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Chapter 12 Employee Benefits

Chapter 12

Employee Benefits

Benefits Planning

Effective Benefit Programs:

Benefits should accomplish the strategic purposes of attracting, motivating and retaining good employees in a competitive environment.

Employee involvement in selecting benefits leads to greater satisfaction.

Offering the Right Benefits

A diverse workforce creates demand for diverse benefit packages.

Domestic partner benefits have become one way employers accommodate diverse employee needs.

Family-friendly and flexible-workplace benefits .

•Social and recreational events

•Employee assistance programs

•Credit unions

•Housing

•Tuition reimbursement

•Paid jury duty time

•Uniforms

•Military pay

•Paid transportation and parking

•Free food

•Childcare services or referrals

•Pet health insurance

•On-site fitness centers

•Free massages

•Haircuts

•On-site health care

Communicating Benefits to Employees

Over 60 percent of employees are not aware of the content of their benefit packages.

Unused benefits waste money.

Communication is important: meetings, e-mails, social media, employee handbooks, newsletters, lunch and learn sessions, online benefits information.

Legally Required Benefits

Social Security:

Financed by equal employee and employer contributions, based on a percentage of earnings.

Provides income for retirees, disabled workers and surviving dependents .

Provides some health insurance coverage through Medicare .

Social Security Administration website. https://www.ssa.gov/

Unemployment Compensation:

Funded by employers who pay combined federal and state tax imposed on taxable wage base.

Tax varies based on organization’s unemployment experience: the more layoffs, the higher the rate.

Provides employees with some income continuation during periods of involuntary unemployment.

Typical coverage is for 26 weeks. May be extended beyond 26 weeks when unemployment is high.

Requirements for receiving unemployment benefits:

Involuntary loss of job (but not having been fired).

Must have worked a minimum number of weeks.

Have applied to a state agency for unemployment .

Have registered for available work.

Are willing to accept any suitable job offered through the state agency.

Paid for 12-30 weeks, most pay 26 weeks

Workers’ Compensation:

Paid for by the organization.

Rates based on likelihood of accidents, past history, and the type of industry.

Benefits pay expenses and/or compensate for losses resulting from work-related accidents or illness, regardless of fault.

Note:  Employers have a right and should investigate employee claims

Health Insurance Continuation:

The Consolidated Omnibus Budget Reconciliation Act (COBRA).

Provides for continuation of benefits for up to three years after an employee leaves a job.

Cost is paid by the employee.

HIPAA – The Health Insurance Portability and Accountability Act of 1996:

Portability

Requires employers and health providers to protect the confidentiality of employee health information .

U.S. Department of Health and Human Services. https://www.hhs.gov/hipaa/index.html

Patient Protection and Affordable Care Act:

Individual responsibility

Individuals must purchase minimum coverage or pay fine.

Health Insurance Exchanges

Created by states for individuals and small

Patient Protection and Affordable Care Act continued…

Employer responsibility

Penalties for employers with over 50 employees  who do not provide coverage

Employers with more than 200 employees must provide coverage

Penalties for coverage that is

Patient Protection and Affordable Care Act continued…

Insurance Industry responsibility

Ends restrictions on pre-existing coverage and lifetime limits

Must provide coverage for employee's children up to age 26

Details at www.healthcare.gov

Voluntary Benefits Health Insurance:

Increases in healthcare costs have made health insurance a critical benefit.

Healthcare costs are growing faster than wages.

Purpose is to protect employee from

HR often leads efforts to reduce cost of healthcare:

Raising deductibles or percentage of premiums that employees pay.

Providing wellness programs.

Financial incentives for participation in wellness programs.

Prescription drug mail-order with smaller co-pays or mandatory generic prescriptions.

Adding a smoker surcharge.

Access to online doctors.

Availability of Employee Assistance Programs.

Onsite clinics.

Health Maintenance Organizations (HMOs)

Alternative benefit required by Health Maintenance Act of 1973. 

Broad comprehensive care provided by physicians who are “in network”. 

Employee incurs small co pay. 

Preferred Provider Organizations (PPOs)

Employer or insurer agrees to use provider's network of doctors, hospitals and medical service facilities in exchange for reduced cost.

Primary Care Physician is selected. 

Point of Service Plans (POS)

Similar to HMOs and PPOs.

Requires employees to

High Deductable Health Plan (HDHP)

Employer provides a plan with low monthly premiums and high deductibles.

Less expensive for employer, but more expensive for employee.  

Consumer Driven Health Plans (CDHP)

Similar to HDHP, but more popular with employees because it includes a Health Savings Account (HSA). Usually includes:

HDHP

Health savings account with tax advantages

Decision support and counseling

Disability Insurance Programs:

Provide salary continuation for:

Short-term disabilities (sick leave)

Long-term disabilities  (coverage usually effective after 6 months)

Some companies provide financial incentives to employees to not use their sick leave.

Long-term disability plans usually replace a

Group Term Life Insurance: 

Benefit is usually based on employee’s annual rate of pay.

Supplemental insurance increases coverage to two to

Just a few popular voluntary benefits:

Travel Insurance

Dental and Vision Insurance

Tuition Reimbursement

Employee Assistance Programs

Wellness Programs

five-times the employee’s

Flexible Spending Accounts:

Employees can set aside a designated dollar amount before federal, state, and social security taxes for specified services such as:

Health-care premiums

Medical expenses

Dependent child or elder care

Group legal services

IRS rules to forfeit balance not spent at the end of the year have lossen a little bit

Retirement Benefits

Employee Retirement Income Security Act (ERISA) of 1974:

Requires summary plan description (SPD).

Vesting rights – right to pension benefits even if one leaves the company.

Enables pension rights to be portable.

Sets up pension benefit guaranty corporation. (PBGC)

Claims corporate assets to cover inadequately funded pension plans.

Defined Benefit Plans:

Plan specifies the dollar benefit workers receive at retirement.

Usually based on some formula of years of service and average final compensation.

More common in government and unionized industries.

Defined Contribution Plans:

Employee and employer may contribute to account based on rules established for contributions.

Amount of benefits depends on success of account investments.

Include:

Money Purchase Pension Plans 

Profit-Sharing Plans

Individual Retirement Accounts (IRAs)

401(k)s

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Leave Benefits

Paid Time Off:

Employees earn paid time off to use for any reason, including illness, vacation, personal time or holidays.

None is required in the U.S.

Many employers offer it in order to attract the best talent.

Benefits in a Global Environment

Benefits for international workforce should be customized to consider:

Strategy and Talent Management.

Factors unique to each country:

Customs

Culture

Competition for employees.

Government benefits offered or required.\

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