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Human ResourceHuman Resource

ManagementManagementTENTH EDITONTENTH EDITON

2003 Southwestern College Publishing. All rights reserved. PowerPoint Presentationby Charlie CookPowerPoint Presentationby Charlie Cook

Managing Employee BenefitsManaging Employee Benefits

Chapter 14Chapter 14

SECTION 4Compensating

HumanResources

SECTION 4Compensating

HumanResources

Robert L. MathisRobert L. Mathis John H. JacksonJohn H. Jackson

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BenefitsBenefits

Benefit An indirect compensation given to an employee or

group of employees as a part of organizationalmembership.

Strategic Perspectives on Benefits Benefits absorb social costs for health care and

retirement.

Benefits influence employee decisions about

employers (e.g., recruitment and retirement). Benefits are increasingly seen as entitlements.

Benefit costs are about 40% of total payroll costs.

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How the Benefit Dollar Is SpentHow the Benefit Dollar Is Spent

Figure 141

Source: Based on information in Employee Benefits, 2000

edition (Washington, D.C.: U.S. Chamber of Commerce, 2000).

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Types of BenefitsTypes of Benefits

Figure 142

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Pension PlansPension Plans

Pension Plans Retirement benefits established and funded by

employers and employees.

Traditional Benefit Plans

Defined-benefit plans Employees are promised a definite pension amount

based on age and length of service.

Defined-contribution plans

Employer makes an annual payment to an employeesaccount.

Benefit payout is determined by the financial

performance of the employees retirement account.

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Pension PlansPension Plans

Cash Balance Plans A hybrid plan that defines retirement benefits in

terms of a hypothetical account balance.

Employee Retirement Income Security Act(ERISA) Regulates pension funds to assure their soundness.

Requires firms to offer retirement plans to allemployees if offered to any employees.

Accrued benefits must be paid to departingemployees.

Requires minimum funding for IRS approval andpurchase of plan termination insurance.

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Pension Terms and ConceptsPension Terms and Concepts

Contributory Plan Both employer and employee pay money into the

retirement fund.

Non-contributory Plan

All pension benefits funding is paid by the employer.

Vesting

The right of employees to receive benefits from theirpension plans.

Portability

A pension plan feature that allows employees tomove their benefits from one employer to another.

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Individual RetirementIndividual Retirement

KeoghPlans

IndividualRetirement

Accounts (IRAs)

401(k) and403 (b) Plans

IndividualIndividualRetirementRetirement

OptionsOptions

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Controlling HealthControlling Health--Care Benefits CostsCare Benefits Costs

Co-Payment Employees are required to pay a portion of the cost

of both insurance premiums and medical care.

Defined Contribution Plans for Health Benefits

Employer provides a set amount that the employeemay spend on health-care coverage benefits.

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Controlling HealthControlling Health--Care Costs (contd)Care Costs (contd)

Managed Care Approaches that monitor and reduce medical costs

using restrictions and market system alternatives.

Preferred Provider Organization

A health-care provider that contract with anemployer group to provide health-care services toemployees at a competitive rate.

Health Maintenance Organization (HMO)

A managed care plan that provides services for afixed period on a prepaid basis.

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Family Medical Leave Act (FMLA)Family Medical Leave Act (FMLA)

Coverage Employers with 50 or more employees

Requirements

Employers must allow eligible employees to take upto a total of 12 weeks of unpaid leave to attend toa family or serious medical condition.

Employees have the right to continued healthbenefits and the right to return to their job.

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Flexible BenefitsFlexible Benefits

Flexible Benefit Plan A plan (flex or cafeteria) that allows employees to

select the benefits they prefer from groups ofbenefits established by the employer.

Flexible Spending Accounts An account that allows employees to contribute

pre-tax dollars to buy additional benefits (e.g., lifeinsurance).

Problems with Flexible Plans Inappropriate benefits package choices

Adverse selection and use of specific benefits byhigher-risk employees