Chapter 14: Managing Employee Benefits

1. Chapter 14: Managing Employee Benefits • Introduction

2. Chapter 14: Managing Employee Benefits • Introduction (Contd.) • Healthcare costs can be managed or contained at the national level so that employers can provide and employees can enjoy better healthcare services at lower costs • One major thrust of a cost-effective healthcare system is to get rid of the “someone else is paying” mentality • Benefits • Indirect reward given to an employee or a group of employees for organizational membership • Legally Required Benefits • Retirement • Paid annual leave • Paid sick and hospitalization leave • Long-term hospital and related healthcare (Medisave)

3. Chapter 14: Managing Employee Benefits • Introduction (Contd.) • Benefits (Contd.) • Employer Voluntary Benefits • Additional sick and hospitalization leave • Employee savings plans • Outpatient and inpatient plans • Childcare assistance

4. Chapter 14: Managing Employee Benefits • Benefits and HR Strategy

5. Chapter 14: Managing Employee Benefits • Benefits and HR Strategy (Contd.) • Benefits may form a significant part of the total compensation • Factors Affecting Benefits Strategy • Workforce Composition • Organizational Life Cycle • Corporate Strategies • Strategic Considerations • Competitive advantage • Workforce Attraction and Retention • Benefits Management • Benefits Communications

6. Chapter 14: Managing Employee Benefits • Benefits and HR Strategy (Contd.) • Benefits as Competitive Advantage • Employees perceive benefits importantly—as part of an employer’s branding or as “employer of choice” • Employers may voluntarily want to be more socially responsible by offering benefits aimed at meeting social objectives • Global Benefits • In some countries, the government plays a major role in providing health, retirement, and other benefits • In others such as the U.S. and Singapore, employers play a major role in providing government-mandated and voluntary benefits

7. Chapter 14: Managing Employee Benefits • Benefits and HR Strategy (Contd.) • The Role of Benefits for Workforce Attraction and Retention • Generally not taxed as an employee’s income (e.g., medical reimbursements) • Employees in different stages of the life cycle are interested in different types of benefits

8. Chapter 14: Managing Employee Benefits • Benefits Management and Communication

9. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • Benefits Design • Key Decisions • How much total compensation including benefits to provide? • The proportion of total compensation to be in benefits form? • Which employees should be provided which benefits? • Size of each benefit? • Return on investment for each benefit? • How flexible should the benefits package be?

10. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • Benefits Design (Contd.) • Part-Time Employee Benefits • Most part-timers do not receive voluntary employer benefits and when they do, they receive an amount that is in proportion to the percentage received by their full-time counterparts • In Singapore, part-timers are covered by the Employment Act and they receive specific benefits (e.g., paid sick leave and paid annual leave) in proportion to their full-time counterparts

11. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • Benefits Design (Contd.) • Flexible Benefits • Flexible Benefits Plan • Program that allows employees to select the benefits they prefer from groups of benefits established by the employer • Can be administratively complex, time-consuming, and expensive • Growing in popularity due to the changing composition of the workforce • Adverse Selection • Situation in which only higher-risk employees select and use certain benefits

12. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • HR and Benefits Administration • HR specialists play a more significant role • Operating managers must help to communicate to employees

13. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • HR Technology and Benefits • Internet technology is increasingly used to facilitate benefits administration and selection/consumption/payment • Benefits Measurement • Both benefits expenditures and the costs and return on investment for each benefit should be measured

14. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • Benefits Cost Control • High costs lead to reductions/withdrawals and/or the use of a cost-sharing approach to benefits • Some employers try to reduce benefits costs by teaching employees to live a healthier way and changing prescription drug programs

15. Chapter 14: Managing Employee Benefits • Benefits Management and Communication (Contd.) • Benefits Communication • Employees are more satisfied with their benefits programs if they are knowledgeable about their benefits • Communication Channels • Videos • CDs • Electronic alerts • Newsletters • Employee meeting • Benefits Statements • Personal statement of benefits that translates benefits into dollar amounts for each employee so that the employee knows exactly how much his/her benefits are worth

16. Chapter 14: Managing Employee Benefits • Types of Benefits

17. Chapter 14: Managing Employee Benefits • Types of Benefits (Contd.) • Government-Mandated Benefits • Retirement savings under the Central Provident Fund Act • Compensation for work-related injuries/illnesses under the Work Injury Compensation Act • Skills training under the Skills Development Levy Act • Basic benefits under the Employment Act (including maternity benefits and (to a lesser extent) paternity benefits) • Enhanced maternity benefits and enhanced (to a lesser extent) paternity benefits under the Children Development and Co-Savings Act

18. Chapter 14: Managing Employee Benefits • Types of Benefits (Contd.)

19. Chapter 14: Managing Employee Benefits • Types of Benefits (Contd.) • Voluntary Benefits • Employers voluntarily provide a wide variety of other benefits subject to budgetary constraints and more and more employers are injecting a higher degree of flexibility into their benefits system to help employees maximize the values of the benefits

20. Chapter 14: Managing Employee Benefits • Security Benefits • Workers’ Compensation • Security benefits provided to persons injured on the job • Employees may be compensated with up to 2 months of fully-paid medical leave and thereafter on 2/3 pay for up to the rest of one year plus medical treatment costs • Permanent loss of work capacity is compensated based on a formula considering the worker’s pay level, age, and percentage of permanent incapacity • Loss of life in work-related mishap is also compensated based on a formula considering the worker’s age and pay level

21. Chapter 14: Managing Employee Benefits • Security Benefits • Unemployment Compensation • No unemployment insurance in Singapore • Skills upgrading is seen as the best way to help people secure a job • Severance Pay • Security benefit voluntarily offered by employers to individuals whose jobs are eliminated or who leave by mutual agreement with their employers • Unionized employees tend to enjoy a better severance package than their non-unionized counterparts

22. Chapter 14: Managing Employee Benefits • Healthcare Benefits

23. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Health Benefits Costs in Singapore • Healthcare costs are less of a burden to employers • Government’s Strategies • Subsidizes patient care at public hospitals (lower-class wards) and outpatient polyclinics • Central Provident Fund: The Medisave account can be used to pay for hospital expenses subject to some caps • MediShield insurance plans (or alternative plans as approved by the Government) to cover hospital bills • ElderShield to cover long-term severe disabilities • No 100%-paid-for coverage insurance products are allowed • Medifund to help the needy pay medical bills • Actively promote healthy lifestyle at the national level (e.g., via the Health Promotion Board)

24. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Healthcare Coverage for Employees • Insurance Model Used in the U.S. • Copayment • Employees pay part of the costs • Managed Care • Reduce costs via restrictions and market system alternatives • Preferred Provider Organization • A healthcare provider contract with employers to provide healthcare services to employees at a competitive rate • Health Maintenance Organization • Service for a fixed period on a prepaid basis • Mini-Medical Plans • Limited health benefits for employees

25. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Healthcare Coverage for Employees (Contd.) • Insurance Model Used in the U.S. (Contd.) • Consumer-Driven Health Plans

26. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Healthcare Coverage for Employees (Contd.) • Insurance Model Used in the U.S. (Contd.) • Consumer-Driven Health Plans (Contd.) • Defined contribution health plans • Employees make regular contributions to cover their own health related expenses • High deductibles are imposed which means the employee does not receive coverage below the deductible levels • Health Savings Accounts • Tax advantages • Health Reimbursement Agreement • Employers set aside monies to help employees pay for qualified medical expenses

27. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Tax Deduction for Medical Expenses

28. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Tax Deduction for Medical Expenses (Contd.) • Employers and employees jointly contribute a percentage of the employee’s monthly pay (both as pre-tax dollars) to the employee’s Central Provident Fund Account, of which a portion is credited into the employee’s Medisave sub-account; employees can use Medisave to pay for hospital expenses • Employers can pay up to an additional 2% of the employee’s pay (in pretax dollars) to help the employee buy Portable Medical Benefits Scheme (PMBS) or Transferable Medical Insurance Scheme (TMIS)

29. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Tax Deduction for Medical Expenses (Contd.) • Both schemes allow employees to enjoy medical coverage after leaving one employer and joining another • PMBS is bought under the employee’s personal name, so the employee is covered as long as he/she pays the premium • TMIS is employer-based, which means the employee is covered only if his/her employer is a participant of the scheme (for an employee who has left a participating employer, he/she is given an extension of up to 12 months so that he/she has time to—if he/she so prefers—look for another participating employer to work for in order to continue with the coverage)

30. Chapter 14: Managing Employee Benefits • Healthcare Benefits (Contd.) • Healthcare Preventive and Wellness Efforts • Training sessions and incentives for improving health habits • Employee Reactions to Cost-Control Efforts • Employees understand the importance of healthcare benefits and some would even forgo a pay raise to enjoy the same medical benefits • Healthcare Legislation • US laws extend medical coverage for some employees to include widowed or divorced spouses and dependent children of former or current employees as well as employees who quit voluntarily; employees have the right to switch their health insurance plans when they change employers • Singapore laws do not require such extensions and any such extensions are arranged on a private basis

31. Chapter 14: Managing Employee Benefits • Retirement Benefits • Populations in numerous countries are fast aging • Many countries outside Singapore use the taxation model to raise funds from the current working population to finance social security and medical payments to support the retired, disabled, surviving-spouse, and old-age population

32. Chapter 14: Managing Employee Benefits • Retirement Benefits (Contd.) • Numerous employer-sponsored pension funds (either contributory (employees and employers pay into it) or non-contributory (only employers pay into it) are in use in the U.S. • Defined-Benefit Pension Plans • An employee is promised a pension amount and the employer must make up the shortfall if it arises • Defined-Contribution Pension Plans • The employee makes an annual payment to his/her pension account • Cash Balance Plans • Accumulated funds from annual contributions made by the employer plus the interest credited • Individual Retirement Options • Employees put a portion of their pay into their tax-deferred account and then invest the money in approved investment instruments • Employers may match the contributions subject to some limits

33. Chapter 14: Managing Employee Benefits • Retirement Benefits (Contd.) • Central Provident Fund (CPF)

34. Chapter 14: Managing Employee Benefits • Retirement Benefits (Contd.) • Central Provident Fund (CPF) (Contd.) • A national defined contribution retirement plan for all wage earners • Multiple uses with some flexibility for individual members to decide how to invest their funds • This save-as-you-earn system is the mainstay in Singapore for retirement planning • Workfare Income Supplement (WIS) Scheme • Lower income employees are assisted with government supplements to their wages • This is preferred to setting an across-the-board minimum wage level

35. Chapter 14: Managing Employee Benefits • Retirement Benefits (Contd.) • Supplementary Retirement Scheme (SRS) • Employees can contribute pre-tax dollars subject to some limits to prepare for retirements • Monies can be invested in any approved instruments that comply with SRS requirements • CPF Monies as Matrimonial Assets • In divorce proceedings, a person’s CPF monies can be considered as part of the matrimonial assets and the court may order an employee to transfer part of it to the divorcing spouse

36. Chapter 14: Managing Employee Benefits • Legal Requirements for Retirement Benefits • In the U.S., laws are in place to ensure procedural and philosophical fairness in managing employees’ pension benefits/systems • In Singapore, the focus is on the outcome adequacy, practicality, and fairness for the average wage earner

37. Chapter 14: Managing Employee Benefits • Financial Benefits • Employers pay all or part of the premiums; employees still benefit even if the employers do not pay all because group policy rates are usually lower than individual policy rates

38. Chapter 14: Managing Employee Benefits • Financial Benefits (Contd.) • Insurance Benefits • Life Insurance • Typically 1-2 times of employees’ annual pay • Disability Insurance • Long-term or short-term disability • This type of insurance is on top of the compulsory workers’ compensation laws that may be in place to compensate workers for work-related injuries/illnesses • Long-Term Care Insurance • Voluntary • In Singapore, the national ElderShield program covers all people above 40 years unless the individual opts out • Legal Insurance • Addresses legal problems facing employees

39. Chapter 14: Managing Employee Benefits • Financial Benefits (Contd.) • Financial Services • Stock Purchase Plan • Plan in which the corporation provides matching funds equal to the amount invested by the employee for the purchase of stock in the company • Credit Union • Saving and lending services for employees • Thrift Plans and Savings Plans • Employers provide matching funds equal to the amount saved by employees subject to some limits • Purchase Discount • Discounts on goods and services purchased from the company

40. Chapter 14: Managing Employee Benefits • Financial Benefits (Contd.) • Financial Services (Contd.) • Relocation Assistance • Moving expenses and help • Employment assistance for spouse • Company car, company expense accounts, buying/selling houses • Educational Assistance • Employers pay part or all of the costs associated with formal education courses and degree programs • ROI of Tuition Aid • Employee retention • Internal promotions • Employee satisfaction

41. Chapter 14: Managing Employee Benefits • Family-Oriented Benefits

42. Chapter 14: Managing Employee Benefits • Family-Oriented Benefits (Contd.) • Increasing dual-career couples, single-parent households, and work demands all heighten the need for family-oriented and work-life balanced benefits • Employers can be very creative in providing work-life balanced benefits • The Employment Act and Children Development Co-Savings Act (CDCA) • Minimum paid annual leave: 7 days per year in first year of service; add 1 day per year for each subsequent year until it reaches 14 days per year • Paid maternity of 8 weeks per confinement for first two confinements (Employment Act)

43. Chapter 14: Managing Employee Benefits • Family-Oriented Benefits (Contd.) • The Employment Act and Children Development Co-Savings Act (CDCA) (Contd.) • Under CDCA • Add 8 weeks of government-paid maternity leave per confinement for the first two confinements • 16 weeks of government-paid maternity leave per confinement to cover the first 4 children • Government-paid parental leave (mother and father) to bring the total to 6 days per year if the employee has a child below 7 years of age

44. Chapter 14: Managing Employee Benefits • Family-Oriented Benefits (Contd.) • Family-Care Benefits • May cause resentment in single employees or married employees with no children because they don’t have families to get the privileges • Adoption Benefits • Usually days off and some financial assistance • Child-Care Assistance • Onsite childcare • After-school care • Children healthcare services/expenses • Discounts/subsidies for childcare service • Referral and arrangements for childcare services • Elder-Care Assistance • Usually neglected • Some employees’ performance (productivity, attendance, work output) is affected by their responsibilities to look after their senior relatives

45. Chapter 14: Managing Employee Benefits • Family-Oriented Benefits (Contd.) • Measuring the Effectiveness of Family Benefits • Recruiting costs • Training costs • Turnover costs • Lost productivity (absenteeism, work output) • Benefits for Domestic Partners • Gay and lesbian couples not recognized for benefits administration purposes in Singapore • In Western countries, these employees are fighting for recognition to enjoy employment benefits given to ordinary marriage couples

46. Chapter 14: Managing Employee Benefits • Time-Off and Other Benefits

47. Chapter 14: Managing Employee Benefits • Time-Off and Other Benefits (Contd.) • Holiday Pay • 11 paid public holidays per year in Singapore • Some countries have many more, as many as 20-30 days per year • Vacation Pay • In Singapore: Minimum 7-14 days per year depending on the years of service • Some employers buy back some paid annual leave from employees • Leaves of Absence • Ad hoc leaves of absence may be granted by employers for many reasons with or without pay

48. Chapter 14: Managing Employee Benefits • Time-Off and Other Benefits (Contd.) • Leaves of Absence (Contd.) • In-Camp Training • For male National Servicemen in Singapore (compulsory) • Funeral or Bereavement Leave • Family Leave • To look after children or aged/incapacitated parents • Sick Leave • For employees to recuperate • Well-Pay • Extra pay for not taking sick leave

49. Chapter 14: Managing Employee Benefits • Time-Off and Other Benefits (Contd.) • Paid-Time-Off Plans • Plans that combine all sick leave, vacation time, and holidays into a total number of hours or days that employees can take off with pay • Ease of administration • Reduce absenteeism • Retention • Increased employee understanding • Miscellaneous Benefits • Employees may have to pay for it but enjoy advantages like lower rates • Tennis • Bowling

50. Chapter 14: Managing Employee Benefits • Time-Off and Other Benefits (Contd.) • Miscellaneous Benefits (Contd.) • Picnics • Parties • Athletic teams • Lodges/chalets • Interest groups • Yoga