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SECTION 4 Compensating Human Resources. Human Resource Management TENTH EDITON. Robert L. Mathis  John H. Jackson. Managing Employee Benefits. Chapter 14. PowerPoint Presentation by Charlie Cook. © 2003 Southwestern College Publishing. All rights reserved. Learning Objectives.

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human resource management tenth editon

SECTION 4CompensatingHuman Resources

Human ResourceManagementTENTH EDITON

Robert L. Mathis  John H. Jackson

Managing Employee Benefits

Chapter 14

PowerPoint Presentation by Charlie Cook

© 2003 Southwestern College Publishing. All rights reserved.

learning objectives
Learning Objectives

After you have read this chapter, you should be able to:

  • Define a benefit and identify two strategic reason why employers provide benefits.
  • Distinguish between mandated and voluntary benefits and list three examples of each.
  • Describe two security benefits.
  • List and define at least six pension-related terms.
  • Explain the importance of health-care cost management and identify some methods of achieving it.

© 2002 Southwestern College Publishing. All rights reserved.

learning objectives cont d
Learning Objectives (cont’d)
  • Discuss the growth of family-oriented and time-off benefits and their importance to many employees.
  • Summarize benefits communication and flexible benefits as considerations in benefits administration.

© 2002 Southwestern College Publishing. All rights reserved.

benefits
Benefits
  • Benefit
    • An indirect compensation given to an employee or group of employees as a part of organizational membership.
  • Strategic Perspectives on Benefits
    • Benefits absorb social costs for health care and retirement.
    • Benefits influence employee decisions about employers (e.g., recruitment and retirement).
    • Benefits are increasingly seen as entitlements.
    • Benefit costs are about 40% of total payroll costs.

© 2002 Southwestern College Publishing. All rights reserved.

how the benefit dollar is spent
How the Benefit Dollar Is Spent

Source: Based on information in Employee Benefits, 2000 edition (Washington, D.C.: U.S. Chamber of Commerce, 2000).

Figure 14–1

© 2002 Southwestern College Publishing. All rights reserved.

benefit needs analysis
Benefit Needs Analysis
  • Benefit Needs Analysis
    • A comprehensive look at all aspects of benefits.
      • How much total compensation?
      • What part of total compensation should benefits comprise?
      • What expense levels are acceptable for each benefit?
      • Which employees should get which benefits?
      • What are we getting in return for the benefit?
      • How will offering benefits affect turnover, recruiting, and retention of employees?
      • How flexible should the benefits package be?

© 2002 Southwestern College Publishing. All rights reserved.

types of benefits
Types of Benefits

Figure 14–2

© 2002 Southwestern College Publishing. All rights reserved.

security benefits
Security Benefits
  • Worker’s Compensation
    • Benefits provided to persons injured on the job.
  • Unemployment Compensation
    • A Federal/state payroll tax that funds state unemployment systems.
    • Involuntary unemployment and actively seeking work is required for persons to claim benefit.
  • Supplemental Unemployment Benefits (SUB)
    • A union-negotiated benefit provision that pays a supplemental amount to laid-off employees who are drawing unemployment compensation.

© 2002 Southwestern College Publishing. All rights reserved.

security benefits cont d
Security Benefits (cont’d)
  • Severance Pay
    • A security benefit voluntarily offered by employer to employees who lose their jobs.
    • Payments are determined by the employee’s level within the organization and years of employment.
    • Other benefits (e.g., outplacement and continued health insurance) may be offered in lieu of cash severance payments.

© 2002 Southwestern College Publishing. All rights reserved.

services during severance
Services During Severance

Source: Linda Jones, “Severance Policies in Place at Most Organizations,” Human Resource Executive, May 1, 2001, 28. Used with permission.

Figure 14–3

© 2002 Southwestern College Publishing. All rights reserved.

median age at retirement by gender
Median Age at Retirement by Gender

Source: U.S. Bureau of Labor Statistics. *Projected.

Figure 14–4

© 2002 Southwestern College Publishing. All rights reserved.

retirement security benefits
Retirement Security Benefits
  • Retirements and Age Discrimination
    • Age Discrimination in Employment Act (ADEA) prohibits mandatory retirement age provisions.
  • Social Security Act of 1935
    • Established a system providing old age, survivor’s, disability, and retirement benefits.
    • Federal payroll tax on both the employer and the employee.
    • Benefit payments are based on employee’s lifetime earnings.

© 2002 Southwestern College Publishing. All rights reserved.

pension plans
Pension Plans
  • Pension Plans
    • Retirement benefits established and funded by employers and employees.
  • Traditional Benefit Plans
    • Defined-benefit plans
      • Employees are promised a definite pension amount based on age and length of service.
    • Defined-contribution plans
      • Employer makes an annual payment to an employee’s account.
      • Benefit payout is determined by the financial performance of the employee’s retirement.

© 2002 Southwestern College Publishing. All rights reserved.

pension plans14
Pension Plans
  • Cash Balance Plans
    • A hybrid plan that defines retirement benefits in terms of a hypothetical account balance.
  • Employee Retirement Income Security Act (ERISA)
    • Regulates pension funds to assure their soundness.
    • Requires firms to offer retirement plans to all employees if offered to any employees.
    • Accrued benefits must be paid to departing employees.
    • Requires minimum funding for IRS approval and purchase of plan termination insurance.

© 2002 Southwestern College Publishing. All rights reserved.

pension terms and concepts
Pension Terms and Concepts
  • Contributory Plan
    • Both employer and employee pay money into the retirement fund.
  • Non-contributory Plan
    • All pension benefits funding is paid by the employer.
  • Vesting
    • The right of employees to receive benefits from their pension plans.
  • Portability
    • A pension plan feature that allows employees to move their benefits from one employer to another.

© 2002 Southwestern College Publishing. All rights reserved.

individual retirement
Individual Retirement

IndividualRetirementAccounts (IRAs)

401(k) and403 (b) Plans

Individual Retirement Options

KeoghPlans

© 2002 Southwestern College Publishing. All rights reserved.

401 k for small business
401(k) for Small Business

Source: Based on data in Virginia Munger Kahn, “Pension Plans for Everyone,” Business Week Small Biz, July 16, 2001, 22.

Figure 14–5

© 2002 Southwestern College Publishing. All rights reserved.

controlling health care benefits costs
Controlling Health-Care Benefits Costs
  • Co-Payment
    • Employees are required to pay a portion of the cost of both insurance premiums and medical care.
  • Defined Contribution Plans for Health Benefits
    • Employer provides a set amount that the employee may spend on health-care coverage benefits.

© 2002 Southwestern College Publishing. All rights reserved.

controlling health care costs cont d
Controlling Health-Care Costs (cont’d)
  • Managed Care
    • Approaches that monitor and reduce medical costs using restrictions and market system alternatives.
  • Preferred Provider Organization
    • A health-care provider that contract with an employer group to provide health-care services to employees at a competitive rate.
  • Health Maintenance Organization (HMO)
    • A managed care plan that provides services for a fixed period on a prepaid basis.

© 2002 Southwestern College Publishing. All rights reserved.

increases in health care benefits costs to employers
Increases in Health-Care Benefits Coststo Employers

Figure 14–6

Source: U.S. Bureau of Labor Statistics, U.S. Department of Labor, 2002.

© 2002 Southwestern College Publishing. All rights reserved.

health care legislation
Health-Care Legislation
  • COBRA Provisions
    • Former employees, their spouses, and eligible dependents are covered for 18 to 36 months
    • Up to 102% of group premium costs paid by the former employee.
  • HIPPA Provisions
    • Allows employees to switch their health insurance plan from one company to another, regardless of pre-existing health conditions.
    • Health plans must continue to cover sick employees.

© 2002 Southwestern College Publishing. All rights reserved.

u s population lacking health insurance
U.S. Population Lacking Health Insurance

Source: U.S. Census Bureau, 2002.

Figure 14–7

© 2002 Southwestern College Publishing. All rights reserved.

other benefits
Other Benefits

Credit Unions Purchase Discounts Stock Investment

Family-Care Benefits

Relocation Expenses

Benefits

Family-Oriented Benefits

Life, Disability, Legal Insurances

Social and Recreational

Educational Assistance

© 2002 Southwestern College Publishing. All rights reserved.

family medical leave act fmla
Family Medical Leave Act (FMLA)
  • Coverage
    • Employers with 50 or more employees
  • Requirements
    • Employers must allow eligible employees to take up to a total of 12 weeks of unpaid leave to attend to a family or serious medical condition.
    • Employees have the right to continued health benefits and the right to return to their job.

© 2002 Southwestern College Publishing. All rights reserved.

most common paid holidays in the u s
Most Common Paid Holidays in the U.S.

Figure 14–8

© 2002 Southwestern College Publishing. All rights reserved.

companies offering different types of paid time off
Companies Offering Different Types of Paid Time Off

Source: “Employee Benefits Survey Technical Note,” Compensation and Working Conditions (Washington, DC: U.S. Bureau of Labor Statistics), Fall 2000.

Figure 14–9

© 2002 Southwestern College Publishing. All rights reserved.

time off benefits
Holiday Pay

Eligibility

Vacation Pay

Leaves of Absence

Family Leave

Medical and Sick Leave

Paid Time-Off (PTO) Plans

Military Leave

Election Leave

Jury-duty Leave

Funeral Leave

Time-Off Benefits

© 2002 Southwestern College Publishing. All rights reserved.

benefits administration
Benefits Administration
  • Benefits Communication
    • Benefits Statements
      • Annual “personal statement of benefits” that translates the benefits into dollars to show their worth.
    • HRIS and Benefits Communication
      • HRIS information allows employees to obtain benefits information on-line.

© 2002 Southwestern College Publishing. All rights reserved.

typical division of hr responsibilities benefits administration
Typical Division of HR Responsibilities:Benefits Administration

Figure 14–10

© 2002 Southwestern College Publishing. All rights reserved.

flexible benefits
Flexible Benefits
  • Flexible Benefit Plan
    • A plan (flex or cafeteria) that allows employees to select the benefits they prefer from groups of benefits established by the employer.
  • Flexible Spending Accounts
    • An account that allows employees to contribute pre-tax dollars to buy additional benefits (e.g., life insurance).
  • Problems with Flexible Plans
    • Inappropriate benefits package choices
    • Adverse selection and use of specific benefits by higher-risk employees

© 2002 Southwestern College Publishing. All rights reserved.

pension and retirement functions on the internet
Pension and Retirement Functions on the Internet

Figure 14–11

© 2002 Southwestern College Publishing. All rights reserved.