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Chapter 13:Chapter 13:
Providing Benefits and ServicesProviding Benefits and Services
Jackson and SchulerJackson and Schuler
© 2003 South-Western College Publishing. All rights reserved.
Eighth editionEighth edition
Managing Human Managing Human ResourcesResources
© 2003 South-Western College Publishing. All rights reserved. 13–2
Chapter OutlineChapter OutlineChapter OutlineChapter Outline
Employee Benefits and Services Within an Integrated Employee Benefits and Services Within an Integrated HR SystemHR System
The Strategic Importance of Employee Benefits & The Strategic Importance of Employee Benefits & ServicesServices
Public Protection ProgramsPublic Protection Programs Private Protection ProgramsPrivate Protection Programs Health Care Benefits & ServicesHealth Care Benefits & Services Paid LeavePaid Leave Work-Life BalanceWork-Life Balance Other Benefits & ServicesOther Benefits & Services Administrative IssuesAdministrative Issues
© 2003 South-Western College Publishing. All rights reserved. 13–3
TerminologyTerminologyTerminologyTerminology
Benefits and ServicesBenefits and Services In-kind payments to employeesIn-kind payments to employees For membership or participation in the For membership or participation in the
organizationorganization
Public Protection ProgramsPublic Protection Programs Legally requiredLegally required Social Security, unemployment, workers’ Social Security, unemployment, workers’
compensationcompensation
Private Protection ProgramsPrivate Protection Programs Voluntary for employersVoluntary for employers Health care, life insurance, disability, retirementHealth care, life insurance, disability, retirement
© 2003 South-Western College Publishing. All rights reserved. 13–4
Benefits and Services within Benefits and Services within an Integrated HR Systeman Integrated HR System
Benefits and Services within Benefits and Services within an Integrated HR Systeman Integrated HR System
Other HR Activities• Fairness/Legal• Recruitment• Compensation• Safety/Health
Global Environment
OrganizationalEnvironment
Objectives for Total Compensation• Communicate Values• Support Objectives• Attract, Retain• Motivate• Contain Costs
Total CompensationMonetary….Nonmonetary
Provide Mandatory Benefits & Services• Social Security• Unemployment/Wkrs Comp
Provide Voluntary Benefits and Services• Retirement, Medical• Paid Leave, Life Cycle
Communicate and Administer
Monitor Health and Safety
© 2003 South-Western College Publishing. All rights reserved. 13–5
External Influences External Influences External Influences External Influences
EmployeeEmployeeBenefitsBenefits
EmployeeEmployeeBenefitsBenefits
Wage controlsWage controlsWage controlsWage controls
Health care costsHealth care costsHealth care costsHealth care costs
Union bargainingUnion bargainingUnion bargainingUnion bargaining
Federal tax policiesFederal tax policiesFederal tax policiesFederal tax policies
InflationInflationInflationInflation
CompetitionCompetitionCompetitionCompetition
Social legislationSocial legislationSocial legislationSocial legislation
Expansion of social securityExpansion of social securityExpansion of social securityExpansion of social security
© 2003 South-Western College Publishing. All rights reserved. 13–6
Internal InfluencesInternal InfluencesInternal InfluencesInternal Influences
Human Human resourceresource
philosophyphilosophy
Human Human resourceresource
philosophyphilosophy
Business Business strategystrategy
and and objectivesobjectives
Business Business strategystrategy
and and objectivesobjectives
Employee wantsEmployee wantsEmployee wantsEmployee wants
EmployeeEmployeeBenefitsBenefits
EmployeeEmployeeBenefitsBenefits
© 2003 South-Western College Publishing. All rights reserved. 13–7
Average Annual Monetary BenefitsAverage Annual Monetary Benefitsand Earningsand Earnings
Average Annual Monetary BenefitsAverage Annual Monetary Benefitsand Earningsand Earnings
68%
14%
9%
7% 2%
Pay for TimeWorked
Private Pensions,Insurance
Paid Vacationsand Rest Periods
Legally RequiredPayments
Other
© 2003 South-Western College Publishing. All rights reserved. 13–8
Percentage of Who Rank Each BenefitPercentage of Who Rank Each BenefitMost ImportantMost Important
Percentage of Who Rank Each BenefitPercentage of Who Rank Each BenefitMost ImportantMost Important
0 10 20 30 40 50 60 70
Health Insurance
Retirement Savings
Pension
Life Insurance
Long-term care
Disability
Stock Options
© 2003 South-Western College Publishing. All rights reserved. 13–9
The Strategic Importance of The Strategic Importance of Benefits and ServicesBenefits and Services
The Strategic Importance of The Strategic Importance of Benefits and ServicesBenefits and Services
Benefits and Services May:Benefits and Services May: Attract good employeesAttract good employees Increase employee moraleIncrease employee morale Reduce turnoverReduce turnover Increase job satisfactionIncrease job satisfaction Enhance the organization’s Enhance the organization’s
imageimage
© 2003 South-Western College Publishing. All rights reserved. 13–10
Benefits, Services and Business Benefits, Services and Business StrategyStrategy
Benefits, Services and Business Benefits, Services and Business StrategyStrategy
Are generally not considered motivatorsAre generally not considered motivators Benefits and services are not contingent on Benefits and services are not contingent on
performanceperformance Innovative packages may attract and retain Innovative packages may attract and retain
employeesemployees
Communication is importantCommunication is important Many employees don’t know the worth of Many employees don’t know the worth of
benefits they receivebenefits they receive Employees may view benefits as entitlementEmployees may view benefits as entitlement Employees differ on the relative value they Employees differ on the relative value they
place on particular benefit place on particular benefit
© 2003 South-Western College Publishing. All rights reserved. 13–11
Business Objectives Addressed by Business Objectives Addressed by Benefits and ServicesBenefits and Services
Business Objectives Addressed by Business Objectives Addressed by Benefits and ServicesBenefits and Services
Objective: To unify a company acquired from Objective: To unify a company acquired from a mergera merger Benefits Response: Analyze immediate Benefits Response: Analyze immediate
versus gradual transfer of subsidiary versus gradual transfer of subsidiary employees into corporate benefits plan.employees into corporate benefits plan.
Objective: To cut accident rates 10% by year Objective: To cut accident rates 10% by year endend Benefits Response: Establish employee Benefits Response: Establish employee
assistance program. Set up literacy training assistance program. Set up literacy training to ensure employees can read safety signs.to ensure employees can read safety signs.
© 2003 South-Western College Publishing. All rights reserved. 13–12
Benefits CostsBenefits CostsBenefits CostsBenefits Costs
In 1929, total benefits In 1929, total benefits averaged 5% of total averaged 5% of total pay, in 2000: 30% of pay, in 2000: 30% of
Wages and salaries are Wages and salaries are 40 times greater than 60 40 times greater than 60 years agoyears ago
Benefits and services Benefits and services are 500 times greaterare 500 times greater
© 2003 South-Western College Publishing. All rights reserved. 13–13
Public Protection ProgramsPublic Protection ProgramsPublic Protection ProgramsPublic Protection Programs
Social security systemSocial security system Unemployment Unemployment
compensation benefitscompensation benefits Workers’ compensation Workers’ compensation
and disabilityand disability
© 2003 South-Western College Publishing. All rights reserved. 13–14
Social SecuritySocial SecuritySocial SecuritySocial Security
Social Security Act of 1935; Medicare was Social Security Act of 1935; Medicare was added in 1966added in 1966
Federal Insurance Contributions Act (FICA)Federal Insurance Contributions Act (FICA) 6.2% of the first $68,400 income for 6.2% of the first $68,400 income for
retirement and disabilityretirement and disability 1.45% of total income for hospital insurance 1.45% of total income for hospital insurance
(Medicare)(Medicare) Equal contributions from the employer and Equal contributions from the employer and
the employeethe employee
© 2003 South-Western College Publishing. All rights reserved. 13–15
Unemployment CompensationUnemployment CompensationUnemployment CompensationUnemployment Compensation
Jointly administered by Federal and State Jointly administered by Federal and State governmentsgovernments
Tax rates for employers vary based on Tax rates for employers vary based on number of people using benefitsnumber of people using benefits
Level of benefits ranges Level of benefits ranges 50-70% of base salary50-70% of base salary
© 2003 South-Western College Publishing. All rights reserved. 13–16
Workers’ CompensationWorkers’ CompensationWorkers’ CompensationWorkers’ Compensation
Covers costs and lost income due to injury or Covers costs and lost income due to injury or illness that result from on-the-job eventsillness that result from on-the-job events
Administered by statesAdministered by states Fully financed by employersFully financed by employers Managing workers’ compensation costs:Managing workers’ compensation costs:
Use health care cost-containment strategies Use health care cost-containment strategies (audit bills, develop preferred providers, (audit bills, develop preferred providers, etc.)etc.)
Implement job safety programsImplement job safety programs Combine with disability managementCombine with disability management
© 2003 South-Western College Publishing. All rights reserved. 13–17
Relevant LawsRelevant LawsRelevant LawsRelevant Laws
Pregnancy Discrimination Act of 1978Pregnancy Discrimination Act of 1978 Pregnancy is defined as a disability.Pregnancy is defined as a disability. Female employees (and spouses) Female employees (and spouses)
must receive same benefits for must receive same benefits for pregnancy as for other disabilities.pregnancy as for other disabilities.
© 2003 South-Western College Publishing. All rights reserved. 13–18
Family and Medical Leave Act of Family and Medical Leave Act of 19931993
Family and Medical Leave Act of Family and Medical Leave Act of 19931993
Covers employers with 50 or more workersCovers employers with 50 or more workers Required to grant up to 12 weeks of unpaid Required to grant up to 12 weeks of unpaid
leave annually leave annually For birth/adoptionFor birth/adoption To care for immediate family member with To care for immediate family member with
serious health conditionserious health condition For employee with serious health conditionFor employee with serious health condition
Employee keeps preexisting health coverage Employee keeps preexisting health coverage and must be allowed to return to same or and must be allowed to return to same or equivalent jobequivalent job
© 2003 South-Western College Publishing. All rights reserved. 13–19
Relevant Laws (cont’d)Relevant Laws (cont’d)Relevant Laws (cont’d)Relevant Laws (cont’d)
Economic Recovery Tax Act of 1981Economic Recovery Tax Act of 1981 Employees allowed to make tax deductible Employees allowed to make tax deductible
contributions to employer-sponsored plan or contributions to employer-sponsored plan or individual retirement account (IRA)individual retirement account (IRA)
Encouraged employee stock ownershipEncouraged employee stock ownership
Health Insurance Portability and Health Insurance Portability and Accountability Act of 1996Accountability Act of 1996 Facilitates employees’ transfer of Facilitates employees’ transfer of
coverage when they change jobscoverage when they change jobs
© 2003 South-Western College Publishing. All rights reserved. 13–20
Economic Growth and Tax Relief Economic Growth and Tax Relief Reconciliation Act of 2001Reconciliation Act of 2001
Economic Growth and Tax Relief Economic Growth and Tax Relief Reconciliation Act of 2001Reconciliation Act of 2001
Raises contribution limits for IRAs and employer-Raises contribution limits for IRAs and employer-sponsored retirement planssponsored retirement plans
Reduces (to 3 yrs) length of service before employer Reduces (to 3 yrs) length of service before employer contributions to retirement programs must be contributions to retirement programs must be availableavailable
Shortens pension vesting waiting periodsShortens pension vesting waiting periods Eliminates federal taxes on Eliminates federal taxes on
withdrawals from college withdrawals from college savings planssavings plans
© 2003 South-Western College Publishing. All rights reserved. 13–21
Private Protection ProgramsPrivate Protection ProgramsPrivate Protection ProgramsPrivate Protection Programs
Are not required by lawAre not required by law IncludeInclude
Retirement income plansRetirement income plans Capital accumulation plansCapital accumulation plans Savings and thrift plansSavings and thrift plans Supplemental unemploymentSupplemental unemployment Guaranteed payGuaranteed pay
© 2003 South-Western College Publishing. All rights reserved. 13–22
Pension PlansPension PlansPension PlansPension Plans
Qualified Plan: Qualified Plan: Covers broad class of employeesCovers broad class of employees Receives favorable tax treatmentReceives favorable tax treatment
ERISA (Employee Retirement Income Security ERISA (Employee Retirement Income Security Act of 1974)Act of 1974) Protects benefits for workers covered by Protects benefits for workers covered by
private pension plans; prohibits unfunded private pension plans; prohibits unfunded plansplans
Specifies provisions for vesting (time when Specifies provisions for vesting (time when employer’s contribution belongs to employee)employer’s contribution belongs to employee)
© 2003 South-Western College Publishing. All rights reserved. 13–23
Types of Pension Plans Types of Pension Plans Types of Pension Plans Types of Pension Plans
Defined Benefit PlanDefined Benefit Plan Benefits vary with age and length of serviceBenefits vary with age and length of service Provides predictable income after retirementProvides predictable income after retirement Penalizes employee mobilityPenalizes employee mobility Regulated by ERISARegulated by ERISA
Cash Balance PlanCash Balance Plan Pays a lump sum upon employees’ Pays a lump sum upon employees’
departuredeparture Has become more popular as Has become more popular as
employee mobility has increased employee mobility has increased
© 2003 South-Western College Publishing. All rights reserved. 13–24
Types of Pension Plans (cont’d)Types of Pension Plans (cont’d)Types of Pension Plans (cont’d)Types of Pension Plans (cont’d)
Defined Contribution PlansDefined Contribution Plans Each employee has separate accountEach employee has separate account Employer may contribute (contributory) or Employer may contribute (contributory) or
not (noncontributory)not (noncontributory) Money purchase plansMoney purchase plans
• Employer makes regular contributionsEmployer makes regular contributions Tax-deferred profit-sharing plansTax-deferred profit-sharing plans
• Employees share profits and Employees share profits and investment risk investment risk
© 2003 South-Western College Publishing. All rights reserved. 13–25
Supplemental PlansSupplemental PlansSupplemental PlansSupplemental Plans
401K Plans401K Plans Employer and employee contribute to fundEmployer and employee contribute to fund Employee makes investment decisionsEmployee makes investment decisions
Employee stock and stock option plansEmployee stock and stock option plans Recent trend is to offer to all employeesRecent trend is to offer to all employees
© 2003 South-Western College Publishing. All rights reserved. 13–26
Health Care Benefits and ServicesHealth Care Benefits and ServicesHealth Care Benefits and ServicesHealth Care Benefits and Services
Medical CoverageMedical Coverage Wellness ProgramsWellness Programs Employee Assistance ProgramsEmployee Assistance Programs Disability InsuranceDisability Insurance
© 2003 South-Western College Publishing. All rights reserved. 13–27
Medical Care Medical Care Medical Care Medical Care
Most employees underestimate cost and view Most employees underestimate cost and view medical care as an entitlementmedical care as an entitlement
Companies that provide health insurance Companies that provide health insurance spend more than 13 cents of every dollar they spend more than 13 cents of every dollar they make to pay for coverage.make to pay for coverage.
© 2003 South-Western College Publishing. All rights reserved. 13–28
Medical Care ApproachesMedical Care ApproachesMedical Care ApproachesMedical Care Approaches
Insurance CompaniesInsurance Companies Provider OrganizationsProvider Organizations Health Maintenance Organizations (HMOs)Health Maintenance Organizations (HMOs) Preferred Provider NetworksPreferred Provider Networks Self-Funded PlansSelf-Funded Plans
© 2003 South-Western College Publishing. All rights reserved. 13–29
Medical Cost Containment Medical Cost Containment StrategiesStrategies
Medical Cost Containment Medical Cost Containment StrategiesStrategies
Hospital utilization Hospital utilization programsprograms
Coordination of benefitsCoordination of benefits Data analysisData analysis Case managementCase management Cost sharing with Cost sharing with
employeesemployees Incentives to promote Incentives to promote
employee healthemployee health
© 2003 South-Western College Publishing. All rights reserved. 13–30
Wellness ProgramsWellness ProgramsWellness ProgramsWellness Programs
Proactive programs to prevent health Proactive programs to prevent health problemsproblems
May include:May include: On-site exercise programsOn-site exercise programs Stress-management trainingStress-management training Assistance to stop smokingAssistance to stop smoking Weight-loss programsWeight-loss programs
© 2003 South-Western College Publishing. All rights reserved. 13–31
Employee Assistance ProgramsEmployee Assistance ProgramsEmployee Assistance ProgramsEmployee Assistance Programs
Assist employees with chronic personal Assist employees with chronic personal problems that hinder job performance and problems that hinder job performance and attendanceattendance
Employees referred to confidential counseling Employees referred to confidential counseling servicesservices
Includes help with alcohol and drug Includes help with alcohol and drug dependencies, domestic problems, mental dependencies, domestic problems, mental disorders, financial problemsdisorders, financial problems
© 2003 South-Western College Publishing. All rights reserved. 13–32
Paid LeavePaid LeavePaid LeavePaid Leave
Off the job:Off the job: Vacations and holidaysVacations and holidays Paid absencesPaid absences
On the jobOn the job Lunches, rest periodsLunches, rest periods
© 2003 South-Western College Publishing. All rights reserved. 13–33
Managing AbsenteeismManaging AbsenteeismManaging AbsenteeismManaging Absenteeism
In U.S., average daily absenteeism rate 2-3% In U.S., average daily absenteeism rate 2-3% of payroll.of payroll.
Programs that reward attendance may be Programs that reward attendance may be more effective than disciplinary approaches.more effective than disciplinary approaches.
Personal Time Off (PTO) benefits may Personal Time Off (PTO) benefits may prevent unscheduled absenteeism.prevent unscheduled absenteeism.
© 2003 South-Western College Publishing. All rights reserved. 13–34
Work-Life BalanceWork-Life BalanceWork-Life BalanceWork-Life Balance
Child Care ServicesChild Care Services Dependent care reimbursement accountsDependent care reimbursement accounts Resource and referral programsResource and referral programs On-site care facilitiesOn-site care facilities Flexible schedulingFlexible scheduling
Backlash from child-free Backlash from child-free workers tends to be workers tends to be limited in scopelimited in scope
© 2003 South-Western College Publishing. All rights reserved. 13–35
Work-Life BalanceWork-Life BalanceWork-Life BalanceWork-Life Balance
Elder Care ServicesElder Care Services Information and referral programsInformation and referral programs Long-term care insuranceLong-term care insurance
28% of employees over 30 spend an average of 10 hours a week giving careto an older relative
© 2003 South-Western College Publishing. All rights reserved. 13–36
Work-Life Balance (cont’d)Work-Life Balance (cont’d)Work-Life Balance (cont’d)Work-Life Balance (cont’d)
Other Life Cycle and Life Style BenefitsOther Life Cycle and Life Style Benefits Benefits for spousal equivalentsBenefits for spousal equivalents Educational expense allowancesEducational expense allowances Relocation and housing assistanceRelocation and housing assistance
© 2003 South-Western College Publishing. All rights reserved. 13–37
Administrative IssuesAdministrative IssuesAdministrative IssuesAdministrative Issues
DeterminingDeterminingthe benefitsthe benefits
packagepackage
DeterminingDeterminingthe benefitsthe benefits
packagepackage
ProvidingProvidingbenefitsbenefitsflexibilityflexibility
ProvidingProvidingbenefitsbenefitsflexibilityflexibility
CommunicatingCommunicatingthe benefitsthe benefits
packagepackage
CommunicatingCommunicatingthe benefitsthe benefits
packagepackage
ManagingManaging& reducing& reducing
benefitsbenefitscostscosts
ManagingManaging& reducing& reducing
benefitsbenefitscostscosts
© 2003 South-Western College Publishing. All rights reserved. 13–38
Determining the Benefits and Determining the Benefits and Services PackageServices Package
Determining the Benefits and Determining the Benefits and Services PackageServices Package
Employee preferences vary considerably and Employee preferences vary considerably and are difficult to predict, based on demographic are difficult to predict, based on demographic characteristics.characteristics.
Corporate size, ability to pay, strategy and Corporate size, ability to pay, strategy and culture affect benefits decisions.culture affect benefits decisions.
Flexible plans, which allow employee choice Flexible plans, which allow employee choice of benefits, are very effective.of benefits, are very effective.
© 2003 South-Western College Publishing. All rights reserved. 13–39
Communicating the Benefits andCommunicating the Benefits and Services Package Services Package
Communicating the Benefits andCommunicating the Benefits and Services Package Services Package
Most companies use Most companies use passive, impersonal passive, impersonal techniquestechniques
New approaches New approaches include:include: Voice response Voice response
systems (call systems (call centers)centers)
Intranet web sitesIntranet web sites