2 Employee Benefit Programs Part of Total CompensationSome Government MandatedSome Incentive RelatedPart of Cost of Doing BusinessIndirect Compensation
3 Factors Contributing to Growth of Benefit Discourage UnionsBenefits not Always TaxedEasier to negotiate Than WagesAttitude of General Public
4 Objectives of Benefit Programs To Improve MoraleTo Meet Health and Safety NeedsTo Attract Good EmployeesTo Reduce TurnoverTo Reduce UnionismTo Maintain a Competitive PositionTo Enhance the Organization's Image
12 Categories of Employee Benefits EMPLOYEE SERVICESEmployee assistance programCounseling servicesEducational assistance plansChild careElder careFood servicesHealth servicesLegal servicesFinancial planningHousing and moving expensesTransportation pooling/parkingPurchasing assistanceCredit unionsSocial and recreational servicesAwards
13 Employee Benefit Costs 30-40% of the Annual WagesFastest Growing Part of Total Compensation
14 Typical Cost of Benefits TYPES OF BENEFITSTOTAL PERCENTAGE, ALL COMPANIESPayments for vacations, sick leave, holidays, etc.12.0%Legally required payments10.0 %Medical and medically related benefit paymentsRetirement and savings (employer’s share)7.0 %Paid rest periods, lunch periods, etc.3.0 %Miscellaneous benefits1.0%Life insurance.5%Total employee benefits as percent of payroll43.5%
15 Health Plan Costs Climb Higher Annually Average Annual Health Plan Costs Per Employee $4000$1500COSTYEAR
16 Flexible Benefits Plan (Cafeteria Plans) Benefit plan that enable individual employees to choose the benefits that are best suited to their particular needs.
17 Flexible Benefit Plans Employees ChooseCafeteria PlansCost AttachedSome Government Requirements
18 Major ConcernsRising CostsControlling CostsLegal Concern
19 Pension Plans: Provide for Retirement Income Federal Regulation - Not Total CoverageReward for Long Service OriginallyNow Based on Earnings Philosophy
20 Types of Pension Plans Contributory (joint pay) Non-Contributory (employer pays)Classified by Amount of Benefits to be Paid
21 Noncontributory PlanA pension plan where contributions are made solely by the employer.
22 Defined Benefit Plan Amount is Specifically Defined Years of Service RequiredAverage Earnings During Certain YearsAge at Retirement“Example: Average Annual Salary of Last 3-5 years x number of years of service”
23 Defined Contribution Plan Basis Upon Which the Employer PaysPaid to Thrift Plan, IRA, etc.Benefits Depends Upon Accumulation
24 Federal Regulation (ERISA) Employee Retirement Income Security ActInformed About FactsBenefits DefinedComplex Law
25 VestingA guarantee or accrued benefits to participants at retirement age, regardless of their employment status at that time.
26 Vesting Guarantee of Benefits Paid at Retirement Regardless of Last EmploymentNon-revokable by EmployerVested After XX YearsComplex Rules (ERISA)
27 Vesting Provisions (General Plans) General Provisions*5-Year Vesting: An employee must receive nonforfeitable rights after five years of service to all accrued benefits derived from employer contributions.3- to 7-Year Vesting: An employee must receive nonforfeitable rights after three years of service to 20 percent of accrued benefits derived from employer contributions. Nonforfeitable rights increase 20 percent each year until the employee is 100 percent vested in the employer-derived accrued benefits after 7 years of service.
28 Social Security Insurance Guarantee of IncomeRetirement, Disability, UnemploymentTime LimitsComplex RulesDedicated Tax on Earnings
29 Pension Funds Privately Managed $3 Trillion in Assets Invested in Stocks and Bonds
30 Unemployment Insurance Defined Period (26 weeks)Register for Work RequirementFunded by Payroll TaxAmount Based on WagesSupplemental Unemployment Benefits (Private)
31 Worker’s Compensation Insurance Federal-or-state-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness.
32 Worker's Compensation Work Related Accident Compulsory Complex Law Based on WagesPermanent or Partial Disability
33 Health Care Insurance Partial Government Funded Mostly Private Insurance
34 Why Are Health Care Costs Skyrocketing? Federal RegulationChanges in PricingAdvances in MedicineMalpractice InsuranceLabor CostsOver Utilization of FacilitiesElder CareTransplants/AIDS/Other
35 Health Maintenance Organizations (HMOs) Organizations of physicians and health care professional that provide a wide range of services to subscribers and dependents on a prepaid basis.
36 Cost Containment Vehicles HMO (Health Maintenance Organization)Group of ProfessionalsServices for Fixed AmountsPPO (Preferred Provide Organization)Guarantees Cost Efficiency for GroupsEmployer Steers Employees to PPO
37 Retirement Planning Programs Company Pension PlansSocial Security/MedicareHealth Care InsurancePersonal Financial PlanningLegal ConcernsInvestments/Tax PlanningVolunteerismPart-Time EmploymentHousing OptionsRelocation
38 Silver HandshakeAn early-retirement incentive in the form of increased pension benefits for several years or a cash bonus.
39 Decisions Relating to Pensions ALTERNATIVESPhilosophyEarned vs rewardSource of fundsContributory vs non-contributoryAmount of benefitsDefined benefits vs defined contributionsCustody of pension fundsInsured vs trusteed plansInvestment problemsProtections against loss of fundsProtection against loss of purchasingWhere and where not to investTax consequences