1. Benefits OS652 HRM Fisher Nov. 2, 2004

2. 2 Agenda Presentation Key issues with benefits – Employer vs. employee contribution – Comprehensiveness – Flexibility

3. 3 Compulsory Benefits Social Security Retirement Income Disability Income Medicare Survivor Benefits Workers ’ Compensation (higher accident rates lead to higher premiums) Unemployment Insurance Unpaid Leave Adds up to approximately 24% of salary

4. 4 Voluntary Benefits Employers do not have to offer – Health Insurance – Retirement – Paid vacation, holidays Can add up to an additional 20% of salary – Highest in manufacturing – Lowest in retail Most employers do offer these benefits. Why?

5. 5 Health Benefits 16% of Americans currently uninsured (approx. 43 million people) (www.factcheck.org) Costs rising for everyone (11% in 2003) Balancing costs of monthly premiums, co- pays, benefit caps, deductibles, prescription coverage – Average worker contributes $558/$3695 for single coverage, $2661/$9950 for family

6. 6 Trends in Health Care Benefits Medical spending plans (pre-tax) Higher employee premiums Fewer plan choices – Fewer participating HMOs, doctors Higher prescription drug costs Surcharges for spousal coverage Greater access to decision support tools to help employees make less expensive choices Source: Miller (Oct. 2004). Open enrollment: Benefit trends for 2005 may unnerve some Employees. Retrieved from www.shrm.org on October 28.www.shrm.org

7. 7 Retirement Benefits: Defined Benefit Amount of your retirement income is defined based on certain criteria – Years of service – Age Funded vs. unfunded (vs. underfunded!) ERISA governs pension issues – Cannot discharge workers to cut their pension benefits – Cannot eliminate pension for vested workers

8. 8 Retirement Benefits: Defined Contribution 401(k) is most common defined contribution plan – Tax implications – Usually voluntary, which can cause problems “ Employer match ” benefits – Average match was 2.5% of payroll in 2001 (www.workforce.com) – Down from 3.3% in 1997 – May vary based on seniority Cash balance plans attempt to combine features of both

9. 9 Who is covered by employee benefits? Traditionally, employee, spouse, and children – Married couples with kids now only 25% of households in the US Part-time employees often not covered – Ikea, Wegman ’ s cover part time employees more broadly; report lower turnover Domestic partner benefits – Opposite sex – Same sex Extended family benefits

10. 10 Flexible vs. Fixed Benefits Programs Flexible (Cafeteria) Employees select the benefits they want. May be less costly. Supports corporate diversity strategy. Increased fairness perceptions. But, administratively complex. Fixed All employees receive the same benefits. Simple administration. But, one-size-fits-all approach may not meet employees ’ needs.

11. 11 For next class Topic: Labor relations Read Chapter 16 – How does the presence of labor unions affect an organization ’ s approach to HR?