1. © 2001 by Prentice Hall and Anne S. Tsui, 2002 12-1 November 5, 2002 Employee Benefits

2. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-2 HR planning Evaluating Separating Relating Career Planning Benefits RewardingPaying Training Hiring Job designing The Course: HRM Activities Attract Motivate Retain

3. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-3 Module III: Employee – Employer Relationship  Protecting employees – benefits (ch. 12) u 1 session plus Ms. Eileen Thom  Developing employee careers (ch. 9) u 2 sessions  Relationship with employees (ch. 13) u 2 sessions  HR across borders (ch. 17) u 1 session plus Mr. Bernie Au Yang (Nov. 28 evening)  Separating with employees (ch. 6) u 1 session including project presentations

4. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-4 Learning Objective – at the end of this topic, you should be able to:  Understand the significance of employee benefits to both employers and employees.  Distinguish between legally required benefits and voluntary benefits.  Explain why firms vary in employee benefits.  Develop methods of communication that achieves the HRM objectives for the benefits program.  Design a benefits package that supports the firm’s overall compensation strategy and meet employee needs. © 1998 by Prentice Hall Reading: see last page of the file

5. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-5 Total Compensation Total Compensation Pay Incentives (Chapter 11) Indirect Compensation/ Benefits (Chapter 12) Base Compensation (Chapter 10)

6. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-6 It is an indirect compensation because it provides a plan rather than cash Group membership rewards that provide security and protection for employees and their family members Attractive benefit packages help recruit and retain talented employees Benefits = indirect compensation

7. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-7 Who gave the contributions?  Contributions u Payments made for benefits coverage u May come form the employer, employee, or both u Vacations: employer u Some types of insurance: paid partly by employer and partly by the employees

8. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-8 Types of Benefits Benefits Strategy Communication of Benefits

9. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-9 Types of Benefits - HK Voluntary Benefits Legally Required Benefits Sick leave Holidays Worker’s compensation Annual leave (10-40 days) Retirement (MPF) Health insurance Educational allowance Housing allowance Life insurance Travel insurance Rest periods Child and elderly care Employee services

10. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-10 Legally required benefits - HK  Hong Kong government requires employers to give the following benefits u maternity leave, rest days, sickness allowance, statutory holidays and annual leave provided under the Employment Ordinance and the keeping and maintenance of records as required by the OrdinanceEmployment Ordinance u MPF u Part IV of the Employees' Compensation Ordinance which provides for compulsory insurance in relation to compensation for work injuriesEmployees' Compensation Ordinance

11. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-11 A Common Voluntary Benefit – Health insurance  Hospital costs, physician charges, and the cost of other medical services  Most UST staff u Are allowed to claim $250 for each medical consultation, with a total less than about $19, 000 per year

12. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-12 Housing allowance  This allowance provides extra funding for employees to buy or rent a flat  This type of benefits usually applicable to employees at senior positions  Examples: In government, the lowest position that are granted with this allowance is about $50,000 per month; the allowance is about $ 13,000 per month (last year)  $11,000 per month (this year)

13. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-13 Education allowance  For children u This type of benefits provide employees’ children with reasonable funding for education u This type of benefits usually applicable to employees at senior positions  For employee themselves u Employers may contribute all or part of the tuition fee (may only be applicable to some specified courses or programs)  Workplace English Campaign Workplace English Campaign  MBA/PTMBA/EMBA degree

14. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-14 Annual Number of Vacation Days in Various Countries for Employees with One Year of Service Austria Canada France Japan Netherlands Spain United Kingdom Hong Kong 10-42 days

15. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-15 Four Components of a Benefits Strategy I.Benefit mix (appropriate) II.Benefit amount (proportional) III.Flexibility of benefits (effective)

16. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-16 I. Benefits mix (range of benefits)  The complete package of benefits that a company offers its employees  Three issues should be considered A. Total compensation strategy B. Organizational objectives C. Characteristics of the workforce

17. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-17 A. Total compensation strategy u Corresponding to the “below-market vs. above-market compensation”, that is to consider the packages offered by others u In hi-tech firm, retirement benefits are generally not so emphasized, thus, an effective total compensation strategy for a hi-tech firm could be the one that increases base compensation, but does not offer retirement benefits

18. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-18 B. Organization’s objectives u Some organizations’ objectives are to minimize the compensation differences between low-level and high-level employees, then benefit mix should be the same for all employees u Some are to increase the differences to encourage low-level employees to move upward, then benefit mix for the top- management should be more attractive than than for the low-level employees

19. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-19 C. Workforce Characteristics u For workforces consist largely of parents with young children  child-care, family-friendly benefits u Unionized workforce  retirement plan

20. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-20 II. Benefits Amount (proportion of total compensation)  The percentage of the total compensation package that will be allocated to benefits compared to the other components of the package.  The more the proportion in the benefits, the more the predictability is the outcome, thus it can be considered fixed pay, rather than variable pay.  The total amount of benefits reflects the management philosophy toward employees.

21. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-21 Cost of Employee Benefits in the United States, 1929-1993 Year Percent of Employer Payroll 051015202530354045 1993 1984 1975 1965 1955 1929 41.0 33.8 30.0 21.5 17.0 3.0

22. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-22 How the Benefit Dollar Is Spent - US Payment for Time Not Worked 24% Life Insurance 1% Medical and Medically Related Benefits 23.1% Legally Required 29.6% Miscellaneous (discounts, educational assistance, etc.) 3.2% Paid Rest Periods 5.5% Retirement and Savings Plans 13.6%

23. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-23 III. Flexibility of benefits (effective use of benefit cost)  The degree of freedom employees have to decide the benefits package to suit their personal needs, as different employees may have different needs.  Flexibility increases total administrative cost but also increases more effective use of the benefit dollars.  Three common types of plans: modular, core-plus, flexible accounts

24. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-24 Communication of Benefits Colorful Fliers or Newsletters Payroll Stickers or Posters Wallet Cards Audio-Visual Presentations Toll-Free Number or hotline Computer Software Package Benefits Web Sites

25. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-25 Thinking questions on employee benefits  Why do all employers provide some benefits that are not required by law?  Why do some employers provide more voluntary benefits than other employers?  What are the advantages and disadvantages of flexible benefits systems (or cafeteria benefits programs) for the employee, and for the employer?  Should companies discontinue benefits that are used by only some employees?  Should part time employees deserve the same benefits as full time employees or different ones?

26. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-26 Guest Speaker on Benefits  Ms. Thom has over 20 years of experience in designing and administering benefits programs  She has experience in computer industry, oil refinery, food products, and entertainment industries (Disney and Universal Music).  Her current employer Universal Music has the most interesting products.  She also has broad Asia international HRM experience.  So, ask her lots of questions …

27. © 2001 by Prentice Hal and Anne S. Tsui, 2002 12-27 Chapter 12 – Reading Guide  You may skip p. 398 and the section on Legally Required Benefits (mid of p. 401 to 415) – these are common benefits in the U.S. However,  You should be familiar with some basic terms on these pages, such as worker’s compensation, unemployment insurance, health insurance (HMO, PPO), defined benefits plans, defined contribution plans, disability insurance, etc. I won’t test you on these but you should know these terms as part of HR knowledge.