2 Chapter Objectives Define benefits as indirect financial compensation. Describe mandated (legally required) benefits.Describe the basic categories of voluntary benefits.Describe the range of employee discretionary benefits.Explain factors involved in non-financial compensation.Explain factors that are involved in workplace flexibility.Discuss workplace flexibility
3 Benefits Include all financial rewards provide to employees for being employed for theorganizationThis includes direct and indirect compensation
4 Benefits in a Total Compensation Program External Environment Internal Environment FinancialNon-FinancialThe Job Job EnvironmentDirectIndirect (Benefits)Legally Required Benefits Social Security Unemployment Compensation Workers’ Compensation Family & Medical LeaveVoluntary Benefits Payment for Time Not Worked Health Care Life Insurance Retirement Plans Employee Stock Option Plans Supplemental Unemployment Benefits Employee Services Premium Pay Unique BenefitsThere are two types of benefits. Direct and indirect. Indirect benefits can account for as much 30% - 40% of an employees compensation
5 Mandated Benefits (Legally Required) Social securityUnemployment compensationWorker’s compensationFamily and Medical Leave Act of 1993 (FMLA)Certain benefits have been mandated and count for 10% of the total compensation
6 Social Security (SS) Created system of retirement benefits Federal payroll tax to fund unemployment and retirement benefitsIncreased SS has caused for the use of skilled nurses and home health careSS 6.2% and Medicare 1.45%95% of workers pay into and draw SSSolving the surplus problem by 2038Social Security was setup up to fund unemployment and retirement.95% of people who work pay into Social SecurityCurrently the SS program is running a surplus but if changes are not make by 2038 our nation will not have a surplus. This is due to the 77million baby-boomers retiring.
7 Unemployment Compensation Laid off individual receives compensation for up to 26 weeksProvide compensation until job is foundHelp sustain the consumer spendingPrograms administered by states and will have direct guidelinesWhen employees are terminated through no fault of their own they can receive unemployment. During the recent recession the government increase the weeks of unemployment.
8 Worker’s Compensation Expenses resulting from job-related accidents or illnessesAdministered by statesProgram paid for by employersEncouragement for proper health and Safety programsWhen employees on injured on the job the employer will pay all cost of the worker’s compensation. Companies may sometime investigate claims to make sure the are legitimate
9 Family and Medical Leave Act of 1993 (FMLA) Private employers with 50 or more employees and governmental employers regardless of number of employeesUp to 12 workweeks of unpaid leave per yearEmployees come back to the same or equivalent jobApplies to companies that have employees of 50 or more. If the organization is governmental the number of employees do not make a difference.For employees to take advantage of the FMLA benefit they must be employed for at least 12months and worked over 1250hrs within the 12 months.
10 Discretionary Benefits (Voluntary) Payment for time not workedHealth careLife InsuranceRetirement plansEmployee Stock Option Plans (ESOP)Supplemental Unemployment Benefits (SUB)Employee servicesDistinctive benefitsPremium payPart-time employee benefitsThere are other benefits that do not provide direct compensation. These benefits will vary by company.
11 Payment for Time Not Worked “PTO” Paid vacationsSick payJury dutySabbaticalsNational guard or other military reserve dutyVoting timeBereavement timeSome companies offer Vacation time separate from Sick time.The normal is moving towards companies offering “PTO” and having sick and vacation rapped into oneEmployers pay and allow time off for Jury duty military, voting and bereavement leave. The time off will vary by company.
12 Health CareHealth maintenance organizations (HMO) – cover services for fixed fee, but control exercised over doctors and health facilitiesPreferred provider organizations (PPO) – incentives to use services within system, may use outside providers at greater costsPoint-of-service – requires primary physician and referrals to see specialistsHMOs have a fixed fee but controls which doctors are used by the employeesPPO provides flexibility to employees and employees are able to control which doctor they usePoint-of-services indicates that before an employee can see a specialist they must have a referral from their physician
13 Health Care (Continued) Defined-contribution health-care system – employee gets set amount of money annually to purchase health-care coverageMedical saving accounts – employees set aside pretax money to pay for medical bills that are not covered, including deductibles and co-paymentsDental and vision careDefined contribution- Employees receive a certain amount of money to purchase the health care neededMedical Savings- Employees have the opportunity to set aside pretax dollars for medical reasons. Employees must use it within the calendar year.
14 Life InsuranceGroup life insurance commonly provided benefit to protect employee’s family in event of deathEmployees have the ability to select the coverage they need/want. It can include coverage of as much as 2 times to times an employees base salary
15 Retirement Plans Defined benefits plans Defined contribution plan Cash balance planDisability protection
16 Employee Stock Option Plans (ESOP) Firm provides employees the opportunity to purchase stockEmployees can buy stock at a discountPromotes ownership within the organizationPromote ownership in the company and is offered to employees at all levels
17 Employee Services Relocation benefits Child care Educational assistanceFood service/subsidized cafeteriasLegal benefitsCompanies provide relocation of household goods and help ensure that the employee can arrive at work and not worry about their personal items. It also provides temporary housing if needCompanies are now providing on-site child care or permit employees to bring Child to workCompanies offer subsidized lunches, soda machines, coffee to help increase productive and provide a great place to workCompanies offer employees the ability to purchase insurance policies and receive a payroll dedication and discount
18 Premium PayCompensation paid to employees for working long periods of time or working under dangerous or undesirable conditionsHazard Pay - Pay provided to employees who work under extremely dangerous conditionsShift Differentials - Paid to employees for the inconvenience of working less desirable hoursCompanies will pay extra for the conditions employees are put in. This includes hazard pay and shift differentials.Hazard employment could be a washer for skyscrapers or military pilots.Shift differentials is for inconvenient work schedules. For example working from 12am – 7am.
19 Nonfinancial Compensation Very powerful factorin compensationequationIt is a well known fact that people do not always want a lot of money to stay or even join a new company. There are other factors that come into play that do not include direct compensation.
20 The Job as a Total Compensation Factor Skill VarietyTask IdentityTask SignificanceAutonomyFeedbackSkill Variety – when an employee has variety in their job has the ability to utilize different skillsTask Identity- When an employee is able to identify their job with a certain accomplishment. For example, a Footwear Product Developer will see his or her shoe in footlocker.Task Significance- when an employees job influence the lives of people it adds a sense of achievement. For example, a doctor or police officer.Autonomy- leads employees to feel they have ownership and responsibility for outcomes on the jobFeedback-
21 Workplace Flexibility FlextimeCompressed workweekJob sharingFlexible compensation (cafeteria compensation)TelecommutingPart-time workModified retirementFlextime- allows employees to have the benefits of adjusting the time they come to work. Businesses can offer flexible services to customers, supervisors are forced to communicate more effectively.Compressed workweek- employees have the opportunity to work 4 days a week with longer work hours, usually 10hours per day. In return they are able to take one day off a week with out using vacation.Job sharing- two part-time people split the work schedule of 40 hours a week. Sometimes the days work over lap to allow for successful hand-offs and communication. Trust is very important in this roleFlexible compensation- allows employees the ability to select what components that have for their compensation package. This approach with employees individual needs and preferencesTelecommuting- allows employees the ability to work from home if they are able to maintain their performance. Not every job can be performed remotely. For example, Customer Service Representative. Most telecommuters are information workers. For example, programmer or recruiter.Part-time work- the employee who are students or parents with young children may need part-time schedules. The retail industry is known for having its workforce be part-time.Modified retirement- permits older workers to work fewer hours for a certain time period while maintaining their eligibility to retire
22 FlextimePractice of permitting employees to choose, with certain limitations, their own working hoursWork the same number of hours per day as they would on a standard scheduleMany firms are using
23 Illustration of Flextime Flexible TimeCore TimeFlexible Time (Lunch)Core TimeFlexible Time6 a.m.9 a.m.Noon3 p.m.6 p.m.Bandwidth
24 Compressed Work WeekArrangement of work hours that permits employees to fulfill their work obligation in fewer days than the typical five-day workweekFour 10-hour daysOften greater job satisfaction
25 Job SharingTwo part-time people split the duties of one job in some agreed-on manner and are paid according to their contributionsPartners must be compatible, have good communication skills and trust must exist between the job sharers and their manager
26 Flexible Compensation Plans Permit employees to choose from among many alternatives in deciding how their financial compensation will be allocatedDetermine the compensation package that best satisfies his or her particular needs
27 Compensation Vehicles Utilized in a Cafeteria Compensation Approach Accidental death, dismemberment insuranceBirthdays (vacation)Bonus eligibilityBusiness and professional membershipCash profit sharingClub membershipsCommissionsCompany medical assistanceCompany-provided automobileCompany-provided housingCompany-provided or –subsidized travelDay care centersDeferred bonusDeferred compensation planDental and eye care insuranceDiscount on company productsEducation costsEducational activities (time off)Free checking accountFree or subsidized lunchesGroup automobile insuranceGroup homeowners’ insuranceGroup life insuranceHealth maintenance organization feesHome health careHospital-surgical-medical insuranceIncentive growth fundInterest-free loansLong-term disability benefitMatching educational donationsNurseriesNursing home careOutside medical servicesPersonal accident insurancePrice discount planRecreation facilitiesResort facilitiesSabbatical leavesSalary continuationSavings planScholarships for dependentsSeverance paySickness and accident insuranceStock appreciation rightsStock bonus planStock purchase plan
28 TelecommutingWork arrangement whereby employees, called teleworkers or telecommuters, are able to remain at home, or otherwise away from the office, and perform their work using computers and other electronic devices that connect them with their offices
29 Advantages of Telecommuting For the CompanyFor the EmployeeFor the CommunityAids recruitment and retentionBroadens labor market (worker location not a factor; caters to employees with disabilitiesReduces sick time and absenteeismImproves job satisfaction and productivitySaves costs for office space and utilitiesProvides work/life flexibilityReduces transportation and clothing costsReduces stress of travelCaters to most productive hours for both “early birds” and “night owlsDecreases traffic congestionConserves energy and reduces pollutionRelieves public transportation of “rush hour” problemsReduces peak-time congestion for many service organizations (e.g., retail and health care)
30 Part-time WorkSome people do not either want or need full-time employmentAdds many highly qualified individuals to the labor market by permitting both employment and personal needs to be addressed
31 Modified RetirementPermits older employees to work fewer than regular hours for a certain period of time preceding retirementAllows an employee to avoid an abrupt change in lifestyle and move gracefully into retirement