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Employees benefits (Pros&Cons)
Employees benefits can include paid leave, insurance, retirement plans and flexible hours. Companies offer benefits to comply with laws, save on taxes, attract top talent and increase productivity. While benefits are costly, they help recruitment and retention. The Affordable Care Act requires employers with 50+ employees to offer health insurance or pay penalties. Both benefits and costs must be considered to design a sustainable package.
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Employees benefits (Pros&Cons)
- 1. Employees benefits: Pros &Cons Christine Bills, Lindsey Janosko , Evelyne Ringia, Suzanne Mell.
- 2. Employee Benefits Compensation informs other than cash Types of employees benefits: • Paid leave for vacations and holidays • Life and medical insurance • Retirement plans • Flexible working hours • Family friendly benefits
- 3. • Google: Freefood, car wash and oil changes, massages, yoga, playroom, back-up childcare assistance, and $12000/year in tuition reimbursement • Scripps Health: concierge, massage, tuition reimbursement, and pet insurance • Timberland: 40 hours paid to volunteer • Ernst & Young: concierge, parental leave, and same benefits to same-sex partners as for opposite-sex partners Examples of Companies with Various Benefits
- 4. • AOL: newparents get 8 weeks fully paid (adoptive parents get 2 weeks) and on-site day care facility • Deloitte: 3-6 months partially paid leave to volunteer or enhance career • Starbucks: health insurance for part-time employees • Umpqua Bank: clothing advance of up to $1000 • Grasshopper Group: 4 weeks paid time off, every Friday Memorial Day to Labor Day ends at 1pm,and $5 daily lunch allowance Examples of Companies with Various Benefits
- 5. Why offer Employees benefits? •Compliance with the law • Get financial savings • Obtain a competitive edge in the market • Recruit/Retain Top Performers
- 6. Benefits Required byLaw BENEFIT EMPLOYER REQUIREMENT Social Security Flat payroll tax on employees and employers Unemployment insurance Payroll tax on employers that depends on state requirements and experience rating Workers’ compensation insurance Provide coverage according to state requirements. Premiums depend on experience rating Family and medical leave Up to 12 weeks of unpaid leave for childbirth, adoption, or serious illness Health care Provisions of 2010 law phased in through 2014
- 7. Benefits Required byLaw • The law does require employers to offer employees benefits such as: - Time off to vote - Comply with all workers’ compensation requirements - Withhold social security from paychecks - Contribute to short-term disability programs - Employers pay federal & state unemployment taxes to provide benefits for unemployed workers - Comply with Family Medical Leave Absence (FMLA)
- 8. Benefits Required byLaw Health care benefit Hawaii is the first state to require employers to provide health insurance to employees. The law, the Prepaid Health Care Act, was passed in 1974 and requires employers to provide health insurance to all full-time employees, either through an indemnity plan or an HMO Avoid health care reform assessments. The Patient Protection and Affordable Care Act and related legislation requires employers with 50 or more full-time employees (or a combination of full-time and part-time employees that is equivalent to 50 full- time employees) to offer adequate health coverage or be subject to assessment if their employees receive premium tax credits to buy their own insurance. This mandate is in effect beginning in 2015
- 9. Financial Savings You canoffer employees something that increases their compensation package and yet allows you an income tax deduction for the contribution, so that your out-of-pocket cost is less than the value of the benefit to the employee. Self-employed individuals can deduct 100 percent of their health insurance premium costs as a business expense. You can always deduct 100 percent of premiums for your employees. If the business is incorporated, all costs for your own insurance as well as your employees' is deductible. Tax advantage
- 10. Financial Savings •Take advantageof the small business health care tax credit: • Small businesses with fewer than 25 employees may be eligible for a tax credit for purchasing health insurance for their employees. Tax advantage
- 11. Financial servings Employees oftenwill accept better benefits in lieu of a higher salary, which can be a savings to the business. Benefits in lieu of a higher salary
- 12. Financial servings Another costadvantage of paying benefits is that employers, especially large ones, often can get a better deal on insurance or other programs than employees can obtain on their own. (group purchasing power) For instance, small businesses (generally, those with 50 or fewer full-time employees) may purchase health care coverage through a government-run insurance marketplace established specifically for them—the Small Business Health Options Program (SHOP) Utilizing economies of scale
- 13. Increasing a CompetitiveEdge • Attract and retain the most qualified employees: - Market Dependent, are your competitors offering: • Health, vision and dental insurance • Tuition reimbursement • Wellness programs • Incentive/performance bonuses • Professional development Attract and retain quality employees.
- 14. Increasing a competitiveedge Offering health insurance has been shown to decrease absenteeism and improve employee health and morale. Higher employee motivation
- 15. Increasing a competitiveedge Increase productivity Insurance plans offer preventative care that can keep employees healthy and working. If employees don't get preventative care and yearly physicals (which they might not do if they don't have insurance), you could end up having more employees out for long periods of time with serious illnesses.
- 16. • Too expensive. •Too much paperwork • Not required by law • Not the company’s responsibility • Little value to this kind of company Cons of Offering Health Insurance as a Benefit:
- 17. Cons of OfferingHealth Insurance as a Benefit: • High employee turnover • Policy offerings are too complicated • Not familiar enough with options • Most employees are not interested in coverage • Most employees are covered elsewhere • Most employees would not be eligible
- 18. Major Drawback ofProviding Benefits: Cost $- $20,000 $40,000 $60,000 $80,000$100,000 Employee 1 Employee 2 Employee 3 Base Salary Benefits & Taxes $50,000 $30,000 $70,000 $14,000 $16,000 $18,000
- 19. Source: Bureau ofLabor Statistics (2013) Relative importance of employer costs for employee compensation, December 2013 Compensation component Civilian workers % Private industry % State and local government % Wages and salaries 69 70.1 64.5 Benefits 31 29.9 35.5 Paid leave 7 6.9 7.3 Supplemental pay 2.4 2.9 0.8 Insurance 9 8.3 12 Health benefits 8.5 7.8 11.6 Retirement and savings 4.8 3.7 9.4 Defined benefit 3 1.6 8.6 Defined contribution 1.9 2.1 0.8 Legally required 7.8 8.2 6
- 20. The Cons ofProviding Benefits: • Benefits costs more for small employers than for large ones due to: - Higher prices because of lesser buying power - Higher costs of administration • Administrative costs of designing a retirement plan • Increased benefits = Increased administrative overhead
- 21. The Cons ofProviding Benefits: • The cost of health insurance has steadily risen, making it: - Less affordable to employers, and employees - Difficult to plan financially from year to year • Offering benefits creates legal compliance concerns: - Companies incur legal fees - Mistakes made in benefit plans can lead to lawsuits or regulatory fines
- 22. Value Proposition • AValue Proposition is the overall perceived value of the organization • Developing a value proposition is based on a review and analysis of the benefits, costs and value that an organization can deliver to its employees • A strong value proposition differentiates great companies from the mediocre ones
- 23. A Value PropositionIncludes: • Corporate Culture and Values: what makes your company unique? • Corporate Citizenship: company’s contribution to the community • Rewards and Retention: A-players wants rewards based on their performances and contributions • Growth and Career Runway: opportunities for growth , both vertically and horizontally?
- 24. Employee Benefits • Thelaw does not require employers to provide the following benefits to their employees: - Retirement Plans - Vision, Dental Plans - Life insurance plans - Paid sick time, vacation days & holidays
- 25. Affordable Care Act •Affordable Care Act: Law that requires companies to offer health insurance if company has more than 50 full-time FTE’s: • Full-time FTES defined as >30 hours/week or 130 hours/month • Pay a fine if they do not cover their employees & their families starting in 2014: • 2,000 Per full time employee
- 26. Impact to MajorStakeholders: Business • Small businesses: - Potential for Small Business Health Care Tax Credit • Increasing from 35% to 50% in 2014 • Businesses with more than 50 full time employees: - If the employer does not offer affordable health insurance options they will be subject to a penalty: • $2000 per FT employees (excluding the first 30 employees) - If the employer offers insurance but it doesn’t meet minimum requirements: • $3000 per FT employee who qualifies for marketplace premium savings
- 27. Cost Disadvantages • HealthInsurance Costs are 17.9% of the GDP ( Gross Domestic Product) in the U.S. • Much Cheaper to pay fine than pay for health insurance Benefits Health Care Cost Statistics Single Coverage Family Coverage Average cost of Healthcare in the U.S. $5,615 $15,745 Average cost to employee with a company plan $1,225 $4,316 Company Contribution to Insurance Costs $ 4390 $ 11,429 Company Fines For Not Supplying Health Insurance ( >50 FTE’s) $2,000 $ 2,000
- 28. Cost Disadvantages • Accordingto the Bureau of Labor Statistics: - Private companies pay out $9.21 an hour per employees with benefits • 30% of the cost of employee compensation - Local & state government agencies pay out $14.19 per hour per each employee with benefits • 34.8% of the cost of employee compensation
- 29. Cost Disadvantages • Employeesmay take advantage of employment benefits & the company may pay unnecessary costs: - Ex) RAME a small roofing company with 70 FTE- would put 5% of every hour worked by employee into their retirement plan (401K) - Employees would quit just to take their retirement out, willingly taking the penalty of 50% since they did not put any of the money in the retirement fund themselves.
- 30. Disadvantages • The populationis aging and health insurance is becoming more expensive - Costs companies more money offer health insurance plans to employees Ex) Company wellness & prevention programs • Requires employees to share health information in order to receive lower monthly premiums & financial incentives • Can be seen as coercive, threatening & intimidating by employees- can actually backfire on employers
- 31. Disadvantages • Employee benefitsare confusing • Many employees do not understand what is being offered to them or do not take advantage of packages offered to them • Small companies do not have human resource support - Disempower employees
- 32. Conclusion. . . Employeesbenefits have both advantages and disadvantages to the employer so employers have to do a cost benefits assessment in designing the benefits so that they can make business sense as well as being compliant with the law
- 33. SHRM Executive Summary • Createa Strategy to Comply with Patient Protection and Affordable Care Act • Promote Workplace Flexibility Initiatives • Improve Employee Benefits Communication • Obtain Feedback
- 34.
- 35. References Brox, Denene “14Companies with Incredible Employee Perks” http://www.salary.com/14-companies- with-incredible-employee-perks/ Kaiser Family Foundation. (2013, December 19). Health insurance cost statistics. Retrieved from http://www.statisticbrain.com/health-insurance-cost-statistics/ IRS. (2014, February 27). Questions and answers on employer shared responsibility provisions under the affordable care act. Retrieved from http://www.irs.gov/uac/Newsroom/Questions-and- Answers-on-Employer-Shared-Responsibility-Provisions-Under-the-Affordable-Care-Act (March 12, 2014) Economic news release. Bureau of labor statistics. Retrieved March 17, 2014. from http://www.bls.gov/news.release/ecec.nr0.htm (January 14,2014) Should you offer health care benefits?. Business Owners Toolkit. Retrieved on March 15, 2014 from http://www.bizfilings.com/toolkit/sbg/office-hr/managing-the- workplace/offering-health-care-benefits.aspx Pro and Cons: Offering Employee Benefits . Findlaw.com. Retrieved March 15,2014 from http://smallbusiness.findlaw.com/employment-law-and-human-resources/pro-and- cons-offering-employee-benefits.html#sthash.UptznLZk.dpuf