Benefits

1
Benefits

• Importance of indirect compensation
• Factors which influence indirect compensation
• Major types of employee benefits
• Costs and containment of benefits
• Administrative issues

2
Benefits Goals

• Attract and retain good employees
• Help employees meet security needs
• Motivate employees
• Reduce operating costs
• Enhance corporate image

3
Benefit Planning

• Employee objectives Demographics, FMLA
• Organizational objectives Strategic Financial
• Union objectives
• Legal obligations ERISA
• Regulations Include employees over 21, working
  1000 hrs. /yr, funding and fiduciary liability
• PBGA

4
Cost Containment Strategies

• Raise deductibles and co-payments
• Managed care (HMO, PPO)
• Limit services
• Second opinion
• Cap on coverage
• Self-insurance

5
External Influences

• Wage controls
• Expansion of social security
• Union bargaining
• Federal tax policies
• Social legislation
• Inflation
• Competition

6
Internal Influences

• Employee wants Demographics and economic class
  of workers
• Management needs Containing costs
• Business objectives Strategic considerations

7
Major Categories of Benefits

• Pay for time not worked
• Security plans
• Health plans
• Employee services

8
Pay for Time not Worked

• Rest periods, lunch breaks, coffee breaks
• Sick leave
• Leave of absence, Family Leave - Mandated
• Holiday and vacations

9
Security Plans

• Retirement plans
• Unemployment insurance
• Severance pay
• Life insurance
• Disability pay

10
Retirement Plans

• Defined benefit Benefits vary by age and length
  of service according to a formula. Set amount
  received. Funded mostly by employer
• Defined contribution Each employee has an
  account to which personal and/or corporate
  contributions are made. Funded jointly

11
Defined Contribution Plans

• 401K
• ESOP
• Matched savings
• Simplified employment pension

12
Comparison of Plans

• Defined benefits
• 20 of new plans
• Must meet ERISA control
• Guaranteed level of income but may not be enough
  to maintain standard of living
• May be underfunded, but contributions are tax
  deductible to employer

• Defined contributions
• 80 of new plans
• No set funding requirement
• No set income, based on profitability of
  investments
• Value can go down
• Less costly for employer, but contributions go up
  with income

13
Social Security

• Mandated
• Cost is 7.65 of pay for employee and employer
  (including medicare)
• Currently on first 65,000 of pay for social
  security, no limit on medicare
• An income supplement not a pension plan
• Pay as you go puts future stress on system

14
Other Security Plans

• Unemployment insurance - Mandated
• Severance pay
• Life insurance
• Disability

15
Health benefits

• Hospitalization
• Physician services in hospital
• Major medical
• HMOs, PPOs
• Workmens compensation Mandated
• Prescription, eye glasses, dental plans
• Medical spending accounts
• Medical savings accounts

16
Employee Services

• Subsidized food (cafeterias)
• Subsidized child care
• Tuition aid
• Credit unions

17
Administration

• EEO issues
• Costing benefitsAnnual cost for all, Cost per
  employee, Percent of payroll, cents/hr.
• Cafeteria plans
• Communicating benefits
• Regulations Civil rights, Age discrimination,
  Fiduciary

18
Backwards Forwards

• Summing up Weve covered benefits from strategy
  to a menu of security and health benefits to
  issues in the administration of benefit programs.
  With benefits being a substantial part of the
  cost of labor, it is important for organizations
  to manage and communicate the programs well.
• Looking ahead Next time well consider employee
  motivational strategies available to management
  and human resources.