EMPLOYMENT BENEFITS. Employee Benefit Programs Part of Total Compensation Some Government Mandated...
Transcript of EMPLOYMENT BENEFITS. Employee Benefit Programs Part of Total Compensation Some Government Mandated...
EMPLOYMENTBENEFITS
Employee Benefit Programs
Part of Total CompensationSome Government MandatedSome Incentive RelatedPart of Cost of Doing BusinessIndirect Compensation
Factors Contributing toGrowth of Benefit
Discourage UnionsBenefits not Always TaxedEasier to negotiate Than WagesAttitude of General Public
Objectives of Benefit Programs
To Improve MoraleTo Meet Health and Safety NeedsTo Attract Good EmployeesTo Reduce TurnoverTo Reduce UnionismTo Maintain a Competitive PositionTo Enhance the Organization's Image
Basis for Employee BenefitsOrganizational
Objectives
Human ResourcesObjectives
EmployeeBenefit Package
GovernmentRegulations
FinancialResources
CollectiveBargaining
RecruitingCompetition
EMPLOYEES
Employee Participation
Employee Needs
Providing Individual Benefits
Communicating Benefits
Employee Benefits Required by Law
Types of Benefits
Time-off (vacation, sickness, holidays, etc.)Legal Social SecurityMedical PaymentsRetirementPaid Rest Periods (breaks)Life Insurance
Categories of Employee Benefits
BENEFITS REQUIRED BY LAWOld age and survivors insurance (OASI)Unemployment insuranceWorkers’ compensationLeaves without pay
Categories of Employee Benefits
PAYMENT FOR TIME NOT WORKED
HolidaysVacationsSick leaveSupplemental unemployment benefits (SUB)Jury duty, military service, and bereavement leaves
Categories of Employee Benefits
INSURANCEGroup life insuranceHealth care insuranceLegal insurance
Categories of Employee Benefits
RETIREMENT BENEFITSPension plansDeferred compensation plansPre-retirement counseling
Categories of Employee Benefits
EMPLOYEE SERVICESEmployee assistance programCounseling servicesEducational assistance plansChild careElder careFood servicesHealth servicesLegal servicesFinancial planningHousing and moving expensesTransportation pooling/parkingPurchasing assistanceCredit unionsSocial and recreational servicesAwards
Employee Benefit Costs
30-40% of the Annual WagesFastest Growing Part of Total Compensation
Typical Cost of Benefits
TYPES OF BENEFITS
TOTAL PERCENTAGE, ALL
COMPANIES
Payments for vacations, sick leave, holidays, etc.
12.0%
Legally required payments 10.0 %
Medical and medically related benefit payments 10.0 %
Retirement and savings (employer’s share) 7.0 %
Paid rest periods, lunch periods, etc. 3.0 %
Miscellaneous benefits 1.0%
Life insurance .5%
Total employee benefits as percent of payroll 43.5%
CO
ST
YEAR
$4000
$1500
Health Plan Costs Climb Higher AnnuallyAverage Annual Health Plan Costs Per Employee
Flexible Benefits Plan(Cafeteria Plans)
Benefit plan that enable individual employees to choose the benefits that are best suited to their particular needs.
Flexible Benefit Plans
Employees ChooseCafeteria PlansCost AttachedSome Government Requirements
Major Concerns
Rising CostsControlling CostsLegal Concern
Pension Plans: Provide for Retirement Income
Federal Regulation - Not Total CoverageReward for Long Service OriginallyNow Based on Earnings Philosophy
Types of Pension Plans
Contributory (joint pay)Non-Contributory (employer pays)Classified by Amount of Benefits to be Paid
Noncontributory Plan
A pension plan where contributions are made solely by the employer.
Defined Benefit Plan
Amount is Specifically DefinedYears of Service RequiredAverage Earnings During Certain YearsAge at Retirement
“Example: Average Annual Salary of Last 3-5 years x
number of years of service”
Defined Contribution Plan
Basis Upon Which the Employer PaysPaid to Thrift Plan, IRA, etc.Benefits Depends Upon Accumulation
Federal Regulation (ERISA)
Employee Retirement Income Security Act
Informed About FactsBenefits DefinedComplex Law
Vesting
A guarantee or accrued benefits to participants at retirement age, regardless of their employment status at that time.
Vesting
Guarantee of BenefitsPaid at RetirementRegardless of Last EmploymentNon-revokable by EmployerVested After XX YearsComplex Rules (ERISA)
Vesting Provisions (General Plans)
General Provisions*1. 5-Year Vesting: An employee must
receive nonforfeitable rights after five years of service to all accrued benefits derived from employer contributions.
2. 3- to 7-Year Vesting: An employee must receive nonforfeitable rights after three years of service to 20 percent of accrued benefits derived from employer contributions. Nonforfeitable rights increase 20 percent each year until the employee is 100 percent vested in the employer-derived accrued benefits after 7 years of service.
Social Security Insurance
Guarantee of IncomeRetirement, Disability, UnemploymentTime LimitsComplex RulesDedicated Tax on Earnings
Pension Funds
Privately Managed$3 Trillion in AssetsInvested in Stocks and Bonds
Unemployment Insurance
Defined Period (26 weeks)Register for Work RequirementFunded by Payroll TaxAmount Based on WagesSupplemental Unemployment Benefits (Private)
Worker’s Compensation Insurance
Federal-or-state-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness.
Worker's Compensation
Work Related AccidentCompulsoryComplex LawBased on WagesPermanent or Partial Disability
Health Care Insurance
Partial Government FundedMostly Private Insurance
Why AreHealth Care Costs
Skyrocketing?
Federal RegulationChanges in Pricing
Advances in MedicineMalpractice InsuranceLabor CostsOver Utilization of FacilitiesElder CareTransplants/AIDS/Other
Health Maintenance Organizations (HMOs)
Organizations of physicians and health care professional that provide a wide range of services to subscribers and dependents on a prepaid basis.
Cost Containment Vehicles
HMO (Health Maintenance Organization)
Group of ProfessionalsServices for Fixed Amounts
PPO (Preferred Provide Organization)
Group of ProfessionalsGuarantees Cost Efficiency for GroupsEmployer Steers Employees to PPO
Retirement Planning Programs
Company Pension PlansSocial Security/MedicareHealth Care InsurancePersonal Financial PlanningLegal ConcernsInvestments/Tax PlanningVolunteerismPart-Time EmploymentHousing OptionsRelocation
Silver Handshake
An early-retirement incentive in An early-retirement incentive in the form of increased pension the form of increased pension benefits for several years or a benefits for several years or a cash bonus.cash bonus.
Decisions Relating to Pensions
DECISIONS ALTERNATIVES
Philosophy Earned vs reward
Source of funds Contributory vs non-contributory
Amount of benefitsDefined benefits vs defined contributions
Custody of pension funds
Insured vs trusteed plans
Investment problems
Protections against loss of fundsProtection against loss of purchasingWhere and where not to investTax consequences