HR Chapter10

8/12/2019 HR Chapter10

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Chapter #10 Employee Benefits and Services

- Cans fringe benefits systems strikes balance btwn situation in U.S& that in Europe

- most employers make benefits an important part of the total

compensation pkg & use it increasingly as a tool to attract moti!ate & keep keypersonnel

- some cs tailor-make benefits pkgs for in"i! empls to satisfyspecial nee"s

- typical org spen"s consi"erable share of its # costs onbenefits$ser!ices to empls

- pay% direct compensation base" on critical 'ob factors orperformance

- benefits & services% indirect compensation b$c e(ten"e"con"ition of employment & not "irectly relate" to performance )inclu"es* insuranceincome security time off sche"uling benefits e"ucational$social$fin ser!ices+

- benefits % sig part cs compensation system almost , mark ofannual payroll e(penses

- benefits wont replace performance incenti!es as moti!ators buthealth & pension benefits can make a feat "iff in corporate loyalty

- benefits play- critical role in cs staffing strategy

Role of Indirect Compensation:- empl benefits$ser!ices seeks to satisfy "iff ob's*

1. societal obs to sol!e social probs & pro!i"e security for inter"epen"ent wageearners go!s rely on support of employers )empls can recei!e most benefits ta(-

free employers "e"uct cost of benefits as reg bi/ e(p+0 benefits coul" amount too!er most cs payroll costs in near future0 benefits gi!e empls fin securityagainst illness "isability retirement

2. or! obs lower empl turno!er )empls may stay to sa!e pension cre"its or theirrights to e(ten"e" !acations that typically come w$ greater seniority+0!acations$holi"ays$rest breaks helps empls re"uce fatigue & can enhancepro"ucti!ity "uring hours empls wking0 if benefits not a!ailable empls mightform a union & collecti!ely bargain w$ employer0 in"irect comp* re"uces fatigue"iscourages # unrest satisfies empl ob's ai"s recruitment re"uces turno!ermins o!ertime costs

3. empl obs empls usu seek c-pro!i"e" benefits b$c of lower costs & a!ailability

)insurance lower e!en if empl has to pay the entire premium b$c group planssa!e insurer a"min$selling costs of many in"i! policies insurer also re"ucesa"!erse selection of insuring 'ust those who nee" the insurance actuaries gi!esa!ings to policyhol"ers+0 lower income ta(es % employee ob' buying power ofc can negotiate a lower cost for the insurance policy0 when c pays for a benefitempl is partially protecte" from inflation )ie. 2-week !acation not re"uce" in!alue by inflation0 some empls ob' % get supplementary health & life insurance)b$c w$o c-pro!i"e" insurance cant get policies if empl has pre-e(isting me"con"ition+


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- 2 types of benefits & ser!ices* those that are legally re4uire" an"those that the employer !oluntarily gi!es

"e!ally Re$ired Benefits:- impose" on orgs by go!0 these benefits "esigne" to help empls

go! seeks to ensure min le!els of fin security for the nations wkforce )ob' ofpro!i"ing fin security % easer monetary bur"ens of retirement "eath #5 "isabilityunemployment+

- fin probs of in!oluntary unemployment lessene" by unemploymentcompensation0 'ob-relate" in'uries & "eath compensate" un"er workerscompensation laws

- no progs fully reimburses affecte" wkrs- )67 1-2 pg 93:+- legal re4uirements important to ;< "ept b$c top management hol"

;< "ept resp for meeting legal nee"s0 if improperly han"le" result can be se!erefines & more ta(es

%inancial Sec$rity:- large ma'ority Cans fin "epen"ent on monthly payche4ues small

pop self-employe"0 to protect well-being of society go! regs on retirement plansemployment insurance "isability compensation & health care % imperati!e0 in Canmany of these regs % pro! a"ministere" )to suit specific wk en!ironsstatues$pro!isions !ary pro! to pro!+

Canada ension lan 'C()=C> for =uebec+ a man"atory contributory & portablepension plan applicable to all empls & self-employe" people in Can. e(cept those wkngfor the fe"eral go!Contrib$tory lans benefits that re4uire the employer to contribute to the cost of the

benefit )both employer & empl pay part of costs+- C>> & =C> % contributory plansortability Cla$ses allow accumulate" pension rights to be transferre" to anotheremployer when an empl changes employers0 ie. pension rights not affecte" by changes of'ob$resi"ence plans also tie" to cost-of-li!ing changes- go!s cant limit benefits by "iscriminating against same-se(

common-law relationships b$c contrary to CC


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- Aorkers Compensation ?ct replace" by Aorkplace Safety &7nsurance ?ct0 a"ministration "one pro! pro! acts % of Bcollecti!e liability type)compensation payable to employers collecti!ely+ in"ustries co!ere" classifie" intogroups accor"ing to special ha/ar"s & employers in each group collecti!ely liable forpayment of compensation to all wkrs employe" in that group0 annual contribution rate

base" on cs total annual payroll figs )c can be charge" higher rate if many ACclaims+-ealth Ins$rance lans health & me"ical insurance pro!i"e" by pro!incialgo!ernments w$ assistance from the fe" go!0 e"ical Care ?ct inclu"es all of Can. )ma'part me" care pai" by ta(es collecte" at fe" le!el+- -olidays & vacations base" on empls length of ser!ice but

fe"$pro! laws specify 2week min !acation entitlement0 holi"ays fe" & pro!regulate"

.ol$ntary Benefits:7nsurance Denefits*

- risks share" by pooling fun"s in form of insurance premiums then when insure" risk occurs co!ere" empls or their families are compensate"

- "ife ins$rance 1stform of insurance offere" to wkrs by cs group life insurance % uni!ersal element in corporate empl benefit progs

- 2 types life insurance plans 1+ "ecease" family recei!es lumpsum payment 2+ family recei!e" lower lump sum than in 1+ plus a sur!i!ors pensionpayable to "ecease"s spouse for life sometimes supplemente" by family allowancebenefits ie. C>> AC )if "eath is in'ury relate"+ or auto insurance benefits )if "eath isauto relate"+0 employers gen pay cost of life insurance plans co!erage base" onempls pay ie. 1-2 of annual pay

- -ealth/related ins$rance all Can. citi/ens & lan"e" immigrants

co!ere" by pro! health-care progs thus employers offer supplementary healthinsurance plans only- group life & "isability insurance wi"ely pro!i"e" as empl benefit0

e(ten"e"$ma' me" insurance for empls who tra!el out of country many orgs gi!e"ental insurance )costs often share" btwn employer & empl+

Salary Continuation >lans*- if empl becomes "isable" for long time perio" Can cs offer S5

& #5 "isability plansShort/erm isability lan cre"iting a @ of "ays to be use" as sick lea!e )fornonoccupational acci"ents$illnesses+ cre"its may be cumulati!e )insure" cre"its earne""uring one year may be transferre" to the following year+$noncumulati!e )empls

entitlement is renewe" on a yearly basis or after each illness+"on!/erm isability lan benefit plan pro!i"ing the empl w$ an income in the caseof #5 illness or in'ury0 plans ha!e long waiting perio" )ie mos+ & pay empl smalleramt ),-+ reg pay payments ma"e until normal retirement age reache"

Employee Sec$rity Benefits:- noninsurance benefits seek to ensure an income before & after

retirementEmployment 7ncome Security*


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- Severance ay payment to a wkr upon permanent separationfrom a c usu e4uals 2 wks reg wages0 can be up to $12 mos compensation fore(ecs

- layoffs may be ease" by accrue" !acation pay- 2$aranteed ,nn$al )a!e '2,)( an employer assures empls

that they will recei!e a min annual income regar"less of layoffs of a lack of wk0 wkrsget min amt of wk or pay- S$pplemental 3nemployment Benefits 'S3B( pri!ate plans

pro!i"ing compensation for wage loss to lai"-off wkrs0 pai" form SUD fun"s assures co!ere" empls income almost e4ual to pre!ious earnings for as long as SUDfun"s remains sol!ent

ension >lanefined Benefits lan 'B( benefits "efine" by formula base" on age & length ofser!ice w$ employer assuming resp for fun"ing empl recei!es fi(e" "ollar amt pre"ictable outcomes thus like" by empls$unions plans reg" by >ension DenefitsStan"ar"s ?ct a"!ans* empls know retirement benefits in a"!ance c a"!an* promoteswkr loyalty & helps retain !aluable wkrsefined Contrib$tion lans 'C( base" on amts contribute" by employer & emplfinal pension "epen"ing on amts contribute" in!estment income an" ec con"itions atretirement )if only employer contributes calle" a non/contrib$tory plan+ ie. emplallows monthly$weekly "e"uctions from salary employer matches$ups amt to certainle!el after retirement F put into an annuity etc. that pays regular income to retiree- GC plan % greater benefits to empls )esp if starte" at younger age+

accumulations continue in account e!en if empls lea!e firm0 in GD plan benefitsfro/en if empl lea!es firm benefits lose !alue w$ inflation0 GC % more control o!erin!estment for in"i! empls b$c own retirement accounts in"i! & its portable

- 2 probs w$ pension plan a"min* 1+ some cs go out of bi/ lea!ingpension plan unfun"e" 2+ some cs min pension costs by ha!ing long !esting perio"s

.estin! a pro!ision in employer-pro!i"e" retirement plans that gi!es wkrs right to apension after specifie" @ of yrs of ser!ice e!en if they lea!e a c0 empl who is fire"$4uitsbefore !esting perio" has passe" has no pension rightsension Benefits Standards ,ct fe" act regulating pension plans in in"ustries un"er'uris"iction of o! of Can. ie. banks railways shipping cs ra"io$comm cs0 re4uirespension fun"s be hel" in trust for members & the fun"s not be hel" un"er the completecusto"y & control of either c or empls0 fun"ing must be carrie" out !ia one or more offollowing means*

- an insurance contract w$ a c authori/e" to con"uct life insurance bi/ in Can.0- a trust in Can whose trustees % trust c or group of in"i!s )at least 3 li!ing Can & 1

is in"epen"ent of c & empls+0- a corporate pension society0- an arrangement a"ministere" by o! of Can. or pro! go!

- 8 pro!inces ha!e own benefits acts


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aid ime/4ff Benefits:- time perio"s "uring which empl isnt wkng but is getting pai" are

result of time-off benefits0 inclu"e legal benefits )stat holi"ays !acay+ & !oluntarybenefits )wash-up time+0 these benefits often costliest ma' category of benefits

- on/the/ob/brea*s common form of time-off benefits foun" on

the 'ob ie. rest breaks meal breaks wash-up-time0 can increase pro"ucti!ity )butprob % empls stretch these breaks+

- paid sic* leave one of most buse" benefits many wkrs consi"ersick lea!e as e(tra "ays off if ;< policies prohibit cre"iting unuse" sick lea!e tofollowing yr absence increases near yr en" some cs re4uire me"ical !erificationsof illness$pay empls for unuse" sick "ays0 some cs offer Bpersonal lea!e "ays skipwk for any reason & get pai" allow empls to Bborrow e(tra "ays abo!e specifie" @when use up in"i! allocation

- holidays & vacays most cs grant holi"ays abo!e legallyre4uire" @ of "ays sub'ect to abuse policies that re4uire atten"ance the "ay before& after a holi"ay as con"ition of holi"ay pay lessen this prob0 some cs allow empls

to recei!e !acation pay as bonus instea" of take time off

Empl Services:- some cs pro!i"e e"$fin$social ser!ices for empls- ed$cational assistance ie. tuition refun" progs % common may

be limite" to 'ob-relate" courses or may ha!e no restrictions- financial services ol"est ser!ice % empl "iscount plans )common

among retail stores$cust goo"s manufacs+ allow wkrs to buy gs from c at "iscount0cre"it-unions )interest collecte" by cre"it union on loans$in!estments is "istribute" tomembers as "i!i"en"s in proportion to amt in in"i! empl accts+ lower interest rateon loans % higher interest on "eposits & payroll "e"uctions for sa!ings or loan

repayments are the ma' empl a"!ans0 stock purchase progs )enable empls to buy cstock !ia payroll "e"uctions empl outlays may be matche" by c contribs+

- social services from simple interest groups ie. softball teams tocomprehensi!e Employee and %amily ,ssistance ro!rams 'E%,()seek to helpempls & family members o!ercome personal & wk-relate" probs+0 empl ser!ices canlessen probs & offer potential "i!i"en"s in empl performance loyalty & re"uce"turno!er

- many ;< "epts. successfully implement alcohol$"rug rehab progs- womans absenteeism greater than menHs )mostly "ue to family

role as well+0 Ithe best benefit for working women may actually be as simple ascreating a wk en!iron & comm strat that con!eys the message that orgs recogni/e that

men ha!e personal & family commitments tooJ- Relocation ro!rams a c-sponsore" benefit that assists empls

who must mo!e in connection w$ their 'ob )support in F$ser!ice c pro!i"es totransferre" or new empls+ ie. payment for mo!ing e(penses0 transferre" empl maybe able to sell home to employer for appraise" !alue to a!oi" selling it on the mkt

- E6?>s tra"itionally in!ol!e" personal interaction w$7nternet$tech employers respon"ing to empls nee"s faster$effecti!ely$efficiently best !ia online service delivery)E6?> ser!ices a!ailable to empls !ia 7nternet &intranet+0 goal of online assistance progs not to replace counseling 'ust enhance it


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Emer!in! Services & rends:- types of benefits possibly in G o!er ne(t 1 yrs* increase" me"

co!erage )w$ "ental plans optometrists ser!ices more me" co!erage by employers+0more$longer !acations )re"uce" length-of-ser!ice re4uirements & more holi"ays+0

increase" pension co!erage greater contrib by empls0 cost-of-li!ing a"'ustments ofpension plans0 impro!e" portability of pension rights$earlier !esting0 sabbatical lea!esfor managers & pai" e" lea!e for rank-an"-file empls0 chil" care )partially$fullysubsi"i/e" by employer+0 el"er care0 pro! legislation granting benefits to same-se(couples0 granting of benefits to pt-time empls & retirees

- some cs offer nontra" benefits ie. free laun"ry back-up chil" care"og-walking ser!ices

- in future in"irect compensation will form a greater proportion oftotal compensation offere"0 it will be critical for top management to a"opt a totalcompensation approach when "ecisions ha!e to be ma"e relating to pay0 orgs cantaffor" to treat empl benefits & ser!ices in"epen"ent of "irect compensation b$c

theyre growing at twice the pace of wages & salaries0 management must consi"erchanges in # force a!g age will increase greater emphasis on pension as part ofbenefits pkg

5ana!ement of .ol$ntary Benefit & Service ro!s:- serious shortcoming of ;


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many cs use interactive voice response systems (IVRs)& web-base" technologiesfor a"min of fle(ible benefit plan making comm process more effecti!e

- implications for HR management retirement pans un"er constantlegal re!iew ta( reforms a""e" comple(ity health-care policies change" & e(psgone up0 tech a"!ans allowe" ;< people to be able to "e!elop own applications

- to fin" right approach for a"min of benefits plans nee"s analysis %essential first step shoul" "eal w$ , basic =s* 1+ what tasks performe" how often &how 4uicklyL 2+ who currently "oes these tasks cost now to perform themL 3+ whatalt ways of performing these tasks are possible$practicalL 9+ what will each alt cost toinstall & maintainL ,+ how long will it take to implement each option & can it e!erbe truly complete"L

- ob' of nee"s analysis % i"entify best a"min metho"s to meet#5&S5 nee"s of employer report shoul" result to be use" as reference by "ecision-makers

- Kral implications of fin security plans - firm must a"here to allpro!isions relating to min wage & pension "e"uctions ie. Can. # Stan"ar"s regs

re4uire each empls social insurance @ se( occupational classification be recor"e" &kept for inspection0 a!oi" "uplication by consi"ering empl C>> & other benefitswhen "esigning their firms own fringe benefit$ser!ice plans )some items inclu"e" inpri!ate plans alrea"y co!ere" un"er pro! wkrs comp & health insurance plans+0concerne" about re"ucing acci"ents in or"er to lower cost of AC

- can challenge un'ustifie" claims for employment compensationma"e against employers if successfully challenge" they may re"uce costs in thefuture

- to keep health costs un"er control employers shoul"* not ha!e aset empl-pai" "e"uctible but ask staff to pay 2 of any treatment stop out-of-country me" co!erage for personal tra!el )or set 3-"ay F-ma(+ monthly "entalcheckups not necessary pay only for generic "rugs when can )sa!e a!g on "rugplans+ ask empls to get larger amts of Bmaintenance "rugs ie. DC pills to sa!e on"ispensing fees

- Retention a cs ability to keep its empls0 inno!ati!e & fle(iblebenefit plans % effecti!e in attracting & retaining highly skille" staff benefitsbecome increasingly important as comp a"!an if cant negotiate aroun" total comppkg tips for "esigning a successful benefits plan* in!ol!e your empls "ontun"erestimate the amt of time re4uire" "ont rush spen" F on getting e(pertise

- Benefit ,$dit system to control the efficiency of a benefit prog rea"ily i"entifies inefficiencies 2 components* claims a$dit)e(amines claims &claim tren"s+ or!ani7ation a$dit)e(amines efficiency & effecti!eness of han"lingempl benefits w$in employers org inclu"ing "ealings w$ an insurer or 3r"party0 benefitau"it enables cs to* i"entify opps for fin & ;< sa!ings ensure insurers$3 r"partya"ministrators "oing goo" 'ob e(ert effecti!e control o!er benefits bu"get checkhow empl claiming habits compare against other Can. employers

- !oods & services ta6 application to benefits S5 applies tosome benefit s& not to others must be pai" on* company cars )if also use" forpri!ate purposes+ car operating costs ta( return preparation S5 resi"entialaccommo"ation holi"ay trips w$in continental M? fre4uent flyer points fincounseling parking0 "ont pay S5 on* awar"s health benefits stock options low-


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interest or no-interest loans tuition fees chil" care Christmas turkey gifts un"erF1

- benefits & strat implications take following steps* "efine ob'sof org link ob's of ;< "ept w$ org ob's assess empl nee"s asses legal re4uirementsto ensure laws followe" compare cs benefits w$ those of competition ensure

benefits !alue" by empls con"uct annual benefit au"it- ;< managers must integrate benefits into age & salary pkg pkgmust fulfill S5 goals )S5 % high moti!ation & pro"ucti!ity usu satisfie" w$merit pay & incenti!e systems that rewar" high performers+ )#5 retain goo" emplachie!e" by !alue" pension$profit-sharing plan

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