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Designing andDesigning andAdministering BenefitsAdministering Benefits

Chapter 12Chapter 12

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• Explain the significance of employee benefits to Explain the significance of employee benefits to both employers and employeesboth employers and employees

• Design a benefits package that supports the Design a benefits package that supports the firm’s overall compensation strategy and other firm’s overall compensation strategy and other HRM policiesHRM policies

• Distinguish between a defined benefit retirement Distinguish between a defined benefit retirement plan & a defined contribution retirement plan and plan & a defined contribution retirement plan and recognize the situations in which each is most recognize the situations in which each is most appropriateappropriate

• Discuss how traditional health insurance plans Discuss how traditional health insurance plans and managed-care health insurance plans work and managed-care health insurance plans work and the advantages and disadvantages of eachand the advantages and disadvantages of each

Chapter 12 OverviewChapter 12 Overview

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• Develop cost-containment strategies for the Develop cost-containment strategies for the different types of employee benefitsdifferent types of employee benefits

• Understand the administrative complexities of Understand the administrative complexities of providing a full array of benefits to the work force providing a full array of benefits to the work force and suggest ways to deliver benefits effectivelyand suggest ways to deliver benefits effectively

• Recognize the HR department’s key role in Recognize the HR department’s key role in keeping accurate records of employee benefits keeping accurate records of employee benefits and informing employees about their benefitsand informing employees about their benefits

Chapter 12 Overview Chapter 12 Overview (cont’d)(cont’d)

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• Benefits issues are important to employeesBenefits issues are important to employees

• Benefits are a powerful recruiting toolBenefits are a powerful recruiting tool

• Benefits help retain talented employeesBenefits help retain talented employees

• Certain benefits play a part in managerial Certain benefits play a part in managerial decisionsdecisions

• Benefits are important to managersBenefits are important to managers

The Managerial Perspective to The Managerial Perspective to BenefitsBenefits

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An Overview of BenefitsAn Overview of Benefits

• Employee benefits Employee benefits or indirect or indirect compensationcompensation – – Group membership Group membership rewards that provide rewards that provide security for security for employees and their employees and their family membersfamily members

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How the Benefits Dollar Is SpentHow the Benefits Dollar Is Spent

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Benefits – Basic TerminologyBenefits – Basic Terminology

• ContributionsContributions

• CoinsuranceCoinsurance

• CopaymentCopayment

• DeductibleDeductible

• Flex/cafeteria Flex/cafeteria benefits programbenefits program

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The Cost of Benefits in the U.S.The Cost of Benefits in the U.S.

• Federal tax Federal tax policypolicy

• Federal Federal legislationlegislation

• Union influenceUnion influence

• Cost saving of Cost saving of group plansgroup plans

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• Legally Required BenefitsLegally Required Benefits

• Health InsuranceHealth Insurance

• RetirementRetirement

• InsuranceInsurance

• Paid Time OffPaid Time Off

• Employee ServicesEmployee Services

Types of BenefitsTypes of Benefits

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The Benefits StrategyThe Benefits Strategy

• The Benefits MixThe Benefits Mix

• Benefits AmountBenefits Amount

• Flexibility of Flexibility of BenefitsBenefits

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Social SecuritySocial Security• Retirement IncomeRetirement Income

• Disability IncomeDisability Income

• MedicareMedicare

• Survivor BenefitsSurvivor Benefits

Legally Required BenefitsLegally Required Benefits

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Legally Required BenefitsLegally Required Benefits

• Workers’ Workers’ CompensationCompensation

• Unemployment Unemployment Insurance – SUBInsurance – SUB

• Unpaid Leave – Unpaid Leave – FMLA of 1993FMLA of 1993

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Health InsuranceHealth Insurance– COBRA of 1985COBRA of 1985

– HIPAAHIPAA

– Preexisting ConditionPreexisting Condition

Traditional Health InsuranceTraditional Health Insurance– PremiumPremium

Voluntary BenefitsVoluntary Benefits

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Health Spending in Various Health Spending in Various Countries 2003Countries 2003

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• Health Maintenance Organizations Health Maintenance Organizations (HMOs)(HMOs)

• Preferred Provider Organizations Preferred Provider Organizations (PPOs)(PPOs)

• Health Insurance Coverage of Health Insurance Coverage of Employees’ PartnersEmployees’ Partners

• Health-care Cost ContainmentHealth-care Cost Containment

Voluntary BenefitsVoluntary Benefits

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• Tips for obtaining your own health Tips for obtaining your own health insuranceinsurance

– Form your own small groupForm your own small group– Join an association that has group coverageJoin an association that has group coverage– Check out prices on the WebCheck out prices on the Web– Take advantage of COBRA provisionsTake advantage of COBRA provisions

Customer-Driven HRCustomer-Driven HR

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Retirement BenefitsRetirement Benefits

• ERISA – vestingERISA – vesting• Defined Benefits Defined Benefits

Plan – pensionsPlan – pensions• Defined Defined

Contribution PlansContribution Plans• 401k401k• IRAIRA• SEPSEP• Keogh PlanKeogh Plan• HybridHybrid

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Insurance PlansInsurance Plans

• Life InsuranceLife Insurance– Long-term disability Long-term disability

insuranceinsurance

• Paid Time OffPaid Time Off– Sick leaveSick leave– VacationsVacations– Severance paySeverance pay– Holiday and other Holiday and other

paid time offpaid time off

• Employee ServicesEmployee Services

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Flexible BenefitsFlexible Benefits• Types of flexible benefits plansTypes of flexible benefits plans

– ModularModular– Core-plus optionsCore-plus options– Flexible spending accountsFlexible spending accounts

• Challenges with flexible benefitsChallenges with flexible benefits– Adverse selectionAdverse selection– Employees who make poor choicesEmployees who make poor choices– Administrative complexityAdministrative complexity

Administering BenefitsAdministering Benefits

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Administering BenefitsAdministering Benefits

Benefits Benefits CommunicationCommunication

• Increasing complexity Increasing complexity of programsof programs

• Companies do not Companies do not devote resources to devote resources to explain programs to explain programs to employees employees

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• An Overview of BenefitsAn Overview of Benefits

• The Benefits StrategyThe Benefits Strategy

• Legally Required BenefitsLegally Required Benefits

• Voluntary BenefitsVoluntary Benefits

• Administering BenefitsAdministering Benefits

Summary and ConclusionsSummary and Conclusions