Human Resource Management Managing Employee Benefits CHAPTER 13

Human Resource Management Managing Employee Benefits CHAPTER 13 Robert L. Mathis | John H. Jackson | Sean R. Valentine 14 e © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Indirect reward given to an employee or group of employees for organizational membership © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Employer Provided Benefits Absorb social costs for health care and retirement Average over 30% to 40% of total payroll costs © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits and HR Strategy Benefits approach adopted as part of total rewards depends on many factors, such as: Size of the organization Workforce competition Organizational life cycle Employee demographics Corporate strategic approach Employees’ life stages © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits as a Competitive Advantage Benefits Aid are offered to: recruiting and retention Improve Meet organizational performance legal requirements Reinforce the company philosophy of social and corporate citizenship © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits as a Competitive Advantage Benefits about: Which can influence employees’ decisions employer to work for Looking for another job Retirement age © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Tax-Favored Status of Benefits Most benefits are not taxed as income to employees Except for paid time off Gross-up: To increase the net amount of what the employee receives to include the taxes owed on the amount © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Global Benefits Total differ significantly across the globe hourly compensation Retirement Amount and health insurance plans of paid leave and vacation time Paid time off for childbirth and medical disability Paid sick leave policies In many countries, employers and employees are taxed heavily to pay into government funds © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Global Benefits Multinational companies must determine how to compensate both host-country nationals and expatriates So that all employees will feel that they are being treated fairly Decisions about compensation impacts global attraction and retention of employees for international employers © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Management Components • • • Benefits design Benefits administration Technology administration Benefits measurement Cost control efforts Communication to employees © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Figure 13. 4 - Benefit Design Decisions © 2014 Cengage Learning. All rights reserved.

Managing Benefits are designed by organizations with a goal of providing value for employees while remaining cost-effective for the company Flexible benefits plan: Program that allows employees to select the benefits they prefer from groups of benefits established by the employer Part-time employee benefits Domestic partner benefits Older workers benefit needs © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Administration and Technology Open enrollment: Time when employees can change their participation level in various benefit plans and switch between benefit options Outsourcing benefits administration Many organizations must make coordinated efforts to administer benefits programs Third-party administrators (TPA): Vendor that provides administrative services to an organization © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Administration and Technology Internet and employee self-service and computer-based systems are being used to: Communicate Conduct Facilitate employee benefits surveys benefits administration Decrease Increase benefits information expenses positive communication Effectively connect people across many HR functions © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Administration and Technology Self-service: Change Track Technology that allows employees to: their benefits choices their benefits balances Submit questions to HR staff members and external benefits providers © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Benefits Cost Control • • • Reducing or dropping benefits Cost sharing with employees Sponsoring wellness programs Fostering employee health education Changing prescription drug programs Consolidating of benefits packages © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Figure 13. 7 - Types of Benefits © 2014 Cengage Learning. All rights reserved.

Security Benefits Types of Security Benefits Workers’ Compensation Unemployment Compensation Severance Pay © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Retirement Plan Concepts Vesting: Right of employees to receive certain benefits from their pension plans No pension rights accrue if they have not been employed long enough to be vested Portability: A pension plan feature that allows employees to move their pension benefits from one employer to another Once workers are vested they can transfer their fund balances to other retirement plans © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Retirement Plan Retirement program established and funded by the employer and employees © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Types of Retirement Plans © 2014 Cengage Learning. All rights reserved. May not be

Figure 13. 1 1 - Comparison of Defined Benefit and Defined Contribution Retirement Plans © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Common Defined Contribution Plans Profit-sharing Employee plans stock ownership plans (ESOPs) 401(k) plans: Agreement in which a percentage of an employee’s pay is withheld and invested in a tax-deferred account Auto-enrollment: Employee contributions to a 401(k) plan are started automatically when an employee is eligible to join the plan © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Legal Requirements of Retirement Benefits © 2014 Cengage Learning. All rights reserved. May not

Controlling Health Care Benefit Costs Increasing deductibles and copayments Instituting high-deductible plans Increasing employee contributions Using managed care Limiting family coverage; excluding spouses • Switching to consumer-driven health plans • Increasing wellness efforts • • • © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Figure 13. 14 - Common Types of Financial Benefits © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Insurance Benefits Life insurance Typical level of coverage is one and one-half or two times an employee’s annual salary Disability insurance Common Types of Insurance Benefits Provide continuing income protection for employees who become disabled and are unable to work Long-term care insurance Allow employees to purchase insurance to cover costs for long-term health care in a nursing home, an assisted-living facility, or at home Legal insurance Employees (or employers) pay a flat fee for a fixed number of hours of legal assistance each month © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.

Figure 13. 15 - Guidelines Regarding FMLA Administration © 2014 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.