indirect financial compensation chapter 10 © 2011 cengage learning. all rights reserved. may not be...
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INDIRECT INDIRECT FINANCIAL FINANCIAL COMPENSATIONCOMPENSATIONCHAPTER 10CHAPTER 10
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 13–1
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 13–2
Employer-Provided Benefits
Absorb social costs for
health care and
retirement
Influence employee decisions
about employers
Are increasingly
seen as entitlements
Average over 40% of total payroll costs
Benefits and HR StrategyBenefits and HR Strategy• BenefitBenefit
An indirect reward given to an employee or group of An indirect reward given to an employee or group of employees for organizational membership.employees for organizational membership.
© 2011 Cengage Learning. All rights reserved. May not be scanned, copied or duplicated, or posted to a publicly accessible Web site, in whole or in part. 13–3
FIGURE 13–1 Employer Compensation and Benefits Costs per Hour
Source: U.S. Bureau of Labor Statistics, 2008.
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FIGURE 13–2 Strategic Benefits Considerations
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FIGURE 13–3 Benefits Management Components
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Benefits DesignBenefits Design• Decisions Affecting Benefit Design:Decisions Affecting Benefit Design:
How much total compensation, including benefits, How much total compensation, including benefits, can be provided?can be provided?
What part of total compensation of individuals should What part of total compensation of individuals should benefits comprise?benefits comprise?
Which employees should get which benefits?Which employees should get which benefits?
What expense levels are acceptable for each benefit?What expense levels are acceptable for each benefit?
What are we getting in return for the benefit?What are we getting in return for the benefit?
How flexible should the benefits package be?How flexible should the benefits package be?
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Flexible BenefitsFlexible Benefits• Flexible Benefits PlanFlexible Benefits Plan
A program that allows employees to select the A program that allows employees to select the benefits they prefer from groups of benefits benefits they prefer from groups of benefits established by the employer.established by the employer.
• The Challenge of Providing ChoicesThe Challenge of Providing Choices Inappropriate benefits packageInappropriate benefits package
Requiring selection of core benefitsRequiring selection of core benefits Adverse selectionAdverse selection
Situation in which only higher-risk employees Situation in which only higher-risk employees select and use certain benefitsselect and use certain benefits
Administrative time and plan complexityAdministrative time and plan complexity
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HR Technology and Benefits HR Technology and Benefits AdministrationAdministration
Benefits Administration Issues and Trends
Outsourcing of Benefits
Administration
Internet-Based Administration
Systems
Benefits Measurement
(Return vs. Costs)
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FIGURE 13–5 Common Benefits Metrics
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Benefits Cost ControlBenefits Cost Control
• Reducing or dropping benefits• Cost sharing with employees• Sponsoring wellness programs• Fostering employee health education• Direct purchase of benefits by
employees• Negotiating reduced-rate benefit
contracts• Consolidating of benefits packages
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FIGURE 13–6 How the Typical Benefits Dollar Is Spent
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FIGURE 13–7 Types of Benefits
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Health-Care BenefitsHealth-Care Benefits
Controlling Health-Care Benefits Costs
Co-Payments and
Employee Contribution
s
Managed Care(PPOs and HMOs,
Utilization Reviews)
Mini-MedicalPlans
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Consumer-Driven Health (CDH) PlansConsumer-Driven Health (CDH) Plans
Employee-Focused Health Benefits Plans
Defined-Contribution Health Plans
Health Savings Accounts(HSAs)
Health Reimbursement Arrangements
(HRA)
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Pension PlansPension Plans
Types of Pension Plans
Defined-Benefit Plan
Defined-Contribution
Plan
CashBalance Plan
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FIGURE 13–11 Worker Participation in Pension Plans
Source: U.S. Bureau of Labor Statistics, www.bls.gov
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Pension Plan ConceptsPension Plan Concepts
PensionPlan
Formats
ContributoryPlan
Non-Contributory
Plan
Portability of Pension Benefits
Vesting of Pension Rights
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Individual Retirement OptionsIndividual Retirement Options
Individual Retirement
Options
Individual Retirement Account (IRA)
401(k) and Roth IRA
403(b)
Keogh
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FIGURE 13–12 Common Types of Financial Benefits
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Time-Off and Other BenefitsTime-Off and Other Benefits
Holiday Pay
Vacation Pay
Leaves of Absence
Miscellaneous Benefits
Paid-Time-Off (PTO)
Plans
Time-Off and Other Benefits