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© 2003 Prentice Hall, Inc Instructor presentation questions: Chapter 13 Benefits and Services
© 2003 Prentice Hall, Inc Chapter 13 Outline The benefits picture today Pay for time not worked Unemployment insurance Vacations and holidays Sick leave Parental leave and the Family and Medical Leave Act Severance pay Supplemental unemployment benefits
© 2003 Prentice Hall, Inc Chapter 13 Outline Insurance benefits Workers’ compensation How benefits are determined Controlling workers’ compensation costs High-performance insight Hospitalization, health,and disability insurance Reducing health benefits costs Mental health benefits The Pregnancy Discrimination Act COBRA Requirements Long-term care
© 2003 Prentice Hall, Inc Chapter 13 Outline Insurance benefits (continued) Life insurance Benefits for part-time workers Retirement benefits Social Security Pension plans 401(k) plans Other types of defined contribution plans Pension planning
© 2003 Prentice Hall, Inc Chapter 13 Outline Retirement benefits (continued) Pensions and the law Pension trends Early-retirement windows Portability Cash balance pension plans Patio’s better benefits program
© 2003 Prentice Hall, Inc Chapter 13 Outline Employee services Personal services Credit unions Counseling services Employee Assistance Programs (EAP’s) Other personal services Job-related services Subsidized child care Elder care Other job-related benefits
© 2003 Prentice Hall, Inc Chapter 13 Outline Job-related services (continued) The new workplace Effect on performance Research insight Executive perquisites Flexible benefits programs Research insight The cafeteria approach Flexible programs: Pros and cons
© 2003 Prentice Hall, Inc Chapter 13 Outline Flexible benefits programs (continued) Computers and benefits administration Benefits and employee leasing Summary
© 2003 Prentice Hall, Inc Strategic Overview Pay for performance and financial incentives, The pros and cons of various employee benefit plans Four main types of plans: Supplemental pay benefits Insurance benefits Retirement benefits Employee services
© 2003 Prentice Hall, Inc After Studying This Chapter You Should Be Able To: Name and define each of the main pay for time not worked benefits Describe each of the main insurance benefits Discuss the main retirement benefits Outline the main employees services benefits Explain the main flexible benefit programs
© 2003 Prentice Hall, Inc The Benefits Picture Today What are your benefits? They are indirect financial and non- financial payments due to employment Benefits are a major expense for most employers Are 41% as a percentage of payroll
© 2003 Prentice Hall, Inc Benefits Breakdown Shown below are percentages of 33 million employee’s benefits
© 2003 Prentice Hall, Inc Benefits Classifications Pay for time not worked Insurance benefits Retirement benefits Services
© 2003 Prentice Hall, Inc Pay For Time Not Worked Also called supplemental pay benefits is usually the most costly benefit provided What are some examples of pay for time not worked? A real 1000 pound gorilla
© 2003 Prentice Hall, Inc Unemployment Insurance All states have unemployment insurance or compensation acts Provide for benefits if a person is unable to work Checklist to follow to reduce unemployment payouts
© 2003 Prentice Hall, Inc Typical Vacations and Holidays One week after 6 months to 1 year of service Two weeks after 1 to 5 years of service Three weeks after 5 to 10 years of service Four weeks after 15 to 25 years of service Five weeks after 25 years of service Average 10 days per year
© 2003 Prentice Hall, Inc Sick Leave Sick leave Paid time off (PTO) reduces the use of sick leave for non-illness
© 2003 Prentice Hall, Inc Parental and The Family and Medical Leave Act Parental leave is an important benefit Half of workforce is female Many men and women are single parents President Clinton signed FMLA 1993 Leave form
© 2003 Prentice Hall, Inc Severance Pay A humanitarian gesture Employers require 2 weeks notice so only fair to provide 2 weeks severance Cuts down on litigation Plant closure requires 60 days notice Usually 1 week severance pay for each year worked
© 2003 Prentice Hall, Inc Supplemental Unemployment Benefits Supplemental unemployment benefits - provide for a “guaranteed annual income” in certain industries
© 2003 Prentice Hall, Inc Insurance Benefits Insurance benefits fall into 3 categories Workers’ compensation Hospitalization, health, and disability Life insurance
© 2003 Prentice Hall, Inc Workers’ Comp Workers’ compensation laws provide income and medical benefits Benefits can be monetary or medical Reducing claims and saving premiums Screen out accident-prone workers Reduce accident-causing conditions Get injured employees back on the job Use case management
© 2003 Prentice Hall, Inc High Performance Insight Weirton steel established a workers’ compensation program to review, contain, and reduce the costs of workers’ compensation
© 2003 Prentice Hall, Inc Hospitalization, Health, and Disability Insurance Nearly all large companies provide major medical insurance Plans must comply with ADA laws Optional eye-care and dental coverage Accidental death and dismemberment coverage is another option HMO’s and PPO’s
© 2003 Prentice Hall, Inc Reducing Health Benefits Costs Many employers are: Moving away from 100% medical cost payments Increase annual deductibles Require medical contributions Use gatekeepers
© 2003 Prentice Hall, Inc Reducing Health Benefits Costs Encourage preventative care Form healthcare coalitions Manage the cost of AIDS
© 2003 Prentice Hall, Inc Other Health Benefits Mental health insurance Pregnancy discrimination act COBRA requirements Long-term care insurance
© 2003 Prentice Hall, Inc Insurance Benefits In addition to hospitalization and medical benefits, most employers provide group life insurance Must address policy issues of: Benefits-paid schedule Supplemental benefits Financing
© 2003 Prentice Hall, Inc Retirement Benefits Employers are revising and improving their retirement benefits Boomers stampede into retirement with most turning 65 in 2011 Social security, pension plans and saving plans are primary means
© 2003 Prentice Hall, Inc Social Security Provides 3 types of benefits: People over 62 Survivor benefits Disability payments Full payments available at age 65 (soon to be 67)
© 2003 Prentice Hall, Inc Pension Plans About ½ of full time workers have some pension plan Plans classified as: Contributory vs. noncontributory Qualified vs. nonqualified Defined contribution vs. defined benefit
© 2003 Prentice Hall, Inc Pension Plans Defined benefit pension plan - contains a formula for determining retirement benefits Defined contribution pension plan - a plan in which the employer’s contribution to employee’s retirement or savings funds is specified Definitions
© 2003 Prentice Hall, Inc k Deduct specified pre-tax dollars from pay Employer may match some or all Employer arranges account management Most managed online Taxes paid when funds are withdrawn
© 2003 Prentice Hall, Inc Other Defined Contribution Plans Deferred profit-sharing plan - a plan in which a certain amount of profits is credited to each employee’s account, payable at retirement, termination, or death Employee stock ownership plan (ESOP) - a qualified, tax-deductible stock bonus plan in which employers contribute stock to a trust for eventual use by employees Definition
© 2003 Prentice Hall, Inc Pension Planning When developing plans must consider: Membership requirements Benefit formula Plan funding Vesting ERISA – guarantees non- forfeitable rights Established the Pension Benefits Guarantee Corporation - PBGC
© 2003 Prentice Hall, Inc Pension Trends Early retirement windows Portability – pension may be rolled over Cash balance pension plans – earn interest
© 2003 Prentice Hall, Inc Employee Services Personal services include: Credit unions Counseling services Employee assistance programs (EAP) Other services: Vacation facilities, cultural subsidies, and lunch and learn programs
© 2003 Prentice Hall, Inc How To Launch EAPs Specify goals and philosophy Develop a policy statement Ensure professional staffing Maintain confidential record-keeping systems Train supervisors Be aware of legal issues EAP
© 2003 Prentice Hall, Inc Job Services Subsidized child care with either an in- house facility or cost defrayed Elder care Other benefits Transportation Food services Education subsidies
© 2003 Prentice Hall, Inc Elder Care Programs can be simple: A lunchtime program Information seminars AARP’s Care Management Guide
© 2003 Prentice Hall, Inc Family friendly benefits Ninety percent of employees said these programs were very important Family friendly firms are on “best to work for” lists Are these types of programs are useful? Do they improve productivity?
© 2003 Prentice Hall, Inc Research Insight Society for Human Resource Management found that 58% offer flextime, 31% compressed workweeks, and 24% allow child to be brought to work in an emergency
© 2003 Prentice Hall, Inc Executive Perquisites Perks range from use of the executive washroom to use of the corporate jet Some conventional perk$ include: Management loans Salary guarantees Financial counseling Great relocation benefits Use of anything a corporation owns
© 2003 Prentice Hall, Inc Flexible Benefits Programs Cafeteria approach Total cost is limited Certain benefits must be present Can be structured as a flexible spending account or core plus option plan
© 2003 Prentice Hall, Inc Pros and Cons to Flexible Benefits Often desired by employees Cheaper Employees can make bad choices Administrative costs can be high Computerization helps
© 2003 Prentice Hall, Inc Computers and Benefits Administration Employees interactively update their accounts Find medical information Find answer to routine questions Big and small companies use online systems
© 2003 Prentice Hall, Inc Employee Leasing Employee leasing firms handle all arrangements Group insurance rates are lowered Downside includes liability issues and loyalty
© 2003 Prentice Hall, Inc Chapter 13 Summary Incentives are paid to employees whose work is above standard Benefits, on the other hand, are given to all employees who work for a company Four types of benefits: pay supplements, insurance, retirement, and services
© 2003 Prentice Hall, Inc Chapter 13 Summary Supplemental pay benefits provide pay for time not worked including unemployment insurance, vacation and holiday pay, severance pay, and supplemental unemployment Insurance benefits include workers’ compensation, group hospitalization, accident and disability, and group life
© 2003 Prentice Hall, Inc Chapter 13 Summary Retirement benefits include social security and pension plans Most employers provide benefits like employee services including food services, recreational opportunities, legal advice, credit unions, and counseling
© 2003 Prentice Hall, Inc Chapter 13 Summary Employees prefer individualizing the organization’s benefits plans Flexible benefits plans, also called the cafeteria approach, allow the employee to put together their own plan, subject to cost limits and the inclusion of non- optional items
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