Snell Ch11 - Employee Benefits.pptx

Chapter 11: Employee Benefits Snell, Managing Human Resources, 19th Edition. © 2023 Cengage. All Rights Reserved. Many not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Learning Outcomes After...

Chapter 11: Employee Benefits Snell, Managing Human Resources, 19th Edition. © 2023 Cengage. All Rights Reserved. Many not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Learning Outcomes After studying this chapter, you should be able to 1. Detect cost-effective strategies companies use to develop benefits plans. 2. Identify and explain the employee benefits required by law. 3. Describe the types of work-life benefits that employers may provide. 4. Describe the different types of retirement programs and pension plans and the regulations related to them.  Elements of a Successful Benefits Program Some benefits are legally required, whereas others are voluntarily granted by employers. Benefits are expensive. Many forces must be kept in balance for a benefits program to succeed. A firm’s managers must consider how to fund its benefits program and sustain it, as well as the tax consequences related to it. The needs of a company’s employees also must be considered because they can differ significantly from firm to firm. Whether a firm’s industry is unionized and the benefits offered by competitors will affect the types of benefits the firm is likely to have to offer. The benefits need to be compatible with the organization’s strategic compensation plan, including its total reward strategy.  Selecting Benefits (slide 1 of 2) Before a new benefit is introduced, its need should first be determined through consultation with employees. Designing benefits programs with employee participation means employees are more satisfied with the final benefits plan and, ultimately, more likely to be satisfied with their jobs. Flexible Benefits To make it easier to accommodate the individual needs of different employees, a wide range of organizations have begun offering flexible benefits plans, also known as cafeteria plans. Flexible benefits plans (cafeteria plans) – Benefit plans that enable individual employees to choose the benefits that are best suited to their particular needs  Selecting Benefits (slide 2 of 2) Flexible Benefits (cont’d) Compensation specialists often see flexible benefits plans as ideal. Employees select the benefits of greatest value to them, while employers manage benefits costs by limiting the dollars employees have to spend. Typically, employees are offered a basic or core benefits package of life and health insurance, sick leave, and vacation. Requiring a core set of benefits ensures that employees have a minimum level of coverage to protect against unforeseen financial hardships. Employees are then given a certain amount of funds to purchase whatever other benefits they need through the plan. Other benefit options might include prepaid legal services, financial planning, dental insurance, and long-term care insurance.  Administering Benefits With the wide variety of benefits offered to employees today, administering an organization’s benefits program can be both costly and time-consuming. Online employee benefit systems have become mainstream for both large and small employers. Employees are provided with passwords that allow them to get information about their benefits plans, enroll in their plans of choice, change their coverage, or simply inquire about the status of their various benefit accounts without contacting an HR representative. Online benefits systems are often referred to as employee self-service (ESS) systems and can result in significant cost savings in benefits administration, improved accuracy of decisions, decreased processing time, and greater employee satisfaction.  Communicating Employee Benefits (slide 1 of 7) It is important to communicate employee benefits information. Some countries have implemented laws that make is easier to share information about employee benefits. The laws may require that employees be informed about their pension and certain other benefits in a manner calculated to be understood by the average employee. When communicating employee benefits, the best advice is to use multiple media techniques.  Communicating Employee Benefits (slide 2 of 7) Some general pointers for designing benefits information regardless of the medium include the following: Avoid complex language when describing benefits. Explain the purpose behind a benefit and the value it offers employees. Use graphics whenever possible to make the information understandable at a glance. Provide numerous examples to illustrate how a benefit choice might affect different types of employees, depending upon their personal circumstances. Cost Containment Strategies Many firms have either begun requiring employees to pay part of the cost of their benefits or, if they were already doing so, increasing the amounts they pay in the form of premiums, copays, and deductibles.  Communicating Employee Benefits (slide 3 of 7) Containing Medical Benefits Costs High-deductible health insurance plans (HDHPs) – A medical insurance plan characterized by high deductibles but lower premiums for workers and a health spending account to which employers contribute funds employees can keep should they leave the organization An advantage of a health spending account (HSA) is that the funds remaining in the account at the end of the year belong to the employee, even if he or she leaves the company. The downside is that with an HDHP, when employees receive treatment, they have to pay either a percentage of their care or all of it until they meet a high threshold called a deductible.  Communicating Employee Benefits (slide 4 of 7) Containing Medical Benefits Costs (cont’d) Health maintenance organizations (HMOs) – Organizations of physicians and health care professionals that provide a wide range of services to subscribers and dependents on a prepaid basis Employees pay a small fixed fee or a percentage, called a copay, whenever they get medical treatment. Employers pay a fixed annual fee to the HMO to cover the majority of their employees’ medical costs. Employees who sign up for the plan must choose a general-practice physician, called a primary-care physician, from the HMO’s list of doctors. To see a specialist, employees need a referral from their primary-care physicians and must pay a higher copay.  Communicating Employee Benefits (slide 5 of 7) Containing Medical Benefits Costs (cont’d) Preferred provider organization (PPO) – A network of physicians who establish an organization that guarantees lower health care costs to employers and their employees Unlike HMOs, PPOs allow employees to select their doctor of choice from a wider list of physicians. Employees do not need a referral to see a specialist. Employers sometimes couple PPOs and HMOs with different types of tax- advantaged accounts employees can use to pay their out-of-pocket healthcare expenses such as their copays, the cost of prescriptions drugs, and so forth. Health reimbursement accounts (HRAs) Flexible spending accounts (FSAs) Medical Tourism – medical treatment overseas that costs a percentage of what it costs at home.  Communicating Employee Benefits (slide 6 of 7) Value-Based Health Initiatives Companies pursuing value-based health initiatives look at the medical care their employees most use and need—such as treatment for asthma, high blood pressure, or diabetes—and target benefits and health programs toward them. Wellness Programs Wellness programs – Employer-sponsored programs designed to encourage employees to maintain and improve their health and well-being by getting regular checkups, eating properly, exercising, and managing their stress levels so as to prevent costly and protracted illnesses.  Communicating Employee Benefits (slide 7 of 7) Disease Management Programs Disease management programs – Programs that provide patients and their caregivers with information on monitoring and treating medical conditions, while coordinating communication between them, their health care providers, employers, and insurers Employee Assistance Programs Employee assistance programs (EAPs) – Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs. An EAP typically provides diagnosis, counseling, and referral for advice or treatment when necessary for problems related to alcohol or drug abuse, emotional difficulties, and financial or family difficulties.  Employee Benefits Required by Law Legally required employee benefits include (depends on the country): Employer contributions to social security / employee provident fund / retirement fund Unemployment insurance Workers’ compensation insurance Medical insurance  Social Security (slide 1 of 2) The Social Security was designed to protect workers against the loss of earnings resulting from old age and unemployment. Different countries have different structure (or name) of the Social Security program. It is supported by a variety of means e.g. a tax levied against an employee’s earnings that must be matched by the employer in each pay period, or a percentage contribution by the employer based on the staff’s earning. The revenues are used to pay many types of benefits, including: 1.Retirement benefits 2.Disability benefits 3.Survivors’ benefits  Social Security (slide 2 of 2) Retirement Benefits To qualify for retirement benefits, a person must have reached retirement age and be fully insured. An individual’s full retirement age depends on the year of his or her birth. Different countries have different retirement ages even within the same country. Malaysia – 60 Singapore – 65 Japan – 65 The Philippines – 65 Indonesia – 58 India – 60-65 Thailand – 60 Australia – 66 The amount of monthly social security retirement benefits is based on earnings, adjusted for inflation, over the years an individual is covered by social security.  Unemployment Insurance  Unemployment insurance protects workers who lose their jobs through no fault of their own.  Employers entirely foot the bill for this benefit via a payroll tax, which can vary widely by the state.  Employees who are laid off are generally eligible for up to a certain limit of weeks of unemployment insurance benefits during their unemployment.  Workers eligible for unemployment benefits must submit an application for unemployment compensation with their state employment agencies, register for available work, and be willing to accept any suitable employment that may be offered to them.  The amount of compensation workers are eligible to receive is determined by a worker’s previous wage rate and length of employment.  Workers’ Compensation Insurance  Workers’ compensation insurance – State-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness  Workers’ compensation law is governed by statutes in every state, which has different regulations governing the amount and duration of lost income benefits, including provisions for medical and rehabilitation services and how the state system is administered.  Workers’ compensation laws also provide death benefits to surviving spouses and dependents.  Workers’ compensation insurance covers workers injured on the job, whether injured on the workplace premises, elsewhere, or in an auto accident while on business, regardless of whether the employee is at fault.  Workers that collect compensation cannot sue their employers for their injuries unless gross negligence by the employer led to the injury or the employer lacked the level of insurance required by law.  Workers’ compensation also covers certain work-related illnesses.  Work-Life Discretionary Benefits Many organizations are seeking to create a work-life organizational climate that allows employees to balance their work with their personal needs. Research shows that 60 percent of employees prefer to have work-life balance benefits, and that employees are 20 percent more engaged in and satisfied with their job when they’ve hit the right work-life balance. Domestic Partner Benefits More employers are granting benefits to employees who establish domestic partnerships, which can consist of same-sex and unmarried opposite-sex couples.  Child and Elder Care  Elder care – Care provided to an elderly relative by an employee who remains actively at work  Beyond the loss of organizational productivity and higher employee costs, a growing concern of employers is the negative effects of caregiving on employee health.  To help employees meet the challenges of caregiving, organizations may offer elder care counseling, educational fairs and seminars, printed resource materials, support groups, and special flexible schedules and leaves of absence.  Backup care program – A benefit program whereby an employer supplies or subsidizes temporary care for its employee’s elders or children when their regular arrangements fall through  Payment for Time Not Worked The “payment for time not worked” category of benefits includes: Paid vacations Bonuses given in lieu of paid vacations Payments for holidays not worked Paid sick leave Maternity / Paternity leave Sabbaticals Severance Pay Military and jury duty Payments for absence due to a death in the family or other personal reasons The United States is the only country in which paid time off is not mandatory.  Life Insurance  Group term life insurance provides death benefits to beneficiaries and may also provide accidental death and dismemberment benefits.  The premium costs are normally paid by the employer, with the face value of the life insurance equal to two times the employee’s yearly wages.  These programs frequently allow employees to purchase additional amounts of insurance for nominal charges.  In addition, many companies allow employees to purchase life insurance for their spouses and dependents via their company plans.  This is an attractive benefit because the rates employees pay for the insurance are often lower when purchased through their company plans.  Pension Plans (slide 1 of 2) Types of Pension Plans There are two major ways to categorize pension plans: 1. According to contributions made by the employer Contributory plan – A pension plan in which contributions are made jointly by employees and employers Noncontributory plan – A pension plan in which contributions are made solely by the employer 2. According to the amount of pension benefits to be paid Defined benefit plan – A pension plan in which the amount an employee is to receive on retirement is specifically set forth Defined contribution plan – A pension plan that establishes the basis on which an employer will contribute to the pension fund  Pension Plans (slide 2 of 2) Types of Pension Plans (cont’d) Defined benefit plan: The amount employees collect is usually based on their years of service, average earnings during a specific period of time, and age at time of retirement. Defined contributions plan: The employer’s contributions may be made through profit sharing, thrift plans, matches of employee contributions, employer-sponsored individual retirement accounts (IRAs), and various other means. The amount of benefits employees receive on retirement is determined by the funds accumulated in their accounts and how well the investments purchased with the funds have grown over time. Additional Information – Malaysian Context Snell/Morris, Managing Human Resources, 19th Edition. © 2023 Cengage. All Rights Reserved. Many not be scanned, copied or duplicated, or posted to a publicly accessible website, in whole or in part.  Payment for Time Not Worked Vacations with Pay  Employees in Malaysia often get 8-16 paid days of vacation a year depending on number of years of service: 8 days per year for employees who have worked 1-2 years, 12 days per year for those who have worked 2-5 years, 16 days per year for employees who have worked longer than 5 years.  Most companies require their employees to take their vacation days by the end of the year or forfeit them.  Employee Provident Fund (EPF) / KWSP EPF is a federal statutory body under the purview of the Ministry of Finance. It manages the compulsory savings plan and retirement planning for private sector workers in Malaysia. Membership of the EPF is mandatory for Malaysian citizens employed in the private sector, and voluntary for non-Malaysian citizens. Usual contribution: Employees – 9% mandatory (can be as high as 11%) Employers – 13% mandatory (for monthly salary RM5000 or less) Employers – 12% mandatory (for monthly salary more than RM5000)