MGT351 Human Resource Management Chapter13 Employee Benefits and

MGT-351 Human Resource Management Chapter-13 Employee Benefits and Services

Employee Benefits ØDo not directly related to worker’s performance like incentives ØBut inadequate benefits lead to employee dissatisfaction Ø Benefit and service offerings add about 30 -40% to an organization’s payroll cost Ø Benefits become the focus of negotiations with employees when large wage and salary increases are not feasible

Paid Time Off • Maternity Leave Ø Under Article 4(1) of Maternity Protection Convention, 2000, ensure the period of maternity leave of not less than 14 weeks. Ø Rule 197(1) of the Bangladesh Service Rules (as amended 9 January 2011) provides for female Government servants six months and Ø The Bangladesh Labour Act, 2006 section 46, provides for a female workers 16 weeks maternity leave. Ø Though paternity leave is not a new concept but Bangladesh has no paternity leave opportunity for its male employees or workers.

Paid Time Off Disability Insurance Programs • Provides salary continuation for: Ø Short-term disabilities (sick leave) Ø Long-term disabilities (coverage usually effective after 6 months) Vacation and Holiday Leave Ø Vacation time is usually related to the length of time on the job Ø Some companies also allow personal days that can be used for any reason

Pay for Time Not Worked • Severance pay Ø A one-time payment when terminating an employee. Ø Reasons for granting severance pay: v Acts as a humanitarian gesture and good public relations. v Avoids litigation from disgruntled former employees. v Meets Worker Adjustment and Retraining Notification (“plant closing”) Act requirements. v Reassures employees who stay on after the employer downsizes its workforce of employer’s good intentions.

Pay for Time Not Worked (cont’d) • Supplemental unemployment benefits (SUB) Ø Payments that supplement the laid-off or furloughed employee’s unemployment compensation. v The employer makes contributions to a reserve fund from which SUB payments are made to employees for the time the employee is out of work due to layoffs, reduced workweeks, or relocations. v SUB payments are considered previously earned compensation for unemployment calculation purposes.

Insurance Benefits • Workers’ compensation Ø Provides income and medical benefits to work-related accident victims or their dependents, regardless of fault. v Death or disability: a cash benefit based on earnings per week of employment. v Specific loss injuries: statutory list of losses Ø Controlling worker compensation costs v Screen out accident-prone workers. v Make the workplace safer. v Thoroughly investigate accident claims. v Use case management to return injured employees to work as soon as possible.

Insurance Benefits (cont’d) • Hospitalization, health, and disability insurance Ø Provide for loss of income protection and group-rate coverage of basic and major medical expenses for off-the-job accidents and illnesses. • Preferred provider organizations (PPOs) Ø Groups of health care providers that contract to provide medical care services at reduced fees. v Employees can select from a list of preferred individual health providers. v Preferred providers agree to discount services v Employees using non-PPO-listed providers may pay all of the service costs or the portion of the costs above the reduced fee structure for services.

Retirement Benefits • Pension plans Ø Contributory: employees contribute to the plan. Ø Noncontributory plans: employer makes all contributions to the plan. Ø Qualified plans: plans that meet requirements for tax benefits for employer contributions. Ø Nonqualified plans: plans not meeting requirements for favorable tax treatment. Ø Defined contribution: contributions of employees and employers are specified; plan payouts are not. Ø Defined benefit plans: plan payouts are specified; however, contributions must be sufficient to insure payouts.

Provident Fund • The Employee Provident Fund, popularly known as PF is the retirement saving scheme available to all the salaried employees, is backed by the government on which fixed interest is paid. • A provident fund is a form of social safety net into which workers must contribute a portion of their salaries and employers must contribute on behalf of their workers. • Example: at company “X” both the employees and employers contribute 10% of the basic wages and dearness allowance to the provident fund (PF) account. Ø Total contribution to the PF= 20% X basic salary x months of service . Note: However, full/partial contribution depends of service tenure

Gratuity • Gratuity is a long term financial benefit given by the employer to its employee during separation. As per Bangladesh Labor Law 2006 gratuity is not mandatory to employers. • Gratuity policy is depends upon company's own resolution. It may be applicable after 3 years or 5 years continuous service tenure. • Example: Company “X” allow Gratuity after 5 years of continuous service. Ø Total gratuity payment = Years of service x Last basic salary Note: However, sometimes company use different “basic salary” for different service tenure. Usually Dismissed employees don’t received Gratuity.

Flexible Benefits Programs • The cafeteria (flexible benefits) approach Ø Each employee is given a benefits fund budget to spend on the benefits he or she prefers. v The fund limits the total cost for each benefits package. v Core plus option plans establish a core set of benefits which are mandatory for all employees. • Flexible spending accounts Ø Enable employees to pay for medical and other expenses with pretax dollars by depositing funds in their accounts from payroll deductions.