Podcast Beta
Questions and Answers
What was the catalyst for the growth of employee benefits in the US?
What percentage of payroll costs did employee benefits account for in 1959 compared to today?
What are the three main objectives of the benefit determination process?
What is the most common method for determining external equity of employee benefits?
Signup and view all the answers
What is the impact of higher benefits on employee retention?
Signup and view all the answers
What percentage of workers are satisfied with their benefits according to the text?
Signup and view all the answers
What is the purpose of benefits committees in companies?
Signup and view all the answers
What are some examples of cost containment strategies for employee benefits?
Signup and view all the answers
What is the purpose of the two potential concession packages proposed by World Measurement to reduce employee benefits costs?
Signup and view all the answers
What is the approximate cost of employee benefits in the US today?
Signup and view all the answers
What was the catalyst for the growth of employee benefits?
Signup and view all the answers
What is the main objective of the benefit determination process?
Signup and view all the answers
What is the purpose of conducting a benefit survey?
Signup and view all the answers
What is a potential impact of higher benefits on employee retention?
Signup and view all the answers
What is the main challenge in evaluating employee benefits?
Signup and view all the answers
What is a prevalent cost-containment strategy for many companies?
Signup and view all the answers
What is the purpose of committees in benefits administration?
Signup and view all the answers
What is a potential benefit of using intranets for benefits communication?
Signup and view all the answers
Study Notes
The Growth and Value of Employee Benefits
-
Employee benefits cost around $4 trillion in the US today
-
In the past, benefits were very limited and mostly included longer working hours and fewer days off
-
Fortune magazine's "100 Best Companies to Work For in America" provide a mix of benefits including education reimbursement, on-site child care, financial counseling, and retirement benefits
-
Employees consistently rate benefits as a key factor in job satisfaction
-
However, the cost of benefits is much higher than employees estimate
-
Employee benefit costs have risen rapidly, from 25% of payroll costs in 1959 to over 40% today
-
The growth of employee benefits was catalyzed by wage and price controls during World War II and the Korean War, which led to a focus on new and improved benefits to satisfy worker demands
-
Unions fought for the introduction of new benefits and the improvement of existing benefits during and after the war years
-
Many benefits were provided at employer initiative to create a climate where employees perceived management was genuinely concerned for their welfare
-
Employee benefits are cost-effective because they are not taxable and many group-based benefits can be obtained at a lower rate
-
The government has played an important role in the growth of employee benefits by mandating workers’ compensation, unemployment insurance, and social security, and through various laws affecting benefits
-
Employers need to plan, design, and administer effective benefit programs, communicate their value to employees, and offer greater choice over benefits to improve their effectiveness.The Benefit Determination Process
-
The benefit determination process involves three main objectives: internal equity, external competitiveness, and cost-effectiveness
-
The planning process for benefits should include strategies for ensuring external competitiveness and adequacy of benefits
-
Four major administration issues arise in setting up a benefit package: who should be protected or benefited, how much choice should employees have among an array of benefits, how should benefits be financed, and are your benefits legally defensible
-
Companies differentiate treatment based on employment status, with fewer part-time workers being eligible for full-time benefits
-
Flexible benefit plans provide employees with more choice, allowing them to select the benefit options of greatest value to them
-
Consumer-driven health care provides employees with more awareness of the true costs of benefits and increases employee recognition of benefit value
-
Noncontributory, contributory, and employee-financed benefit plan options exist for financing benefits
-
Benefits have to comply with hundreds of arcane sections of the tax code and other “devils” designed to turn any benefit administrator’s hair gray
-
Benefit costs are only one part of a total compensation package, and decisions about outlays have to be considered from this perspective
-
Costs relative to benefits should be considered when determining desirable components of a benefit package
-
Employers should evaluate benefits offered by other firms and the competitiveness of the existing package when determining cost commitments for the existing benefit package
-
Benefits that top the list of employee preferences should be evaluated in relation to current and future costs, and if a benefit forecast suggests future cost containment may be difficult, the benefit should be offered to employees only on a cost-sharing basisThe Benefit Determination Process
-
Employers must determine the appropriate level of benefits for their employees based on the organization's financial resources and goals.
-
The cost of employee benefits is a significant investment for employers, and they must ensure that the benefits are cost-justified.
-
Benefits must be externally equitable, and employers must decide on the position they want to maintain in their absolute level of benefits relative to their competitors.
-
Employers may conduct a benefit survey to determine external equity, or they may purchase benefit data from consulting organizations, professional associations, and interest groups.
-
Employee benefits are designed to help with the retention of workers, and benefit schedules are specifically designed to favor longer-term employees.
-
There is some evidence to support the common assumption that benefits increase retention, and higher benefits have been found to reduce mobility.
-
Employee benefits may also be valued if they increase employee satisfaction, but today only 32% of workers are satisfied with their benefits.
-
Employee benefits may have an impact on the bottom line, and some benefits, such as employee stock ownership plans and employee assistance programs, have been shown to improve company productivity.
-
Employers must ensure that their benefit package complies with all aspects of the law, and legislation in the benefit area is complex.
-
Any evaluation of employee benefits must be placed in the context of total compensation costs, and decisions on whether to adopt certain options must be considered in light of the impact on total costs and in relationship to expenditures of competitors.
-
Employee preferences for various benefit options are determined by individual needs, and benefits perceived to best satisfy individual needs are the most highly desired.
-
Equity is an important factor in determining employee needs, and occasionally this comparison process leads to a “bandwagon” effect in which new benefits offered by a competitor are adopted without careful consideration.
-
Employers may use several methods to identify individual employee preferences, including demographic approaches, surveying individuals about needs, and flexible benefit plans.Employee Benefits Administration: Communication, Claims Processing, and Cost Containment
-
Benefits administration resolves problems from various departments such as MIS, finance, accounting, and legal.
-
Committees are formed to improve policies and processes in benefits strategy development and implementation.
-
Benefits satisfaction surveys are developed with input from benefits administrators and conclusions for final reports.
-
Benefits administrators attend conferences to network with other professionals and maintain knowledge of new studies and practices.
-
Effective communication of benefits requires clear objectives and matching the message with the appropriate medium.
-
Intranets are increasingly used for benefits communication, providing 24/7 access to information and ease of updating.
-
Claims processing involves determining if an employee is eligible for benefits and calculating payment levels while ensuring coordination of benefits.
-
Cost containment strategies include probationary periods, benefit limitations, co-pay, and administrative cost control.
-
Outsourcing benefits administration is a prevalent cost-containment strategy for many companies.
-
World Measurement, a product testing company, wants to reduce total compensation package costs by 3%.
-
Two potential concession packages are proposed to reduce employee benefits costs.
-
Cost calculations and employee preferences are considered in choosing the recommended concession package.
Studying That Suits You
Use AI to generate personalized quizzes and flashcards to suit your learning preferences.
Related Documents
Description
Test your knowledge on the growth and value of employee benefits with this informative quiz. Learn about the history of employee benefits, the benefit determination process, and benefits administration. Discover the importance of cost-effectiveness, external competitiveness, and compliance with the law when it comes to offering employee benefits. Find out about the impact of benefits on employee satisfaction, retention, and productivity. Test your understanding of communication, claims processing, and cost containment strategies used in benefits administration. Take this quiz and enhance your knowledge of employee
