OH 12-1 Ensuring Employee Benefits and Compensation Human Resources Management and Supervision 2 OH 12-1 1

OH 12-1

Ensuring Employee Benefits and Compensation

Human Resources Management and Supervision

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Employment Cycle

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Employment Cycle

• Benefits offered by the foodservice operation are of significant interest to potential employees.

• After hiring, employees must learn about benefits and receive written plan information.

• During the employees’ time at the operation, managers must communicate information about some types of benefits and help employees to take advantageof them.

• Page 314 are listed information that managers should be able to answer about each benefit plan offered by the operation.

• Managers must understand several important concepts about employee benefit plans.

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Basics of Employee Benefits Plans

Federal law requires most types of plans to have a plan administrator who is responsible for administering the plans.

Employee benefit plans describe the non-wage compensation an employee is eligible to receive.

Employees must enroll for benefit plans.

Plan providers offer the benefits.

A participant is a member of a plan; a beneficiary is entitled to receive benefits under the plan.

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Employee Benefit Programs Mandated by Federal Government

Family and medical leave

Healthcare coverage after termination (if covered before termination)

Military leave

Social Security

Unemployment insurance

Workers’ compensation

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Common Voluntary Benefits

Uniform benefitsUniforms and dress codes provide a professional look

that impacts the customers’ impression of the operation.

Proper uniforms also provide some measure of personal protection.

Meal benefitsMany operations provide meal benefits by offering

meals to employees at a reduced or no cost.

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Common Voluntary Benefits—Healthcare Plans

Common types

Fee-for-service plans: Fee-for-service plans are administered by insurance companies that directly pay service providers, such as physicians, or reimburse plan participants.

Preferred provider organizations (PPOs): Preferred provider organizations discount the cost of their services in exchange for more patients and timely payment..

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Common Voluntary Benefits—Healthcare Plans

Common types continued:

Health maintenance organizations (HMOs): The cost of healthcare through a health maintenance organization is almost entirely prepaid by premiums, and service providers are part of the HMO.

Some employers establish flexible spending account programs that allow employees to contribute a certain amount of income before taxes to their individual account that is used to pay certain medical expenses not covered by the employee’s healthcare plan.

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Common Voluntary Benefits— Employee Assistance Programs (EAPs)

EAPs provide counseling and other services to individuals and families to help them deal with problems that impact their ability to work effectively.

When a person decides to seek help through an EAP, he/she contacts the EAP to make an appointment.

If EAP is suggested in corrective action, it cannot be required that an employee use EAP, only that inappropriate behavior must be corrected.

In the text, page 323, you can review a list of employee problems that may be addressed in an EAP

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Common Voluntary Benefits—Retirement Benefits

Retirement benefits provide regular payments to employees who retire because of age.

Defined benefits (DB) The employee is guaranteed certain payments upon

retirement (the final value of the benefit is defined).

Defined contribution (DC) Payments are made into an account owned by the

employee (the employer’s or employee’s contribution is defined).

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Common Elements of Retirement Benefits

Both have rules for eligibility.

Benefits belong to the employee and cannot be revoked even if the employee leaves before retirement.

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Saving for Retirement

This young employee is probably not thinking about retirement. However, he should recognize the importance of financial independence after retirement and begin saving for it now.

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Employee Retirement Income Security Act (ERISA)

Protects employee pensions and healthcare plans from incompetent, unethical, and unfair administration

ERISA helps ensure that benefits promised to employees will be available when the employees need them.

Participants must receive notification about changes in the plan.

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Consolidated Omnibus Reconciliation Act (COBRA)

Extends healthcare coverage for people who would otherwise lose healthcare insurance

COBRA enables eligible people to continue their employer’s healthcare group plan for a limited time if they pay their own and the employer’s share of the cost, plus, sometimes, an administrative fee.

Exhibit 12i (page 330) list of events that qualify an employee for continuation of coverage under COBRA.

COBRA also requires plan administrators to communicate specific information to qualified beneficiaries. Exhibit 12j, page 331,reviews communication requirements for plan administrators.

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Health Insurance Portability and Accountability Act (HIPAA)

Helps ensure that people do not lose access to healthcare because of preexisting conditions, other health status factors, or limits on plan enrollment periods.

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Health Insurance Portability and Accountability Act (HIPAA)

Three main functions:

1. To give people the right to add family members to their group healthcare plan at times other than open enrollment, under certain circumstances

2. To protect people from being excluded from healthcare plans or denied coverage because of a preexisting conditions

3. To protect people from discriminatory pricing or treatment under a plan because of preexisting condition or other health status facors

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Mandatory Benefits—Social Security

A federal pension program providing

Retirement benefits

Survivor benefits

Disability benefits

Medicare

Both employers and employees pay for Social Security benefits through a payroll tax.

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Mandatory Benefits—Unemployment Insurance

Provides a temporary reduced level of income to employees who lose their jobs involuntarily.

Some employees are typically not eligible for unemployment insurance including those who Are fired Turn down a job offer of suitable work Go on strike or do not work because of a labor dispute Accept certain types of income such as workers’

compensation, retirement or Social Security pension, or Social Security payments

Workers’ compensation is a third mandatory benefit.

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Workers’ Compensation

Kitchens can be dangerous places to work if equipment is improperly operated and/or if operating procedures are not consistently followed.

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Workers’ Compensation

Workers’ compensation is a system of providing financial compensation to employees or their survivors when an individual is injured at work, becomes sick because of the work environment, or dies from a workplace situation.

Workers’ compensation is “no fault”—employers are financially responsible to take care of injured or ill employees regardless of who (employee or employer) causes the illness.

Foodservice operations typically purchase workers’ compensation insurance to pay for any claims.

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Mandatory Benefits—Family and Medical Leave Act (FMLA)

Allows qualified employees to take up to twelve weeks of continuous or intermittent unpaid leave in a twelve-month period for certain medical or family-care situations.

FMLA requires employees to allow unpaid leave when employees Have a serious medical condition Must take care of a child, spouse, or parent with a

serious medical condition Have a newborn child or adopted child

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Mandatory Benefits—Family and Medical Leave Act (FMLA)

If the employee has health insurance through the employer, the employer must continue to provide this benefit during the leave, and the employee must pay any premiums that he/she would normally pay, including healthcare insurance premiums.

Employers must comply with FMLA if they have fifty or more full-time employees who live within seventy to seventy-five miles of the business.

To be eligible for FMLA benefits, covered employees must have worked for the operation for one year and a minimum of 250 hours in the previous 12-month period.

Military leave must also be provided for applicable employees

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Mandatory Benefits—Uniformed Services Employment and Reemployment Rights Act

Protects employees from workplace discrimination based upon an obligation to, application for, or interest in military service.

While on military leave, USERRA requires the employer to continue all of the employee’s benefits as if the employee were not on leave. Note: employers must communicate information about USERRA to their employees.

USERRA poster illustrated in Exhibit 12r (page 343).

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Keeping Current on Benefitsand Related Laws

This manager and employee must know about many work-related concerns. The wide array of voluntary and mandatory employee benefits that (seemingly) always change are high on this list.

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Keeping Current on Benefits and Related Laws continued

Benefit laws are numerous and complex.

Noncompliance can be expensive (or worse!).

All managers must be trained in employee benefits, policies, procedures, and workplace laws.

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Ensuring Legal Wages

Fair Labor Standards Act

Provides minimum wage and overtime pay with exceptions for Tipped employees minimum wage

Youth minimum wage

Subminimum wage

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Legal Wages

Full-time employees are generally expected to work forty hours per week.

Hourly employees receive overtime pay (one and a half times hourly rate).

Employers using tip credits must notify the employees and show that cash wages and tips equal the minimum wage.

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Tip Income Details

Employees and employers must report tip income.

Employees must report tips at least monthly.

Employers must report tip income from each employee and withhold taxes on tip income.

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Ensuring Accurate Compensation

Managers must ensure that employees receive a correct paycheck.

Tracking the length of time and dates an employee has worked is also important to ensure proper retirement benefits.

Payroll administrator must ensure that all applicable items are deducted from each employee’s wages and forwarded to the correct agency, company, or account. Special payments due each employee must also be added to the paycheck.

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Ensuring Accurate Compensation

It is necessary to track the number of days worked to determine vacation days.

Length-of-service information must be communicated to benefit plan administrators.

Outside companies can be contracted to provide payroll administration tasks.

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Payroll System

A method for recording and tracking employees’ time and issuing paychecks

Managers must ensure that employees report the correct number of hours.

Methods range from manual timecards to electronic card readers.

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Payroll Administration Options

Many operations outsource payroll administration.

Small operations may use a part-time bookkeeper and/or bookkeeping software.

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Controlling Labor Costs

Pay rates must be competitive with the local job market.

The operation’s total labor needs must be carefully considered.

Legal aspects of compensation must be considered as wage rates are established.

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Controlling Overtime

Overtime must be approved before it is incurred.

Employee hours worked should be monitored.

There are times when overtime is needed Unforeseen needs

Coverage to train employees

Coverage for vacation and time-off

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Key Term Review

• Annuities—retirement plans in which regular payments continue for a specified period of time

• Beneficiary—someone who is entitled to receive a benefit under a plan

• Certificate of creditable coverage—document showing that a person was covered under a healthcare plan, and the starting and ending dates of that coverage

• Compensation package—combination of benefits, wages, and incentives paid to an employee

• Consolidated Omnibus Budget Reconciliation Act (COBRA)—federal regulation that extends healthcare coverage for people who would otherwise lose healthcare insurance after leaving their job

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Key Term Review

• Conventional indemnity plans—same as fee-for-service plans

• Deductible—minimum out-of-pocket expenses that employees must pay under their healthcare coverage plan

• Defined benefit (DB)—retirement benefit in which the employee is guaranteed certain payments upon retirement

• Defined contribution (DC)—benefit that guarantees that certain payments will be paid into an account owned by an employee

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Key Term Review continued

• Employee assistance programs (EAPs)—provide counseling and other services to individuals and families to help them deal with a range of problems that impede their ability to function effectively at work

• Employee benefit plan—program that describes the non-wage compensation or services that an employee is eligible to receive, and the circumstances under which the employee will receive them

• Employee Retirement Income Security Act of 1974 (ERISA)—federal program designed to protect employee pensions and healthcare plans from incompetent, unethical, and unfair administration

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• Enrollment—act of an employee signing up for a benefit plan

• Exclusion period—length of time that a healthcare plan excludes coverage for preexisting conditions

• Family and Medical Leave Act (FMLA)—federal program that gives qualified employees the right to take up to twelve weeks of continuous or intermittent unpaid leave in a rolling twelve-month period

• Fee-for-service plans—healthcare plans administered by insurance companies that directly pay service providers or reimburse plan participants

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• Flexible spending accounts (FSAs)—accounts that allow employees to contribute a certain amount of income before taxes to their individual account that can be used to pay medical expenses not covered by the employee’s healthcare plan

• Garnishments—employee payments ordered by a court

• Group plan—plan that provides essentially the same benefits to multiple people

• Health Insurance Portability and Accounting Act (HIPAA)—federal program that helps ensure people do not lose access to healthcare because of preexisting conditions, other health status factors, or limits on a plan’s enrollment period

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• Health maintenance organizations (HMOs)—healthcare plan in which costs are almost entirely prepaid through premiums, and service providers are part of the HMO

• Health savings accounts (HSAs)—same as flexible spending accounts

• Individual plan—employee benefit plan that provides a benefit for one person or family

• Leave of absence—period of time an employee does not work that is not covered by paid-time-off

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• Levies—employee payments taken by a government agency

• Life events—events that change a family

• Look-back period—six-month time frame for preexisting conditions under the Health Insurance Portability and Accountability Act (HIPAA)

• Mandated—types of employee benefits that are required by federal or state governments

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• Medicare—federally insured healthcare plan for people age 60–65 or older

• Open enrollment period—times when employees can change their benefits or coverage under a benefit plan

• Overtime—hours worked after which nonexempt employees must be paid 1.5 times their regularly hourly rate. Note: This definition is changed from the less-than-traditional definition found on page 348.

• Participant—one who is a member of an employee benefit plan

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• Payroll administrator—person, department, or outside company that ensures employee paychecks are issued

• Payroll system—method for recording and tracking employee time and issuing paychecks

• Pensions—regular retirement benefits (payments) that continue until the retiree dies

• Person-hour—one hour of work done by one person

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• Plan administrator—designated person or entity required by federal law to be responsible for handling administrative tasks for an employee benefit plan

• Plan provider—company offering an employee benefit such as an insurance company

• Preexisting condition—medical condition for which a person has sought medical treatment before applying to join a healthcare plan.

• Preferred provider organizations (PPOs)—healthcare plans in which service providers discount the cost of their services in exchange for more patients and timely payment

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• Premium—monthly fee paid by employers and employees for a healthcare or other benefit plan

• Primary care physicians—general practitioners or internists who receive a referral through a health maintenance organization (HMO)

• Qualified beneficiary—person entitled to COBRA healthcare continuation coverage

• Qualified plan—account an employee can use to keep money from a closed defined contribution account until he/she reaches retirement age

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• Self-insured—employers who pay for all covered employee healthcare costs without the use of an insurance company

• Serious medical condition—illness, injury, impairment, or physical or mental condition that involves inpatient care or continuing treatment by a healthcare provider under the Family Medical Leave Act (FMLA)

• Service—days or times spent at work required before an employee is eligible for retirement plan benefits

• Social Security—federal pension program in which most nongovernmental employers and employees must participate

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• Special enrollment periods—times other than open enrollment periods when persons can enroll in group healthcare plan

• Subminimum wage—lower-than-minimum wages that the Fair Labor Standards Act (FLSA) allows employers to pay certain people

• Summary annual report—report provided to participants and beneficiaries by plan administrators to summarize the annual report filed with the government

• Summary of material modification (SMM)—document that explains the changes made to a benefit plan that a plan administrator must provide to participants

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• Summary plan description (SPD)—document that explains benefits, identifies the plan administrator, and describes the participants’ rights and responsibilities under the benefits plan

• Tax deferred—financial contribution to a retirement benefit plan that involves income before taxes that does not require the taxes be paid until money is withdrawn from the account

• Tip allocation—rules that require employers to allot tip income amounts to employees who reported tips of less than 8% of their individual sales

• Tipped employees—employees who regularly receive more than a certain amount of tip income each month

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• Tipped employees’ minimum wage—provision of the Fair Labor Standards Act (FLSA) that allows tipped employees to be paid a lower cash wage when their tips are enough to ensure they receive the basic minimum wage

• Traditional health insurance—same as a fee-for-service plan

• Unemployment insurance—benefit mandated by the Social Security Act that temporarily provides a reduced level of income to employees who lose their job involuntarily

• Uniformed Services Employment and Reemployment Rights Act (342 USERRA)—federal law that protects employees from workplace discrimination based on their obligation to, application for, or interest in military service

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• Vested—being fully entitled to a benefit

• Workers’ compensation—system controlled by state laws that provides financial compensation to employees or their survivors when an employee is injured at work, becomes sick because of the workplace environment, or dies as a result of a workplace situation

• Youth minimum wage—provision of the Fair Labor Standards Act (FLSA) that allows employees younger than 20 years of age to be paid a lower minimum wage during their first 90 consecutive days of employment

Documents

OH 12-1 Ensuring Employee Benefits and Compensation Human Resources Management and Supervision 2 OH 12-1 1