Human resrouce management 12th mathis jacson chapter 0014

CHAPTER 14

Managing Employee Benefits
S E C T I O N 4 Compensating Human Resources

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PowerPoint Presentation by Charlie Cook
The University of West Alabama


Chapter
Chapter Objectives
Objectives
After you have read this chapter, you should be able to:
■ Define a benefit and identify four strategic benefits considerations.
■ Summarize why benefits management and communications efforts
are important.
■ Distinguish between mandated and voluntary benefits and list
three examples of each.
■ Explain the importance of managing the costs of health benefits
and identify some methods of doing so.
■ Discuss the shift of retirement plans from defined-benefit to
defined-contribution and cash balance programs.
■ Describe the growth of financial, family-oriented, and time-off
benefits and their importance to many employees.

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14–2

Benefits and HR Strategy
• Benefit
 An indirect reward given to an employee or group of

employees for organizational membership
EmployerProvided
Benefits

Absorb social
costs for health
care and
retirement

Influence
employee
decisions about
employers

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Are increasingly
seen as
entitlements

Average over
40% of total
payroll costs

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FIGURE 14-1

Employer Compensation and Benefits Costs per Hour, Private Industry

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Source: U.S. Bureau of Labor Statistics, “Employer Costs for
Compensation,” News Release, June 21, 2006, www.bls.gov.

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FIGURE 14-2
Strategic
Benefits
Considerations

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14–5


FIGURE 14-3
Benefits
Management
Components

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Benefits Design
• Decisions Affecting Benefit Design:
 How much total compensation?
 What part of total compensation should benefits

comprise?
 What expense levels are acceptable for each benefit?
 Which employees should get which benefits?
 What are we getting in return for the benefit?
 How will offering benefits affect turnover, recruiting,

and retention of employees?
 How flexible should the benefits package be?

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FIGURE 14-4

Typical Division of HR Responsibilities: Benefits Administration

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14–8

HR and Benefits Administration
Benefits Administration Issues
and Trends

Outsourcing of
Benefits
Administration

Internet-Based
Administration
Systems

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Benefits
Measurement
(Return vs. Costs)

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FIGURE 14-5

Common Benefits Metrics

• Benefits as a percentage of payroll (pattern over a
multi-year period)
• Benefits expenditures per full-time equivalent (FTE)

employee
• Benefits costs by employee group (full-time vs. parttime, union vs. nonunion, office, management,
professional, technical, etc.)
• Benefits administration costs (including staff time
multiplied by the staff pay and benefits costs per hour)
• Health-care benefits costs per participating employee
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FIGURE 14-6

How the Typical Benefits Dollar Is Spent

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Source: Based on data summarized from the U.S. Department of Labor, Bureau of Labor statistics, National Compensation Survey: Employee Benefits
in Private Industry in the United States, 2006; and Employee Benefits Study, 2006 ed. (Washington, D.C.: U.S. Chamber of Commerce, 2007).

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FIGURE 14-7

Types of Mandated and Voluntary Benefits

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Security Benefits

Types of Security Benefits

Workers’
Compensation

Unemployment
Compensation

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Severance
Pay

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FIGURE 14-8

Private Industry Workers with Health Benefits

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Source: U.S. Bureau of Labor Statistics, March 2006, www.bls.gov/ncs/home.htm.

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Health-Care Benefits
Controlling Health-Care
Benefits Costs

Co-Payments
and Employee
Contributions

Managed Care
(PPOs and HMOs,
Utilization Reviews)

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Mini-Medical
Plans

14–15


Consumer-Driven Health (CDH) Plans
Employee-Focused Health
Benefits Plans

DefinedContribution
Health Plans

Health Savings
Accounts

(HSAs)

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Health
Reimbursement
Arrangement (HRA)

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FIGURE 14-9

Components of Consumer-Driven Health Plans

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FIGURE 14-10

Overview of Consolidated Omnibus Budget Reconciliation Act
(COBRA) Provisions

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Health-Care Legislation
• Health Insurance Portability and Accountability
Act (HIPAA) of 1996
 Allows employees to switch their health insurance

plan from one company to another, regardless of preexisting health conditions.
 Requires employers to provide privacy notices to

employees and to not disclose of health information
without authorization.

• Flexible Spending Accounts
 Benefits plans that allow employees to contribute pre-

tax dollars to fund certain additional benefits.
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14–19


Retirement Benefits
• Social Security Act of 1935
 Provides old age, survivor’s, disability,

and retirement benefits.
 Federal

payroll tax (7.65%) on both
the employer and the employee.

 Medicare

taxes are 2.9%.

 Benefit

payments are based on
an employee’s lifetime earnings.

 Administered by the Social

Security Administration.
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FIGURE 14-11

Median Age at Retirement by Gender

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Source: U.S. Bureau of Labor Statistics, www.bls.gov.

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Pension Plans

Types of Pension Plans

DefinedBenefit Plan

DefinedContribution Plan

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Cash
Balance Plan

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FIGURE 14-12
Worker
Participation in
Pension Plans

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Pension Plan Concepts
Contributory
Plan

Non-Contributory
Plan

Pension
Plan
Formats

Vesting of
Pension Rights

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Portability of
Pension Benefits

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Individual Retirement Options
Individual Retirement
Account (IRA)

401(k) and Roth IRA

Individual
Retirement
Options
403(b)

Keogh

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14–25