Employee Benefits

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Employee Benefits
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Lecture Outline

• Definition and Role of Benefits
• Benefits Required by Law
• Optional Benefits Programs

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Definition and Role of Benefits
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Discussion Question

• Would you rather work at a company that paid
  40,000 per year with excellent benefits or a
  company that paid 45,000 per year with terrible
  benefits?

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Quick Quiz

• By a show of hands, how many of you have heard of
  each of these and know what they entail?
• Social security
• Unemployment insurance
• Unpaid leave
• HMO and PPO
• Flexible spending account (FSA)
• Defined benefits plan
• Defined contribution plan

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Benefits as a Percentage of Total Compensation
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How the Typical Benefits Dollar is Spent
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Benefits Required by Law
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Social Security Act of 1935

• Key components
• Established a system providing old age,
  survivors, disability, and retirement benefits.
• Federal payroll tax on both the employer and the
  employee.
• Taxes
• 6.2 of the first 68,400 income for retirement
  and disability
• 1.45 of total income for hospital insurance
  (Medicare)
• Equal payroll tax contributions (7.65) from the
  employer and the employee

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Unemployment Insurance and Workers Compensation

• 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.
• Employers pay based on their experience rating
• Workers compensation
• Benefits provided to persons injured on the job.
• No-fault liability protects employers from
  lawsuits
• Employees are covered unless injury is
  self-inflicted or caused by a willful disregard
  of safety rules.

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Family Medical Leave Act (FMLA)

• Coverage
• Employers with 50 or more employees
• Employees who have worked at least 12 months and
  1,250 hours in the previous year.
• Requirements
• Employers must allow eligible employees to take
  up to a total of 12 weeks of unpaid leave in a
  12-month period 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.

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FMLA Specifics
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Quick Quiz

• Rauls wife, Elizabeth, just gave birth to a
  bouncing baby boy (yes, hes the father).
  According to the FMLA, he is eligible for which
  of the following?
• No time off because it only applies to women
• 12 weeks unpaid leave
• 12 weeks paid leave
• 12 weeks paid leave but does not have position
  guaranteed upon return.

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Discussion Question

• If so few benefits are legally mandated, why do
  employers provide so many additional types of
  benefits?

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Optional Benefits
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Optional Benefits
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Quick Quiz

• XYZ company has determined that they will have to
  reduce their benefits costs to stay competitive.
  Which of the following solutions is not a choice
  for XYZ?
• Eliminate health coverage
• Reduce the percentage of employees Social
  Security insurance they pay.
• Reduce their unemployment insurance costs by
  managing their workforce to avoid layoffs.
• Institute a safety program to minimize workers
  compensation costs.

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Paid Leave and Medical Insurance

• Paid leave
• Vacations, holidays, sick leave
• Medical insurance
• Health Maintenance Organization (HMO)
• Must receive health care from the HMOs health
  care professionals
• Preferred Provider Organization (PPO)
• Have a choice about which doctor to see
• Flexible Spending Account (FSA)
• An account where you can place a percentage of
  your salary to be used for medical expenses.

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Rising Costs of Health Care
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Discussion Question

• Do Americans generally get the same amount of
  paid leave as Europeans?
• Is it optional or legally mandated in Europe?

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Wellness Programs

• Wellness programs
• A set of communications, activities, and
  facilities designed to change health-related
  behaviors in ways to reduce health risks.
• Do organizations actually do this?
• A recent survey of 365 national companies by
  Deloitte Center for Health Solutions found that
  62 percent of companies had implemented wellness
  programs and another 33 percent said they were
  considering doing so.

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Types of Wellness Programs
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Discussion Question

• Would a company offering a wellness program
  (e.g., paid lunch if you work out at on-site gym)
  influence whether you decide to work for a
  company?
• Why do organizations have wellness programs?

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Life Insurance

• Life insurance
• If an employee dies during the time of the
  policy, the employees beneficiaries receive a
  payment called the death benefit which is
  usually twice the employees annual salary.

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Disability Insurance

• Disability insurance
• Pays a percentage of a disabled employees salary
  as benefits to the employee for six months or
  less (Short-term) or potentially for the rest of
  an employees life (Long-term).

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Retirement Plans Defined Benefits Plan

• Defined benefits plan
• Pension plan that guarantees a specific level of
  retirement income.
• If you made 100,000 per year then you may get
  25,000-35,000 per year when you retire.

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Retirement Plans Defined Contribution Plan

• Defined contributions plan
• Money purchase plan
• Organization specifies a level of annual
  contribution and that money is invested and the
  proceeds are given to the employee upon
  retirement
• Profit sharing
• Organization takes a percentage of profit and
  puts in retirement account for employees
• Employee stock ownership plans
• Organization distributes shares of stock and puts
  in retirement account for employees
• 401K/403B
• Employees contribute a percentage of their
  earnings, and employers may make matching
  contributions

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Quick Tip

• With the growth of defined-contribution plans,
  employees need to understand how to wisely invest
  their money to plan for retirement.

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Percentage of Employees Using Plans
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401K Matching
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Important Features Of A 401(k) Savings Plan
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Important Features Of A 401(k) Savings Plan
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Important Features Of A 401(k) Savings Plan
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Work-Life Benefits

• Family friendly benefits
• Family leave
• Child care
• College savings
• Elder care
• Flexible work week
• Telecommuting
• Tuition reimbursement

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Percentage of Companies Offering Work-Life
Benefits
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Discussion Question

• Of the many benefits discussed, which benefit
  would you rate most important?

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Most Important Benefits
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Take-Home Points

• Learn which benefits are legal and which are
  optional
• Understand why organizations offer so many
  benefits
• Think about which benefits are most important to
  you