OS 352 4/10/08 I. Exam II Feedback II. Discussion – “When Salaries Aren’t Secret” III. Employee benefits (chapter 13) A. Key challenges. B. Legally required.
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OS 352 4/10/08 I. Exam II Feedback II. Discussion – “When Salaries Aren’t Secret” III. Employee benefits (chapter 13) A. Key challenges. B. Legally required. C. Psychological contracts and ee expectations. D. Health insurance options. E. New grads and benefits.
Key Challenges in Designing Benefits Plans Cost Control Communication Clarity Value of benefits
3 Legally Required Benefits Social Security Retirement Income Disability Income Medicare Survivor Benefits Workers’ Compensation Unemployment Insurance Unpaid Leave Vacation is not legally required?!!!
4 Social Security Social Security funded by workers Retirement Income Disability Income Medicare Survivor Benefits Social Security funded by general funds Social Security Income (SSI) – for those over 65 with few resources or income, disabled, or very low income individuals
Psychological Contract The ee’s view on What an ee expects to contribute and what the organization will provide to the ee for these contributions. How are these contracts formed? Verbal discussions, promises Observations of past/current practices General ideas re work relationships between ees and ers(e.g., what are other ers providing?)
Current U.S. Ee Expectations Benefit Health care coverage Paid vacation Career development and advancement. Retirement earnings. But … Ees expect to contribute. Most new ees expect only 2 weeks. Ees do not expect long-term job security. Ees expect to contribute, and ees expect a savings plan rather than a pension.
Retirement Plans Employers are moving away from … Defined Benefit Plans: pay a specified level of retirement income to the retiree, up to about 35% of final salary for senior workers. And replacing them with … Defined Contribution Plans: pay a variable level of retirement income depending upon the employees’ contributions and the performance of the individual’s retirement account.
401(k) Plans Employees contribute a percentage of their earnings, and employers make matching contributions. Ees do not pay tax on the earnings contributed until they receive it from the plan – so contributions reduce current year taxes. Clarkson’s 401(k) plan: Ees are required to contribute 4.8% of regular salary, while the University contribution equals 9.6% of their regular salary.
Employer-Provided Health Insurance Plans TraditionalCoverage Issue Where must the covered parties live? Who provides health care? How much coverage of routine/ preventive medicine? What hospital care costs are covered? May live anywhere. Doctor and health-care facility of patient’s choice. Does not cover regular checkups and other pre- ventive services. Diagnostic tests may be covered in part or full. Covers doctors’ and hospitals’ bills. Health Maintenance Organization (HMO) May be required to live in an HMO- designated service area. Must use doctors and facilities designated by HMO. Covers regular checkups, diag- nostic tests, and other preventive services with low or no fee per visit. Covers doctor’s bills; covers bills of HMO- approved hospitals. Preferred Provider Organization (PPO) May live anywhere. May use doctors and facilities associated with PPO. If not, may pay additional copay- ments/deductible. Same as HMO if doctor and facility are on approved list. Copay- ment and deductibles are much higher for doctors and facilities not on list. Covers bills of PPO- approved doctors and hospitals. Fig. 12-7
Flexible vs. Fixed Benefits Programs Flexible (Cafeteria) Ees select the benefits they want. May be less costly. Downsides: Administratively complex. Ees may not select benefits they need. Fixed All ees receive the same benefits. Simple administration. Downsides: Cost One-size-fits-all approach may not meet ees’ needs.
Perceived Organizational Support (POS) Degree to which an ee perceives that the er “cares about” or values the ee. Benefits that may enhance POS perceptions:
Benefits issues relevant to new entrants to labor market. Long-term disability insurance – take it! Retirement plan contributions – do it, or pay off loans instead. Health care costs, options, COBRA. Tuition assistance programs for graduate school.
Terms You Should Know Social Security Psychological contract Defined benefit plan Defined contribution plan Flexible (cafeteria) benefits plan
You Should be Able To … Explain the different benefits provided by the Social Security System Provide the employee and employer contribution rate for Social Security and Medicare (7.65% of earnings for each party) Discuss the pros and cons of cafeteria benefits programs. Discuss SAS Company’s approach to managing their employee benefits.