Human Resource Human Resource Management Management: Benefits and Services Benefits and Services

After studying this chapter, you should be able to:
Human Resource
Management
2. Describe each of the main insurance benefits.
ELEVENTH EDITION
1. Name and define each of the main pay for time not
worked benefits.
3. Discuss the main retirement benefits.
GARY DESSLER
4. Outline the main employees services benefits.

5. Explain the main flexible benefit programs.
Part 4 | Compensation
Chapter 13
Benefits and Services

2008 Prentice Hall, Inc.
All rights reserved.
PowerPoint Presentation by Charlie Cook

The University of West Alabama
2008 Prentice Hall, Inc. All rights reserved.
FIGURE 131
Benefits
132
Annual Health Care Cost IncreasesNational Averages
Types of Employee
Benefits
Supplemental
Pay
Insurance
Benefits
Retirement
Benefits
Employee
Services
Sources: Eric Parmenter, Controlling Health Care Costs, Compensation and Benefits Review, September/October 2002, p. 44; Leah Carlson, Health Care Cost
Increases Easing, Employee Benefit News, Oct. 1, 2004, Item 04274002; Trevor Thomas, Studies Hint at Slowing Health Care Cost Increases, National
Underwriter Life & Health, Oct. 24, 2005, vol. 109, p. 8; Health Care Cost Increases Expected to Slow in 2006, Managing Benefits Plans, April 2006, p. 9.
FIGURE 132
133
Private-Sector Employer Compensation Costs, December 2006
134
Policy Issues in Designing Benefit Packages
Which benefits to offer
Who will be covered
Whether to include retirees
Coverage during probation
Policy Issues
How to finance benefits
Degree of employee choice
Cost containment
procedures
Communicating benefits
options
Source: Employer Costs for Employer CompensationDecember 2006, Bureau of Labor Statistics,
Washington D.C. 20212, www.bls.gov/news.release/pdf/ecec.pdf. Accessed May 21, 2007.
135
136
TABLE 131
Mandated and Discretionary Benefits
Benefits Required by Federal

or Most State Law
Pay For Time Not Worked
Benefits Discretionary
on Part of Employer*
Social Security
Disability, Health, and Life Insurance
Unemployment Insurance
Pensions
Workers Compensation
Paid Time Off for Vacations, Holidays, Sick

Leave, Personal Leave, Jury Duty, etc.
Leaves under the Family Medical

Leave Act
Employee Assistance and Counseling

Programs
Vacations and
Holidays
Unemployment
Insurance
Sick
Leave
Family Friendly benefits for Child Care,

Elder Care, Flexible Work Schedules, etc.
Supplementa
l Pay
Benefits
Executive Perquisites
Severance
Pay
Parental
Leave
Supplemental
Unemployment
Benefits
* While not required under federal law, all these benefits are regulated
in some way by federal law, as explained in this chapter.
137
TABLE 132
Pay for Time Not Worked

Provides for benefits if a person is unable to work
through no fault of his or her own.

Is an employer payroll tax that is determined by an
employers rate of personnel terminations.

Tax is collected and administered by the state.
Vacations and Holidays

Number of paid vacation days varies by employer.
Number of holidays varies by employer.
Premium pay for work on holidays.
An Unemployment Insurance Cost-Control To-Do Checklist
139
Pay for Time Not Worked (contd)
Sick Leave
Severance Pay
Provides pay to an employee when he or she is out

Costs for misuse of sick leave
Pooled paid leave plans
Reasons for granting severance pay:

Parental Leave
The Family Medical Leave Act of 1993 (FMLA)
Up to 12 weeks of unpaid leave within a oneone-year period.
Employees must take unused paid leave first.
Employees on leave retain their health benefits.
Employees have right to return to job or equivalent position.
1310
A oneone-time payment when terminating an employee.
of work because of illness.

138
CauseDo You:
1. Keep documented history of lateness, absence, and warning notices
2. Warn chronically late employees before discharging them
3. Have policy that three days absence without calling in is reason for automatic discharge
4. Request doctors note on return to work after absence
5. Make written approval for personal leave mandatory
6. Stipulate date for return to work from leave
7. Obtain a signed resignation statement
8. Mail job abandonment letter if employee fails to return on time
9. Require new employees to stipulate in writing their availability to work overtime, night shifts, etc.
10. Set probationary periods to evaluate new employees
11. Conduct follow-up interviews one to two months after hire
12. Document all instances of poor performance, recording when and how employees did not meet job requirements
13. Require supervisors to document the steps taken to remedy the situation
14. Require supervisors to document employees refusal of advice and direction
15. Make sure all policies and rules of conduct are understood by all employees
16. Require all employees to sign a statement acknowledging acceptance of firms policies and rules
17. File the protest against a former employees unemployment claim on time (usually within 10 days)
18. Use proper terminology on claim form and attach documented evidence regarding separation
19. Attend hearings and appeal unwarranted claims
20. Check every claim against the individuals personnel file
21. Routinely conduct exit interviews to produce information for protesting unemployment claims
22. Hold periodic workshops with supervisors to review procedures and support effort to reduce turnover costs
23. Identify turnover problems as they occur by
a. location
b. department
c. classification of employee
Unemployment Insurance
1311
Acts as a humanitarian gesture and good public relations.
Mirrors employees two week quit notice.
Avoids litigation from disgruntled former employees.
Meets Worker Adjustment and Retraining Notification (plant

closing) Act requirements.
Reassures employees who stay on after the employer

downsizes its workforce of employers good intentions.
1312

Supplemental Unemployment Benefits (SUB)
Payments that supplement the laidlaid-off or furloughed
FIGURE 133
Your Rights
Under the
Family and
Medical Leave
Act of 1993
employees unemployment compensation.

The employer makes contributions to a reserve fund from

which SUB payments are made to employees for the time
the employee is out of work due to layoffs, reduced
workweeks, or relocations.
SUB payments are considered previously earned

compensation for unemployment calculation purposes.
1313
FIGURE 134
University
Family Illness
Leave Request
1314
Insurance Benefits
Workers Compensation
Provides income and medical benefits to workwork-
related accident victims or their dependents,

regardless of fault.
Death or disability: a cash benefit based on earnings per
week of employment.
Specific loss injuries: statutory list of losses.
Controlling workers compensation costs

Screen out accidentaccident-prone workers.
Make the workplace safer.
Thoroughly investigate accident claims.
Use case management to return injured employees to work
as soon as possible.

1315
Insurance Benefits (contd)

Hospitalization, Health, and Disability Insurance
Provide for loss of income protection and groupgroup-rate
coverage of basic and major medical expenses for

off
off--thethe-job accidents and illnesses.
Accidental
Disability
1316
FIGURE 135
Access to and
Participation by
Workers for
Selected Benefits,
Private Industry,
March 2006
Note: The access rate
represents the percent
of employees offered
the benefit and the
participation rate
represents the percent
of employees that
receive the benefit.
death and dismemberment
insurance
Source: National Compensation Survey: Employee Benefits in Private Industry in the United
States, March 2006, U.S. Department of Labor, U.S. Bureau of Labor Statistics, August 2006.
1317
1318
Health Maintenance Organization (HMO)
Preferred Provider Organizations (PPOs)
A medical organization consisting of specialists
Groups of health care providers that contract to
operating out of a health care center.
provide services at reduced fees.
Provides
routine medical services to employees

who pay a nominal fee.
Employees
can select from a list of preferred

individual health providers.
Receives
Providers
a fixed annual contract fee per

employee from the employer (or employer and
employee), regardless of whether it provides that
person with service.
1319
Trends in Health Care Cost Controls
agree to discount services and to

submit to utilization controls.
Employees
using nonnon-PPO
PPO--listed providers may
pay all costs or only costs above the reduced fee
structure for services.
1320
Other CostCost-Control Options

Automating health care
plan administration
Cost-Control
Trends
Defined contribution
health care plans
Communication,
Involvement, and
Empowerment
Premiums and
Co-Pays
Prevention
Programs
Health Savings
Accounts
Controlling Health
Care Costs
Claim
Audits
Outsourcing health care

plan administration
Eliminating retiree
health care coverage
Benefits purchasing
alliances
1321
1322
FIGURE 136
COBRA RecordKeeping
Compliance
Checklist

Laws Influencing Health Care Benefits Issues
Retirement and Pension Plans
Employee Retirement Income Security Act of 1974 (ERISA)
Mental Health Benefits

Mental Health Parity Act of 1996
Family Leave
Family Medical Leave Act
The Newborn Mothers Protection Act of 1996
Health Insurance
COBRA requirements
Health Insurance Portability and Accountability Act of 1996

(HIPAA)
1323
Source: Reprinted from www.HR.BLR.com with

permission of the publisher Business and Legal
Reports, Inc., 141 Mill Rock Road East, Old
Saybrook, CT 2004.
1324
Other Benefits Issues
Retirement Benefits
Life Insurance
Social Security (Federal Old Age and Survivors

Insurance)
Types

Group life insurance

Accidental death and dismemberment
A federal payroll tax (7.65%) paid by both the
employee and the employer on the employees

wages
Personnel policies
Benefits-paid schedule
BenefitsSupplemental benefits
Financing
Retirement benefits at the age of 62
Survivors or death benefits paid to the employees

dependents
Disability payments to disabled employees and their

dependents
Benefits for PartPart-Time and Contingent Workers

Leave and health benefits are now more commonly
The Medicare program
available to partpart-time workers.

Benefits for longlong-term independent contractors.
1325
Retirement Benefits (contd)
1326
Policy Issues In
Pension Planning
Defined Benefits Plans
Defined Contribution Plans
Types of Pension
Plans
Qualified Plans
Membership
Requirements
Benefit
Formula
Plan
Funding
Vesting
Nonqualified Plans
1327
1328

Employee Retirement Income Security Act
(ERISA) of 1974
Types of Defined
Contribution
Plans
Established guidelines for qualified pension plans.

Requires fiduciary responsibility.
Pension Benefits Guarantee Corporation

(PBGC)
401(k)
Plans
Savings and
Thrift Plans
Deferred
Profit-Sharing
Plans
Employee
Stock
Ownership
Plans
(ESOPs)
Insures plans that terminate without sufficient funds

Cash Balance
Pension Plans
to meet obligations.
Guarantees only defined benefit plans.
Pays individual pensions up to $49,000 per year.
1329
1330
Employees Vesting Rights under ERISA
Early Retirement Windows
Cliff vesting
Specific employees (often age 5050-plus) are offered
an incentive to voluntarily retire earlier than usual.
Gives participants full right to the employers matching

contribution after three years of service.
The incentive is a combination of improved or
liberalized pension benefits plus a cash payment.
Graded vesting
Gives participants an increasing right to the employers

matching contribution over a six year schedule of 20% after
two years of service and 20% for each succeeding year
thereafter.
1331
Personal Services
Older Workers Benefit Protection Act (OWBPA)

Imposes limitations on waivers that purport to
release a terminating employees potential claims

against the employer based on age discrimination.
1332
Personal Services (contd)
Credit Unions
Separate businesses established with the
Steps for Launching an EAP Program
employers assistance to help employees with their

borrowing and saving needs.
Develop a policy statement.
Ensure professional staffing.
Maintain confidential record-keeping systems.
Be aware of legal issues.
Employee Assistance Programs (EAPs)

Provide counseling and advisory services:
Personal legal and financial services
Child and elder care referrals
Adoption assistance
Mental health counseling
Life event planning
1333
1334
FIGURE 137
Sample Survey
of Employee
Needs
Family--Friendly Benefits
Family
Subsidized child care

Sick child benefits
Elder care
Time off
Subsidized employee transportation
Food services
Educational subsidies
Fitness and medical facilities
Flexible work scheduling
Source: Michelle Buckley, Checkup

for Health Benefit Offerings,
Compensation and Benefits Review,
September/October 2000, p. 43.
Reprinted by permission of Sage
Publications, Inc.
1335
1336
Flexible Benefits Programs
KEY TERMS
Cafeteria (Flexible Benefits) Approach
benefits
supplemental pay benefits
unemployment insurance
sick leave
severance pay
supplemental unemployment benefits
workers compensation
case management
health maintenance organization (HMO)
preferred provider organizations (PPOs)
group life insurance
Social Security
pension plans
defined benefit pension plan
defined contribution pension plan
portability
401(k) plan
Each employee is given a limited benefits fund
budget to spend on preferred benefits.

Types of plans

Flexible spending accounts

Core plus option plans
Flexible Work Arrangements

Flextime schedules
Compressed workweek schedules
Job sharing
Work sharing
Telecommuting
1337
savings and thrift plan

deferred profitprofit-sharing plan
employee stock ownership plan (ESOP)
cash balance plans
Employee Retirement Income Security Act
(ERISA)
Pension Benefits Guarantee Corporation
(PBGC)
vested funds
early retirement window
employee assistance program
family--friendly benefits
family
flexible benefits plan/cafeteria benefits plan
flextime
compressed work week
job sharing
work sharing
telecommuting
1338

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After studying this chapter, you should be able to:

2. Describe each of the main insurance benefits.

3. Discuss the main retirement benefits.

4. Outline the main employees services benefits.

Benefits and Services

PowerPoint Presentation by Charlie Cook

2008 Prentice Hall, Inc. All rights reserved.

Annual Health Care Cost IncreasesNational Averages

2008 Prentice Hall, Inc. All rights reserved.

Private-Sector Employer Compensation Costs, December 2006

2008 Prentice Hall, Inc. All rights reserved.

Policy Issues in Designing Benefit Packages

Which benefits to offer

Who will be covered

Whether to include retirees

Coverage during probation

Degree of employee choice

2008 Prentice Hall, Inc. All rights reserved.

Mandated and Discretionary Benefits

Benefits Required by Federal

Pay For Time Not Worked

Disability, Health, and Life Insurance

Paid Time Off for Vacations, Holidays, Sick

Leaves under the Family Medical

Employee Assistance and Counseling

Family Friendly benefits for Child Care,

2008 Prentice Hall, Inc. All rights reserved.

Pay for Time Not Worked

through no fault of his or her own.

employers rate of personnel terminations.

Vacations and Holidays

An Unemployment Insurance Cost-Control To-Do Checklist

2008 Prentice Hall, Inc. All rights reserved.

Pay for Time Not Worked (contd)

Pay for Time Not Worked (contd)

Provides pay to an employee when he or she is out

Pooled paid leave plans

Reasons for granting severance pay:

Up to 12 weeks of unpaid leave within a oneone-year period.

Employees must take unused paid leave first.

Employees on leave retain their health benefits.

Employees have right to return to job or equivalent position.

2008 Prentice Hall, Inc. All rights reserved.

A oneone-time payment when terminating an employee.

of work because of illness.

2008 Prentice Hall, Inc. All rights reserved.

2008 Prentice Hall, Inc. All rights reserved.

Acts as a humanitarian gesture and good public relations.

Mirrors employees two week quit notice.

Avoids litigation from disgruntled former employees.

Meets Worker Adjustment and Retraining Notification (plant

Reassures employees who stay on after the employer

2008 Prentice Hall, Inc. All rights reserved.

Pay for Time Not Worked (contd)

employees unemployment compensation.

The employer makes contributions to a reserve fund from

SUB payments are considered previously earned

2008 Prentice Hall, Inc. All rights reserved.

2008 Prentice Hall, Inc. All rights reserved.

related accident victims or their dependents,

Controlling workers compensation costs

2008 Prentice Hall, Inc. All rights reserved.

Insurance Benefits (contd)