysian Assurance Berhad London & Pacific Insurance Company Berhad Mayban Assurance Berhad MNI Takaful Sdn. Bhd. Malaysia British Assurance Berhad Malaysian Assurance Alliance Berhad Malaysia National Insurance Berhad The Pacific Insurance Berhad Syarikat Takaful
  • 76. • An employer found guilty of not buying an insurance for workmen's compensation, shall be liable, on conviction to fine of RM20,000 or imprisonment for a term of 2 years or to both. • Each worker involved in an accident must inform the employer within 7 days from the date of such accident except in the even of fatal accident.
  • 77. • An employer must notify the nearest Department of Labour from the place of accident in writing. Such notice must be submitted within 10 days from the date of accident. • An employer shall ensure that all information is with full details and supporting documents are enclosed such as medical certificate or death certificate.
  • 78. Pension • What is pension? o Pension means money paid under given conditions to a person following retirement or to surviving dependants. • The Pensions Act 1980 which came into force on the 1st January 1976 is the governing act for pensions benefits in Malaysia. This Act provide for the administration of pensions, gratuities and other benefits for officers in the public service and their dependants. • Under the Pensions Act 1980, pension, gratuity or other benefit granted shall be charged on the Federal Consolidated Fund.
  • 79. • Pension does not include any cash award granted in lieu of accumulated vacation leave to an officer whose salary is not paid out of the Federal Consolidated Fund. • An officer refers to an officer of the public service or an employee of any statutory or local authority who prior to retirement or death, was service in Malaysia or in any of the territories which presently constitute Malaysia.
  • 80. • In Malaysia, officers on full-time employment in the public service under given condition are entitled to pension benefits. • Public service refers to : • the Judicial and Legal Service • the General Public Service of the Federal Government • the Police Force • the Railway Service • the Education Service the Joint Public Services common to the Federal Government and of one or more of the states • the Public service of each state • the Parliamentary service • such other service as the Yang di- Pertuan Agong may determine to be public service for the purposes of the Pensions Act 1980
  • 81. • Officers in the public service – who have opted or who are deemed to have opted for any New Scheme – who are or were appointed under any New Scheme – who by virtue of their option are bound by any New Scheme • temporary officers in the public service who were appointed prior to the 1st January 1976 and who were not given the option to opt for the New Scheme which came into force from that date are entitled for pension benefits.
  • 82. Who Is Deemed to Be A Pensionable Officer? • A permanent officer may be conferred the status of a pensionable officer if he has been confirmed in his present appointment and completed not less than 10 years reckonable service. • An officer who has already been emplaced or qualified to be emplaced on the pensionable establishment under the Pensions Ordinance 1951 prior to the 1st July 1977, the Pensions Ordinance 1963 of Sabah or the Pensions Ordinance of Sarawak prior to the 1st July 1978, as the case may be, shall be deemed to be pensionable officers.
  • 83. • A permanent and confirmed officer who dies in service, retires on medical ground or attains the age of 45 years for : – a woman officer – an officer of the fire service holding the rank of sub-officer and below – a police officer below the rank of Assistant Superintendent of Police – a prison officer below the rank of Superintendent – a male nurse of a mental hospital • before completing 10 years service shall also be deemed to be pensionable officer.
  • 84. EMPLOYEES PROVIDENT FUND (EPF) • Employees Provident Fund is a compulsory savings scheme in Malaysia. Its primary aim is to provide a measure of security for old age retirement to its members. It also provides supplementary benefits to members to utilize part of their savings for house ownership and other withdrawal schemes. • EPF is the abbreviation for Employees Provident Fund. Employees Provident Fund is commonly known in the Malay term as KWSP or Kumpulan Wang Simpanan Pekerja. • Employees Provident Fund Act 1991 is the act governing the Employees Provident Fund in Malaysia. This Act is administered by the Employees Provident Fund, Malaysia.
  • 85. • All employees in Malaysia who have reached the age of 16 and employed under a contract of service whether express or implied, and whether oral or in writing must be registered as a member of the Employees Provident Fund. • An employer will contribute 12% of the employee's wages and the employee contributes 11% of the monthly wages towards the employee's account.
  • 86. • Employers must register their employees with the EPF within 7 days of employment under law. • Under section 41(2) of the EPF Act 1991, an employer who contravenes the above shall be found guilty of an offence and shall be liable, on conviction to imprisonment for a term not exceeding 3 years or fine not exceeding RM10,000 or to both. • An employer shall register the company or firm with the EPF by submitting the KWSP 1 Form. This can be obtained from the nearest EPF branch office. • Thereafter, for each employee, the employee and the employer is required to complete the KWSP 3 (AHL) Form. Generally, an employee will also be required to submit the Nomination Form KWSP 4 (AHL) which is attached together with the KWSP 3 (AHL) Form.
  • 87. • Once the application is approved, the employee will be sent a Membership Card. • The EPF contribution by employer and employee shall commence on the first month of salary payment pursuant to section 45(2) of the EPF Act 1991.
  • 88. When Should Employer Pay Contribution to EPF • An employer shall before the end of the first week in the first month in which he is paying required paying contribution to the Employees Provident Fund. • An employer shall prepare and furnish a statement of wages to each employee. • An employer who fails to make contributions to EPF shall be guilty of an offense and shall be liable on conviction to imprisonment for a term not exceeding 3 years or to a fine not exceeding RM10,000 or to both.
  • 89. SOCSO • The Social Security Organization is an organization set up to administer, enforce and implement the Employees' Social Security Act, 1969 and the Employees' Social Security (General) Regulations 1971. • The Social Security Organization provides social security protection by social insurance including medical and cash benefits, provision of artificial aids and rehabilitation to employees to reduce the sufferings and to provide financial guarantees and protection to the family. • SOCSO is the abbreviation for Social Security Organization. It is commonly known in the Malay term as PERKESO or Pertubuhan Keselamatan Sosial.
  • 90. • An employee employed under a contract of service or apprenticeship and earning a monthly wages of RM2,000 and below must compulsorily register and contribute to SOCSO regardless of the employment status whether it is permanent, temporary or casual in nature. • An employee must be registered with the SOCSO irrespective of the age.
  • 91. • SOCSO only covers Malaysian workers and permanent residents. As a result, foreign workers are protected under the Workmen's Compensation Act 1952. • Nevertheless, SOCSO does not cover the following categories of persons : • A person whose wages exceed RM2,000 a month and has never been covered before. • Government employees. • Domestic servants employed to work in a private dwelling house which includes a cook, gardeners, house servants, watchman, washer woman and driver. • Employees who have attained the age of 55 only for purposes of invalidity but if they continue to work they should be covered under the Employment Injuries Scheme. • Self-employed persons. • Foreign workers.
  • 92. The Coverage Provided To an Insured Person by SOCSO Under ESSA 1969 • An insured person or dependants will be entitled to the following benefits : • Periodical payments in the case of invalidity • Periodical payments in the case of disablement suffered as a result of an employment injury • Periodical payments to the dependants of an insured person who dies as a result of an employment injury • Payments for funeral benefit or expense on the death of an insured person as a result of an employment injury • Periodical payments to an insured person who is in receipt of invalidity pension or disablement benefit and is so severely incapacitated or disabled as to require the personal attendance of another person
  • 93. The Coverage Provided To an Insured Person by SOCSO Under ESSA 1969 • Medical treatments for the attendance on insured persons suffering from disablement • Periodical payments to dependants of an insured person who dies while in receipt of invalidity pension
  • 94. • SOCSO provides coverage to eligible employees through 2 schemes namely – Employment Injury Insurance Scheme – Invalidity Pension Scheme
  • 95. • These schemes are classified into 2 categories: 1) First Category - Employment Injury Insurance Scheme and Invalidity Pension Scheme. The contribution payment is made by both the employer and employee 2) Second Category - Employment Injury Insurance Scheme Only. The contribution is paid by the employer only. An employee who is not eligible for coverage under the Invalidity Pension Scheme is protected under this category. Source: Perkeso Website retrieved at http://www.perkeso.gov.my/en/contribution.html
  • 96. Example of SOCSO • Example: Salary = RM1000.00 Overtime Payments = RM 250.00 COLA = RM 100.00 Total Salary = RM1350.00 Contribution to be paid to SOCSO is RM30.40 (Refer the Contribution Table) However, the following payments are not considered as wages: • Payments by employer to any pension or provident fund for employees • Mileage claims • Gratuity payment(s) for dismissal or retrenchments • Annual bonus
  • 97. “Because of the current economic situation and other changes, my employer may not be able to offer me all the benefits.”
  • 98. Source: MetLife, Inc. (2009)
  • 99. Industrial Relation Act 1967  An employee is entitled to annual leave only after 12 months of continuous service as follows:  1] Less than 2 years of service – 8 days for each year • • • 2] 2 years or more but less than 5 years – 12 days for each year 3] More than 5 years – 16 days for each year The paid annual leave does not include public holidays. An employee must take his annual leave not later 12 months after the end of every 12 months of continuous service. If he fails to do so, his annual leave will be forfeited. The whole or part of the untaken annual leave may be substituted for payment at the request of the employer and with the written consent of the employee.
  • 100. Industrial Relation Act 1967 • An employee’s annual leave can be forfeited if he absents himself from work without permission, or without any reasonable excuse for more than 10% of the total number of working days during the twelve months of continuous service for which his entitlement is accrued. • If an employee’s service is terminated (for reasons other than misconduct) or if he resigns by giving due notice, he is entitled to the ordinary rate of pay in lieu for the completed months of service. • If an employee who is on annual leave falls sick, or is on maternity leave, the employee is entitled to sick leave or maternity leave as the case may be and the annual leave already taken by him/her becomes cancelled.
  • 101. Effect on organization performance Do Employee Benefits Really Offer No Advantage On Firm Productivity? An Examination Of Taiwan's Shipping Industry  Usually, employee benefits viewed as a hygiene factor and provided to employees because of membership in the organization do not motivate employees (Rosenbloom and Hallman, 1981; Hills, 1987; Milkovich and Newman, 1990)  Benefits may be valuable in recruiting and retaining employees, but are typically unrelated to productivity (Adigun and Stephenson, 1992; Mondy et al., 2002) Source: Kuen-Hung Tsai., et.al.,(2009)
  • 102. • Hennessey (1989) argued that benefits cannot help firms achieve competitive advantages. • Huseman et al. (1978), Sutton (1986), and McCaffrey (1987) argued that benefits can be seen a means to meet organizational objectives, such as increasing morale and retaining and attracting good employees; however, they claimed that benefits can affect employee attitudes and performance through operation of benefit programs. • Hennessey et al. (1992) contended that mixed views result from benefit awareness. He argued that if employees are completely unaware of benefits, they bring no motivation to organizational productivity. His investigation further demonstrated that benefit-awareness intervention has a significant impact on perceived organizational productivity Source: Kuen-Hung Tsai., et.al.,(2009)
  • 103. • Result: • • • • employee benefits contribute to firm productivity through enhancement of labor efficiency. labor-output elasticity represents efficiency of labor use and has been widely used in empirical research related to firm productivity (e.g. Griliches, 1986; Wakelin, 2001). Efficient companies have higher productivity than rivals and, therefore, lower costs. Thus, this study implies the link between employee benefits and competitive advantage, and confirms claims of previous research (e.g. Hennessey et al., 1992; Lado and Wilson, 1994; Fernandez et al., 1999; Nerdrum and Erikson, 2001). Source: Kuen-Hung Tsai., et.al.,(2009)
  • 104. • A lot of studies suggest that employee benefits are a useful tool in attracting and retaining employees with critical skills (e.g. Beam and McFadden, 1988; Evers, 1998; Federico and Goldsmith, 1998; Steere, 2000; Laabs, 2000; Kurlander and Barton, 2003). • Firms can use employee benefits to increase employee productivity, and, in turn, achieve competitive advantage. Second, using employee benefits to achieve competitive advantage for SMEs seems to be more important than large companies.
  • 105. • In summary, despite the growing cost of employee benefits, little is really known about effects • of benefit level on firm performance. Obviously, this study demonstrates that employee • benefits offer advantage in terms of firm productivity through improvement of labor • efficiency. Although external validity of findings is worthy of further examination in other • contexts, this study has contributed to the understanding of the relationship between employee benefits and firm productivity.
  • 106. The Influence of Employee Benefits Towards Organizational Commitment  Purpose of the study: The purpose of this study was to reveal whether employee benefits offered by the organization are important as antecedents to organizational commitment for employees in foodmanufacturing industry in the state of Kedah, Malaysia.  Result of the study: The results of the study suggested that mandatory benefits and fringe benefits were positively influenced organizational commitment. The results further denoted that fringe benefits fully mediated mandatory benefits when predicting organizational commitment.
  • 107. The Influence of Employee Benefits Towards Organizational Commitment wards Organizational Commitment  Findings :  Both mandatory and fringe benefits were having significant and positive relationship with organizational commitment and fringe benefits having higher relationship as compare to mandatory benefits.  When employees received more fringe benefits, their organization commitment tend to be higher.  Therefore the employers should not only provide mandatory benefits as required by the law, but also provide and/or improve the fringe benefits in order to strengthen the employees’ organizational commitment, motivation, productivity and job performance.
  • 108. • Many internal and external issues have affected organizations and their employee benefits programs in recent years. Legislative changes, escalating costs, slashed HR budgets and an uneven economy are some of the factors organizations are dealing with today. Source: SHRM, 2013
  • 109. Managing an Effective Benefits Program Step 1: Set Objectives & Strategy for Benefit There are 3 strategies for benefits  Pacesetter strategy: Be first with the newest benefits employees desire.  Comparable benefits strategy: Match the benefits program similar organization offer.  Minimum benefits strategy: Offer the mandatory benefits & those that are most desired & least costly. Source: John M. Ivancevich, (2010)
  • 110. Managing an Effective Benefits Program Step 2: Involve Participants & Unions  Encourage employees’ participation in decision making on benefits & services. One way to let employees participate in the decision is to poll them with attitude surveys & set up employee benefits advisory committees.  Involve union leadership so that all parties are seeking benefits desired by the employees. Source: John M. Ivancevich, (2010)
  • 111. Managing an Effective Benefits Program Step 3: Communication Benefits  Develop effective communication program.  For pension, ERISA requires employers to communicate with employees by sending them an annual report on the pension plan & basic information on their pension in language they can understand. Source: John M. Ivancevich, (2010)
  • 112. Managing an Effective Benefits Program Step 4: Monitor Costs Closely  It is vital for the managers to consider the cost of benefits incur.  Review the insurance claims is important. More efficient administration procedures using computerized methods also can lead to greater savings & more satisfied employees. Source: John M. Ivancevich, (2010)
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