Lecture 2 Introduction to Employee Benefits

1
Lecture 2Introduction to Employee Benefits

• Why study employee benefits?
• Define employee benefits
• Show the significance of employee benefits
• Identify factors that have contributed to the
  growth of group insurance
• Describe job opportunities in the field

2
Why Study Employee Benefits?

• To assist you in making personal choices
  involving employee benefits
• To recognize the importance of employee benefits
  for companies
• To prepare for work in this specialty
• Pricing and developing
• Negotiating
• Implementing

3
Definition of Employee Benefits

• Narrow
• Employer provided benefits for
• Death
• Accident
• Sickness
• Retirement
• Unemployment

• Broadest
• All benefits and services, other than wages,
  provided to employees

4
Five Traditional Categories of Employee Benefits

• Legally required social insurance programs
• Social Security, Workers Compensation
• Payments for private insurance and retirement
  plans
• Medical, disability, life insurance
• Payments for time not worked
• Vacations, parental leave, sabbaticals
• Extra cash payments to employees
• Educational expenses, suggestion awards
• Cost of services to employees
• Subsidized cafeterias, adoption assistance,
  parking

5
Significance of Employee Benefits

• For 1995 the Average Cost per Employee
• was 14,659 (42.0 of Payroll)
• Selected Categories
• Medical 3668
• Holidays and Vacation 3564
• Legally Required Benefits 3109
• Retirement and Savings 2620
• Life insurance 140
• Source U.S. Chamber of Commerce Survey

6
Significance of Employee Benefits - continued

• Estimated total employer cost in 1995 1.5
  trillion or 41.8 of payroll
• Estimated value for 1929 3 of payroll
• Estimated value for 1965 21.5 of payroll
• In addition, employee payroll deductions equaled
  13.1 of payroll in 1995

7
Significance of Employee Benefits - continued

• Social insurance plans
• Social Security coverage almost universal
• Cost is 15.3 of payroll
• 90 of workers covered for unemployment
• 95 of workers covered for workers comp.
• Group life
• 4.7 trillion coverage in force
• 1 million contracts with 145 million certificates

8
Significance of Employee Benefits - continued

• Group disability income insurance
• Over 75 covered for short term disability
• About 25 covered for long term disability
• Group medical expense insurance
• Premiums for medical expense coverage exceed 14
  of GNP
• About 185 million people covered under group
  medical insurance
• Retirement plans
• Approximately 104 million people covered
• Assets of private pension plans exceed 3.6
  trillion

9
Factors Influencing the Growth of Employee
Benefits

• Industrialization
• Influence of organized labor
• Wage controls
• Cost advantages
• Tax advantages
• Inflation
• Legislation

10
Employment Opportunities in Employee Benefits

• Marketing
• Human resources
• Finance
• Insurance
• Accounting
• Communications
• Actuarial science
• Social science
• Medical