2. UNIT IV: Employee Benefits
Management
Components - Legally required Benefits
Benefits Administration
Employee Benefits and Employee Services
Funding Benefits through VEBA
Costing Benefits
Components of Discretionary benefits
Designing and Planning Benefit Program
Totally Integrated Employee Benefit Program.
3. Legally required benefits
An overview of legally required benefits
Components of legally required benefits
Implications of legally required benefits for
strategic compensation.
4. FRINGE BENEFITS
Various extra benefits provided to the
employees, in addition to the compensation paid
in the form of wage or salary.
Legally required payment
Contingent /deferred benefits (discretionary)
Payment for Time not worked
5. LEGALLY REQUIRED
BENEFITS
Protection programs that attempt to promote
worker safety and health, maintain family
income streams and assist families in crisis.
Indirectly promote competitive advantage
6. CONTINGENT AND DEFERRED
BENEFITS
Pension plans
Group life insurance
Group health insurance
Medical expenses
Disability income
Guaranteed annual wage
Prepaid legal plans
Military leave and pay
7. Jury duty and bereavement paid leave
Maternity leave
Child care leave
Sick leave
Dental benefits
Tuition aid benefits
Suggestion awards
Service awards
Severance pay
8. Payments for time not worked
Vacations
Holidays
Voting pay allowances
Other benefits:
1. Travel allowances
2. Company car and subsidies
3. Moving expenses
4. Uniform and tool expenses
5. Employee meal allowance
6. Discounts o employer’s goods and services
7. Child care facilities.
9. EMPLOYEE BENEFITS
Comprising of both wage and non-wage
components of total labour costs
Non-wage – kind, wage – cash
Taxable
Non-monetary benefits: motivation
Non-monetary incentives: career advancement
opportunities, flexible working hours and
opportunities to acquire new skills and
knowledge
10. TYPES OF EMPLOYEE
BENEFITS
Employment security
Medical and Healthcare
Old age and Retirement
Miscellaneous benefits
11. STATUTORY EMPLOYEE
BENEFITS IN INDIA
Bonus: 8.33% minimum bonus/ex gratia
Employee security
Retrenchment compensation: Industrial disputes
act 1947: layoff and retrenchment .=50empl,
15days/max 45 days
Layoff compensation: 50% of total basic wage
and DA- 45 days p.a.
Safety and health provision: factories act 1948
12. LEGALLY REQUIRED
PAYMENTS
To protect individuals from catastrophic events such as
disability and unemployment.
Protective programs that attempt to promote worker
safety and health, maintain family income streams, and
assist families in crisis.
Social Insurance – designed to minimise the possibility
that individuals become unemployed or severely injured
while working, enable to maintain subsistence income
levels.
Lead to competitive advantage – participate in economy
13. COMPONENTS OF LEGALLY
REQUIRED BENEFITS
Social security act
Old age benefits
Survivor benefits
Disability benefits
State compulsory disability laws
Family and medical leave act
14. Social security act
Income discontinuity – great depression 1930s–
led to act
To protect families from financial devastation in
the event of unemployment
Retirement income
Health & welfare of employees and their
families
15. UNEMPLOYMENT INSURANCE
Central unemployment tax fund
Exception of most agricultural and domestic workers
Criteria for benefits: minimum period of time, first four
quarters of last five completed calendar quarters, not have let job
voluntarily, able & available for work, be active – seek work, not
have refused an offer, not be unemployed – labor dispute, not
have had termination – violation of conduct.
Receive: weekly benefits, widely vary, fraction, maximum of 26
weeks,1970 – amendment (39 weeks) supplemental
unemployment benefit, September 11th attach- 65 weeks
Experience rating system( 1 to 10% tax)
16. Old age survivor and disability
insurance (OASDI)
Retirement income, survivors’ insurance (1939)
and disability insurance (1965)
Old age benefits: upon retirement/under
survivors and disability programs – they earned
survivors benefits: dependent, unmarried
children of deceased and a spouse of
deceased who is caring for a child or
children - fully insured
17. Disability Benefits:
meet req. of disability insured status (fully
insured and min amt of work under SS –
AGE DIABILITY)
Disability : Endure for atleast 1 year or to
result in death (waiting period upto 6month)
18. MEDICARE
US citizens aged 65 or older for providing
insurance coverage for hospitalization ,
convalescent care and major doctor bills
4 separate plans:
Medicare Part A:
Medicare Part B
Medigap
Medicare + Choice or Medicare Part C:
19. Medicare Part A:
Compulsory hospitalisation insurance – both
inpatient and outpatient hospital care & services
90 days – single spell of illness (60 days out of
hospital)
Unlimited in-home care visits – homehealth
agency – nursing care, therapy treatment home
health aid
20. Medicare Part B
Voluntary supplementary medical insurance
covers 80 % of medical services and supplies -
$100 annually
Not covered under part A – physician/medical
services
Paid jointly by person & federal govt.
Diagnosis, therapy , surgery services of office
nurse, consultation calls , medication not self
administered
21. MEDIGAP INSURANCE
Voluntary supplemental insurance to fill in the
gaps for parts A & B
Pvt insurance companies – extra fee
Medicare select plans : medigap policies that
offer lower premiums in exchange for limiting
the choice of health care providers
22. MEDICARE PART C COVERAGE
Balanced budget act of 1997 established
medicare + choice( switch health plans – annual
open enrollment), a third medicare program –
PART C
Alternative program of part A & B
Receive health care from a variety of options –
pvt fee for service plans – cash benefits,
managed care plans or medical saving accounts.
– high from approved providers
23. STATE COMPULSORY DISABIITY
LAWS(WORKERS COMPENSATION)
Early 20th century – industrial accidents – common &
occupation illness – alarming rate. First law enacted -
1911
Based on
principle of liability without fault
Key principle : employer – assume costs of occupational
injuries and accidents
Workers compensation insurance programs: cover
expenses incurred
Maritime workers – long shore & harbor compensation act
Federal employees compensation act
24. Workers compensation objectives &
obligation to the public:
Sure, prompt, reasonable income & medical benefits
single remedy & reduce court delays, costs &
workloads
Fees to lawyers – eliminate ,
max employer interest in safety,
frank study – causes of accidents.
25. Claims under worker’s compensation
programs
injury claims – disabilities : accidents, keyboards usage
occupational disease claims – ailments: trades/process
death claims
File claims to state commissions
Depending upon the claims: Four kinds of benefits:
Medical:
Disability – 2/3 rd weekly wages
death : burial allowances & survivors benefit
rehabilitative services: physical & vocational
RECENT TRENDS IN WORKERS COMPENSATION
26. FAMILY & MEDICAL LEAVE
ACT OF 1993
To provide employees with job protection – family or medical
emergencies
Guaranteed leave – same position with same benefits, pay and
other terms and conditions
Recognition – parents elderly
Two income families – child rearing – paternity leave
Employed – 12 months atleast - 1250 hrs
Exempt - Less than 50 employees.
12 week period – paid leave-personal, sick vacation , unpaid.
HR professionals – proactive plan – manage workloads – cross
train workers – knowledge & skills, pay – for knowledge,
temporary employees.
27. THE IMPLICATIONS OF LEGALLY
REQUIRED BENEFITS FOR
STRATEGIC COMPENSATION
Do not directly meet the imperatives of competitive
strategy ( provide subsistence income to all beneficiaries
regardless of their performance(Social adequency)).
Hindrance to companies – mandated expenditure.
Invest in direct compensation, R &D, Lowest cost
strategies – reserve.
Reduce worker’s compensation claims – safety
measures, health promotion schemes:
Integrate worker’s compensation benefits in to the rest of
benefits program.
Unemployment insurance costs – reduce (demand – 2yrs)
28. ROAD TO STRATEGIC
COMPENSATION
1980s – compensation professionals : designing &
implementing compensational programs that contribute
to competitive advantage. (describes success)
competitive advantage: ability to maintain market
share & profitability over a sustained period of several
years.
Increased global competition: more productive – leading
edge skills, apply then to sustain competitive advantage.
Compensation practices contribute to CA :
productive, high skilled, well designed merit pay,
incentive pay, pay for knowledge, pay for skills,
discretionary benefits ( strategic value)
29. REFERENCE
Strategic Compensation – a human resource
management approach – 3rd edition – Joseph J.
Martocchio
Chapter 10: Page no: 331 - 345
31. Introduction
Expensive (forgotten stepchild of the total
compensation package – employee benefits &
services (fringe benefits))
In-kind payments
1929 – 3%, 1994 – 40.7 % (wages & salaries) (W
& S increased 65 fold : benefits : 872 times)
Org: 40% , may increase to 50%
32. RAPID EXPANSION: REASONS
Imposition of wage ceilings – world war
Unacceptability of autocratic mgt. & decline of
paternalism.
1940s – 1970s, unions: wage increase later :
benefits
Income tax legislation
social security & medicare
33. EMPLOYEE BENEFITS
They are those compensation components made
available to employees that provide:
Protection in case of health and accident-related
problems
Income at some future date or occasion (upon
retirement, termination of employment or meeting
of certain objective criteria)
34. EMPLOYEE SERVICES
They are compensation components that
contribute to the welfare of the employee by
filling some kind of demand.
35. BENEFITS ADMINISTRATION
Large organisations – benefit manager – vice
president/director of compensation and benefits
Small organisations – manager of compensation and
benefits
Finance dept: pension, life insurance and disability
programs
Accounting dept: medical insurance, claims processing
completion of government reports related to mandated
benefits
Top management: retains authority – time-off with pay
program
36. TWO IMP. PARTS OF BENEFITS
ADMINSITRATION
Benefits Planning and design
Benefits communication
37. BENEFITS PLANNING AND
DESIGN
Recognize importance : 1970s while developing flexible
benefits plans/cafeteria plans:
In design stage: benefits analysed – features:
Minimum age /length of service req.
Possible employee contribution & vesting schedule for
pension plan.
Coinsurance, deductible, ceiling req and dual coverage for
medical insurance
Option : medical insurance
Temporary & Part – time included, regular full time &
what benefits - retirees?, which dependents?
38. CRITICAL ISSUES IN BENEFITS
PLANNING
Current and future role of government
mandated benefits
Employee demographic and preferences
Employer ability to pay and employee
contributions
Self –funding and third party administration
Monitoring and auditing
39. BENEFITS COMMUNICATION
1960s and 1970s – limited motivational value of
programs
Basic benefits communication program – elements
Within 90 days – oral & visual presentation
Every year – benefits statement – detailed description of
employee’s benefit account
Access to as needed service – inhouse/community
Adhoc employee meetings: new benefits, cost containment
opportunities and other critical or important benefits issues
Continuing notices – online communication – HR specialists
41. EMPLOYEE BENEFITS
Insurance & non – insurance
Seven major groups:
Disability income contribution
Loss –of job income contribution
Deferred income
Spouse or family income continuation
Health & accident protection
Property and liability protection
Special group of benefits and services called perquisities
VARIETY FEATURES, AVAIBLABLE TO CERTAIN INDIVIDUAL/GROUPS
42. 1. DISABILITY INCOME
CONTINUATION
Disabilities : regular, temporary, total, partial
Unable to continue work – accident/health related
problem: maintain existing lifestyle without major
modification
11 components: Short-term (S& A), long term,
workers’ compensation, non occupational disability
,social security, travel accident insurance, sick leave,
supplemental disability insurance, accidental death and
dismemberment group life insurance: total permanent
disability , retirement plans
MAXIMIZE PROTECTION AND MIN COSTS
43. 1. Short-term (S& A) disability: insured is absent from
work – accident or illness - 26 weeks, 50 to 75 % of
base pay
2. Long term disability (LTD): incapacitated
employees with long term security. Self insurance
funding, normal pension, 50 to 75 % of base pay.first
2 year more, upto 65 years.
3. Worker’s compensation: occupational disability
insurance, life time – 330 – 650 weeks
4. Non- occupational (temporary) disability: illness,
injury, maternity,26 weeks-depends on wage,
employee contributions
44. 5. Social security: old age, survivors, disability
health insurance (OASDHI) totally &
permanently disabled – cash benefits & social
security, wait – 5 full calendar months & upto 65
years after that retirement rolls.
6. Travel accident insurance: who travel frequently,
disabled or killed – work assignment, first day –
base earnings, or flat % of the regular rate of pay.
7. Sick Leave: unable to work – illness 12 days per
year (on avg, 10 days), accumulation – 10 – 20
days : earned sick leaves, 6 months base pay after
retirement. – buy back.
45. 8. Supplemental disability insurance: top management
employees: select / small group
9. Accident, death and dismemberment: accident loss
of limbs or sight. – amount – extent of disability, travel
– full benefit.
10. Group Life Insurance: Total permanent Disability
(TPD): monthly payment over a period 60 – 120
months . Face value of policy is small – less than
60 payments.
11. Retirement Plans: service & age req., disability, 10
years, 50 years, long –term disability.
46. 2. LOSS – OF- JOB INCOME
CONTINUATION
Assist workers during short-term periods of
unemployment – layoff & termination
Eight major compensation components:
Unemployment Insurance (UI)
Supplemental unemployment benefit insurance (SUB)
Guaranteed annual income(GAI)
Guaranteed income stream (GIS)
Individual account plan
Severance pay
Job contract
Short-time compensation program
47. UNEMPLOYMENT INSURANCE:
Requirements, differences in employer costs:
economic conditions, eligibility, benefit payments.
SUPPLEMENTAL UNEMPLOYMENT
BENEFIT INSURANCE (SUB):
Unions – steel, rubber, flat glass and farm
equipment, 7 years of employment, 10 yr – 1 yr
SUB approx. 80 % take home payments.
GUARANTEED ANNUAL INCOME: Collective
bargaining situation. 1950 – national sugar refining
com. & union – long island refinery, Monday –
atleast 4 days, 1936 hrs/242 days of work per
year(avg. 230 – 245 days), dock worker
48. Guaranteed Income stream (GIS): 1982 bargaining ,
ford workers : lose jobs after 15 years or more of
service receive : 50 % of their base pay until they are
eligible for retirement
Individual account pay: predetermined and
negotiated contributions: suspensions, layoffs –
disciplinarian labour disputes .
Severance Pay: one time payment/series, plant
closings, tech advances, economic depression, 2-3 days
of work / 6months or 1 year of work. small – last day
of work, large : 2 – 3 different times, imp issue, golden
parachute – late 1970s
49. Job Contract: senior-level management – high
skilled , desired professionals- guaranteed a
certain incomes – specific period of time with
certain obligations.
Short-time compensation program: cut
production – instead of layoff, diff. normal &
reduced pay – state for unemployment
compensation assistance,- 3 days instead of 5 :
40 % of max benefits.
50. 3. DEFERRED INCOME
Accumulate capital & meet future financial goals
Social security
Qualified retirement plan : pension, profit – sharing, stock bonus
Plans meeting IRS POLICIES AND REGULATIONS
Simplified employee pension plans
100% of employees have reached the age of 25 during calender year and
have performed services for the employer during the calender year and
three years preceding – 15%- less than 26 employees -no
Supplemental executive retirement plan
ERISA –imposed limits, qualified pension plans, ERISA EXCESS
BENEFITS PLAN benefit replacement or enhancement under defined
benefits and defined contribution plans.unfunded program – selected
individuals – general assests
Supplemental and executive group life insurance plans
51. Stock purchase: acquisition, Qualified, full market value stock
purchase plan, performance stock plans discounted stock PP,
Stock option
Key personnel over a period of time that exceed the time periods granted
for stock purchase plans
Exercise: time – acquired or purchases
Window – specific period of time set by govt regulation
Stock grant
Stock acquisition plan, selected employees with stock at no cost. – stock
appreciation grants: payment & full value grants: payment (over
predetermined period) – base value, dividend and appreciation (period
grant is in force)
52. 4. SPOUSE AND FAMILY
INCOME PROTECTION
Life insurance: 50-50, 80 -20, all, retired person 30 days after
leaving
Retirement plans :joint and survivor life income, spouse benefits
Social security
Tax- sheltered annuity – cash on deferred arrangements –
reduced salary – qualified trust
Workers compensations
Burial expenses and income benefits
Accidental death and dismemberment
Fixed lumpsum benefit to a beneficiary when a worker’s death is
accidental.
Travel accident insurance
Health care coverage: 3 – 12 months
53. 5. Health and accident protection
Eligibility tests:
50% test - lower paid employees eligible,
90/50% test- 90% lower paid employees eligible atleast 50%
of the highest value benefits – highly paid employees,
plan provision test: no provision – eligibility discriminates
highly paid.
Benefits tests:
value of avg benefit – lower paid for all health plans combined
= atleast 75% of the value –highly paid.
Plans to provide medical benefits:
Fee for service plans (FFS) – coinsurance, choose any
provider , self-insured, commercial insurance , blue
cross/blue shield plans
54. Managed care plans: - specific provider : medical
care and health care cost
Preadmission review, utilization review, discharge
planning, mandatory second surgical opinion –
Health Maintenance Org – 1973/prepaid services
approach (fixed set of medical services) , primary
care physician – 24 hrs
Preferred Provider Organisation – independent
physicians, hospitals & health care providers+
insurance – life time maximum benefits,
Point of service plans – less structure, outside
/within network., open ended HMO
55. Features of health care insurance plans
Excludes mental health benefits, Major medical,
hospitalization plans, surgical, comprehensive
physical, in-house medical services, post retirement
medical, AIDS coverage, medical saving accounts,
health saving accounts presciption drug costs
Dental,vision, hearing aid, worker’s compensation
Social security, additions to health care coverage,
health coast containmenet, play-pay plans
Universal health care
56. 6.Property and liability protections
Group auto, home, legal, umbrella liability,
employee liability, fidelity bond insurance.
57. PERQUISITES
CEO, KEY OFFICIALS
Maximize the time available for business related
purposes and at the same time enhance the
quality of their lives
58. ESOP
EMPLOYEE STOCK OWNERSHIP PLAN
A plan which a company borrows money from a
financial institution by using its stock as a collateral
for the loan. Principal and interest loan repayments
are tax-deductible. (each loan repayment – stock is
released. – stock is placed in Employee stock
ownership trust for distribution at no cost to all
employees. Receive – retirement or seperation.
59. ESOPs take primary forms
A stock bonus ESOP - employer contributes
company stock to the ESOT – Employee stock
bonus trust and does not use ESOT as
mechanism for obtaining funds.
Levareaged/ leveragable ESOP – the employer
uses the special tax privileges granted to an
ESOT to obtain funding for various purposes.
60. BENEFITS - EMPLOYER
Establishing and maintaining a stable, high –
performance workforce (retain)
Certain Tax benefits
Establishes the trust to hold more than 10% of assets
Sell equity interest without having to go public
Leveraged features is desirable
Sell stock in any desired increment at any one time upto
total holdings
Companies currently not paying tax can carry ESOP
deductions for 15 years
61. EMPLOYER COSTS
Dilution of the value of stock and ownership
rights
Cashed out demands – departing employees
Installation cost range : min $10,000 - $15,000
Fair market value of the stock – outside
appraiser – costs
Proxy statement – information
Decline in the prices of the stock – extreme loss
in wealth
62. EMPLOYEE BENEFITS
Equity opportunities with no cash investment
Chance to voice their views at the policy making
levels of the org.
Pay not tax on stock until distribution
Can roll distribution over into an IRA, thus
deferring any tax at the time of distribution.
63. EMPLOYEE COSTS
Might pay lower wages or salaries, recognizing
the possibility of significantly larger total
compensation through stock acquisition
opportunities.
Stock could decrease in value – bankruptcy or
business failure.
64. EMPLOYEE STOCK OPTION
PLANS
Granted to key personnel over a period of time
that exceeds the time periods granted for stock
purchase plans.
Right to purchase a specific amount of
corporate stock at a stipulated price within a
specified period of time. – no obligation
Shares of stock : size – value, level, base pay,
outstanding,no.of employees provided
65. MERITS
Nonqualified perspective : tax laws do not impose any
limitation on the amount of the stock a corporation can
option to an individual.
Granted stock option is not considered a compensation
cost to the organisation.
Tax deduction
Stock warrants to an employee
Motivational compensation tool
Full price, discounted ,variable price, tax offset formula
value, stock grant ,stock appreciation,restricted stock
plan, performance share plan, phantom stock plan…
66. DEMERITS
Taxed – certain kind of stock
Limited employees
Limited period
Meet certain performance measures
Practical business considerations
68. EMPLOYEE SERVICES
To enhance lifestyle of employees
Three major set of components that consitute
the employee services group:
Pay for time not worked
Time off without pay
Income equivalent payment and reimbursement for
incurred expenses
69. PAY FOR TIME NOT WORKED
Holidays: 9 -12 days per year
optional
Vacations: after 6 mths or 1
yr
Jury duty:
Election official
Witness in court
Civic duty
Military duty
Funeral leave
Illness in family leave: 1 -5 da
Marriage leave: 5 days
Paternity leave
Maternity leave
Sick leave
Wellness leave
Time off to vote
Blood donations
Grievance and contract
negotiations
Lunch , rest and wash-up
periods
Personal leave
Sabbatical leave
70. A DIFFERENT APPROACH
Minimise sick leave abuses including eliminating sick
leave programs
Earned time, personal time or no-fault time off
- time-off with pay for every hour worked
Days off with pay – co decides to grant: job or seniority
( 2080 hrs – work, 5yr employee – 35 days off with pay)
35/2080 = 0.0168 days for every hr worked
Earned time – atleast 32 hrs in week, max 90 days
accumulation
71. TIME OFF FROM WORK
WITHOUT PAY
Covered by the employer's medical, life
insurance and disability programs
12 weeks of unpaid leave – FMLA, child, parent,
spouse or own
Hidden cost – job open, continuing their
benefits – non pay status
72. INCOME EQUIVALENT PAYMENTS
AND REIMBURSEMENT FOR
INCURRED EXPENSES
Charitable contributions
Counseling – Employee
assistance )medical,
psychological, family, legal
financial, career,
outplacement
Tax preparation
Education subsidies
Child adoption
Child care
Elderly care
Subsidized food services
Discounts on merchandise
Physical awareness and
fitness programs
Social and recreational
opportunities
Parking
Transportation to and from
work
Travel expenses
74. FUNDING BENEFITS
THROUGH VEBA
A funding vehicle used by many organisations to
reduce benefits costs is a voluntary employee
benefits association – VEBA
Tax-exempt trust designed to meet the
specific needs of an organisation.
Pays benefits claims, expenses and invests
excess funds
Operates under 501(a) of IRC
75. FUND MUST MEET THE FOLL
REQUIREMENTS
Organisation- association of employees
Membership is voluntary
Purpose of providing life, sickness accident or
any other benefits for its members or their
dependents
No part of net earnings goes to benefits any pvt.
Shareholder
76. VEBA REDUCES BENEFITS
COSTS
Lower operating expenses than insured
programs
Requireing small reserves
Paying minimal to no stat insurance premium
taxes ( 2 – 4% of net premium)
Funds – long term disability plans and retired life
insurance reserves vacation benefits, recreational
benefits and facilities, child care facilitates,
severance payment and educational benefits
77. Other
Trusts – Supplementary unemployment
compensation trusts and the group legal service
trusts ( limits on amounts set aside on a tax free
reserves)
IRS approval – non discriminatory test
Employers do not receive – refund, credit or
additional benefits
Prohibited from funding retiree health benefits
78. COSTING BENEFITS
Prerequisite to any benefits communication
program
Four commonly used for costing benefits and
services:
Annual cost of benefits and services for all employees
Cost per employee per year
Percentage of payroll (annual cost divided by annual
payroll)
Cents per hr – cost per employee per hr.
79. ANNUAL COST
For each benefit
Develop accounting procedure – computerised,
bookkeeping
Valuable in developing budgets and in
describing the total cost of the benefits program
80. COST PER EMPLOYEE PER
YEAR
Especially pay for time not worked security and
health benefits
Bookkeeping complex – group insurance
Aggregate cost of benefits per employee
to achieve greatest effect – communicated to
employee- costs
81. PERCENTAGE OF PAYROLL
Identifying and classifying all compensation
costs
Determination of cost of each component and
the total cost of benefits and services as a
percentage of payroll.
Straight time costs – premiums – benefits
82. CENTS PER HOUR
Define the term hour.
260x8 hrs = 2080 hrs/ actual hours worked
Total benefits costs by the total number of
hours worked during the year
Frequently , valuable
83. Cafeteria plans/flexible
compensation/benefits plan
Senior executives, top professionals and mgrs to
choose individually many of their benefits and
services within certain limits.
mandatory/- legal, security, majority rule
Opportunity to contain cost of benefit package
benefits – more tax effective basis
Choice as to benefits they receive
84. Selection process of benefits
Identify alternatives
Determine the cost
Total permissible cost for the entire package
85. FOUR GOALS – PLAN
increases and improves
Appreciation of the interest and desire of employer – QWL
Loyalty & motivation – enhance productivity
Understanding the value & Cost each B & S comp
Understanding the value & Cost of total BP
Well – conceived,, well – designed and well – implemented
Worker expectation and preferences, attitudes
Degree of opportunity for growth and security
Changing benefits – costs, expand their benefits, advise – value,
assist
Micro approach, mix, macro approach
86. ESTABLISHING A FLEXIBLE
C/B PLAN
Senior management
Compensation & human resources specialist
Employees
Collecting data
Administration
Changes in legislation
87. EXAMPLES OF FLEXIBLE
COMPENSATION PROGRAMS
Modular plan: modules/packages
Core plan
Benefits bank
Unlimited choice plan
Mini-flex plan
89. OVERVIEW OF
DISCRETIONARY BENEFITS
40% of employee total payroll costs, lower tax liability
Offered at the will of the co, regardless of their
performance
Three broad categories
Protection programs
Paid time off
Services
Originated in 1940s and 1950s – mandated (not to
increase core compensation ), expanded discretionary
benefits
Offer welfare practices:
anything for comfort and improvement, intellectual or social of
the employees over and above wages paid which is not a
necessity of the industry nor required by law.
90. COMPONENTS OF
DISCRETIONARY BENEFITS
PROTECTION PROGRAMS:
Income protection programs:
Disability insurance
Life insurance : term coverage & whole life
Pension programs – 401(k) plans
Financing method: contributory vs noncontributory
Tax treatment: qualified vs nonqualified
Benefit determination : defined contribution plans vs defined benefit
plans
Employee retirement income security act of 1974 (ERISA)
Health protection program
91. Fee for service: indemnity plans, coinsurance,out of
pocket, self-funded insurance
HMO, PPO
Dental insurance
Vision insurance
Time paid off: different leaves already discussed
Services: discussed already
92. DESIGNING & PLANNING THE
BENEFITS PROGRAM
Objectives
Involve employees in the benefits determination
process – survey, interviews and focus groups
STEPS:
Who receives coverage
Whether to include retirees in the plan
Whether to deny benefits to employees during their
probationary periods
financing the benefits
Degree of employee choice in determining benefits
Cost containment
communication