1. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Designing and Administering Benefits 12-1 Chapter 12

2. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chapter 12 Objectives 12-2  Explain the significance of employee benefits to both employers and employees.  Design a benefits package that supports the firm’s overall compensation strategy and other HRM policies.  Distinguish between a defined benefit plan and a defined contribution retirement plan and recognize the situations in which each is most appropriate.

3. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Chapter 12 Overview 12-3  Discuss how employee health insurance plans and managed-care plans work and the advantages and disadvantages of each.  Develop cost-containment strategies for different types of employee benefits.  Understand the administrative complexities of providing a full array of benefits to the workforce and suggest ways to deliver benefits effectively.  Recognize the HR department’s key role in keeping accurate records of employee benefits and informing employees about their benefits.

4. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Managerial Perspective Benefits:  Important to employees  Powerful recruiting tool  Help retain talented employees  Some affect managerial decisions  (e.g. leave policies)  Important to managers 12-4

5. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall An Overview of Benefits Employee benefits:  Indirect compensation  Based on group membership  Provide security for employees and family 12-5  Costly and becoming costlier  1929: 3% of payroll  2010: 30.3%

6. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall How the Benefit Dollar Is Spent 12-6

7. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Benefit Terminology  Contributions  Coinsurance  Copayment  Deductible  Flex/cafeteria benefits program 12-7

8. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall The Cost of Benefits in the U.S.  Federal tax policy  Employers: cost may be deductible  Employees: many free of taxes— others tax deferred 12-8  Federal legislation  Union influence  Cost saving of group plans

9. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall The Benefits Strategy Three parts to Benefits Strategy: 12-9  Benefits Mix—total package  Compensation strategy  Organization’s objectives  Characteristics of workforce  Benefit Amount  Flexibility of Benefits

10. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Types of Benefits  Legally required benefits  Health insurance  Retirement  Insurance  Paid time off  Employee services 12-10

11. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Legally Required Benefits  Social Security  Retirement Income  Disability Income  Medicare  Survivor Benefits 12-11  Unemployment Insurance  Actively seeking work  Left job involuntarily  Supplemental unemployment benefits

12. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Legally Required Benefits Workers’ Compensation 12-12  Claims and premiums steadily rising  Employers “fighting back”  Role of HR:  Stress safe work procedures  Audit workers’ compensation claims  Coordinate workers’ compensation and health insurance benefits  Encourage those partially disabled to return under a modified duty plan

13. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Legally Required Benefits 12-13 FLMA – Family and Medical Leave Act  Up to 12 weeks unpaid leave  For following reasons:  Birth of a child  Adoption of a child  Care for sick spouse, child or parent  Employee’s own serious health needs  Amended to give up to 26 weeks leave to family of injured military personnel

14. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Voluntary Benefits  Health Insurance  COBRA of 1985  PACA (2010)  HIPAA  Portability  Accountability 12-14  Traditional Health Insurance  Health Maintenance Organization (HMO)  Preferred Provider Organization (PPO)

15. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Health Insurance Plans 12-15

16. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Voluntary Benefits  Health Savings Account  Pretax and benefits not taxed 12-16  Cost containment  Develop self-funded arrangement  Coordinate health insurance in families with two working spouses  Develop a wellness program  Offer high deductible plans

17. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Retirement Benefits  Employee Retirement Income Security Act 12-17  Pensions:  Defined Benefits Plans  Defined Contribution Plans  Cash Balance Plan (Hybrid)  Defined Contribution Plans  401k and 403b  IRA and SEP IRA  Keogh Plan

18. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Defined Contribution Retirement Plans 12-18

19. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Voluntary Benefits  Life Insurance (term) 12-19  Disability insurance  Short and Long-term  Paid Time Off  Sick leave  Vacations  Severance pay  Holiday and other paid time off  Employee Services

20. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Administering Benefits  Flexible benefit plans  Modular  Core-plus options  Flexible spending accounts 12-20  Challenges with flexible benefits  Adverse selection  Employees who make poor choices  Administrative complexity

21. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall Administering Benefits  Benefits Communication  Programs increasingly complex  Employees need to understand value of benefits 12-21 NASA Photo. Used with permission.

22. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 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 12-22

23. Copyright ©2012 Pearson Education, Inc. publishing as Prentice Hall 12-23 All rights reserved. No part of this publication may be reproduced, stored in a retrieval system, or transmitted, in any form or by any means, electronic, mechanical, photocopying, recording, or otherwise, without the prior written permission of the publisher. Printed in the United States of America.