Northern Arizona University
College of Business Administration

MGT 310--Human Resource Management

Ch 11: Employee Benefits

• A sound benefits program

  • Strategic benefits planning

    • Improve worker satisfaction

    • Meet health and security requirements

    • Attract and motivate employees

    • Reduce turnover

    • Maintain a favorable competitive position

    • Cost containment

  • Employee involvement

    • Committees

    • Surveys

    • Focus groups

  • Diverse workforce

    • Changing demographics--age, race, etc.

    • Lifestyle

    • Family-friendly--traditional & alternative structures

  • Flexibility

    • Flexible benefit plans/cafeteria plans--choices

      • Basic--health ins, life ins, sick leave, vacation

      • Other--legal services, financial planning, disability ins, long-term care

    • Advantages/disadvantages--fig 11.1, p 473

  • Communicating information

    • Employee Retirement Income Security Act (ERISA)--informed about pensions in ordinary language

    • Publications/brochures

    • Meetings/trainings

    • Audio/video CDs or online

    • Bulletin boards

    • Payroll inserts

    • Status reports--payroll stubs, online...

• Concerns of management

  • Cost--40+% (see HRM 3, p 477)

    • Fixed cost--co-payments, deductibles

    • Variable cost

  • Domestic partner benefits--unmarried and same-sex partners

    • Surveys

      • 27% same-sex partners, 34% opposite-sex partners

      • 40% Fortune 500 companies

      • 70% Fortune 50 companies

      • Competitive advantage in some industries

    • Definition--Apple Computer (p. 478)

      • Minimum age (18)

      • Live together

      • Financial interdependence

      • Permanent relationship (not just roommates)

      • Not a blood relative

    • "Affidavit of Domestic Partnership"

    • Costs

      • Low--1-2% of total benefits cost

      • Federal

        • Defense of Marriage Act--may not be treated as spouse for federal purposes, e.g., not eligible for Social Security survivor benefits and not tax deductible

• Required benefits

  • Social security--Retirement (old age insurance), disability, dependent support (survivors insurance)

    • Retirement

      • Based on earnings

      • Not intended to cover full cost of retirement

      • Increasing age for full-benefits

      • Concerns over financial viability

    • Disability--unable to engage in "substantial gainful work"

      • Minimum 6 months, expected 12+ months or death

      • After 24 months, Medicare benefit added

      • Dependent benefits

    • Survivor benefits

      • Based on employee's work credit (yrs/$)

    • Medicare

      • 65+

      • Medical and hospital insurance

      • Variable pay (age/credits)

  • Unemployment

    • Up to 26 weeks (with some extensions)

    • Must register for work and accept any suitable employment

    • Amount varies by state (can exceed federal minimum)

  • Workers' compensation--state or federal

    • Disability benefit for on-the-job injuries or illnesses

      • Total or partial

      • Permanent or temporary

      • Death benefit

    • Percentage of wages

    • Cost

      • Rates

        • Occupational risk factors

        • Level of benefits

        • Safety record

      • Reducing cost--see Fig. 11.2, p 481)

  • Consolidated Omnibus Budget Reconciliation Act (COBRA)

    • Required continuation of health insurance coverage at same rate paid by employee upon termination

  • Family and Medical Leave Act (FMLA)

    • 50 or more employees

    • Up to 12 weeks unpaid leave for:

      • Birth/adoption of child

      • Care of an immediate family member

      • Serious health condition of the employee

    • Continued medical coverage, benefits accrued

    • May use paid leave and vacation

    • Required notice

    • Restore to original job or "equivalent"

  • Older Worker Benefit Protection Act--prohibits age discrimination regarding early retirement or other benefits

• Discretionary benefits

  • Health care

    • Cost--aging population, technological advances, malpractice rates, labor costs, over-use of services

    • Cost containment

      • Reduce coverage

      • Increase deductibles and co-payments

      • Increased coordination of benefits (single reimbursements)

      • Health maintenance organizations (HMOs)--25+ employees, required option

        • Prevention & early intervention (not so much any more)

        • Quality vs. cost concerns (HMOs/insurers making health care decisions vs. health care providers)

      • Preferred provider organizations--network of doctors that guarantee lower rates

      • Consumer-driven health plans

        • Types

          • Defined-contribution health plans

          • Medical savings accounts (MSAs)--personal spending account

            • Tax deductible

            • Excess rolls over

          • Health savings accounts

          • Flexible spending accounts (FSAs)--similar but does not roll over

          • Health reimbursement accounts

        • Features

          • Tax free--employers, employees, both

          • Unused usually rolls over

          • Use for out-of-pocket expenses--deductibles, co-pay, other non-covered expenses

          • May be portable (see HIPAA)

    • Dental insurance plans

    • Disease management programs--information and coordination

    • Health Insurance Portability and Accountability Act (HIPPA)--right to switch to insurance of new employer regardless of pre-existing conditions (usually a waiting period)

  • Paid leave

    • Vacation--2+ weeks (seniority)

    • Holidays--6 common: New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving, Christmas; often 2-3 other or personal leave days [other religious holidays]

    • Sick--days per year, may or may not roll over or be capped

    • Severance pay--days, months ("golden parachutes")

    • Supplemental unemployment--may be offered by employer

    • Life insurance--may provide small amount and allow employee to purchase additional at a group rate

    • Long-term care insurance--nursing home and other during old age

    • Long-term disability insurance--much more likely than early death

  • Retirement

    • Trend toward early retirement (see Fig. 11.3, p. 490)

      • Sometimes used in downsizing or to cut costs (hiring at lower pay rates)

      • May provide additional incentives--"silver handshake" (cash, pension benefits...)

      • Upcoming labor shortage and concerns re social security as well as longer lives may change this trend

    • Pre-retirement programs

      • Help prepare employees for reality of retirement--disappointment, fixed income, health care costs, family issues, idleness...

      • Gradual retirement options

    • Pension Plans

      • Defined benefit plan--amount of retirement benefit is specified (less popular now)

      • Defined contribution plan--amount of contribution is specified

      • 401(k)--tax-deferred savings plan

        • Employer contributes 3% of pay for all who participate OR

        • Employer contributes 2% of pay for all workers

        • Payroll deductions matched by employer--50 cent/dollar common, but may double or cover full contribution

        • Cash payments or stock--no guarantees

        • Often allow investment options, including other stock

          • Managed accounts

          • Financial planning advice

      • Cash-balance pension plans

        • Employer contribution (e.g., 4%) to an employee savings account

        • May roll over to IRA if leave

      • ERISA--standards and controls on pension plans

        • Soundness of actuarial assumptions

        • Vesting--guarantee of accrued benefits, usually in stages (e.g., 3-5 years)

        • Portability is optional

        • Pension Benefit Guarantee Corp.--guarantee minimum benefit if pension fund is unable to pay (employers pay premiums)

          • Currently under funded due to large numbers of failures

      • Pension funds

        • Trust fund

        • Often purchase insurance annuities

          • Problems

            • Under funding for wage increases

            • Under funding for increasing life expectancies

            • Pension Benefit Guaranty Corporation is also now under funded

• Work/life benefits

  • Employee Assistance Programs--alcohol/drug abuse, emotional difficulties, financial or family problems ["presenteeism"--present but affected by other issues]

    • Training/referral services to providers (often covered by insurance)

  • Counseling

  • Child/elder care--day care, financial assistance, flexible work schedules, family leave; counseling, support groups, referrals

  • Food services

  • Onsite health services

  • Legal services

  • Financial planning

  • Housing/moving expenses

  • Transportation pooling

  • Purchasing assistance (discounts)

  • Credit unions

  • Recreational and social services

    • Sports programs

    • Social functions (picnics, parties)

      • Alcohol liability concerns

  • Wellness programs

  • Tuition assistance

  • Adoption assistance

  • Employee charitable-giving match

• VIDEO--Verizon