The cafeteria approach

OCTOBER 1, 2010 in HUMAN RESOURCE MANAGEMENT

Individualized plans allowed by employers to accommodate employees preferences for benefits. Because employers do have different preferences for benefits employers often let employees individualize their benefit plans. The cafeteria approach is one way to do this. (The terms flexible benefits plan and cafeteria benefits plan are generally used synonymously). A cafeteria plan is one in which the employer gives each employee a benefits fund budget, and lets the person spend it on the benefits he or she prefers, subject to two constraints. First, the employer must of course limit the total cost for each employees benefits package. Second, each employees benefits plan must include certain required items for example, Social Security workers compensation and unemployment insurance. Employers can often make mid-year changes their plans if for instance, their dependent care costs rise and they want to divert more contributions to these expenses. Types of plans Cafeteria plans come in several varieties. To give employees more flexibility in what benefits they use, about 70% of employers offer flexible spending accounts for medical and other expenses. This option lets employees pay for certain benefits expenses with pretax dollars (so the IRS in effect subsidizes some of the employees expense). During the open enrollment period, the employee may choose how much for his or her pay the employer will deposits in this account. To encourage employees to use this option without laying out cash, some firms are offering debit cards that employees can use at their medical provider or pharmacy. Core plus option plans establish a core set of benefits (such as medical insurance) which are usually mandatory for all employees. Beyond the core, employees can then choose from various benefits options.

The Life Plan at Pitney Bowes provides an example, Pitney Bowes attaches a price to every benefit offered and allows employees to shop for the benefits they need each year. Each employee gets a certain number of flex dollars to spend each year on the benefits be or she prefers, Employees can buy whatever benefits they want up to the limit of their available flex dollars they can even supplement that amount with their personal funds if they so choose. Many businesses particularly smaller ones dont have the resources or employee base to support the cost of many of the benefits we discussed. Flexible Work Arrangements Flextime A work schedule in which employees workdays are built around a acre of mid day hours and employees determine within limits what other hours they will work. Flextime is a plan whereby employees workdays are built around a core of mid day hours, such as 11am to 2 pm. Workers determine their own starting and stopping hours. For example, they may opt to work from 7am to 3 pm or from 11 am to 7pm. The number of employees in formal flextime programs from 4% of operators to 17% of executive employees doesnt tell the whole story. Many more employees about 46%, actually take advantage of informal flexible work schedules. In practice, most employers hold fairly close to the traditional 9am to 5pm workday. In short, half the firms, employees cant start work later than 9am and employees in about 40% of the firms must be in by 10m. Therefore the effect of flextime for most employees is to give them about one hour of leeway before 9 am or after 5pm. Compressed worksheets Schedule in which employees works fewer but longer days each week

Many employees like airline pilots do not conventional five day, 40 hour worksheets similarly hospitals may want doctors and nurses to provide continuing care to a patient, or manufacturers may want to reduce the productivity lost whenever workers change shifts. Firefighters usually work for several days straight. Workers like these typically have compressed worksheet schedules, which mean they work fewer days each week, but each day they work longer hours.

Subsidized Child care

OCTOBER 1, 2010 in HUMAN RESOURCE MANAGEMENT

Fulfilling ones work responsibilities, while raising a family is a challenge particularly for single parents. Most working people make private provisions to take care of their children. For example, relatives accounted for 48% of all child care providers in one study. Organized day care centers accounted for another 30% of child care arrangements and non relatives accounted for most of the remaining arrangements. Employers who want to reduce the distractions associated with finding reliable child care can help in various ways. Some employers (about 18% recently) simply investigate the day care facilities in their communities and recommend

certain ones to interested employees. But more employers are setting up company sponsored and subsidized day care facilities, both to attract employees and to reduce absenteeism For example, Abbott Laboratories built a $10 million childcare center at its headquarters north of Chicago, day time home to about 400 children of Abbott employee. By establishing subsidized day care centers, employers can benefit via improved recruiting results, lower absenteeism improved morale favorable publicity and lower turnover. But good planning is required. This often starts with questionnaire to employees to answer questions like what would you be willing to pay for care for one child in a child care center near work? And have you missed work during the past six months because you needed to find care arrangements? Sick Child benefits What do you do when your child is sick and you need to get to work? One study found that

unexpected absences climbed to about 2.4% of payroll hours recently, with a cost per absence to employers of about $600 per episode (for temp employees and reduced productivity for instance). More employers are thus offering emergency child care benefits for instance for when a young childs regular baby sitter is a no show. Texas Instruments built a Web database its employees use to find last minute child care providers. Others, like Canadian financial services company CIBC are expanding their on site child care centers to handle last minute emergencies. Elder Care Elder care benefits are important for much the same reasons as are child care benefits. The responsibility for caring for an aging relative can affect the employees performance at work. One study found that, to care for an older relative 64% of employees took sick days or vacation time, 35% decreased work hours, 22% took leaves of absence, 20% changed their job status from full

to part time, 16% quit the jobs, and 13% retired early. The problem will grow more acute as the segment of the population over age 65 rises. One survey found that about 120 million Americans are now or have in the past cared for an adult relative or friend. So often citing human toll on caregivers more employers are providing elder care. For example, the United Auto Workers and Ford Motors Company provide elder care referral service for Fords salaried employees. They provide detailed assessment of the elderly relatives needs, and recommendations on the care that would be best. The National Council on Aging has a useful Web site to help elders and categories find benefit programs www.benefitcheckup.org Time off One survey found that about half the 2,586 workers surveyed felt they were working too much, and putting too little time into other things in life that really matter. In response, employers

such as Hartford Financial Services Group, and Nationwide Mutual Insurance are changing their time off policies. For example, they are handling out time off as performance reward; tracking employees time off to avert burnout; giving new hires more vacation, and offering employees more long weekends on holidays.
Other job related Benefits
OCTOBER 1, 2010 in HUMAN RESOURCE MANAGEMENT

Employers provide various other job related benefits. Some provide subsidized employee transportation. Googles website lists benefits such as adoption assistance the Google Child care Center, free shuttle service from San Francisco onsite dry cleaning backup, childcare assistance and on site physician and dental care at this Mountain view and Seattle facilities. Food services are provided in some form by many employers they let employees purchase meals, snacks or coffee usually at relatively low prices. Educational subsidies Educational subsidies such as tuition refunds are popular benefits for employees seeking to continue their educations. Payments range form all tuition and expenses to some percentage of expenses to a flat fee of several hundred dollars per year. One survey found that about 72% of the 579 companys surveyed pay for college courses related to an employees present job. Many employers also reimburse non job related course (such as Web designer taking an accounting class) that pertain to the company business. Some employers pay for self improvement classes, such as foreign language study, even though they are unrelated to company business or the employees job. (Although there seems to be a trend toward reducing such benefits) Many

employers provide college programs, taught on the employers premises. Other in-house educational programs include remedial work in basic literacy and training for improved supervisory skills. College tuition subsidies may help employers attract recruits, retain some employees and provide promotable employees with the educations they need to move up. However, that same enhanced mobility makes it easier for employees to leave. Two researchers studied employer sponsored part time college education reimbursements impacted job mobility. They focused on the US Navys tuition assistance program. Tuition assistance usage significantly decreased the probability of staying in the Navy. The New Workforce feature describes another personal / family benefit. Executive When you reach the pinnacle of the organizational pyramid or at least get close to the top you will find, waiting for you, the Executive Perk. Prerequisites (perks, for short) usually only go to top executives. Perks can range from substantial (company planes) to relatively insignificant (private bathrooms). Many popular perks fall between these extremes. These include management loans (which typically enable senior officers to exercise their stock options). Salary guarantees (also known as golden parachutes) to protect executives of their firms become targets of acquisitions or mergers and financial counseling (to handle top executives investment programs). And relocation benefits, often including subsidized mortgages, purchase of the executives current house and payment for the actual move. A selection of other executive perks includes time off with pay (including sabbaticals and severance pay) outplacement assistance, company cars, chauffeured limousines, security systems, company planes and yachts, executive dining rooms, physical fitness programs, legal services tax assistance liberal expenses accounts club memberships season tickets, company credit cards and childrens educational subsidies. As you can see, employers have many ways of making their hardworking executives lives as pleasant as possible.

Flexible benefits programs When given the opportunity employees prefer choice in their benefits plans, In one survey of working couples, 83% took advantage flexible hours, 69% took advantage of the sorts of flexible style benefits options packages well discuss next; and 75% said that flexible style benefits plans are the sorts of plans they would like to see their companies offer. About 70% of employers in one survey chose flexible health care options. The online job listing service jobtrak.com asked college students and recent graduates. Which benefit do you desire most? Thirty five percent sought flexible hours; 19% stock options; 13% more vacation time; 12% a better health plan and 9% wanted a signing bonus. Most of the preferred benefits had to do with lifestyle issues rather than financial ones. At the same time employers tend to misjudge employees preferences for various benefits. In any case its apparent that employers must provide opportunities for choice when designing benefits plans

Early retirement
OCTOBER 1, 2010 in HUMAN RESOURCE MANAGEMENT

A type of offering by which employees are encouraged to retire early the incentive being liberal pension benefits plus perhaps a cash payment To trim their workforce or for other reasons many employers including GM. Verizon have been encouraging employees to retire early. Many plans take the form of early retirement window arrangements in which specific employees (often age 50 plus) are eligible to participate. The window means that for a limited time, the company opens up the opportunity for employees to retire earlier than usual. The financial incentive is generally a combination of improved or liberalized pension benefits plus a cash payment. Employers should use such programs cautiously. Unless structured properly early retirement programs can be challenged de facto methods for forcing the discharge of older employees against their will. While it is generally legal to use incentives to encourage individuals to choose early

retirement the employees decision must be voluntary. In one case (Paolillo v Dresser Industries Inc) the employer told employees on October 12 that they were eligible to retire under a totally voluntary early retirement program and must inform the company of their decision by October 18 However, employees didnt get the details of the program until October 15. The employees subsequently sued claiming coercion. The US Court of Appeals for the Second Circuit (New York) agreed with them, arguing that an employees decision to retire must be voluntary and made without undue strain. Waivers Employers must therefore exercise caution in encouraging employers to take early retirement. The Older Workers Benefit Protection Act (OWBPA) imposes limitations on waivers that purport to release a terminating employees potential claims against his or her employer based on age discrimination. The waiver of future claims must: 1) Be knowing and voluntary 2) Not provide for the release of prospective rights to claims 3) Not to an exchange for benefits to which the employees was already entitled. 4) Give the employee ample opportunity to think over the agreement and to seek legal advice. Early retirement plans can backfire in other ways. When Verizon Communications offered enhanced pension benefits to encourage what it hoped would be 12,000 employees to retire more than 21,000 took the plan. Verizon had to place 16,000 managers. Phased Retirement and the Aging Workforce In a recent SHRM, human resource professionals said the number one demographic trend impacting employers was the aging workforce. The demographic fact of an aging workforce has two implications for employers first, with the population aging with the overall workforce growing more slowly, employer will need to attract and retain older workers. Second, employer will need policies to deal with employees who are older than traditional workers, and who may therefore have somewhat different needs and work preferences. Employers are dealing with these issues in various ways. A SHRM survey found that 41% of surveyed employers are bringing retirees back into the workforce; 34% are conducting studies to determine projected retirement rates in the organization; and 31% are offering employment options designed to attract and retain semi retired workers.

Give that three out of four employees approaching retirement age say they would rather cut back gradually than retire abruptly; one way to attract and retain these people is to offer phased retirement programs. Here, for instance, retirement-eligible employees may get the option to work half time for several years beyond normal retirement plans. However SHRM reports that the movement toward phased retirement could gain steam if employers have difficulty recruiting skilled workers and need to strategy that retains talent and organizational knowledge. While time off insurance and retirement benefits account for the lions share of benefits costs, must employers also provide various services benefits . These include personal services (such as legal and personal counseling) job related family friendly services (such as child care facilities) educational subsidies and executive prerequisites (such as company cars for its executives). Personal Services Many companies provide the sorts of personal services that most employees need at one time or another. These include credit union, legal services counseling and social and recreational opportunities (Some employers use the term voluntary benefits to cover personal service benefits that range from things like pet insurance to automobile insurance).

Personal Services and family friendly benefits

OCTOBER 1, 2010 in HUMAN RESOURCE MANAGEMENT

Credit Unions Credit unions usually separate businesses established with the employers assistance to help employees with borrowing and savings needs. Employees usually become members by purchasing a share of the credit unions stock for a small fee perhaps $5 or $10. Members can then deposit savings that accrue interest at a rate determined by the credit unions board of directors. Loan eligibility and the loans rate of interest are usually more favorable than those of banks and finance companies. Employee Assistance Programs (EAPs)

A formal employer program for providing employees with counseling and /or treatment programs for problems such as alcoholism gambling or stress EAPs provide counseling and advisory services such as personal legal and financial services, child and elder care referrals, adoption assistance mental health counseling and life event planning. EAPs are increasingly popular will more than 60% of larger firms offering such programs. One study found that personal mental health was the most common problem addressed by employee assistance programs, followed by family problems. For the employer EAPs produce advantages not just costs. For example sick family members an problem like depression account for many of the sick days employees take. Employee assistance programs can reduce such absences by providing expert advice on issues like elder care referrals and diseases management. Key steps for launching a successful EAP program include: 1) Develop a policy statement: Define the programs purpose employee eligibility the roles and responsibilities of various in the organization and procedures for using the plan. 2) Ensure professional staffing: Consider the professional and state licensing requirements. 3) Maintain confidential record Keeping systems: Everyone involved with the EAP including supervisors secretaries and support staff, must understand the importance of confidentiality. Also ensure files are locked access is limited and monitored and identifying information is minimized. 4) Be aware of legal issues: For example in most states counselors must disclose suspicious of child abuse to appropriate state agencies. Get legal advice on establishing the EAP, carefully screen the credentials of the EAP staff, and obtain professional liability insurance for the EAP. Family friendly benefits Benefits such as child care and fitness facilities that make it easier for employees to balance their work and family responsibilities.

Several trends are changing the landscape of benefit administration. There are more households where both adults work; more one parent households more women in the workforce. More workers over 55, and theres the time bind people working harder and longer without the time to do all theyd like to do. The issues involve working men, as well as women. One expert on work and family issues says that for men, particularly the younger ones, it has become more socially acceptable to take time off or flexible schedule to take care of kids and employers are responding to this change by granting to fathers the time required. The pressures of balancing work and family life had led many employers to bolster what they call their family friendly benefits. These generally include benefits like child care, elder care fitness facilities and flexible work schedules benefits that help employees balance their family and work lives. A survey by the Society for Human Resource Management (SHRM) found that bout 29% of employers provided at least some type of child care assistance. The SHRM survey also found that, of the firms responding, 55% offer flextime, 31% offer compressed workweeks, and 34% permit some telecommuting. Family friendly firms routinely turn up on best companies to work for lists. Software giant SAS Institute Inc offers generous employee benefits. The North Carolina firms keeps turnover at 4% in an industry where 20% is typical in large part by offering family friendly benefits like paid maternity leave, day care on site, lunchtime piano concerts, massages, and yoga classes like this one