INDIRECT FINANCIAL COMPENSATION CHAPTER 10 © 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–1

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–2 Employer- Provided Benefits Absorb social costs for health care and retirement Influence employee decisions about employers Are increasingly seen as entitlements Average over 40% of total payroll costs Benefits and HR Strategy BenefitBenefit  An indirect reward given to an employee or group of employees for organizational membership.

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–3 FIGURE 13–1 Employer Compensation and Benefits Costs per Hour Source: U.S. Bureau of Labor Statistics, 2008.

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–4 FIGURE 13–2 Strategic Benefits Considerations

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–5 FIGURE 13–3 Benefits Management Components

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–6 Benefits Design Decisions Affecting Benefit Design:Decisions Affecting Benefit Design:  How much total compensation, including benefits, can be provided?  What part of total compensation of individuals should benefits comprise?  Which employees should get which benefits?  What expense levels are acceptable for each benefit?  What are we getting in return for the benefit?  How flexible should the benefits package be?

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–7 Flexible Benefits Flexible Benefits PlanFlexible Benefits Plan  A program that allows employees to select the benefits they prefer from groups of benefits established by the employer. The Challenge of Providing ChoicesThe Challenge of Providing Choices  Inappropriate benefits package  Requiring selection of core benefits  Adverse selection  Situation in which only higher-risk employees select and use certain benefits  Administrative time and plan complexity

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–8 HR Technology and Benefits Administration Benefits Administration Issues and Trends Outsourcing of Benefits Administration Internet-Based Administration Systems Benefits Measurement (Return vs. Costs)

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–9 FIGURE 13–5 Common Benefits Metrics

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–10 Benefits Cost Control Reducing or dropping benefits Cost sharing with employees Sponsoring wellness programs Fostering employee health education Direct purchase of benefits by employees Negotiating reduced-rate benefit contracts Consolidating of benefits packages

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–11 FIGURE 13–6 How the Typical Benefits Dollar Is Spent

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–12 FIGURE 13–7 Types of Benefits

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–13 Health-Care Benefits Controlling Health-Care Benefits Costs Co-Payments and Employee Contributions Managed Care ( PPOs and HMOs, Utilization Reviews) Mini-Medical Plans

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–14 Consumer-Driven Health (CDH) Plans Employee-Focused Health Benefits Plans Defined- Contribution Health Plans Health Savings Accounts (HSAs) Health Reimbursement Arrangements (HRA)

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–15 Pension Plans Types of Pension Plans Defined- Benefit Plan Defined- Contribution Plan Cash Balance Plan

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–16 FIGURE 13–11 Worker Participation in Pension Plans Source: U.S. Bureau of Labor Statistics,

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–17 Pension Plan Concepts Pension Plan Formats Contributory Plan Non-Contributory Plan Portability of Pension Benefits Vesting of Pension Rights

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–18 Individual Retirement Options Individual Retirement Account (IRA) 401(k) and Roth IRA 403(b) Keogh

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–19 FIGURE 13–12 Common Types of Financial Benefits

© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part.13–20 Time-Off and Other Benefits Holiday Pay Vacation Pay Leaves of Absence Miscellaneous Benefits Paid-Time- Off (PTO) Plans Time-Off and Other Benefits