1. Benefits 1

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

3. Why Offer Benefits?

4. Why Offer Benefits? Some are legally required
Improve employee work satisfaction
Meet employee health and security requirements
Attract and motivate employees
Reduce turnover
Maintain a favorable competitive position

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

6. Form groups and develop a list of the benefits that you would be interested in receiving from an employer after finishing your degree.
Also share a good or bad experience that you may have had with an employer’s benefits program during internships, summer job, or full-time position.

7. 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.

8. Communicating Benefits Information

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
Employee self-service systems (ESS)

10. 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.
The average distribution of these benefits was $21,527 per employee per year.
Shifting Benefit Costs to Employees
Shared Responsibility
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.

11. Types of Employee Benefits
Required By Law
Discretionary
Social Security
Payment for time not worked
Unemployment Insurance
Supplemental
Unemployment Benefits
Workers’ Compensation
Life and LT care insurance
Unpaid leave (FMLA)
Retirements and pensions
Health care 6

12. Social Security Insurance
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)
Provides long-term disability benefits
Must work 40 quarters in an occupation covered by Act to qualify for benefits
Benefits paid are determined by an individual’s life-time earnings 5

13. Unemployment Insurance
Federal payroll tax on employer and employee
Tax is refunded to states which individually administer unemployment compensation programs.
Benefit weekly amounts 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.”

14. Worker’s Compensation
Workers’ Compensation – Disability benefits paid for workplace accidents
Claims and premiums steadily rising
Employers “fighting back”
Role of HR:
Stress safe work procedures
Audit workers’ compensation claims
Coordinate workers’ comp and health insurance benefits
Encourage those partially disabled to return under a modified duty plan
Workers Comp:
- medical care & income continuation for those injured on the job
- premiums based on three factors:
- risk of injury for an occupation
- company’s injury experience rating (the frequency and severity of the injuries sustained by the company’s workforce)
- the level of benefits provided for specific injuries within the state where the company is located
- small companies forming self-insurance pools -

15. 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.
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

16. 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:
Birth of and care for a newborn child.
Adoption or foster care placement of a child.
Care for an immediate family member
Serious health condition of the employee.
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,

17. Previously Voluntary Benefits
Health Insurance
Traditional Health Insurance
Health Maintenance Organizations (HMOs)
Preferred Provider Organizations (PPOs)
Consumer-Driven Health Plan (CDHP)
Health Savings Accounts etc.
Benefits that are frequently voluntarily provided by employers are listed here and in the following illustration. Future legislation may move some of these benefits from the voluntary category to the legally required category.

18. How Would You Try to Keep Costs Down?

19. Payment for Time Not Worked
Sick leave
Severance pay
Paid holidays
Vacations with pay
Time Not Worked

20. Retirement Benefits Pensions: Retiree Health Care
Defined Benefits Plans
Defined Contribution Plans
Cash Balance Plan (Hybrid)
401k and 403b
IRA and SEP IRA
Employee Retirement Income Security Act or 1974 (ERISA):
- ERISA protects employees’ retirement benefits from mismanagement
- requires that the minimum age for participation in a retirement plan cannot be greater than 21
- participation may be restricted to employees who have completed one year of service
- vesting - a guarantee that accrued retirement benefits will be given to retirement plan participants when they retire or leave the employer
- under current rules, employee vesting rules must conform to one of two schedules:
- full vesting after three years of service,
- 20 percent vesting after 2 years and 20% per year thereafter until fully vested at 6 years
- requires that retirement plan administrators act prudently in making investments with participants’ funds
- plans that do not meet ERISA funding standards are subject to financial penalties from the Internal Revenue Service
- requires employers to pay for plan termination insurance, which guarantees the payment of retirement benefits to employees even if the plan terminates before they retire
Defined Benefit Plan – a retirement plan that promises to pay a fixed dollar amount of retirement income
- based on a formula that takes into account the average earnings of the employee’s last three to five years’ before retirement
Defined Contribution Plan - a retirement plan in which the employer promises to contribute a specific amount of funds into the plan
- contribution is generally a percentage of the employee’s pay
Cash Balance Plan (Hybrid) – designed to address limitations of both defined benefit & defined contribution plans
- employees credited with certain amount in their tax deferred accts each year
- contributions are compounded based on agreed upon interest rate
- employees can take cash balances when they leave

21. Trends Affecting Retirement
The number of people age 65 and older tripled to about 34 million between 1940 and 1995.
According to U.S. census projections, people age 65 and older are expected to number 86 million by 2050, an increase of 51 million since 2000.
In 1960, 45.4 percent of male workers over age 65 were still in the labor force; in 1990, only 27.4 percent were still working. While the labor force participation rates of women between ages 55 and 64 have been rising, further increases are not expected.
Eight baby boomers turn 50 every ten minutes.
The U.S. net national savings rate was relatively stable at about 7 percent of GDP from 1951 to It has collapsed since 1980, most recently dropping to less than 1 percent of GDP.
In 1900, the average life expectancy in the U.S. was 48; today, it is 80 for women and 75 for men. Virtually all of these gains can be attributed to improvements in public health and safety, such as clean water, refrigeration, seat belts, and routine vaccinations.

22. Contemporary Pension Plan Options
401(k) Savings Plans
Defined Contribution
A tax-deferred savings plan.
Employees save through payroll deductions.
Employers may match a portion of employee savings.
Cash-Balance Pension Plans
Employer contributes a percentage of employee’s pay each year.
Account balance earns interest each year.
Experts predict it will replace traditional pension plans.

23. Federal Regulation of Pension Plans
Employee Retirement Income Security Act (ERISA)
Private pension plans are subject to ERISA regulations that provides standards and controls for pension plans:
Plans must comply IRS tax standards to qualify.
Plans must meet actuarial standards to qualify for Pension Benefit Guarantee (PBGC) insurance.
Plans must meet Department of Labor standards for treatment of plan participants.

24. Retiree Health Benefits
Future retirees should expect to cover the costs of their health care not covered by Medicare.
By 2031, companies are expected to pay less than 10 percent of total medical expenses for retirees as part of actions already taken.
About 20 percent of employers studied have eliminated retiree medical plans for new hires, and 17 percent will require new hires to pay the full premium for coverage.
Watson Wyatt Worldwide 2002

25. Employee Services 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.

26. Work/Life Benefits: Balancing Work and Home Needs
Child care/elder care referral services
Time off for children’s school activities
Employer-paid on-site or near-site child care facilities
Flexible work hours scheduling
Health club and wellness programs
Employer-accumulated leave days for dependent care
Subsidized temporary or emergency dependent care costs
Extended leave policies for child/elder care
Educational reimbursement
Sick-child programs (caregiver on call)
Work-at-home arrangements/telecommuting
Partial funding of child care costs
Part-time work schedules

27. Perks to Attract and Retain
In North Texas, the Container Store – which ranked No. 4 in Fortune magazine's list of best places to work – offers employees on-site carwashes, dry cleaning and free yoga classes.
Texas Instruments Inc. provides on-site concierge service for its Dallas employees.
At Dallas-based Half Price Books, employees are allowed to borrow any of the books, music or movies in stock.
And employees at T. Boone Pickens' BP Capital LLC can use the office fitness room and book appointments with a personal trainer.
Dallas Morning News

28. Special Extras Concierge service Game room Wash gym clothes
Oil change in parking lot
Dental service in parking lot
Dry cleaning
No dress code
42 kinds of drinks
Game tickets
Credit union
Discount club membership
Game room
Home computers
Stock for spouse
Pet friendly
Pet day care
Health club
Chef – take home meals
Nap room
Sabbaticals
Beer on Friday

29. Summary and Conclusions
Design benefits to align with overall compensation strategy
Benefits provide security for employees and their families
It is important to:
Provide benefits employees value and appreciate
Communicate value of benefits to employees