Noe_FHRM9e_PPT_Ch14_accessible.pptxSHRM.Ch14

Providing Employee Benefits - SHRM

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2. Chapter 14 Providing Employee Benefits freesoulproduction/Shutterstock © 2022 McGraw Hill. All rights reserved. Authorized only for instructor use in the classroom. No reproduction or further distribution permitted without the prior written consent of McGraw Hill.

3. What Do I Need to Know? 1 L O 14-1 Discuss the importance of benefits as a part of employee compensation. L O 14-2 Summarize the types of employee benefits required by law. L O 14-3 Describe the most common forms of paid leave. L O 14-4 Identify the kinds of insurance benefits offered by employers. L O 15-5 Define the types of retirement plans offered by employers.

4. What Do I Need to Know? 2 L O 14-6 Describe how organizations use other benefits to match employees’ wants and needs. L O 14-7 Explain how to choose the contents of an employee benefits package. L O 14-8 Summarize the regulations affecting how employers design and administer benefits programs. L O 14-9 Discuss the importance of effectively communicating the nature and value of benefits to employees.

5. The Role of Employee Benefits Employee Benefits Compensation to employees in forms other than cash. Help attract, retain, and motivate employees. Help employers tailor their compensation to the kinds of employees they need. Employees have come to expect that benefits will help them maintain economic security. Benefits impose significant costs. Certain benefits are required by law. Creative benefits packages make companies competitive.

6. Figure 14.1 Benefits as a Percentage of Total Compensation Access the text alternative for slide images. Source: Bureau of Labor Statistics, “Employer Costs for Employee Compensation,” http://data.bls.gov, accessed May 7, 2020.

7. Table 14.1 Benefits Required by Law Benefit Employer Requirement Social Security Flat payroll tax on employees and employers. Unemployment insurance Payroll tax on employers that depends on state requirements and experience rating. Workers’ compensation insurance Provide coverage according to state requirements; premiums depend on experience rating. Family and medical leave Up to 12 weeks of unpaid leave for childbirth, adoption, or serious illness. Health care For employers with at least 50 employees, payment of a fee to the federal government if the employer does not meet conditions for providing health insurance benefits.

8. Benefits Required by Law 1 Social Security Employers and employees share cost through payroll tax to provide benefits in the OASDHI program (Social Security): Old age (retirement) insurance. Unemployment insurance. Survivor’s insurance. Disability insurance. Hospital insurance (Medicare Part A). Medical insurance (Medicare Part B). Benefits depend on a person’s age and earnings history.

9. Benefits Required by Law 2 Unemployment Insurance Federally mandated program administered by states. Minimizes unemployment hardship. Provides payments to offset lost income. Helps unemployed workers find new jobs. Gives employers incentive to stabilize employment. Preserves investments in worker skills. Most funding comes from taxes on employers. Size of unemployment tax imposed on employer depends on the employer’s experience rating . H R planning can keep experience rating favorable.

10. Benefits Required by Law 3 To receive benefits, workers must meet four conditions: Can demonstrate they were employed. Be available for work. Actively seeking work. Were not discharged for cause, did not quit voluntarily, and are not out of work because of a labor dispute.

11. Benefits Required by Law 4 Workers’ Compensation State programs that provide benefits to workers who suffer work-related injuries/illness, or to their survivors. Operate under principle of no-fault liability: Employee does not need to show that employer was grossly negligent in order to receive compensation. Employer is protected from lawsuits. Generally two-thirds of workers’ earnings and tax free.

12. Benefits Required by Law 5 Four major categories of benefits: Disability income. Medical care. Death benefits. Rehabilitative benefits. Cost influenced by kind of occupation involved, state where company is located, employer’s experience rating.

13. Benefits Required by Law 6 Family and Medical Leave Act (F M L A) Organizations with 50 or more employees must provide up to 12 weeks of unpaid leave: After childbirth or adoption. To care for a seriously ill family member. For an employee’s own serious illness. Same/comparable job guaranteed upon employee’s return. Must comply with Pregnancy Discrimination Act.

14. Benefits Required by Law 7 Patient Protection and Affordable Care Act Employers are not required by law to provide health care. Those who choose not to must pay a penalty. Choice depends on number of full-time employees. Small businesses can buy insurance from SHOP. Law is complex and changing; H R professionals must continue to educate themselves on the requirements.

15. Figure 14.2 Percentage of Full-Time Workers with Access to Selected Benefit Programs Access the text alternative for slide images. Source: Bureau of Labor Statistics, “Employee Benefits in the United States, March 2019,” news release, September 19, 2019, https://www.bls.gov.

16. POLLING QUESTION 1 Which optional benefits program is most important to you? A. Paid leave B. Medical insurance C. Life insurance D. Disability insurance E. Retirement plans F. “Family-friendly” benefits G. Other benefits, such as tuition reimbursement and employee discounts

17. Optional Benefits Programs 1 Paid Leave Major categories: vacations, holidays, sick leave. Must also account for other situations like jury and military duty. Optional paid leave for things like voting or donating blood. There is N O legal requirement for paid leave in the U.S. Average paid leave in U.S. after five years: 15 vacation days and 10 paid holidays. Sick-leave days accumulate with length of service. Optional are personal days, floating holidays, and paid time off.

18. Paid Time Off Paid time off is a way for employees to enjoy time with their families and to refresh their bodies and spirits. Is paid time off an important factor for you when accepting a position? moorboard / SuperStock

19. Optional Benefits Programs 2 Group Insurance—Medical Insurance 70% of all full-time employees in U.S. receive medical benefits. Hospital expenses, dental/vision care, prescription drug programs, etc. Consolidated Omnibus Budget Reconciliation Act (C O B R A): Employers required to allow employees to extend health insurance coverage at group rates for up to 36 months after layoff, reduction in hours, or employee’s death (for dependents).

20. Optional Benefits Programs 3 Employer approaches to controlling health costs: Managed care: the insurer plays a role in decisions about health care, avoiding unnecessary procedures. Health maintenance organizations (H M O): requires patients to receive their medical care from the H M O’s health care professionals. Preferred provider organizations (P P O): contracts with health care professionals to provide services at a reduced fee. Flexible spending accounts: employees set aside a portion of pretax earnings to pay for eligible expenses.

21. Optional Benefits Programs 4 High-deductible health plans: typically brings together insurance with a high deductible and a medical savings account with a specified limit ($2,700 in 2020) that the employee contributes to as a payroll deduction. Accountable care organizations (A C O): a network of health care providers that practice value-based care; they agree to be paid based on results. Employee wellness programs (E W P): communications, activities, and facilities designed to change health-related behaviors in ways that reduce health risks.

22. Figure 14.3 Health Care Costs in Various Countries Access the text alternative for slide images. Source: Organisation for Economic Co-operation and Development, “Health Spending,” O E CD Data, https://data.oecd. org, accessed May 7, 2020.

23. Optional Benefits Programs 5 Group Insurance—Life Insurance Employers may provide life insurance or offer the opportunity to buy coverage at low group rates. Term-life insurance: if employee dies during term of policy, beneficiaries receive a death benefit payment. Benefits for accidental death and dismemberment.

24. Wellness Programs Many companies offer wellness programs such as yoga classes to encourage employees to reduce their health risks as insurance costs climb for both workers and employers. Wavebreakmedia Ltd/Getty Images

25. Optional Benefits Programs 6 Group Insurance—Disability Insurance Short-term disability insurance. Percentage of employee’s salary paid as benefits for six months or less. Long-term disability insurance . Percentage of employee’s salary paid as benefits after an initial period and potentially for rest of employee’s life. Group Insurance—Long-Term Care Insurance Employer provides benefits toward the cost of long-term care and related medical expenses.

26. Figure 14.4 Sources of Income for Persons 65 and Older Access the text alternative for slide images. Source: E B R I Databook on Employee Benefits , Chapter 3 (Employee Benefit Research Institute, July 2014), https:// www.ebri.org.

27. Optional Benefits Programs 7 Retirement Plans Contributory plan: funded by employer and employee. Noncontributory plan: funded entirely by employer. Defined-benefit plan: guarantees specified level of retirement income. Meets requirements of Employee Retirement Income Security Act (E R I S A) . Aided by the Pension Benefit Guarantee Corporation (P B G C) .

28. Optional Benefits Programs 8 Defined-contribution plan: employer sets up account for each employee; specifies size of contribution into account. Money purchase plan. Profit-sharing and employee stock ownership plans. Section 401(k) plans. Cash balance plan: employer sets up account for each employee; contributes percentage of employee’s salary.

29. Figure 14.5 Value of Retirement Savings Invested at Different Ages Note : Investment portfolio consists of 60% stocks, 30% bonds, and 10% cash (for example, money-market funds, bank savings accounts), assuming average rates of return based on historical rates from 19 28 to 2016. Access the text alternative for slide images. Sources: Data from Aswath Damodaran, “Annual Returns on Stocks, T. Bonds and T. Bills: 1928–Current,” http://people.stern.nyu.edu/ adamodar / New_Home_Page /datafile/histretSP.html.

30. Optional Benefits Programs 9 Government Requirements for Vesting and Communication Vesting rights . When employees become participants in pension plans and work a specified number of years, they are guaranteed to receive pension at retirement regardless of if they remained with the employer. Summary plan description (S P D) . Report that describes pension plan’s funding, eligibility requirements, risks, and other details. Individual benefit statement describes employee’s vested and unvested benefits.

31. POLLING QUESTION 2 Jakar does not know a lot about investing and wants to ensure he has some retirement income when he is retires. Agnes plans on changing employers every few years and is interested in investing her own money. Which plan would be best for Jakar and Agnes, respectively? A. Defined benefit; defined contribution B. Defined contribution; defined benefit C. Contributory; defined benefit D. Defined contribution; non-contributory

32. Optional Benefits Programs 10 Family-Friendly” Benefits Family leave. Federal law requires 12 weeks of unpaid leave. Child care. College savings. 529 savings plans. Elder care. Ingram Publishing/ SuperStock

33. Optional Benefits Programs 11 Other Benefits Subsidized cafeterias. On-site health care services, fitness centers, dry cleaning. Moving and relocation. Employee discounts. Tuition reimbursement. On and off-site company recreation. Sabbaticals. In order to provide a relaxed environment for their employees, some companies allow employees to bring their pets to work. What other unique benefits do companies offer their employees? Stuart O’Sullivan/Getty Images

34. Selecting Employee Benefits 1 The Organization’s Objectives Decisions about benefits should take into account: Organization’s goals, objectives, and budget. Expectations of current employees and prospective recruits. Organizations that do not offer expected benefits will have difficulty attracting and keeping employees.

35. Selecting Employee Benefits 2 Employees’ Expectations and Values Employees expect to receive benefits that are legally required and widely available. Bureau of Labor Statistics is a good source of benefits data. They value benefits they are likely to use. Value differs from one employee to another.

36. Selecting Employee Benefits 3 Organizations can offer flexible benefits plans in place of a single benefits package for all employees. Addresses differences in employees’ needs. Empowers employees. Cafeteria-style plan: employees can choose the types and amounts of benefits they want from a set of alternatives.

37. Selecting Employee Benefits 4 Benefits’ Costs Approaches to saving money: Shift from traditional health insurance to P P Os and H D H Ps. Shift more of the cost to employees. Exclude or limit coverage for certain types of claims.

38. Legal Requirements for Employee Benefits 1 Tax Treatment of Benefits Qualified plans: offer more favorable tax treatment of benefits. Employees may immediately take tax deduction on contributions to the plans. No immediate tax on employee for amount employer contributes. Tax-free earnings on money in retirement fund. Plan must meet certain requirements to be a qualified plan.

39. Legal Requirements for Employee Benefits 2 Antidiscrimination Laws Intended to provide equal employment opportunity without regard to race, sex, age, disability, and several other protected categories. Pregnancy Discrimination Act. Age Discrimination in Employment Act (A D E A). Older Workers Benefit Protection Act of 19 90. Americans with Disabilities Act (A D A).

40. Legal Requirements for Employee Benefits 3 Accounting Requirements Financial Accounting Standards Board (F A S B) sets requirements for companies’ financial statements. Ensures that statements are true picture of financial status. Employers must set aside funds they expect to need for benefits to be paid after retirement. Statement must list funds for retirement as future cost obligations.

41. Communicating Benefits to Employees Communication Is Essential Employees must be given information about benefits. Benefits are necessary to attract, motivate, and retain talent. It is difficult for employees and applicants to understand the value of benefits, so companies must help. Employers can use a variety of media to communicate.