EMPLOYMENT
BENEFITS

Employee Benefit Programs

Part of Total CompensationSome Government MandatedSome Incentive RelatedPart of Cost of Doing BusinessIndirect Compensation4.unknown

Factors Contributing to
Growth of Benefit

Discourage UnionsBenefits not Always TaxedEasier to negotiate Than WagesAttitude of General Public

Objectives of Benefit Programs

To Improve MoraleTo Meet Health and Safety NeedsTo Attract Good EmployeesTo Reduce TurnoverTo Reduce UnionismTo Maintain a Competitive PositionTo Enhance the Organization's Image

Basis for Employee Benefits

Organizational

Objectives

Human Resources

Objectives

Employee

Benefit Package

Government

Regulations

EMPLOYEES

Financial

Resources

Collective

Bargaining

Recruiting

Competition

Employee

Participation

Employee

Needs

Providing Individual Benefits

Communicating Benefits

Employee Benefits Required by Law

1.unknown

Types of Benefits

Time-off (vacation, sickness, holidays, etc.)Legal Social SecurityMedical PaymentsRetirementPaid Rest Periods (breaks)Life Insurance

Categories of Employee Benefits

BENEFITS REQUIRED BY LAWOld age and survivors insurance (OASI)Unemployment insuranceWorkers compensationLeaves without pay

Categories of Employee Benefits

PAYMENT FOR TIME NOT WORKEDHolidaysVacationsSick leaveSupplemental unemployment benefits (SUB)Jury duty, military service, and bereavement leaves

Categories of Employee Benefits

INSURANCEGroup life insuranceHealth care insuranceLegal insurance

Categories of Employee Benefits

RETIREMENT BENEFITSPension plansDeferred compensation plansPre-retirement counseling

Categories of Employee Benefits

EMPLOYEE SERVICESEmployee assistance programCounseling servicesEducational assistance plansChild careElder careFood servicesHealth servicesLegal servicesFinancial planningHousing and moving expensesTransportation pooling/parkingPurchasing assistanceCredit unionsSocial and recreational servicesAwards

Employee Benefit Costs

30-40% of the Annual WagesFastest Growing Part of Total Compensation

Typical Cost of Benefits

TYPES OF BENEFITSTOTAL PERCENTAGE, ALL COMPANIESPayments for vacations, sick leave, holidays, etc.12.0%Legally required payments10.0 %Medical and medically related benefit payments10.0 %Retirement and savings (employers share)7.0 %Paid rest periods, lunch periods, etc.3.0 %Miscellaneous benefits1.0%Life insurance.5%Total employee benefits as percent of payroll43.5%

Health Plan Costs Climb Higher Annually
Average Annual Health Plan Costs Per Employee

COST

YEAR

$4000

$1500

Flexible Benefits Plan
(Cafeteria Plans)

Benefit plan that enable individual employees to choose the benefits that are best suited to their particular needs.

Flexible Benefit Plans

Employees ChooseCafeteria PlansCost AttachedSome Government Requirements

Major Concerns

Rising CostsControlling CostsLegal Concern

Pension Plans:
Provide for Retirement Income

Federal Regulation - Not Total CoverageReward for Long Service OriginallyNow Based on Earnings Philosophy

Types of Pension Plans

Contributory (joint pay)Non-Contributory (employer pays)Classified by Amount of Benefits to be Paid

Noncontributory Plan

A pension plan where contributions are made solely by the employer.

Defined Benefit Plan

Amount is Specifically DefinedYears of Service RequiredAverage Earnings During Certain YearsAge at Retirement

Example: Average Annual Salary of Last 3-5 years x number of years of service

Defined Contribution Plan

Basis Upon Which the Employer PaysPaid to Thrift Plan, IRA, etc.Benefits Depends Upon Accumulation

Federal Regulation (ERISA)

Employee Retirement Income Security ActInformed About FactsBenefits DefinedComplex Law

Vesting

A guarantee or accrued benefits to participants at retirement age, regardless of their employment status at that time.

Vesting

Guarantee of BenefitsPaid at RetirementRegardless of Last EmploymentNon-revokable by EmployerVested After XX YearsComplex Rules (ERISA)

Vesting Provisions (General Plans)

General Provisions*

5-Year Vesting: An employee must receive nonforfeitable rights after five years of service to all accrued benefits derived from employer contributions.

3- to 7-Year Vesting: An employee must receive nonforfeitable rights after three years of service to 20 percent of accrued benefits derived from employer contributions. Nonforfeitable rights increase 20 percent each year until the employee is 100 percent vested in the employer-derived accrued benefits after 7 years of service.

Social Security Insurance

Guarantee of IncomeRetirement, Disability, UnemploymentTime LimitsComplex RulesDedicated Tax on Earnings

Pension Funds

Privately Managed$3 Trillion in AssetsInvested in Stocks and Bonds

Unemployment Insurance

Defined Period (26 weeks)Register for Work RequirementFunded by Payroll TaxAmount Based on WagesSupplemental Unemployment Benefits (Private)

Workers Compensation Insurance

Federal-or-state-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness.

Worker's Compensation

Work Related AccidentCompulsoryComplex LawBased on WagesPermanent or Partial Disability

Health Care Insurance

Partial Government FundedMostly Private Insurance

Why Are
Health Care Costs
Skyrocketing?

Federal RegulationChanges in PricingAdvances in MedicineMalpractice InsuranceLabor CostsOver Utilization of FacilitiesElder CareTransplants/AIDS/Other

Health Maintenance Organizations (HMOs)

Organizations of physicians and health care professional that provide a wide range of services to subscribers and dependents on a prepaid basis.

Cost Containment Vehicles

HMO (Health Maintenance Organization)Group of ProfessionalsServices for Fixed AmountsPPO (Preferred Provide Organization)Group of ProfessionalsGuarantees Cost Efficiency for GroupsEmployer Steers Employees to PPO

Retirement Planning Programs

Company Pension PlansSocial Security/MedicareHealth Care InsurancePersonal Financial PlanningLegal ConcernsInvestments/Tax PlanningVolunteerismPart-Time EmploymentHousing OptionsRelocation

Silver Handshake

An early-retirement incentive in the form of increased pension benefits for several years or a cash bonus.

Decisions Relating to Pensions

DECISIONSALTERNATIVESPhilosophyEarned vs rewardSource of fundsContributory vs non-contributoryAmount of benefitsDefined benefits vs defined contributionsCustody of pension fundsInsured vs trusteed plansInvestment problemsProtections against loss of fundsProtection against loss of purchasingWhere and where not to investTax consequences

Benefit Links

Hewitt Associates

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