1. Unit 7 – Benefits - Topics
Value of Employee Benefits
Key Issues in Benefit Planning, Design, and Administration
Components of a Benefit Plan
Administering the Benefit Program
Legally Required Benefits
Retirement and Savings Plan Payments
Life Insurance
Medical and Medically Related Payments
Miscellaneous Benefits
Benefits for Contingent Workers

2. What are Employee Benefits?
That part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments (e.g., life insurance, pension, workers’ compensation, vacation)

3. Why the Growth in Employee Benefits?
Wage and Price Controls
Employer Impetus
Cost Effectiveness of Benefits
Unions
Government Impetus

4. Ranking of Employee Benefits
Note: “X” indicates a benefit that was not rated in this study.

5. Key Issues in Benefit Planning and Design
Benefits planning and design issues
How to attract good employees
How to deal with undesirable turnover
Integrating benefits with other compensation components
Strategies for ensuring external competitiveness and adequacy of benefits
Whether employee benefits are cost justified

6. Key Issues in Benefit Administration
Benefit administration issues
Who should be protected or benefited?
How much choice should employees have among an array of benefits?
Standard benefit package
Cafeteria-style,” or flexible, benefit plans
Market-based, or customer-driven , health care

7. Advantages and Disadvantages of Flexible Benefit Programs

8. Key Issues in Benefit Planning
How should benefits be financed?
Noncontributory
Contributory
Employee financed
Are your benefits legally defensible?

9. Factors Influencing Choice of Benefit Package

10. Administering the Benefits Program
Communicate about the benefits program
Claims processing
Cost containment

11. Communicating the Benefits Program
Elements of an effective communications package:
Company must spell out its benefit objectives and ensure that communications achieve the objectives
Match the message with the appropriate medium
Use of intranet - an internal organizational online Web through which all forms of communication within the organization can be streamlined
Use of the employee benefit handbook

12. Claims Processing
Arises when an employee asserts that a specific event has occurred and demands that the employer fulfill a promise of payment
The claims processor must:
Determine whether the act has, in fact, occurred
Determine if the employee is eligible for the benefit
Calculate the payment level

13. An Historical Perspective
Employee benefits in the United States dates back to colonial days
American Express began the first private pension plan in 1875
Biggest early push for benefits, though, came from Uncle Sam in 1935
Companies are now reeling from the high cost of benefits, especially health-care costs

14. ?
What are the legally required benefits?

15. Legally Required Benefits
Workers’ Compensation
Social Security
Unemployment Compensation

16. Workers’ Compensation
Form of no-fault insurance
Employees are eligible even if their actions caused the accident
Covers work-related injuries, diseases
Medical care for work-related injuries
Temporary disability benefits
Permanent partial and permanent total disability benefits
Survivor benefits
Rehabilitation
Covered by State, not Federal laws

17. Commonalities in State Workers’ Compensation Laws
Source: retrieved May 29, 2006.

18. Social Security
Provides a foundation of basic security for American workers and their families
Money comes from contributions made by:
employees,
their employers, and
self-employed people during working years

19. Issues: Social Security
Number of retired workers is rising without a corresponding increase in number of contributors to offset costs
Currently, 3.5 workers pay into system for each person collecting benefits
Within next 40 years this ratio drops to about 2 to 1

20. Unemployment Insurance
Financing:
Unemployment compensation is financed exclusively by employers that pay federal and state unemployment insurance tax in the majority of states
Federal tax amounts to 6.2% of the first $7,000 earned by each worker
States additionally impose a tax above the $7,000 figure
The extra amount a company pays depends on its experience rating

21. Unemployment Insurance (cont.)
Coverage:
Eligibility requirements to receive benefits
Must meet state requirements for wages earned or time worked during an established (one year) period of time referred to as a “base period”
Must be determined to be unemployed through no fault of your own and meet other eligibility requirements of State law

22. Family and Medical Leave Act (FMLA)
Coverage:
Employers with 50 or more employees
Eligibility:
Must have worked at least 1,250 hours for the employer in the previous year
Qualifying events:
Specified family or medical reasons
Qualifying event coverage:
Unpaid leave up to 12 weeks per year

23. Consolidated Omnibus Budget Reconciliation Act (COBRA)
Coverage:
Employers with 20 or more employees
Eligibility:
Current and former employees
Their spouses and dependents
Qualifying events:
Specified events (e.g. layoffs)
Qualifying event coverage:
18 to 36 months, depending on category of event

24. Retirement and Savings Plan Payments
Employees rank pensions as one of the more important benefits
Two generic types of pension plans
Defined benefit plans
Defined contribution plans
Individual Retirement Accounts (IRAs)
Employee Retirement Income Security Act (ERISA)

25. Life Insurance One of the most common benefits
Most companies offer term policies
Value of 1-2 times an employee’s salary
Most plan premiums paid completely by employer
Companies make retiree coverage forfeitable at the time of departure
Is heavily affected when shifting to flexible benefit program

26. Health and Medical Benefits
General Health Care
Health Care: Cost Control Strategies
Short- & Long- Term Disability
Dental Insurance
Vision Care

27. General Health Care
An employer’s share of health care costs are contributed into one of the six health care systems
Community-based system
Commercial insurance plan
Self-insurance
Health maintenance organization (HMO)
Preferred provider organization (PPO)
Point-of-service plan (POS)

28. Health Care: Cost Control Strategies
Motivate employees to change their demand for health care via changes in design or administration of policies
Change structure of health care delivery systems and participate in business coalitions
HMOs
PPOs
Promote preventive health programs

29. Types of Incentive Rewards Offered
Source: Buck Consultants, “Working Well: A Global Survey of Health Promotion and Workplace Wellness Strategies,” October 2007.

30. Short- and Long-Term Disability
Workers’ compensation covers disabilities that are work-related
Social security has provisions for disability income to those who qualify
Private sources of disability income
Employee salary continuation plans
Long-term disability plans

31. Miscellaneous Benefits
Paid Time Off During Working Hours
Payment for Time Not Worked
Child Care
Elder Care
Domestic Partner Benefits
Legal Insurance

32. Employees Receiving Leave Time Benefits

33. Benefits Received: Full-Time vs. Contingent Employees
Source: Bureau of Labor Statistics, 2006,