BenefitsBenefits

Why Offer Benefits?Why Offer Benefits?

Benefits are approx 40% of compensationBenefits are approx 40% of compensation

Costs have risen more than 20% since 1990Costs have risen more than 20% since 1990

Why Offer Benefits?Why Offer Benefits?

Requirements for a Sound Requirements for a Sound Benefits ProgramBenefits Program

Strategic Strategic Benefits Benefits PlanningPlanning

Allowing for Allowing for Employee Employee

InvolvementInvolvement

Benefits for a Benefits for a Diverse Diverse

WorkforceWorkforce

Providing Providing for for

FlexibilityFlexibility

Communicating Communicating Employee Benefits Employee Benefits

InformationInformation

The Chief Objectives of The Chief Objectives of Benefits ProgramsBenefits Programs

Improve employee work satisfactionImprove employee work satisfaction

Meet employee health and security Meet employee health and security requirementsrequirements

Attract and motivate employeesAttract and motivate employees

Reduce turnoverReduce turnover

Maintain a favorable competitive positionMaintain a favorable competitive position

Providing for FlexibilityProviding for Flexibility

Flexible Benefits Plans (Cafeteria Plans)Flexible Benefits Plans (Cafeteria Plans) Benefit plans that enable individual employees Benefit plans that enable individual employees

to choose the benefits that are best suited to to choose the benefits that are best suited to their particular needs.their particular needs.

A basic or core benefits package of life and health A basic or core benefits package of life and health insurance, sick leave, and vacation ensures that insurance, sick leave, and vacation ensures that employees have a minimum level of coverage.employees have a minimum level of coverage.

Employees use “credits” to “buy” whatever other Employees use “credits” to “buy” whatever other benefits they need.benefits they need.

Flexible Benefits Plans: Flexible Benefits Plans: Advantages and DisadvantagesAdvantages and Disadvantages

ADVANTAGES

•Employees select benefits to match their individual needs.

•Benefit selections adapt to a constantly changing (diversified) workforce.

•Employees gain greater understanding of the benefits offered to them and the costs incurred.

•Employers maximize the psychological value of their benefits program by paying only for highly desired benefits.

•Employers limit benefit costs by allowing employees to “buy” benefits only up to a maximum (defined) amount.

•Employers gain a competitive advantage in the recruiting and retention of employees.

DISADVANTAGES

•Poor employee benefits selection results in unwanted financial costs.

•There are certain added costs to establishing and maintaining the flexible plan.

•Employees may choose benefits of high use to them that increase employer premium costs.

Communicating Benefits Communicating Benefits InformationInformation

In-house publications (employee handbooks and In-house publications (employee handbooks and organizational newsletters)organizational newsletters)

Group meeting and training classesGroup meeting and training classes

Audiocassettes/videotapesAudiocassettes/videotapes

Bulletin boardsBulletin boards

Payroll inserts/pay stub messages Payroll inserts/pay stub messages

Specialty brochuresSpecialty brochures

Employee self-service systems (ESS)Employee self-service systems (ESS)

Crafting an Effective Benefits Communication Program

A Personalized Statement of Benefits Costs

Benefits IssuesBenefits Issues

Rising costs of providing benefits Rising costs of providing benefits

Benefits offered by other employersBenefits offered by other employers

Concerns of ManagementConcerns of Management

Union demands for additional benefitsUnion demands for additional benefits

Tax consequences of benefitsTax consequences of benefits

Concerns of ManagementConcerns of Management

The High Cost of Providing BenefitsThe High Cost of Providing Benefits According to a 2007 U.S. Chamber of Commerce study, the According to a 2007 U.S. Chamber of Commerce study, the

cost of employee benefits averaged 42.7 percent of payroll.cost of employee benefits averaged 42.7 percent of payroll. The average distribution of these benefits was $21,527 per The average distribution of these benefits was $21,527 per

employee per year.employee per year.

Shifting Benefit Costs to EmployeesShifting Benefit Costs to Employees Shared ResponsibilityShared Responsibility

Employers to require employees to pay part of the costs of certain Employers to require employees to pay part of the costs of certain benefits (e.g., copayments or higher deductibles), especially benefits (e.g., copayments or higher deductibles), especially medical coverage.medical coverage.

Employees are paying a larger part of their retirement programs Employees are paying a larger part of their retirement programs through contributory pension plans or 401(k) saving plans.through contributory pension plans or 401(k) saving plans.

Types of Employee BenefitsTypes of Employee BenefitsRequired By Law DiscretionaryDiscretionary

Health careHealth care

Unemployment InsuranceUnemployment Insurance

Workers’ CompensationWorkers’ Compensation

Payment for time not workedPayment for time not worked

SupplementalUnemployment Benefits

SupplementalUnemployment Benefits

Social SecuritySocial Security

Unpaid leave (FMLA)Unpaid leave (FMLA)

Life and LT care insuranceLife and LT care insurance

Retirements and pensionsRetirements and pensions

Social Security InsuranceSocial Security Insurance

Benefits paid are determined by an Benefits paid are determined by an individual’s life-time earningsindividual’s life-time earnings

Benefits paid are determined by an Benefits paid are determined by an individual’s life-time earningsindividual’s life-time earnings

Provides long-term disability benefitsProvides long-term disability benefitsProvides long-term disability benefitsProvides long-term disability benefits

Social Security Act (1935)A payroll tax on both employees and employers15.3% tax split between employer & employee

Social Security Act (1935)A payroll tax on both employees and employers15.3% tax split between employer & employee

Old Age and Survivors Insurance (OASI)Old Age and Survivors Insurance (OASI)Old Age and Survivors Insurance (OASI)Old Age and Survivors Insurance (OASI)

Must work 40 quarters in an occupation Must work 40 quarters in an occupation covered by Act to qualify for benefitscovered by Act to qualify for benefits

Must work 40 quarters in an occupation Must work 40 quarters in an occupation covered by Act to qualify for benefitscovered by Act to qualify for benefits

Unemployment InsuranceUnemployment Insurance

Federal payroll tax on employer and employeeFederal payroll tax on employer and employee Tax is refunded to states which individually Tax is refunded to states which individually

administer unemployment compensation administer unemployment compensation programs.programs.

Benefit weekly amounts vary from state to state.Benefit weekly amounts vary from state to state. Involuntarily unemployed workers are eligible for Involuntarily unemployed workers are eligible for

up to 26 weeks of unemployment benefits.up to 26 weeks of unemployment benefits. Benefit is based on an employee’s recent earnings.Benefit is based on an employee’s recent earnings. Unemployed workers are required to seek “suitable Unemployed workers are required to seek “suitable

employment.”employment.”

Workers’ Compensation Workers’ Compensation InsuranceInsurance

Federal- or state-mandated insuranceFederal- or state-mandated insurance Funded by an employer payroll taxFunded by an employer payroll tax Provided to workers to defray the loss of income and Provided to workers to defray the loss of income and

cost of treatment due to work-related injuries or cost of treatment due to work-related injuries or illness.illness.

Factors influencing the employer’s insurance rate:Factors influencing the employer’s insurance rate: The risk of injury or illness for an occupationThe risk of injury or illness for an occupation

Each state’s level of benefits for injuries sustained by Each state’s level of benefits for injuries sustained by employees varies.employees varies.

The company’s frequency and severity of employee injuries The company’s frequency and severity of employee injuries (the company’s experience rating).(the company’s experience rating).

Workers’ Compensation Workers’ Compensation InsuranceInsurance

Covers EmployersCovers EmployersCovers EmployersCovers Employers Covers EmployeesCovers EmployeesCovers EmployeesCovers Employees

Cost of injuryCost of injuryCost of injuryCost of injury

Negligent co-workersNegligent co-workersNegligent co-workersNegligent co-workers

Contributory negligenceContributory negligenceContributory negligenceContributory negligence

Temporary, Permanent,Temporary, Permanent,Partial or Total DisabilityPartial or Total DisabilityTemporary, Permanent,Temporary, Permanent,Partial or Total DisabilityPartial or Total Disability

Assumed employment riskAssumed employment riskAssumed employment riskAssumed employment risk

Survivor’s InsuranceSurvivor’s InsuranceSurvivor’s InsuranceSurvivor’s Insurance

Injury is a cost of doing businessInjury is a cost of doing businessInjury is a cost of doing businessInjury is a cost of doing business

Workers’ Compensation – Disability benefits paid for workplace accidentsWorkers’ Compensation – Disability benefits paid for workplace accidents

Worker’s CompensationWorker’s Compensation

Claims and premiums steadily rising Employers “fighting back” Role of HR:

o Stress safe work procedureso Audit workers’ compensation claimso Coordinate workers’ comp and health

insurance benefitso Encourage those partially disabled to return

under a modified duty plan

Extension and Portability of Extension and Portability of Health CoverageHealth Coverage

The Consolidated Omnibus Budget Reconciliation Act of The Consolidated Omnibus Budget Reconciliation Act of 1986 (COBRA)1986 (COBRA)

Mandates that employers make health coverage—at the same Mandates that employers make health coverage—at the same rate the employer would pay—available to employees, their rate the employer would pay—available to employees, their spouses, and their dependents on termination of employment, spouses, and their dependents on termination of employment, death, or divorce.death, or divorce.

The coverage must be offered for between 18 and 36 months The coverage must be offered for between 18 and 36 months depending on qualifying guidelines.depending on qualifying guidelines.

Health Insurance Portability and Accountability Act (HIPAA) Health Insurance Portability and Accountability Act (HIPAA) of 1996of 1996

Grants employees the right to switch medical insurance between Grants employees the right to switch medical insurance between former and present employers with no gap in coverage regardless former and present employers with no gap in coverage regardless of preexisting health condition once the employees have earned of preexisting health condition once the employees have earned twelve service credits at the former employeetwelve service credits at the former employee

The Family and Medical The Family and Medical Leave Act (FMLA) Leave Act (FMLA)

Provisions:Provisions: An employer must grant an eligible employee up to An employer must grant an eligible employee up to

12 workweeks of unpaid leave in a 12-month period 12 workweeks of unpaid leave in a 12-month period for the following reasons:for the following reasons:

Birth of and care for a newborn child. Birth of and care for a newborn child. Adoption or foster care placement of a child. Adoption or foster care placement of a child. Care for an immediate family member Care for an immediate family member Serious health condition of the employee.Serious health condition of the employee.

Employees retain their health benefits and have the Employees retain their health benefits and have the right to return to their job or an “equivalent job.”right to return to their job or an “equivalent job.”

Those caring for service members are entitled to up Those caring for service members are entitled to up to 26 weeks of leave,to 26 weeks of leave,

The Older Workers Benefit The Older Workers Benefit Protection ActProtection Act

Older Workers Benefit Protection Act (OWBPA)Older Workers Benefit Protection Act (OWBPA) Prohibits age-based discrimination in early Prohibits age-based discrimination in early

retirement and other benefit plans by imposing retirement and other benefit plans by imposing strict guidelines on employers who seek to have strict guidelines on employers who seek to have employees sign release forms waiving their right to employees sign release forms waiving their right to pursue age discrimination claims under the ADEA.pursue age discrimination claims under the ADEA.

The waiver must be voluntary and written in a manner The waiver must be voluntary and written in a manner that is understandable to the parties involved.that is understandable to the parties involved.

Employees have the right to consult with an attorney Employees have the right to consult with an attorney before signing the waiver.before signing the waiver.