MGTO 231 Human Resources Management Benefits 福利 Dr. Kin Fai Ellick WONG

Prologue Job 1 Job 2 Job 3 Some jobs list a brief summary of benefits, some do not.

So, what are included in a benefit package? Why don’t we simply pay more base salary and eliminate the benefit package? How benefits can be designed in a way that is consistent with the business strategy?

Outline Some basic concepts of benefits Types of benefits The strategic aspect of benefits Managing benefits

Basic concepts The three components of compensation systems  Base compensation  Pay incentives  Indirect compensation / benefits They are complementary to each other

Benefits = indirect compensation  Group membership rewards that provide security for employees and their family members  It is an indirect compensation because it provides a plan rather than cash  Attractive benefit packages help recruit and retain talented employees

Who gave the contributions? Contributions  Payments made for benefits coverage  May come from the employer, employee, or both  Vacations: employer  Some types of insurance: paid partly by employer and partly by employees

Outline Some basic concepts of benefits Types of benefits The strategic aspect of benefits Managing benefits

Major types of benefits Legally required benefits Health insurance Retirement Housing allowance Insurance Education allowance Paid time off

Legally required benefits Hong Kong government requires employers to give the following benefits  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  MPF  Part IV of the Employees' Compensation Ordinance which provides for compulsory insurance in relation to compensation for work injuriesEmployees' Compensation Ordinance

Health insurance Hospital costs, physician charges, and the cost of other medical services Most UST staff  Are allowed to claim $250 for each medical consultation, with a total less than about $19,000 per year It is usually separated from other types of insurance

Retirement Retirement benefit provides income to employees after they retire The implementation of Mandatory Provident Fund (MPF) follows this idea

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 Example: In government, the lowest position that is granted with this allowance is about $50,000 per month; the allowance is about $13,000 per month (2001)  $11,000 per month (2002)

Insurance Protect employees and their family from financial difficulties as a result of  Disability  Death

Education allowance For children  This type of benefits provides employees’ children with reasonable funding for education  This type of benefits is usually applicable to employees at senior positions For employee themselves  Employers may contribute all or part of the tuition fee (may only be applicable to some specified courses or programs) Workplace English Campaign ( 職業英語資助計劃 ) Workplace English Campaign

Paid time off Sick leave Vacations  I have 42 days per year

Outline Some basic concepts of benefits Types of benefits The strategic aspect of benefits Managing benefits

Designing a benefit package Three issues should be considered  Organizational objectives  Total compensation strategy  Characteristics of the workforce

Organization’s objectives  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  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 that for the low-level employees

Total compensation strategy  Corresponding to the “below-market vs. above- market compensation”, that is to consider the packages offered by others  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  Deciding the percentage of the total compensation package that will be allocated to benefits compared to other components of the package

Workforce’s characteristics  Workforce consists largely of parents with young children  child-care, family-friendly benefits  Old employees  retirement plan  Young employees  leave, social gathering

Outline Some basic concepts of benefits Types of benefits The strategic aspect of benefits Managing benefits

Flexibility of benefits The degree of freedom employees have to decide the benefit package to their personal needs, as different employees may have different needs Similar to  Centralized vs. decentralized pay

Two critical issues in administering benefits How to manage a flexible benefit system? How to let employees know about the benefits (problems of communications), the packages are becoming more and more complicated?  See my benefit packagebenefit package

Conclusion Why don’t we simply pay more base salary and eliminate the benefit package?  Not all benefits are monetary e.g., leave  Creating a sense of protection: benefits occur at the right moment when the employees need them (e.g., medical insurance)  Showing the care from the organizations