EMPLOYMENT BENEFITS

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EMPLOYMENTBENEFITS
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Employee Benefit Programs

• Part of Total Compensation
• Some Government Mandated
• Some Incentive Related
• Part of Cost of Doing Business
• Indirect Compensation

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Factors Contributing toGrowth of Benefit

• Discourage Unions
• Benefits not Always Taxed
• Easier to negotiate Than Wages
• Attitude of General Public

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Objectives of Benefit Programs

• To Improve Morale
• To Meet Health and Safety Needs
• To Attract Good Employees
• To Reduce Turnover
• To Reduce Unionism
• To Maintain a Competitive Position
• To Enhance the Organization's Image

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Basis for Employee Benefits
Organizational Objectives
Human Resources Objectives
Employee Benefit Package
Government Regulations
EMPLOYEES
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Employee Benefits Required by Law
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Types of Benefits

• Time-off (vacation, sickness, holidays, etc.)
• Legal Social Security
• Medical Payments
• Retirement
• Paid Rest Periods (breaks)
• Life Insurance

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Categories of Employee Benefits

• BENEFITS REQUIRED BY LAW
• Old age and survivors insurance (OASI)
• Unemployment insurance
• Workers compensation
• Leaves without pay

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Categories of Employee Benefits

• PAYMENT FOR TIME NOT WORKED
• Holidays
• Vacations
• Sick leave
• Supplemental unemployment benefits (SUB)
• Jury duty, military service, and bereavement
  leaves

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Categories of Employee Benefits

• INSURANCE
• Group life insurance
• Health care insurance
• Legal insurance

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Categories of Employee Benefits

• RETIREMENT BENEFITS
• Pension plans
• Deferred compensation plans
• Pre-retirement counseling

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Categories of Employee Benefits

• EMPLOYEE SERVICES
• Employee assistance program
• Counseling services
• Educational assistance plans
• Child care
• Elder care
• Food services
• Health services
• Legal services
• Financial planning
• Housing and moving expenses
• Transportation pooling/parking
• Purchasing assistance
• Credit unions
• Social and recreational services
• Awards

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Employee Benefit Costs

• 30-40 of the Annual Wages
• Fastest Growing Part of Total Compensation

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Typical Cost of Benefits
TYPES OF BENEFITS TOTAL PERCENTAGE, ALL COMPANIES
Payments for vacations, sick leave, holidays, etc. 12.0
Legally required payments 10.0
Medical and medically related benefit payments 10.0
Retirement and savings (employers share) 7.0
Paid rest periods, lunch periods, etc. 3.0
Miscellaneous benefits 1.0
Life insurance .5
Total employee benefits as percent of payroll 43.5
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Health Plan Costs Climb Higher AnnuallyAverage
Annual Health Plan Costs Per Employee
COST
YEAR
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Flexible Benefits Plan(Cafeteria Plans)

• Benefit plan that enable individual employees to
  choose the benefits that are best suited to their
  particular needs.

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Flexible Benefit Plans

• Employees Choose
• Cafeteria Plans
• Cost Attached
• Some Government Requirements

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Major Concerns

• Rising Costs
• Controlling Costs
• Legal Concern

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Pension Plans Provide for Retirement Income

• Federal Regulation - Not Total Coverage
• Reward for Long Service Originally
• Now Based on Earnings Philosophy

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Types of Pension Plans

• Contributory (joint pay)
• Non-Contributory (employer pays)
• Classified by Amount of Benefits to be Paid

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Noncontributory Plan

• A pension plan where contributions are made
  solely by the employer.

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Defined Benefit Plan

• Amount is Specifically Defined
• Years of Service Required
• Average Earnings During Certain Years
• Age at Retirement
• Example Average Annual Salary of Last 3-5 years
  x number of years of service

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Defined Contribution Plan

• Basis Upon Which the Employer Pays
• Paid to Thrift Plan, IRA, etc.
• Benefits Depends Upon Accumulation

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Federal Regulation (ERISA)

• Employee Retirement Income Security Act
• Informed About Facts
• Benefits Defined
• Complex Law

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Vesting

• A guarantee or accrued benefits to participants
  at retirement age, regardless of their employment
  status at that time.

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Vesting

• Guarantee of Benefits
• Paid at Retirement
• Regardless of Last Employment
• Non-revokable by Employer
• Vested After XX Years
• Complex Rules (ERISA)

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Vesting Provisions (General Plans)

• General Provisions
• 5-Year Vesting An employee must receive
  nonforfeitable rights after five years of service
  to all accrued benefits derived from employer
  contributions.
• 3- to 7-Year Vesting An employee must receive
  nonforfeitable rights after three years of
  service to 20 percent of accrued benefits derived
  from employer contributions. Nonforfeitable
  rights increase 20 percent each year until the
  employee is 100 percent vested in the
  employer-derived accrued benefits after 7 years
  of service.

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Social Security Insurance

• Guarantee of Income
• Retirement, Disability, Unemployment
• Time Limits
• Complex Rules
• Dedicated Tax on Earnings

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Pension Funds

• Privately Managed
• 3 Trillion in Assets
• Invested in Stocks and Bonds

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Unemployment Insurance

• Defined Period (26 weeks)
• Register for Work Requirement
• Funded by Payroll Tax
• Amount Based on Wages
• Supplemental Unemployment Benefits (Private)

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Workers Compensation Insurance

• Federal-or-state-mandated insurance provided to
  workers to defray the loss of income and cost of
  treatment due to work-related injuries or illness.

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Worker's Compensation

• Work Related Accident
• Compulsory
• Complex Law
• Based on Wages
• Permanent or Partial Disability

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Health Care Insurance

• Partial Government Funded
• Mostly Private Insurance

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Why AreHealth Care CostsSkyrocketing?

• Federal Regulation
• Changes in Pricing
• Advances in Medicine
• Malpractice Insurance
• Labor Costs
• Over Utilization of Facilities
• Elder Care
• Transplants/AIDS/Other

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Health Maintenance Organizations (HMOs)

• Organizations of physicians and health care
  professional that provide a wide range of
  services to subscribers and dependents on a
  prepaid basis.

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Cost Containment Vehicles

• HMO (Health Maintenance Organization)
• Group of Professionals
• Services for Fixed Amounts
• PPO (Preferred Provide Organization)
• Group of Professionals
• Guarantees Cost Efficiency for Groups
• Employer Steers Employees to PPO

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Retirement Planning Programs

• Company Pension Plans
• Social Security/Medicare
• Health Care Insurance
• Personal Financial Planning
• Legal Concerns
• Investments/Tax Planning
• Volunteerism
• Part-Time Employment
• Housing Options
• Relocation

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Silver Handshake

• An early-retirement incentive in the form of
  increased pension benefits for several years or a
  cash bonus.

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Decisions Relating to Pensions
DECISIONS ALTERNATIVES
Philosophy Earned vs reward
Source of funds Contributory vs non-contributory
Amount of benefits Defined benefits vs defined contributions
Custody of pension funds Insured vs trusteed plans
Investment problems Protections against loss of funds Protection against loss of purchasing Where and where not to invest Tax consequences
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Benefit Links

• Hewitt Associates
• UCbencom

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