Benefits and Services

What

Happened

The imposition of wage ceilings during

World War II
Decline of paternalism
Union pressure
Tax law
Public policy shifts of cost from
government to the private sector
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Benefits and Services

Once upon a time "fringe benefits" were

of marginal importance. In 1929
benefits were approximately 3 percent
of wages and salaries.

By 1991 benefits had risen to be 38.2

percent of wages and salaries.

Between these two periods wages and

salaries rose by a factor of 55 while
benefits increased by a factor of 716.
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Benefits And Services

What

Do Employers Expect?

Improved productivity
Increased job satisfaction
Improved quality
Reduction in turn-over and
absenteeism
Enhanced sense of security
3

Benefits and Services

Benefits and services become

complicated very quickly because of
the number of available components,
the variety of optional features within
a component, and their legal and
financial interactions.

Benefits and Services

Employee

Benefits

Those compensation components

made available to employees that
provide:
Protection in case of health and
accident-related problems, and
Income at some future date or
occasion.
5

Employee Services

Compensation components that

contribute to the welfare of the
employee by filling some kind of
demand.
Total employee benefits as a percent
of payroll 39.2
Legally required payments

8.9

Retirement and savings

6.0
6

Employee Services
Life and death insurance

0.5

Medical benefits

10.4

Paid rest periods

2.2

Pay for time not worked

10.4

Miscellaneous benefits

0.9
7

Benefits Planning And

Design Criteria

Minimum age and length of service.

Employee contributions an vesting

schedule for pension plan.

Coinsurance, deductible, ceiling

requirements, and dual coverage for
medical insurance.

Options to be included in the medical plan.

What employees will be covered, and what

about retirees and dependents.
8

Critical Issues In
Benefit Planning

Current and future role of governmentmandated benefits.

Employee demographics and employee

preferences.

Possible use of self-funding and third-party

administrator.

Employer ability to pay and employee

contributions.

Monitoring and auditing programs.

9

Benefits Communication

Benefits became viewed as entitlement

and employers were loosing the
motivational value of their programs.

The response was the development of

sophisticated communication programs to
inform employees of how much they were
receiving through their benefits programs.

10

Basic Benefits
Communication

New employees receive

oral and visual
presentations of the
benefit program, and an

Annual benefit statement

that provides a
description of the
employee's benefit
account.
11

Basic Benefits
Communication

The employee has access to inhouse benefit consultant services.

Ad-hoc employee meetings to cover

new benefits, changes, and critical
issues.

On-going communication of benefit

info.
12

Employee Benefits
Employee Benefits Can Be Classified
As:
Disability Income Continuation
Loss-of-Job Income Continuation
Deferred Income
Spouse or Family Income Continuation
Health and Accident Protection
Property and Liability Protection
Perquisites

13

Disability Income
Short-Term Disability
L-T Disability
Worker's Compensation
Sick Leave
Non-Occupational Disability
Travel Accident Insurance
Supplemental Disability Insurance

14

Disability Income

Accidental
Death And
Dismemberment

Retirement
Plans

T-P Disability

Social Security
15

Loss-Of-Job Income

Unemployment Insurance (Ui)

Supplemental Unemployment Benefit

Insurance (Sub)

Guaranteed Annual Income (Gai)

Guaranteed Income Stream (Gis)

Severance Pay

Job Contract
16

Deferred Income

Social Security

Qualified Retirement
Plan

Pension / Profit
Sharing / Stock
Bonus

Simplified Employee
Pension Plans (Sep)
17

Deferred Income

Keogh Plans

Supplemental
Executive
Retirement Plans

Supplemental
and Executive
Group Life
Insurance Plans
18

Spouse and Family

Income
Protection
Life Insurance
Retirement Plans
Social Security
Workers Comp
Tax-Sheltered Annuity
AD & D
Travel Accident Insurance
Health Care Coverage

19

Health and Accident

Protection

Basic Medical,
Hospital, and
Surgical
Major Medical
Dental
Visual
Comprehensive
Physical
Hearing Aid

In-House Medical
Services

HMO's

PPO's

Social Security
(Medicare)

Post-Retirement
Medical

Workers' Comp
20

Property and Liability

Protection

Group Auto / Home

/ Legal

Group Umbrella
Liability

Employee Liability

Fidelity Bond
Insurance

21

Employee Services

Pay For Time Not

Worked
Holidays / Vacations /
Jury Duty / Sick Leave
Election Official /
Witness In Court
Military Duty / Funeral
Leave / Marriage
Leave
22

Employee Services

Illness In Family /
Paternity Leave /

Wellness Leave /
Time Off To Vote /
Give Blood

Grievance And
Contract
Negotiations

Lunch, Rest, And

Wash-up Periods
23

Time Off From Work

Without Pay

The family and medical leave act

passed in 1993 granted up to 12
weeks of unpaid leave for a variety of
purposes, including a worker's own
illness or that of a spouse or a
parent.

24

Income Equivalent Payments

and
Reimbursements

Elderly Care

Counseling (Legal,
Financial,
Psychiatric)

Parking

Subsidized Food Service

Travel Expenses

Education
Subsidies

Relocation Expense

Child Adoption

Emergency Loans

Child Care

Credit Union

Charitable
Contributions

25

Costing Benefits

Costing is an essential prerequisite to any

worthwhile benefits communication
program.

Four methods are available for costing

benefits and services:
Annual cost of benefits and services for
all employees.
Cost per employee per year.
Percentage of payroll
Cents per hour

26

Flexible Compensation /
Benefits
(Cafeteria Plans)

Originally the flexible compensation /

benefits plan was designed to enable
senior executives, top professionals,
and managers to choose individually
many of their benefits and services.

27

Flexible Compensation /
Benefits
(CafeteriaPlans)

However, organizations are

looking to the flex plans today as
an opportunity to:
Contain the cost of benefits
Satisfy employee preference
Provide choice

28

Flexible Compensation /
Benefits

Flex plans are designed to

accomplish four goals that are
considered fundamental to the
development of a successful
program. It increases or improves:
Appreciation of the interest and
desire of the employer to improve
the quality of life of each
employee.
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Flexible Compensation /
Benefits
Loyalty and
Motivation.
Understanding
of Value of Each
Benefit.
Understanding
Of Value Of
Total Program
30

Establishing A Flex Plan

Three Major Groups

Must Participate In the
Design of a Flex Plan:
Senior Management
for setting
objectives and
determining policy.

GOALS

31

Establishing A Flex Plan

Compensation and human
resource specialists for guiding the
development of and assisting in the
construction of a program that
meets organizational objectives
and demands of the employees.
Employees for providing initial
inputs about what should be
included in a benefits program.
32

Employee Spending
Accounts

This is a tax-free reimbursement

account designed to moderate or
possibly reduce the rising cost of
benefits for the employee while at
the same time giving the employer
greater control over the benefit
expenditures.
33

Employee Spending
Accounts

Employee are allowed to convert a

portion of taxable wages or salaries
into nontaxable dollars to be used to
pay for specific benefits.

34

Employee Spending
Accounts

While reducing their taxable income,

they can use the funds to pay for:
Uncovered medical expenses.
Premiums for health, life, and
disability insurance.
Dependent care assistance.
Legal services.
Personal financial planning.
35

Benefits in the 90's

EAPs
Adoption
Expenses
Child Care
Assistance
Paternity Leave
Long-Term Care
Flex Hours
Work-At-Home

36