Human Resource ManagementLecture 19

MGT 350

Last LectureCosts of Providing Employee Benefits

Legally Required Benefits

Social Security

Unemployment Compensation

Workers’ Compensation

Traditional health insurance

Family and Medical Leave

Voluntary Benefits

Perks

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Topic

Employee Benefits

Retirement Benefits

Vesting rights – right to pension benefits even if one leaves the company.

Defined Benefit Plans

• Plan specifies the dollar benefit workers receive at retirement.

• Usually based on some formula of years of service and average final compensation

Retirement Benefits

Defined Contribution Plans:

• Employee and employer may contribute to account based on rules established for contributions

Retirement Benefits

Money Purchase Pension Plan

• Type of defined contribution plan

• Organization commits to depositing fixed amount of money or percentage of employee’s pay annually.

Retirement Benefits

Profit-Sharing Plans

• Variation of defined contribution plan.

• Company amount contributed depends on profit level in the organization.

• Contribution is optional, not required.

Retirement Benefits

Individual Retirement Accounts (IRAs)

• Currently designed for lower-income workers who don’t have pension programs at work

Paid Time Off

Vacation and Holiday Leave – Vacation time is usually related to the length

of time on the job. – Some companies also allow personal days

that can be used for any reason.

Paid Time OffDisability Insurance Programs• Provides salary continuation for:

– Short-term disabilities (sick leave) – Long-term disabilities (coverage usually effective

after 6 months). • Some companies provide financial incentives to

employees to not use their sick leave. • Long-term disability plans usually replace a

portion of the employee’s salary, often 60 percent.

Types of Pension Plans

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

Defined Contribution Plan

• Basis Upon Which the Employer Pays• Benefits Depends Upon Accumulation

Survivor Benefits

Group Term Life Insurance:

• Benefit is usually based on one to five times annual rate of pay.

Travel insurance:

• Life insurance for business travel-related deaths.

Survivor Benefits

The service side of benefits – social and recreational events– employee assistance programs– housing– tuition reimbursement– uniforms– company-paid transportation– parking

• Employers often can provide services at no cost or at a significant reduction from the usual cost.

An Integrative Perspective on Employee Benefits

• Flexible benefits programs allow employees to choose which benefits they want and help to keep costs down.

An Integrative Perspective on Employee Benefits

• Flexible spending accounts – employees can set aside a designated dollar amount

before taxes for specified services• health-care premiums• medical expenses• dependent child-care• group legal services

An Integrative Perspective on Employee Benefits

Modular plans:

• Employees choose a pre-designed package of benefits from several options.

Core-Plus Options Plans

• Employees given core coverage (e.g. medical, life, disability) with option to select other benefits.

Silver Handshake

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

Major Concerns

• Rising Costs• Controlling Costs• Legal Concern

Health Maintenance Organizations

• Federal Regulation• Changes in Pricing

– Advances in Medicine– Malpractice Insurance– Labor Costs– Over Utilization of Facilities– Elder Care– Transplants/AIDS/Other

Summary Vesting rights – right to pension benefits even if one leaves the company. Enables pension rights to be portable. Sets up Pension Benefit Guaranty Corporation (PBGC)

Defined Contribution Plans

Profit-Sharing Plans

Vacation and Holiday Leave

Disability Insurance Programs

Survivor BenefitsFlexible benefits

Modular plans

Core-Plus Options Plans