Indirect Compensation: Benefits Human Resource Management

Benefits: Indirect Compensation n Health care insurance u Medical u Dental u Vision n Life insurance n Disability insurance n Retirement plans u Defined benefit u Defined contribution Protection Programs

Government Mandated Benefits n Social Security u Retirement u Survivor u Disability benefits n Unemployment compensation n Workers Compensation u No fault concept

"Health and Welfare" Plans n Health care u Medical care F Costs controlled through controlling utilization This is what “managed health care” doesThis is what “managed health care” does u Also include dental, vision care and prescription drugs n Disability insurance n Survivor benefits

Basic Major Medical Model n These plans have significantly decreased in number n Also known as “indemnity plans” n Full coverage on first dollar spent n Deductible typically $100 n Co-pay (co-insurance) 80-20

Managed Care Continuum Basic Medical PPOPOSHMO Model Freedom of choice Limited choice High Cost Lower cost

Managed Care Plans n PPO (Preferred provider organization) u Choose health care providers from a “network” u Cheaper for patient if health care provider is in the network u Can go outside the network, but it will cost them more

Managed Care Plans n POS (Point of service plan) u Very similar to preferred provider plans, but must choose a primary care physician for a “gatekeeper” within the network u Patient makes choice at the “point of service” u More limited choice within the network because of PCP

Managed Care Plans n HMO: (Health maintenance organization) u Limited choice; network only u Doctor is "primary gatekeeper" u HMO's lower costs by negotiating with providers u Capitalizes on volume

Retirement: Defined Benefit Plan n Benefit is defined; cost is unknown n Company pays whatever it takes to provide the benefit n Requires actuarial service n Financial risk is on the employer n General higher benefits for career employees

Retirement: Defined Contribution Plan n Employee and company contributions are defined/known; benefit is unknown n Pension equals whatever the total amount in the fund will provide n Financial risk is on the employee n Can provide substantial benefit to shorter career employees n Does not require actuarial services

Regulation of Pension Plans n ERISA u Plan participation rules u Vesting u Nondiscrimination Rules u Fiduciary standards u Reporting and disclosure u Plan termination insurance (PBGC)

Benefits: Indirect Compensation n At work u Changing time u Breaks n Not at work u Vacation u Holidays u Personal days Pay for Time Not Worked

Benefits: Indirect Compensation n General u Subsidized parking u Subsidized lunch room n Limited u Executive F Company car F Country club membership F Company-paid physical F First-class flights u Performance F Employee of the month parking Employee Perquisites

Flexible Benefits? n Each employee's needs are unique n Changing employee demographics: u More women u More "two pay-check" households u Increased number of younger workers u Growth of age and older population u More single parents n Maximize employee perception of benefits program n Better manage employee expenses n Tax effective (Section 125) n Provide additional benefits n Encourage employee long- term savings