Employee Benefits

© Nancy Brown Johnson, 2004

Employee Benefits: Unique Aspects

Legal Compliance Tend to become institutionalized Complexity Little Effect on Motivation

Benefits Growth & Decline

Reasons for Growth

New Deal legislation Wage and price controls

-WW II Tax benefits Group rates Rise in health care costs Union objective

Legally Mandated Benefits

Social SecurityAbout 8% employer and employee tax on wagesAdditional Medicaid tax of 1.45%

Unemployment CompensationExperienced based taxEligibility: work 1 year - not on strike, quit or fired

for cause Workers Compensation

Disability,medical care, death benefit & rehabilitation

Experienced based tax

Family and Medical Leave Act

©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997

IRWIN

Private Insurance

Health Driving the rise in benefit costs Cobra must continue

Life Short & Long Term Disability Nursing home

Retirement

©a Times Mirror Higher Education Group, Inc., company, 1997a Times Mirror Higher Education Group, Inc., company, 1997

IRWIN

Defined Benefit •retirement income level is specified•employer assumes risk

Defined Contribution•amount contributed to retirement defined•employee assumes risk

ERISA (1974)

•Funding

•Vesting

•Communication

•Portability

Invest Early & Often

Retirement income Retirement calculator

Payment for Time Not Worked

Vacations not mandated in US 30 days mandatory in Europe

Holiday Pay Sick Leave Family & Medical Leave

US V. Rest of world

http://www.globalworkingfamilies.org/

Average Hours Worked by Country

0

500

1000

1500

2000

2500

1990

1992

1994

1996

1998

2000

2002

2004

Japan

US

Germany

France

Employee Benefits in 1993 by Category

Source: Adapted from the U.S. Chamber of Commerce Research Center,Employee Benefits (Washington,DC: U.S. Chamber of Commerce), 1991, 1994.

25.2%

Payment for timenot worked

28.3%

Medical & other insurance

21.1%

Legallyrequired

16.0%Retirement

plans

Paid rest periods (5.6%)

Miscellaneous (3.8%)

Benefits as % of payroll

equals 41.3%

Benefits as % of payroll

equals 41.3%

Employer Spending on Benefits as a Percentage of Total Benefit Spending

0%

20%

40%

60%

80%

100%

1960 1970 1980 1990 2002

Other

Health

Retirement

Managing Benefits

Survey & Benchmarks Cost control

managed care co-insurance HMO or PPO

Workforce Demographics Communicating with Employees

Flexible Benefit Plans (Cafeteria)

Helps make employees more aware of benefit costs

Addresses different employees needs Maybe reduce some costs for benefits

not needed Increased design and administrative

costs

Benefit Summary

Benefits do not motivate Usually viewed as entitlement Benefits may help attraction and

retention Often undervalued by employees