Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Designing and Administering Benefits 12-1 Chapter 12

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chapter 12 Objectives 12-2  Explain the significance of employee benefits to both employers and employees.  Design a benefits package that supports the firm’s overall compensation strategy and other HRM policies.  Distinguish between a defined benefit plan and a defined contribution retirement plan and recognize the situations in which each is most appropriate.

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chapter 12 Overview 12-3  Discuss how employee health insurance plans and managed-care plans work and the advantages and disadvantages of each.  Develop cost-containment strategies for different types of employee benefits.  Understand the administrative complexities of providing a full array of benefits to the workforce and suggest ways to deliver benefits effectively.  Recognize the HR department’s key role in keeping accurate records of employee benefits and informing employees about their benefits.

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Managerial Perspective Benefits:  Important to employees  Powerful recruiting tool  Help retain talented employees  Some affect managerial decisions  (e.g. leave policies)  Important to managers 12-4

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall An Overview of Benefits Employee benefits:  Indirect compensation  Based on group membership  Provide security for employees and family 12-5  Costly and becoming costlier  1929: 3% of payroll  2010: 30.3%

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall How the Benefit Dollar Is Spent 12-6

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Benefit Terminology  Contributions  Coinsurance  Copayment  Deductible  Flex/cafeteria benefits program 12-7

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall The Cost of Benefits in the U.S.  Federal tax policy  Employers: cost may be deductible  Employees: many free of taxes— others tax deferred 12-8  Federal legislation  Union influence  Cost saving of group plans

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall The Benefits Strategy Three parts to Benefits Strategy: 12-9  Benefits Mix—total package  Compensation strategy  Organization’s objectives  Characteristics of workforce  Benefit Amount  Flexibility of Benefits

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Types of Benefits  Legally required benefits  Health insurance  Retirement  Insurance  Paid time off  Employee services 12-10

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Legally Required Benefits  Social Security  Retirement Income  Disability Income  Medicare  Survivor Benefits  Unemployment Insurance  Actively seeking work  Left job involuntarily  Supplemental unemployment benefits

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Legally Required Benefits Workers’ Compensation  Claims and premiums steadily rising  Employers “fighting back”  Role of HR:  Stress safe work procedures  Audit workers’ compensation claims  Coordinate workers’ compensation and health insurance benefits  Encourage those partially disabled to return under a modified duty plan

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Legally Required Benefits FLMA – Family and Medical Leave Act  Up to 12 weeks unpaid leave  For following reasons:  Birth of a child  Adoption of a child  Care for sick spouse, child or parent  Employee’s own serious health needs  Amended to give up to 26 weeks leave to family of injured military personnel

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Voluntary Benefits  Health Insurance  COBRA of 1985  PACA (2010)  HIPAA  Portability  Accountability  Traditional Health Insurance  Health Maintenance Organization (HMO)  Preferred Provider Organization (PPO)

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Health Insurance Plans 12-15

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Voluntary Benefits  Health Savings Account  Pretax and benefits not taxed  Cost containment  Develop self-funded arrangement  Coordinate health insurance in families with two working spouses  Develop a wellness program  Offer high deductible plans

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Retirement Benefits  Employee Retirement Income Security Act  Pensions:  Defined Benefits Plans  Defined Contribution Plans  Cash Balance Plan (Hybrid)  Defined Contribution Plans  401k and 403b  IRA and SEP IRA  Keogh Plan

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Defined Contribution Retirement Plans 12-18

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Voluntary Benefits  Life Insurance (term)  Disability insurance  Short and Long-term  Paid Time Off  Sick leave  Vacations  Severance pay  Holiday and other paid time off  Employee Services

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Administering Benefits  Flexible benefit plans  Modular  Core-plus options  Flexible spending accounts  Challenges with flexible benefits  Adverse selection  Employees who make poor choices  Administrative complexity

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Administering Benefits  Benefits Communication  Programs increasingly complex  Employees need to understand value of benefits NASA Photo. Used with permission.

Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Summary and Conclusions  Design benefits to align with overall compensation strategy  Benefits provide security for employees and their families  It is important to:  Provide benefits employees value and appreciate  Communicate value of benefits to employees 12-22

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