Lecture Human resource management: Gaining a competitive advantage (9/e) – Chapter 13: Employee benefits

Chapter 13

Employee Benefits

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Benefit Programs

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Social Security
 Social Security provides old-age insurance,
unemployment insurance, survivors' insurance,
disability insurance, hospital insurance and
supplementary medical insurance.
Social Security retirement benefits are free from
federal tax and free from state tax in some states.
Full benefits begin at age 65 or a reduced benefit at
62.
Both employers and employees are assessed payroll
tax.
Eligibility age for benefits and tax penalty for earnings
influence retirement decisions.
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Unemployment Insurance
 4 Objectives of Unemployment Insurance:

1. offset lost income during involuntary unemployment
2. help unemployed workers find new jobs
3. provide incentive for employers to stabilize
employment
4. preserve investments in skills by providing workers
with income during short-term layoffs

 No state imposes the same tax on every employer.
 Unemployed workers are eligible for benefits if they
 have a prior attachment to the workforce
 are available and actively seeking work
 were not discharged for cause, did not quit
voluntarily and are not out of work because of a labor
dispute.

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Private Group Insurance
 Offered at employer’s discretion; plans not legally required.
 2 major types: medical insurance and disability insurance.
 Medical insurance-most important benefit; most full-time
employees get such benefits.
 Disability insurance includes short-term and long-term plans.

 Group rates are lower because of economies of scale, ability to pool
risks and greater bargaining power of a group.

 Consolidated Omnibus Budget Reconciliation Act (COBRA)
requires employers to permit employees to extend health insurance

coverage at group rates for up to 36 months following a qualifying
event, such as termination.
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Family-Friendly Policies
 Family and Medical Leave Act requires organizations
with 50 or more employees within a 75-mile radius to
provide as much as 12 weeks of unpaid leave after
childbirth or adoption; to care for a seriously ill child,
spouse, or parent; or for an employee’s own serious
illness.

 Child Care: employers may provide some type of
child care support to employees:
supplies and helps employees collect information about
child care,
vouchers or discounts for existing child care facilities or
child care facility at or near worksites.
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Healthcare:
Controlling Costs and Improving Quality
 U.S. spends more on health care than any other
country

 Health-care expenditures have risen from 5.3% of
GNP in 1960 to 18% (about $2.7 trillion) today.

 Percentage of full-time workers receiving job-related
health benefits has declined, with more than 53
million Americans currently uninsured

 Trend is to shift costs to employees through use of

deductibles, coinsurance, exclusions and limitations
and maximum benefits.

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Flexible Spending Accounts
 Permit employees to choose types and amount of
benefits.

 Advantages include:
 employees more aware and appreciative of benefits
 better match between package and employee's
needs, which improves satisfaction and retention
 cost reductions
 take-home pay increases.

 Disadvantages include:
 administrative cost
 adverse selection
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Affordable Care Act: Impact on Employers

Major impact on employer cost control efforts.
Employers with 50 or more workers must offer

health care coverage to full-time employees or
else pay a penalty.

Impacts taxes, coverage of dependents and
wellness programs

Some employers are looking at ways to avoid
being covered by the new law.

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Nondiscrimination Rules and Qualified
Plans
 All benefits packages must meet certain rules to be classified as
qualified plans which receive more favorable tax treatment than a
nonqualified plan.

 Rules must be satisfied for a plan to obtain qualified status.
 A benefit cannot discriminate in favor of “highly compensated
employees.”

 It is illegal for companies to require women to contribute more to a
pension plan than men.

 Employers cannot discriminate against employees over age 40 in pay
or benefits.

 Employees with disabilities have equal access to same health
insurance coverage as other employees.
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Summary
 Average cost of benefits is about 44.5% for every payroll dollar
and about 30.8% of total compensation package and continue to
grow rapidly, most notably health care.

 Employers must offer a benefits package that permits them to
compete in the labor market and attract and retain quality
employees, helped by better communication of the value of the
benefits package and allowing employees to tailor benefits to their
own needs through flexible benefits plans.

 Employees will increasingly become responsible for their own
economic security are being asked to increase proportion of costs
that they pay and to use data on health care quality to make better
health care choices.

 Workers' compensation laws, based on no-fault liability, cover 90%
of U.S. workers for job-related injuries and death for disability
income, medical care, death benefits and rehabilitative services.
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