EMPLOYMENT BENEFITS

Employee Benefit Programs

Part of Total Compensation Some Government Mandated Some Incentive Related Part of Cost of Doing Business Indirect Compensation

Factors Contributing to Growth of Benefit

Discourage Unions Benefits not Always Taxed Easier to negotiate Than Wages Attitude of General Public

Objectives of Benefit Programs

To Improve Morale To Meet Health and Safety Needs To Attract Good Employees To Reduce Turnover To Reduce Unionism To Maintain a Competitive Position To Enhance the Organization's Image

Basis for Employee Benefits

Organizational Objectives Human Resources Objectives Employee Benefit Package Government Regulations Collective Bargaining Employee Participation Employee Needs Financial Resources Recruiting Competition Providing Individual Benefits Communicating Benefits

EMPLOYEES

Employee Benefits Required by Law

Types of Benefits

Time-off (vacation, sickness, holidays, etc.) Legal Social Security Medical Payments Retirement Paid Rest Periods (breaks) Life Insurance

Categories of Employee Benefits

BENEFITS REQUIRED BY LAW

Old age and survivors insurance (OASI) Unemployment insurance Workers compensation Leaves without pay

Categories of Employee Benefits

PAYMENT FOR TIME NOT WORKED
Holidays Vacations Sick leave Supplemental unemployment benefits (SUB) Jury duty, military service, and bereavement leaves

Categories of Employee Benefits

INSURANCE
Group life insurance Health care insurance Legal insurance

Categories of Employee Benefits

RETIREMENT BENEFITS
Pension plans Deferred compensation plans Pre-retirement counseling

Categories of Employee Benefits

EMPLOYEE SERVICES
Employee assistance program Counseling services Educational assistance plans Child care Elder care Food services Health services Legal services Financial planning Housing and moving expenses Transportation pooling/parking Purchasing assistance Credit unions Social and recreational services Awards

Employee Benefit Costs

30-40% of the Annual Wages Fastest Growing Part of Total Compensation

Typical Cost of Benefits

TYPES OF BENEFITS Payments for vacations, sick leave, holidays, etc. Legally required payments Medical and medically related benefit payments Retirement and savings (employers share) Paid rest periods, lunch periods, etc. Miscellaneous benefits Life insurance Total employee benefits as percent of payroll TOTAL PERCENTAGE, ALL COMPANIES 12.0% 10.0 % 10.0 % 7.0 % 3.0 % 1.0% .5% 43.5%

Health Plan Costs Climb Higher Annually

Average Annual Health Plan Costs Per Employee

$4000

COST
$1500

YEAR

Flexible Benefits Plan (Cafeteria Plans)

Benefit plan that enable individual employees to choose the benefits that are best suited to their particular needs.

Flexible Benefit Plans

Employees Choose Cafeteria Plans Cost Attached Some Government Requirements

Major Concerns

Rising Costs Controlling Costs Legal Concern

Pension Plans: Provide for Retirement Income

Federal Regulation - Not Total Coverage Reward for Long Service Originally Now Based on Earnings Philosophy

Types of Pension Plans

Contributory (joint pay) Non-Contributory (employer pays) Classified by Amount of Benefits to be Paid

Noncontributory Plan

A pension plan where contributions are made solely by the employer.

Defined Benefit Plan

Amount is Specifically Defined Years of Service Required Average Earnings During Certain Years Age at Retirement Example: Average Annual Salary of Last 3-5 years x number of years of service

Defined Contribution Plan

Basis Upon Which the Employer Pays Paid to Thrift Plan, IRA, etc. Benefits Depends Upon Accumulation

Federal Regulation (ERISA)

Employee Retirement Income Security Act

Informed About Facts Benefits Defined Complex Law

Vesting

A guarantee or accrued benefits to participants at retirement age, regardless of their employment status at that time.

Vesting

Guarantee of Benefits Paid at Retirement Regardless of Last Employment Non-revokable by Employer Vested After XX Years Complex Rules (ERISA)

Vesting Provisions (General Plans)

General Provisions*
1. 5-Year Vesting: An employee must receive nonforfeitable rights after five years of service to all accrued benefits derived from employer contributions. 2. 3- to 7-Year Vesting: An employee must receive nonforfeitable rights after three years of service to 20 percent of accrued benefits derived from employer contributions. Nonforfeitable rights increase 20 percent each year until the employee is 100 percent vested in the employer-derived accrued benefits after 7 years of service.

Social Security Insurance

Guarantee of Income Retirement, Disability, Unemployment Time Limits Complex Rules Dedicated Tax on Earnings

Pension Funds
Privately Managed $3 Trillion in Assets Invested in Stocks and Bonds

Unemployment Insurance
Defined Period (26 weeks) Register for Work Requirement Funded by Payroll Tax Amount Based on Wages Supplemental Unemployment Benefits (Private)

Workers Compensation Insurance

Federal-or-state-mandated insurance provided to workers to defray the loss of income and cost of treatment due to work-related injuries or illness.

Worker's Compensation
Work Related Accident Compulsory Complex Law Based on Wages Permanent or Partial Disability

Health Care Insurance

Partial Government Funded Mostly Private Insurance

Why Are Health Care Costs Skyrocketing?

Federal Regulation Changes in Pricing
Advances in Medicine Malpractice Insurance Labor Costs Over Utilization of Facilities Elder Care Transplants/AIDS/Other

Health Maintenance Organizations (HMOs)

Organizations of physicians and health care professional that provide a wide range of services to subscribers and dependents on a prepaid basis.

Cost Containment Vehicles

HMO (Health Maintenance Organization)
Group of Professionals Services for Fixed Amounts

PPO (Preferred Provide Organization)

Group of Professionals Guarantees Cost Efficiency for Groups Employer Steers Employees to PPO

Retirement Planning Programs

Company Pension Plans Social Security/Medicare Health Care Insurance Personal Financial Planning Legal Concerns Investments/Tax Planning Volunteerism Part-Time Employment Housing Options Relocation

Silver Handshake

An early-retirement incentive in the form of increased pension benefits for several years or a cash bonus.

Decisions Relating to Pensions

DECISIONS ALTERNATIVES

Philosophy Earned vs reward Source of funds Contributory vs non-contributory Amount of benefits Defined benefits vs defined contributions Custody of pension funds Insured vs trusteed plans Protections against loss of funds Protection against loss of purchasing Investment problems Where and where not to invest Tax consequences

Benefit Links

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