Benefits and Services

1
Benefits and Services

• What Happened
• The imposition of wage ceilings during World War
  II
• Decline of paternalism
• Union pressure
• Tax law
• Public policy shifts of cost from government to
  the private sector

2
Benefits and Services

• Once upon a time "fringe benefits" were of
  marginal importance. In 1929 benefits were
  approximately 3 percent of wages and salaries.
• By 1991 benefits had risen to be 38.2 percent of
  wages and salaries.
• Between these two periods wages and salaries rose
  by a factor of 55 while benefits increased by a
  factor of 716.

3
Benefits And Services

• What Do Employers Expect?
• Improved productivity
• Increased job satisfaction
• Improved quality
• Reduction in turn-over and absenteeism
• Enhanced sense of security

4
Benefits and Services

• Benefits and services become complicated very
  quickly because of the number of available
  components, the variety of optional features
  within a component, and their legal and financial
  interactions.

5
Benefits and Services

• Employee Benefits
• Those compensation components made available to
  employees that provide
• Protection in case of health and accident-related
  problems, and
• Income at some future date or occasion.

6
Employee Services

• Compensation components that contribute to the
  welfare of the employee by filling some kind of
  demand.
• Total employee benefits as a percent of payroll
  39.2
• Legally required payments 8.9
• Retirement and savings 6.0

7
Employee Services

• Life and death insurance 0.5
• Medical benefits 10.4
• Paid rest periods 2.2
• Pay for time not worked 10.4
• Miscellaneous benefits 0.9

8
Benefits Planning And Design Criteria

• Minimum age and length of service.
• Employee contributions an vesting schedule for
  pension plan.
• Coinsurance, deductible, ceiling requirements,
  and dual coverage for medical insurance.
• Options to be included in the medical plan.
• What employees will be covered, and what about
  retirees and dependents.

9
Critical Issues In Benefit Planning

• Current and future role of government-mandated
  benefits.
• Employee demographics and employee preferences.
• Possible use of self-funding and third-party
  administrator.
• Employer ability to pay and employee
  contributions.
• Monitoring and auditing programs.

10
Benefits Communication

• Benefits became viewed as entitlement and
  employers were loosing the motivational value of
  their programs.
• The response was the development of sophisticated
  communication programs to inform employees of how
  much they were receiving through their benefits
  programs.

11
Basic Benefits Communication

• New employees receive oral and visual
  presentations of the benefit program, and an
• Annual benefit statement that provides a
  description of the employee's benefit account.

12
Basic Benefits Communication

• The employee has access to in-house benefit
  consultant services.
• Ad-hoc employee meetings to cover new benefits,
  changes, and critical issues.
• On-going communication of benefit info.

13
Employee Benefits

• Employee Benefits Can Be Classified As
• Disability Income Continuation
• Loss-of-Job Income Continuation
• Deferred Income
• Spouse or Family Income Continuation
• Health and Accident Protection
• Property and Liability Protection
• Perquisites

14
Disability Income

• Short-Term Disability
• L-T Disability
• Worker's Compensation
• Sick Leave
• Non-Occupational Disability
• Travel Accident Insurance
• Supplemental Disability Insurance

15
Disability Income

• Accidental Death And Dismemberment
• Retirement Plans
• T-P Disability
• Social Security

16
Loss-Of-Job Income

• Unemployment Insurance (Ui)
• Supplemental Unemployment Benefit Insurance (Sub)
• Guaranteed Annual Income (Gai)
• Guaranteed Income Stream (Gis)
• Severance Pay
• Job Contract

17
Deferred Income

• Social Security
• Qualified Retirement Plan
• Pension / Profit Sharing / Stock Bonus
• Simplified Employee Pension Plans (Sep)

18
Deferred Income

• Keogh Plans
• Supplemental Executive Retirement Plans
• Supplemental and Executive Group Life Insurance
  Plans

19
Spouse and Family IncomeProtection

• Life Insurance
• Retirement Plans
• Social Security
• Workers Comp
• Tax-Sheltered Annuity
• AD D
• Travel Accident Insurance
• Health Care Coverage

20
Health and Accident Protection

• Basic Medical, Hospital, and Surgical
• Major Medical
• Dental
• Visual
• Comprehensive Physical
• Hearing Aid

• In-House Medical Services
• HMO's
• PPO's
• Social Security (Medicare)
• Post-Retirement Medical
• Workers' Comp

21
Property and Liability Protection

• Group Auto / Home / Legal
• Group Umbrella Liability
• Employee Liability
• Fidelity Bond Insurance

22
Employee Services

• Pay For Time Not Worked
• Holidays / Vacations / Jury Duty / Sick Leave
• Election Official / Witness In Court
• Military Duty / Funeral Leave / Marriage Leave

23
Employee Services

• Illness In Family / Paternity Leave /
• Wellness Leave / Time Off To Vote / Give Blood
• Grievance And Contract Negotiations
• Lunch, Rest, And Wash-up Periods

24
Time Off From Work Without Pay

• The family and medical leave act passed in 1993
  granted up to 12 weeks of unpaid leave for a
  variety of purposes, including a worker's own
  illness or that of a spouse or a parent.

25
Income Equivalent Payments and Reimbursements

• Charitable Contributions
• Counseling (Legal, Financial, Psychiatric)
• Education Subsidies
• Child Adoption
• Child Care

• Elderly Care
• Parking
• Subsidized Food Service
• Travel Expenses
• Relocation Expense
• Emergency Loans
• Credit Union

26
Costing Benefits

• Costing is an essential prerequisite to any
  worthwhile benefits communication program.
• Four methods are available for costing benefits
  and services
• Annual cost of benefits and services for all
  employees.
• Cost per employee per year.
• Percentage of payroll
• Cents per hour

27
Flexible Compensation / Benefits(Cafeteria Plans)

• Originally the flexible compensation / benefits
  plan was designed to enable senior executives,
  top professionals, and managers to choose
  individually many of their benefits and services.

28
Flexible Compensation / Benefits(CafeteriaPlans)

• However, organizations are looking to the flex
  plans today as an opportunity to
• Contain the cost of benefits
• Satisfy employee preference
• Provide choice

29
Flexible Compensation / Benefits

• Flex plans are designed to accomplish four goals
  that are considered fundamental to the
  development of a successful program. It
  increases or improves
• Appreciation of the interest and desire of the
  employer to improve the quality of life of each
  employee.

30
Flexible Compensation / Benefits

• Loyalty and Motivation.
• Understanding of Value of Each Benefit.
• Understanding Of Value Of Total Program

31
Establishing A Flex Plan

• Three Major Groups Must Participate In the Design
  of a Flex Plan
• Senior Management for setting objectives and
  determining policy.

GOALS
32
Establishing A Flex Plan

• Compensation and human resource specialists for
  guiding the development of and assisting in the
  construction of a program that meets
  organizational objectives and demands of the
  employees.
• Employees for providing initial inputs about what
  should be included in a benefits program.

33
Employee Spending Accounts

• This is a tax-free reimbursement account designed
  to moderate or possibly reduce the rising cost of
  benefits for the employee while at the same time
  giving the employer greater control over the
  benefit expenditures.

34
Employee Spending Accounts

• Employee are allowed to convert a portion of
  taxable wages or salaries into nontaxable dollars
  to be used to pay for specific benefits.

35
Employee Spending Accounts

• While reducing their taxable income, they can use
  the funds to pay for
• Uncovered medical expenses.
• Premiums for health, life, and disability
  insurance.
• Dependent care assistance.
• Legal services.
• Personal financial planning.

36
Benefits in the 90's

• EAPs
• Adoption Expenses
• Child Care Assistance
• Paternity Leave
• Long-Term Care
• Flex Hours
• Work-At-Home