employee benefits and services

1. Employee Benefits and Services

2. INTRODUCTION
 Management is concerned with attracting and keeping employees, whose
performance meets at least minimum levels of acceptability and at keeping
absenteeism and turnover to tolerable levels
 The provision of benefits and services can be and are important in maintaining the
employees and reducing the turnover and absenteeism low.
 Financial incentives are paid to specific employees whose work is above standard.
 Employee benefits and services on the other hand are available to all employees.
 The purpose of such benefits is to retain people in the organization and
stimulate(motivate) them to greater effort and higher performance.
 They foster loyalty and act as a security base for the employee.

3. Concept
 Employee benefits and services –
Any benefits that the employee receives in addition to direct
remuneration
‘Fringes embrace(hold) a broad range of benefits and services
that employees receive as part of their total package. It is based
on critical job factors and performance. Benefits and services
however are indirect compensation because they are usually
extended as a condition of employment and are not directly
related to performance’
*fringe benefits are also called welfare expenses, wage
supplements, sub wages or social charges, etc

4. Concept
 Benefits and compensation provided to the employees
usually depend on the conditions of employment and
other factors like security, safety, health, welfare and
recreation(activity) of employees.
 These benefit programs must be managed carefully to
enhance recruitment and to boost the morale of the
employees

5. Concept
 The United States Chamber of Commerce includes
five categories of services and benefits under the
term fringe benefits:
1) Legally required payments-old-age pension:
survivor benefits, disability pension, health
insurance, unemployment insurance, separation
pay and payments made under the Workmen’s
Compensation Act.
2) Pension and group insurance and welfare
payments

6. Concept
3) Paid rest periods, waste-up time, lunch periods
4) Payment for time not worked – vacations and
holidays. For example and
5) Christmas bonus

7. Why Organizations Provide Benefits
 Employee demand: To meet rising prices and increased
cost of living employees demand various types of benefits
Example: Variable dearness allowance, Enhanced HRA
o Trade union demands: The growth and strength of trade
unions has substantial(significant) influence on the
benefits and services a company offers
 Employer’s preferences: Employers prefer to give
benefits to employees as it enhances employee’s morale
and works as an effective motivational tool provided it is
within the accepted norms and limits

8. Special features of Fringe Benefits
 Fringe benefits are those payments or benefits
which a worker enjoys in addition to the wages or
salary he receives.
 These benefits are offered to the workers to stimulate
their interest in their work and to make their job
more attractive and productive for them. They
boost(increase) the earnings of the employees and
put extra spending money in their hands.
 Fringe benefit represents a lobour cost for the
employer. Everything which a company spends over
and above “straight time pay” should be considered a
fringe benefit.

9.  Fringe is not direct reward. It is not on the basis of
the hard work or long hours of work put in by an
employee but on the basis of length of service, his
sickness, sex, the hazards of life he encounters in the
course of his work, etc.
 A fringe must constitute a positive cost to the
employer and should be incurred(experienced) to
finance an employee benefit. If the benefit increases
a worker’s efficiency, it is not a fringe but if it is given
to supplement his wages, it is.

10. Objectives of Fringe Benefit & Service
Programmes
 To Improve Morale
 To Meet Health and Safety Needs
 To Attract Good Employees
 To Reduce Turnover
 To Reduce Unionism
 To Maintain a Competitive Position
 To Enhance the Organization's Image
 To provide security to employee against social risk.
 To promote employees welfare by providing welfare
measures like recreation facilities.

11. Factors influencing the decision to set up a particular employee
benefit and service program
 Cost
 Ability to pay
 Needs of the employees
 Bargaining strength of the trade union
 Tax consideration
 Social responsibility
 The reaction of employees

12. Coverage of Benefits
1. Payment for time not worked
(a) Vacation
(b) Holidays
(c) Sick leave
(d) Miscellaneous types of non-working plans
(e) Shifts premium

13. 2. Employee Security
1. Severance(separation) pay
2. Lay-off
3. Guaranteed annual wage
4. Supplementary unemployment benefits
5. Retrenchment compensation

14. 3. Safety benefits
4. Health Benefits
(a) Medical benefit or insurance
(b) Managed care
 Health maintenance organization
 Preferred-provider organization

15. 5. Maternity benefit
6. Dependent benefit
7. Insurance benefits
(a) Life insurance
(b) Vision insurance
(c) Dental insurance

16. 8. Welfare and recreational facilities
(a) Educational assistance
(b) Legal assistance
(c)Housing facilities
(d) Financial services
(e) Employee assistance programs

17. 9. Old age and retirement benefits
(a) Provident fund
(b) Pension
(c)Deposit linked insurance
(d) Medical benefit
(e) Gratuity
(f) Retirement counseling

18. Employee services
 In addition to fringe benefits, organizations also provide
services that employees find desirable.
 These services are provided at low or no cost to the
employee.
 These are provided at the discretion(will) of the
management with consultation with the trade unions.

19. These services include
 Services related to type of work performed- includes subsidies for
the purchase and upkeep of work clothing and uniform.
 Eating facilities
 Transportation facilities
 Child care facilities
 Housing services
 Financial and legal services
 Recreational(fun), cultural and social programs
 Educational services
 Medical services
 Outplacement services
 Flexible time
 Cafeteria(canteen) service

20. Fringe benefits in India
When a study was conducted , it was revealed that
19,60,981 companies pay little over 2148.3 million in
wages and fringe benefits per year in India.
The fringe benefits were high in mining and plantation
industries low and very low in manufacturing sector.
The quantum of the bonus varied sector to sector
A. Payments for time not worked
B. Statutory fringe benefits
C. Voluntary benefits

21. Problems raised by benefit programs
 Charge of Paternalism = When too many benefits & services are
offered to employees , a feeling develops that employers are playing
the role of parents and workers are looked upon as children.
 Excessive Expenditure = It’s a very costly affair and involves a great
deal of paper work
 Maintenance of least productive worker = With increase in benefits
and services, employees ,particularly when they are not very productive
,tend to stick to their jobs and are not interested in changing them.
 Neglect of other personnel functions = Due to excessive concern
from management they stop emphasizing on other aspects of personnel
programs which can develop a concern among the employees for their
future security rather than for their present productivity.

22. Administration of benefits and services
 Organizations have seldom(rarely) established objectives, systematic
plans and standards to determine the variability of the program
 Lack of employee participation
 Managers take little interest in benefits program and trade unions are
almost hostile(aggressive) to schemes
 Employees have little awareness about such programs
 These problems can be avoided if following steps are taken:
- To establish benefit objectives
- To assess environmental factors
- To assess competitiveness
- To communicate benefit information
- To control benefit costs and evaluation