hra 310 chapter 13
TRANSCRIPT
Chapter Thirteen
Benefits
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Chapter Outline
• The Role of Benefits in Reward Systems
• Types of Benefits• Issues in Indirect Compensation
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The Role of Benefits in Reward Systems
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Issues of the Cost of Benefits
• The Cost of benefits is increasing far more rapidly than the cost of wages
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Figure 13.1: Employment Cost Index
Source: Bureau or Labor Statistics, Employment Cost Index. (Available at: action=EC ectbrief)
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Table 13.1 Benefits in Relation to Total Compensation
Source: “Employer Costs for Employee Compensation,” Bureau of Labor Statistics, June 2004. (Available at: http://stats.bls.gov/news.release/archives/ecec_09152004.pdf)
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Mandatory Protection Programs
• Social Security• Unemployment Compensation• Workers’ Compensation
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Issues with Social Security
• 2/3rds of workers in the US pay more toward SS/Medicare than they pay in income tax
• Not funded on an actuarial basis
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Issues with Social Security (cont’d)
• Designed for a previous era before the issues of:– Longevity– Number of retirees– Retirement age– Ratio of workers to retirees
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Unemployment Compensation
• Temporary income for out-of-work employees
• Recipients must be looking for work• Income is at the rate of 50 to 80% of
normal pay• Managed by each state in accordance
with Federal guidelines
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Workers’ Compensation
• No fault disability insurance for workers injured or killed on the job
• Employers pay premiums based on worker injury experience
• Established in accordance with state laws so provisions vary
• Since involves medical treatment, can be expensive for employers
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Other Types of Benefits
• Compensation for Time Not Worked
– Holidays– Vacation– Sick Leave– Personal Days– Other Leaves
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Optional Benefit Programs
• Health Insurance• Life and Disability Insurance• Retirement/Pension Plans
– Defined Contribution– Defined Benefit– Capital Accumulation– Cash Balance
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Optional Benefit Programs (cont’d)
• Other Benefits– Wellness Programs– Educational Assistance– Child Care Assistance
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Health Care Issues
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Figure 13.3 Percent Change in Health Spending Compared to Other Indicators
Source: The Kaiser Family Foundation and Health Research and Educational Trust, Employer Health Benefits 2004 Annual Survey (Menlo Park, CA: Henry J. Kaiser Family Foundation, 2004).
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Methods of Coping with High Health Care Costs
– Health Plan Redesign• Deductible• Coinsurance• Coordinating Benefits
– Health Funding Alternatives• Preferred Provider Organization (PPO)• Health Maintenance Organization (HMO)
– Legal Requirements for Health Care– Health Benefits for Retirees– Health Benefits for Nonfamily Members
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Types of Pension Plans
• Defined Contribution– Benefits are a function of contributions plus
gains or losses• Defined Benefit
– Benefits based on a formula that includes length of service and average earnings
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Types of Benefit Plans (cont’d)
• Capital Accumulation Plans– 401(k) or thrift plans– Tax-deferred contributions
• Cash-Balance Plans– Combines the benefit formula of a define
contribution with the investment security of a defined benefit plan.
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Regulations Governing Retirement Plans
• ERISA—employment Retirement Income Security Act of 1974
• Single-Sex Pension Benefits• GATT Treaty (1994)
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Health Benefits for Nonfamily Members
• More than 145 (29%) of Fortune 500 companies now offer domestic-partner benefits, more than quadruple the number that offered them in 1997.
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Issues in Indirect Compensation
• Cost Containment• Flexible Benefit Option
– Flexible Benefit Package (Cafeteria-Style Benefit Plan)
• Communicating About Benefits• Work Family Issues
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Table 13.4 Most Popular Family Workplace Initiatives
Source: Adapted from Society for Human Resource Management, “2001 Benefits Survey,” April 2000. (Available at: http://www.shrm.org/surverys/results/default.asp?page=01benefits.asp)
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Review
• Strategic Importance of Variable Pay• Linking Pay to Performance• Individual Incentives• Group Incentives• Barriers to Pay-for-Performance Success• Summary: Making Variable Pay Successful• Executive Compensation• The Role of Benefits in Reward Systems• Types of Benefits• Issues in Indirect Compensation