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Lecture 2 Introduction to Employee Benefits
Why study employee benefits? Define “employee benefits” Show the significance of employee benefits Identify factors that have contributed to the growth of group insurance Describe job opportunities in the field
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Why Study Employee Benefits?
To assist you in making personal choices involving employee benefits To recognize the importance of employee benefits for companies To prepare for work in this specialty Pricing and developing Negotiating Implementing
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Definition of Employee Benefits
Narrow Employer provided benefits for: Death Accident Sickness Retirement Unemployment Broadest All benefits and services, other than wages, provided to employees
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Five Traditional Categories of Employee Benefits
Legally required social insurance programs Social Security, Workers’ Compensation Payments for private insurance and retirement plans Medical, disability, life insurance Payments for time not worked Vacations, parental leave, sabbaticals Extra cash payments to employees Educational expenses, suggestion awards Cost of services to employees Subsidized cafeterias, adoption assistance, parking
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Significance of Employee Benefits
For 1995 the Average Cost per Employee was $14,659 (42.0% of Payroll) Selected Categories Medical $3668 Holidays and Vacation Legally Required Benefits Retirement and Savings Life insurance Source: U.S. Chamber of Commerce Survey
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Significance of Employee Benefits - continued
Estimated total employer cost in 1995: $1.5 trillion or 41.8% of payroll Estimated value for 1929: 3% of payroll Estimated value for 1965: 21.5% of payroll In addition, employee payroll deductions equaled 13.1% of payroll in 1995
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Significance of Employee Benefits - continued
Social insurance plans Social Security coverage almost universal Cost is 15.3% of payroll 90% of workers covered for unemployment 95% of workers covered for workers’ comp. Group life $4.7 trillion coverage in force 1 million contracts with 145 million certificates
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Significance of Employee Benefits - continued
Group disability income insurance Over 75% covered for short term disability About 25% covered for long term disability Group medical expense insurance Premiums for medical expense coverage exceed 14% of GNP About 185 million people covered under group medical insurance Retirement plans Approximately 104 million people covered Assets of private pension plans exceed $3.6 trillion
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Factors Influencing the Growth of Employee Benefits
Industrialization Influence of organized labor Wage controls Cost advantages Tax advantages Inflation Legislation
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Employment Opportunities in Employee Benefits
Marketing Human resources Finance Insurance Accounting Communications Actuarial science Social science Medical
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