Hra 310 chapter 13

Chapter Thirteen

Benefits

Copyright © Houghton Mifflin Company. All rights reserved. 13–2

Chapter Outline

• The Role of Benefits in Reward Systems

• Types of Benefits• Issues in Indirect Compensation


The Role of Benefits in Reward Systems


Issues of the Cost of Benefits

• The Cost of benefits is increasing far more rapidly than the cost of wages


Figure 13.1: Employment Cost Index

Source: Bureau or Labor Statistics, Employment Cost Index. (Available at: action=EC ectbrief)


Table 13.1 Benefits in Relation to Total Compensation

Source: “Employer Costs for Employee Compensation,” Bureau of Labor Statistics, June 2004. (Available at: http://stats.bls.gov/news.release/archives/ecec_09152004.pdf)


Mandatory Protection Programs

• Social Security• Unemployment Compensation• Workers’ Compensation


Issues with Social Security

• 2/3rds of workers in the US pay more toward SS/Medicare than they pay in income tax

• Not funded on an actuarial basis


Issues with Social Security (cont’d)

• Designed for a previous era before the issues of:– Longevity– Number of retirees– Retirement age– Ratio of workers to retirees


Unemployment Compensation

• Temporary income for out-of-work employees

• Recipients must be looking for work• Income is at the rate of 50 to 80% of

normal pay• Managed by each state in accordance

with Federal guidelines


Workers’ Compensation

• No fault disability insurance for workers injured or killed on the job

• Employers pay premiums based on worker injury experience

• Established in accordance with state laws so provisions vary

• Since involves medical treatment, can be expensive for employers


Other Types of Benefits

• Compensation for Time Not Worked

– Holidays– Vacation– Sick Leave– Personal Days– Other Leaves


Optional Benefit Programs

• Health Insurance• Life and Disability Insurance• Retirement/Pension Plans

– Defined Contribution– Defined Benefit– Capital Accumulation– Cash Balance


Optional Benefit Programs (cont’d)

• Other Benefits– Wellness Programs– Educational Assistance– Child Care Assistance


Health Care Issues


Figure 13.3 Percent Change in Health Spending Compared to Other Indicators

Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 2004 Annual Survey (Menlo Park, CA: Henry J. Kaiser Family Foundation, 2004).


Methods of Coping with High Health Care Costs

– Health Plan Redesign• Deductible• Coinsurance• Coordinating Benefits

– Health Funding Alternatives• Preferred Provider Organization (PPO)• Health Maintenance Organization (HMO)

– Legal Requirements for Health Care– Health Benefits for Retirees– Health Benefits for Nonfamily Members


Types of Pension Plans

• Defined Contribution– Benefits are a function of contributions plus

gains or losses• Defined Benefit

– Benefits based on a formula that includes length of service and average earnings


Types of Benefit Plans (cont’d)

• Capital Accumulation Plans– 401(k) or thrift plans– Tax-deferred contributions

• Cash-Balance Plans– Combines the benefit formula of a define

contribution with the investment security of a defined benefit plan.


Regulations Governing Retirement Plans

• ERISA—employment Retirement Income Security Act of 1974

• Single-Sex Pension Benefits• GATT Treaty (1994)


Health Benefits for Nonfamily Members

• More than 145 (29%) of Fortune 500 companies now offer domestic-partner benefits, more than quadruple the number that offered them in 1997.


Issues in Indirect Compensation

• Cost Containment• Flexible Benefit Option

– Flexible Benefit Package (Cafeteria-Style Benefit Plan)

• Communicating About Benefits• Work Family Issues


Table 13.4 Most Popular Family Workplace Initiatives

Source: Adapted from Society for Human Resource Management, “2001 Benefits Survey,” April 2000. (Available at: http://www.shrm.org/surverys/results/default.asp?page=01benefits.asp)


Review

• Strategic Importance of Variable Pay• Linking Pay to Performance• Individual Incentives• Group Incentives• Barriers to Pay-for-Performance Success• Summary: Making Variable Pay Successful• Executive Compensation• The Role of Benefits in Reward Systems• Types of Benefits• Issues in Indirect Compensation

Hra 310 chapter 13

Education

Transcript of Hra 310 chapter 13