PowerPoint Presentation by Charlie Cook The University of West Alabama Managing Human Resources Bohlander Snell 14 th edition © 2007 Thomson/South-Western. All rights reserved. Employee Benefits

© 2007 Thomson/South-Western. All rights reserved.11–2 Objectives After studying this chapter, you should be able to: 1.Describe the characteristics of a sound benefits program. 2.Indicate management concerns about the costs of employee benefits and discuss ways to control those costs. 3.Identify and explain the employee benefits required by law. 4.Discuss suggested ways to control the costs of healthcare programs. 5.Describe benefits that involve payment for time not worked.

© 2007 Thomson/South-Western. All rights reserved.11–3 Objectives (cont’d) After studying this chapter, you should be able to: 6.Discuss the recent trends in retirement policies and programs. 7.Indicate the major factors involved in the management of pension plans. 8.Describe the types of work/life benefits that employers may provide.

© 2007 Thomson/South-Western. All rights reserved.11–4 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

© 2007 Thomson/South-Western. All rights reserved.11–5 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

© 2007 Thomson/South-Western. All rights reserved.11–6 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.  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.

© 2007 Thomson/South-Western. All rights reserved.11–7 Figure 11–1 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 competitive advantage in the recruiting and retention of employees.

© 2007 Thomson/South-Western. All rights reserved.11–8 Figure 11–1 Flexible Benefits Plans: Advantages and Disadvantages (cont’d) 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.

© 2007 Thomson/South-Western. All rights reserved.11–9 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

© 2007 Thomson/South-Western. All rights reserved.11–10 Highlights in HRM 2 A Personalized Statement of Benefits Costs

© 2007 Thomson/South-Western. All rights reserved.11–11 Benefits Issues Rising costs of providing benefits Benefits offered by other employees Concerns of Management Union demands for additional benefits Tax consequences of benefits Benefits coverage for domestic partners

© 2007 Thomson/South-Western. All rights reserved.11–12 The High Cost of Providing Benefits According to a 2003 U.S. Chamber of Commerce study, the cost of employee benefits in that year averaged 42.3 percent of payroll. The average distribution of these benefits was $18,000 per employee per year. The current trend is for employers to require employees to pay part of the costs of certain benefits (for example, through copayments or higher deductibles), especially medical coverage.

© 2007 Thomson/South-Western. All rights reserved.11–13 Types of Employee Benefits Required By Law DiscretionaryDiscretionary Health care Unemployment Insurance Workers’ Compensation Payment for time not worked Supplemental Unemployment Benefits Supplemental Social Security Unpaid leave Life and LT care insurance Retirements and pensions

© 2007 Thomson/South-Western. All rights reserved.11–14 Types of Employee Benefits Benefits Required by Law  Social Security  Unemployment insurance  Workers’ compensation insurance Payment for time not worked  Holidays  Vacations  Sick leave  Jury duty, military service, and bereavement leaves  Severance pay

© 2007 Thomson/South-Western. All rights reserved.11–15 Types of Employee Benefits (cont’d) Supplemental Unemployment Benefits (SUB) Insurance  Group life  Long-term care  Health care  Dental  Legal Retirement Benefits  Pre-retirement counseling  Pension plans

© 2007 Thomson/South-Western. All rights reserved.11–16 Unemployment Insurance Federal payroll tax on employer and employee  Tax is refunded to states which individually administer unemployment compensation programs. Unemployment benefits vary from state to state.  Involuntarily unemployed workers are eligible for up to 26 weeks of unemployment benefits.  Benefit is based on an employee’s recent earnings.  Unemployed workers are required to seek “suitable employment.”

© 2007 Thomson/South-Western. All rights reserved.11–17 Workers’ Compensation Insurance  Federal- or state-mandated insurance (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.  Factors influencing the employer’s insurance rate:  The risk of injury or illness for an occupation  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).

© 2007 Thomson/South-Western. All rights reserved.11–18 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

© 2007 Thomson/South-Western. All rights reserved.11–19 Figure 11–2 Reducing Workers’ Compensation Costs: Key Areas 1.Perform an audit to assess high-risk areas within a workplace. 2.Prevent injuries by proper ergonomic design of the job and effective assessment of job candidates. 3.Provide quality medical care to injured employees by physicians with experience and preferably with training in occupational health. 4.Reduce litigation by effective communication between the employer and the injured worker. 5.Manage the care of an injured worker from the injury until return to work. 6.Keep a partially recovered employee at the work site. 7.Provide extensive worker training in all related health and safety areas.

© 2007 Thomson/South-Western. All rights reserved.11–20 The Family and Medical Leave Act (FMLA) 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.  Adoption or foster care placement of a child.  Care for an immediate family member (spouse, child, or parent) with a serious medical condition.  Serious health condition of the employee. Employees on leave retain their benefits and the right to return to their job or an “equivalent job.”

© 2007 Thomson/South-Western. All rights reserved.11–21 Payment for Time Not Worked Sick leave Severance pay Paid holidays Vacations with pay Time Not Worked

© 2007 Thomson/South-Western. All rights reserved.11–22 Other Discretionary Benefits Supplemental Unemployment Benefits (SUBs)  A plan that enables an employee who is laid off to draw, in addition to unemployment compensation, weekly benefits from the employer that are paid from a fund created for this purpose.  SUB benefits are considered deferred compensation and not current earnings.  The fund is derived from employer contributions based on the total hours of work performed by employees.

© 2007 Thomson/South-Western. All rights reserved.11–23 Retirement Programs Silver Handshake  An early-retirement incentive in the form of increased pension benefits for several years or a cash bonus. Preretirement Programs  Counseling  Seminars  Workshops  Retirement tryouts

© 2007 Thomson/South-Western. All rights reserved.11–24 Types of Pension Plans Contributory plan  Contributions to a plan are made jointly by employees and employers. Noncontributory plan  Contributions to a plan are made solely by the employer. Defined-benefit plan  The amount an employee is to receive upon retirement is specifically set forth. Defined-contribution plan  The basis (amount) an employer contributes to the pension fund is specified.

© 2007 Thomson/South-Western. All rights reserved.11–25 Employee Services: Creating a Work/Life Setting Employee Assistance Programs (EAPs)  Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs.  Typically provide diagnosis, counseling, and referral for advice or treatment for problems related to alcohol or drug abuse, emotional difficulties, and financial or family difficulties. Child and Elder Care  Care provided to a child or an elderly relative by an employee who remains actively at work.

© 2007 Thomson/South-Western. All rights reserved.11–26 Figure 11–4 Work/Life Benefits: Balancing Work and Home Needs Child care/elder care referral services Time off for children’s school activities Employer-paid onsite or near-site child care facilities Flexible work hours scheduling Employer-accumulated leave days for dependent care Customized training programs Subsidized temporary or emergency dependent-care costs Extended leave policies for child/elder care Sick-child programs (caregiver on call) Work-at-home arrangements/telecommuting Partial funding of child care costs Customized career paths

© 2007 Thomson/South-Western. All rights reserved.11–27 AwardsAwards Other Benefits and Services Recreational and Social Credit Unions Food Services Purchasing Assistance Transportation Pooling On-Site Health Services Legal Services Financial Planning Housing and Moving