Benefits

Why Offer Benefits? Benefits are approx 40% of compensation Costs have risen more than 20% since 1990

Why Offer Benefits?

Requirements for a Sound Benefits Program Strategic Benefits Planning Allowing for Employee Involvement Benefits for a Diverse Workforce Providing for Flexibility Communicating Employee Benefits Information

The Chief Objectives of Benefits Programs Improve employee work satisfaction Meet employee health and security requirements Attract and motivate employees Reduce turnover Maintain a favorable competitive position

Providing for Flexibility Flexible Benefits Plans (Cafeteria Plans) Benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs. Benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs. A basic or core benefits package of life and health insurance, sick leave, and vacation ensures that employees have a minimum level of coverage. A basic or core benefits package of life and health insurance, sick leave, and vacation ensures that employees have a minimum level of coverage. Employees use “credits” to “buy” whatever other benefits they need. Employees use “credits” to “buy” whatever other benefits they need.

Flexible Benefits Plans: Advantages and Disadvantages ADVANTAGES Employees select benefits to match their individual needs. Benefit selections adapt to a constantly changing (diversified) workforce. Employees gain greater understanding of the benefits offered to them and the costs incurred. Employers maximize the psychological value of their benefits program by paying only for highly desired benefits. Employers limit benefit costs by allowing employees to “buy” benefits only up to a maximum (defined) amount. Employers gain a competitive advantage in the recruiting and retention of employees. DISADVANTAGES Poor employee benefits selection results in unwanted financial costs. There are certain added costs to establishing and maintaining the flexible plan. Employees may choose benefits of high use to them that increase employer premium costs.

Communicating Benefits Information In-house publications (employee handbooks and organizational newsletters) Group meeting and training classes Audiocassettes/videotapes Bulletin boards Payroll inserts/pay stub messages Specialty brochures Employee self-service systems (ESS)

Crafting an Effective Benefits Communication Program

A Personalized Statement of Benefits Costs

Benefits Issues Rising costs of providing benefits Benefits offered by other employers Concerns of Management Union demands for additional benefits Tax consequences of benefits

Concerns of Management The High Cost of Providing Benefits According to a 2007 U.S. Chamber of Commerce study, the cost of employee benefits averaged 42.7 percent of payroll. According to a 2007 U.S. Chamber of Commerce study, the cost of employee benefits averaged 42.7 percent of payroll. The average distribution of these benefits was $21,527 per employee per year. The average distribution of these benefits was $21,527 per employee per year. Shifting Benefit Costs to Employees Shared Responsibility Shared Responsibility Employers to require employees to pay part of the costs of certain benefits (e.g., copayments or higher deductibles), especially medical coverage. Employers to require employees to pay part of the costs of certain benefits (e.g., copayments or higher deductibles), especially medical coverage. Employees are paying a larger part of their retirement programs through contributory pension plans or 401(k) saving plans. Employees are paying a larger part of their retirement programs through contributory pension plans or 401(k) saving plans.

Types of Employee Benefits Required By Law Discretionary Health care Unemployment Insurance Workers’ Compensation Payment for time not worked Supplemental Unemployment Benefits Supplemental Unemployment Benefits Social Security Unpaid leave (FMLA) Life and LT care insurance Retirements and pensions

Social Security Insurance Benefits paid are determined by an individual’s life-time earnings Provides long-term disability benefits Social Security Act (1935) A payroll tax on both employees and employers 15.3% tax split between employer & employee Social Security Act (1935) A payroll tax on both employees and employers 15.3% tax split between employer & employee Old Age and Survivors Insurance (OASI) Must work 40 quarters in an occupation covered by Act to qualify for benefits

Unemployment Insurance Federal payroll tax on employer and employee Tax is refunded to states which individually administer unemployment compensation programs. Tax is refunded to states which individually administer unemployment compensation programs. Benefit weekly amounts vary from state to state. Benefit weekly amounts vary from state to state. Involuntarily unemployed workers are eligible for up to 26 weeks of unemployment benefits. Involuntarily unemployed workers are eligible for up to 26 weeks of unemployment benefits. Benefit is based on an employee’s recent earnings. Benefit is based on an employee’s recent earnings. Unemployed workers are required to seek “suitable employment.” Unemployed workers are required to seek “suitable employment.”

Workers’ Compensation Insurance Federal- or state-mandated insurance Funded by an employer payroll tax Funded by an employer payroll tax Provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness. Provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness. Factors influencing the employer’s insurance rate: Factors influencing the employer’s insurance rate: The risk of injury or illness for an occupation The risk of injury or illness for an occupation Each state’s level of benefits for injuries sustained by employees varies. Each state’s level of benefits for injuries sustained by employees varies. The company’s frequency and severity of employee injuries (the company’s experience rating). The company’s frequency and severity of employee injuries (the company’s experience rating).

Workers’ Compensation Insurance Covers Employers Covers Employees Cost of injury Negligent co-workers Contributory negligence Temporary, Permanent, Partial or Total Disability Temporary, Permanent, Partial or Total Disability Assumed employment risk Survivor’s Insurance Injury is a cost of doing business

Workers’ Compensation – Disability benefits paid for workplace accidents Worker’s Compensation  Claims and premiums steadily rising  Employers “fighting back”  Role of HR: o Stress safe work procedures o Audit workers’ compensation claims o Coordinate workers’ comp and health insurance benefits o Encourage those partially disabled to return under a modified duty plan

Extension and Portability of Health Coverage The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA) Mandates that employers make health coverage—at the same rate the employer would pay—available to employees, their spouses, and their dependents on termination of employment, death, or divorce. Mandates that employers make health coverage—at the same rate the employer would pay—available to employees, their spouses, and their dependents on termination of employment, death, or divorce. The coverage must be offered for between 18 and 36 months depending on qualifying guidelines. The coverage must be offered for between 18 and 36 months depending on qualifying guidelines. Health Insurance Portability and Accountability Act (HIPAA) of 1996 Grants employees the right to switch medical insurance between former and present employers with no gap in coverage regardless of preexisting health condition once the employees have earned twelve service credits at the former employee Grants employees the right to switch medical insurance between former and present employers with no gap in coverage regardless of preexisting health condition once the employees have earned twelve service credits at the former employee

The Family and Medical Leave Act (FMLA) Provisions: An employer must grant an eligible employee up to 12 workweeks of unpaid leave in a 12-month period for the following reasons: An employer must grant an eligible employee up to 12 workweeks of unpaid leave in a 12-month period for the following reasons: Birth of and care for a newborn child. Birth of and care for a newborn child. Adoption or foster care placement of a child. Adoption or foster care placement of a child. Care for an immediate family member Care for an immediate family member Serious health condition of the employee. Serious health condition of the employee. Employees retain their health benefits and have the right to return to their job or an “equivalent job.” Employees retain their health benefits and have the right to return to their job or an “equivalent job.” Those caring for service members are entitled to up to 26 weeks of leave, Those caring for service members are entitled to up to 26 weeks of leave,

The Older Workers Benefit Protection Act Older Workers Benefit Protection Act (OWBPA) Prohibits age-based discrimination in early retirement and other benefit plans by imposing strict guidelines on employers who seek to have employees sign release forms waiving their right to pursue age discrimination claims under the ADEA. Prohibits age-based discrimination in early retirement and other benefit plans by imposing strict guidelines on employers who seek to have employees sign release forms waiving their right to pursue age discrimination claims under the ADEA. The waiver must be voluntary and written in a manner that is understandable to the parties involved. The waiver must be voluntary and written in a manner that is understandable to the parties involved. Employees have the right to consult with an attorney before signing the waiver. Employees have the right to consult with an attorney before signing the waiver.