Benefits OS352 HRM Fisher Nov. 13, 2003

2 Agenda Collect Exercise 3 Current state of benefits Trends in benefits

3 Comments on Exercise 3 Data can be messy A system like SAP facilitates, but does not guarantee, consistency – Different people entering position description and qualification data – Does not eliminate rating errors Still have to make judgment calls

4 Legally Required Benefits Social Security Retirement Income Disability Income Medicare Survivor Benefits Workers ’ Compensation Unemployment Insurance Unpaid Leave Adds up to approximately 24% of salary

5 Voluntary Benefits Employers do not have to offer – Health Insurance – Retirement – Paid vacation, holidays Can add up to an additional 20% of salary – Highest in manufacturing – Lowest in retail Most employers do offer these benefits. Why?

6 Health Benefits 43.6 million Americans uninsured in 2002 (Schaefer & McGinley, 2003, Wall Street Journal) Costs rising for everyone (12% next year) Balancing costs of monthly premiums, co-pays, benefit caps, deductibles, prescription coverage Some companies focusing on wellness benefits to reduce costs – $114 for normal weight employees – $573 for overweight employees – Dallas city employees (

7 Retirement Benefits Defined benefit vs. defined contribution – Some companies offer both – 401(k) is most common defined contribution plan Cash balance plans 401(k) plans usually come with “ employer match ” benefits – Average match was 2.5% of payroll in 2001 ( – Down from 3.3% in 1997 – May vary based on seniority

8 Personal Services Benefits Examples include – Organization-sponsored sports teams (32%) – Food services/subsidized cafeteria (26%) – Legal assistance/services (25%) – Travel planning (20%) – Dry cleaning (13%) – Massage therapy (11%) – Concierge services (2%) Pros and cons of offering these kinds of benefits? Data Source: SHRM Foundation 2003 Benefits Survey

9 Who is covered by employee benefits? Traditionally, employee, spouse, and children – Married couples with kids now only 25% of households Part-time employees often not covered Domestic partner benefits – Opposite sex – Same sex Extended family benefits

10 Which benefits to provide? Organizations must consider which benefits will help them achieve their strategic goals. For example: – A database applications company in Palo Alto, CA that has just gone public. Has 45 employees, expects to be hiring more. In a highly competitive job market. 85% of employees are years old. – Compare this to a municipal government in the Midwest. Which benefits would you include in the overall package? Why?

11 Flexible vs. Fixed Benefits Programs Flexible (Cafeteria) Employees select the benefits they want. May be less costly. Supports corporate diversity strategy. Increased fairness perceptions. But, administratively complex. Fixed All employees receive the same benefits. Simple administration. But, one-size-fits-all approach may not meet employees ’ needs.

12 For next class Topic: Labor relations Read Chapter 14 – How does the presence of labor unions affect an organization ’ s approach to HR? Expect to see take-home essay questions next week (due Dec. 8)