© 2001 by Prentice Hall and Anne S. Tsui, November 5, 2002 Employee Benefits

© 2001 by Prentice Hal and Anne S. Tsui, HR planning Evaluating Separating Relating Career Planning Benefits RewardingPaying Training Hiring Job designing The Course: HRM Activities Attract Motivate Retain

© 2001 by Prentice Hal and Anne S. Tsui, Module III: Employee – Employer Relationship  Protecting employees – benefits (ch. 12) u 1 session plus Ms. Eileen Thom  Developing employee careers (ch. 9) u 2 sessions  Relationship with employees (ch. 13) u 2 sessions  HR across borders (ch. 17) u 1 session plus Mr. Bernie Au Yang (Nov. 28 evening)  Separating with employees (ch. 6) u 1 session including project presentations

© 2001 by Prentice Hal and Anne S. Tsui, Learning Objective – at the end of this topic, you should be able to:  Understand the significance of employee benefits to both employers and employees.  Distinguish between legally required benefits and voluntary benefits.  Explain why firms vary in employee benefits.  Develop methods of communication that achieves the HRM objectives for the benefits program.  Design a benefits package that supports the firm’s overall compensation strategy and meet employee needs. © 1998 by Prentice Hall Reading: see last page of the file

© 2001 by Prentice Hal and Anne S. Tsui, Total Compensation Total Compensation Pay Incentives (Chapter 11) Indirect Compensation/ Benefits (Chapter 12) Base Compensation (Chapter 10)

© 2001 by Prentice Hal and Anne S. Tsui, It is an indirect compensation because it provides a plan rather than cash Group membership rewards that provide security and protection for employees and their family members Attractive benefit packages help recruit and retain talented employees Benefits = indirect compensation

© 2001 by Prentice Hal and Anne S. Tsui, Who gave the contributions?  Contributions u Payments made for benefits coverage u May come form the employer, employee, or both u Vacations: employer u Some types of insurance: paid partly by employer and partly by the employees

© 2001 by Prentice Hal and Anne S. Tsui, Types of Benefits Benefits Strategy Communication of Benefits

© 2001 by Prentice Hal and Anne S. Tsui, Types of Benefits - HK Voluntary Benefits Legally Required Benefits Sick leave Holidays Worker’s compensation Annual leave (10-40 days) Retirement (MPF) Health insurance Educational allowance Housing allowance Life insurance Travel insurance Rest periods Child and elderly care Employee services

© 2001 by Prentice Hal and Anne S. Tsui, Legally required benefits - HK  Hong Kong government requires employers to give the following benefits u maternity leave, rest days, sickness allowance, statutory holidays and annual leave provided under the Employment Ordinance and the keeping and maintenance of records as required by the OrdinanceEmployment Ordinance u MPF u Part IV of the Employees' Compensation Ordinance which provides for compulsory insurance in relation to compensation for work injuriesEmployees' Compensation Ordinance

© 2001 by Prentice Hal and Anne S. Tsui, A Common Voluntary Benefit – Health insurance  Hospital costs, physician charges, and the cost of other medical services  Most UST staff u Are allowed to claim $250 for each medical consultation, with a total less than about $19, 000 per year

© 2001 by Prentice Hal and Anne S. Tsui, Housing allowance  This allowance provides extra funding for employees to buy or rent a flat  This type of benefits usually applicable to employees at senior positions  Examples: In government, the lowest position that are granted with this allowance is about $50,000 per month; the allowance is about $ 13,000 per month (last year)  $11,000 per month (this year)

© 2001 by Prentice Hal and Anne S. Tsui, Education allowance  For children u This type of benefits provide employees’ children with reasonable funding for education u This type of benefits usually applicable to employees at senior positions  For employee themselves u Employers may contribute all or part of the tuition fee (may only be applicable to some specified courses or programs)  Workplace English Campaign Workplace English Campaign  MBA/PTMBA/EMBA degree

© 2001 by Prentice Hal and Anne S. Tsui, Annual Number of Vacation Days in Various Countries for Employees with One Year of Service Austria Canada France Japan Netherlands Spain United Kingdom Hong Kong days

© 2001 by Prentice Hal and Anne S. Tsui, Four Components of a Benefits Strategy I.Benefit mix (appropriate) II.Benefit amount (proportional) III.Flexibility of benefits (effective)

© 2001 by Prentice Hal and Anne S. Tsui, I. Benefits mix (range of benefits)  The complete package of benefits that a company offers its employees  Three issues should be considered A. Total compensation strategy B. Organizational objectives C. Characteristics of the workforce

© 2001 by Prentice Hal and Anne S. Tsui, A. Total compensation strategy u Corresponding to the “below-market vs. above-market compensation”, that is to consider the packages offered by others u In hi-tech firm, retirement benefits are generally not so emphasized, thus, an effective total compensation strategy for a hi-tech firm could be the one that increases base compensation, but does not offer retirement benefits

© 2001 by Prentice Hal and Anne S. Tsui, B. Organization’s objectives u Some organizations’ objectives are to minimize the compensation differences between low-level and high-level employees, then benefit mix should be the same for all employees u Some are to increase the differences to encourage low-level employees to move upward, then benefit mix for the top- management should be more attractive than than for the low-level employees

© 2001 by Prentice Hal and Anne S. Tsui, C. Workforce Characteristics u For workforces consist largely of parents with young children  child-care, family-friendly benefits u Unionized workforce  retirement plan

© 2001 by Prentice Hal and Anne S. Tsui, II. Benefits Amount (proportion of total compensation)  The percentage of the total compensation package that will be allocated to benefits compared to the other components of the package.  The more the proportion in the benefits, the more the predictability is the outcome, thus it can be considered fixed pay, rather than variable pay.  The total amount of benefits reflects the management philosophy toward employees.

© 2001 by Prentice Hal and Anne S. Tsui, Cost of Employee Benefits in the United States, Year Percent of Employer Payroll

© 2001 by Prentice Hal and Anne S. Tsui, How the Benefit Dollar Is Spent - US Payment for Time Not Worked 24% Life Insurance 1% Medical and Medically Related Benefits 23.1% Legally Required 29.6% Miscellaneous (discounts, educational assistance, etc.) 3.2% Paid Rest Periods 5.5% Retirement and Savings Plans 13.6%

© 2001 by Prentice Hal and Anne S. Tsui, III. Flexibility of benefits (effective use of benefit cost)  The degree of freedom employees have to decide the benefits package to suit their personal needs, as different employees may have different needs.  Flexibility increases total administrative cost but also increases more effective use of the benefit dollars.  Three common types of plans: modular, core-plus, flexible accounts

© 2001 by Prentice Hal and Anne S. Tsui, Communication of Benefits Colorful Fliers or Newsletters Payroll Stickers or Posters Wallet Cards Audio-Visual Presentations Toll-Free Number or hotline Computer Software Package Benefits Web Sites

© 2001 by Prentice Hal and Anne S. Tsui, Thinking questions on employee benefits  Why do all employers provide some benefits that are not required by law?  Why do some employers provide more voluntary benefits than other employers?  What are the advantages and disadvantages of flexible benefits systems (or cafeteria benefits programs) for the employee, and for the employer?  Should companies discontinue benefits that are used by only some employees?  Should part time employees deserve the same benefits as full time employees or different ones?

© 2001 by Prentice Hal and Anne S. Tsui, Guest Speaker on Benefits  Ms. Thom has over 20 years of experience in designing and administering benefits programs  She has experience in computer industry, oil refinery, food products, and entertainment industries (Disney and Universal Music).  Her current employer Universal Music has the most interesting products.  She also has broad Asia international HRM experience.  So, ask her lots of questions …

© 2001 by Prentice Hal and Anne S. Tsui, Chapter 12 – Reading Guide  You may skip p. 398 and the section on Legally Required Benefits (mid of p. 401 to 415) – these are common benefits in the U.S. However,  You should be familiar with some basic terms on these pages, such as worker’s compensation, unemployment insurance, health insurance (HMO, PPO), defined benefits plans, defined contribution plans, disability insurance, etc. I won’t test you on these but you should know these terms as part of HR knowledge.