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Chapter #10 Employee Benefits and Services

& that in Europe most employers make benefits an important part of the total compensation pkg & use it increasingly as a tool to attract moti!ate & keep key personnel some cs tailor-make benefits pkgs for in"i! empls to satisfy special nee"s typical org spen"s consi"erable share of its # costs on benefits$ser!ices to empls pay % direct compensation & base" on critical 'ob factors or performance benefits & services % indirect compensation & b$c e(ten"e" con"ition of employment & not "irectly relate" to performance )inclu"es* insurance income security time off sche"uling benefits e"ucational$social$fin ser!ices+ benefits % sig part cs compensation system & almost ,-. mark of annual payroll e(penses benefits wont replace performance incenti!es as moti!ators but health & pension benefits can make a feat "iff in corporate loyalty benefits play critical role in cs staffing strategy Cans fringe benefits systems strikes balance btwn situation in U.S

Role of Indirect Compensation:

empl benefits$ser!ices seeks to satisfy "iff ob's* 1. societal ob s & to sol!e social probs & pro!i"e security for inter"epen"ent wage earners go!s rely on support of employers )empls can recei!e most benefits ta(free employers "e"uct cost of benefits as reg bi/ e(p+0 benefits coul" amount to o!er 1 most cs payroll costs in near future0 benefits gi!e empls fin security against illness "isability retirement 2. or! ob s & lower empl turno!er )empls may stay to sa!e pension cre"its or their rights to e(ten"e" !acations that typically come w$ greater seniority+0 !acations$holi"ays$rest breaks helps empls re"uce fatigue & can enhance pro"ucti!ity "uring hours empls wking0 if benefits not a!ailable empls might form a union & collecti!ely bargain w$ employer0 in"irect comp* re"uces fatigue "iscourages # unrest satisfies empl ob's ai"s recruitment re"uces turno!er mins o!ertime costs 3. empl ob s & empls usu seek c-pro!i"e" benefits b$c of lower costs & a!ailability & )insurance lower e!en if empl has to pay the entire premium b$c group plans sa!e insurer a"min$selling costs of many in"i! policies & insurer also re"uces a"!erse selection of insuring 'ust those who nee" the insurance & actuaries gi!e sa!ings to policyhol"ers+0 lower income ta(es % employee ob' & buying power of c can negotiate a lower cost for the insurance policy0 when c pays for a benefit empl is partially protecte" from inflation )ie. 2-week !acation not re"uce" in !alue by inflation0 some empls ob' % get supplementary health & life insurance )b$c w$o c-pro!i"e" insurance cant get policies if empl has pre-e(isting me" con"ition+

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2 types of benefits & ser!ices* those that are legally re4uire" an" those that the employer !oluntarily gi!es

"e!ally Re#$ired Benefits:

impose" on orgs by go!0 these benefits "esigne" to help empls & go! seeks to ensure min le!els of fin security for the nations wkforce )ob' of pro!i"ing fin security % easer monetary bur"ens of retirement "eath #5 "isability unemployment+ fin probs of in!oluntary unemployment lessene" by unemployment compensation0 'ob-relate" in'uries & "eath compensate" un"er workers compensation laws no progs fully reimburses affecte" wkrs )678 1--2 pg 93:+ legal re4uirements important to ;< "ept b$c top management hol" ;< "ept resp for meeting legal nee"s0 if improperly han"le" result can be se!ere fines & more ta(es

%inancial Sec$rity:
large ma'ority Cans fin "epen"ent on monthly payche4ues & small . pop self-employe"0 to protect well-being of society go! regs on retirement plans employment insurance "isability compensation & health care % imperati!e0 in Can many of these regs % pro! a"ministere" )to suit specific wk en!irons statues$pro!isions !ary pro! to pro!+ Canada &ension &lan 'C&&( )=C> for =uebec+ & a man"atory contributory & portable pension plan applicable to all empls & self-employe" people in Can. e(cept those wkng for the fe"eral go! Contrib$tory &lans & benefits that re4uire the employer to contribute to the cost of the benefit )both employer & empl pay part of costs+ C>> & =C> % contributory plans &ortability Cla$ses & allow accumulate" pension rights to be transferre" to another employer when an empl changes employers0 ie. pension rights not affecte" by changes of 'ob$resi"ence & plans also tie" to cost-of-li!ing changes go!s cant limit benefits by "iscriminating against same-se( common-law relationships b$c contrary to CC<6 & C;<? )since 1:::+ Employment Ins$rance 'EI( & prog to help alle!iate the monetary probs of wkrs in Can "uring the transition from one 'ob to another0 most salarie" & hourly wkrs who are employe" for a min @ of hours "epen"ing on regional unemployment rates % co!ere" by E7 & self-employe" not eligible for benefits un"er present regs key features of new employment 7nsurance ?ct* benefits base" on hours not weeks worke"0 collection of premiums base" on first "ollar earne"0 re"uction in ma( benefit entitlement perio"0 increase eligibility re4uirements for people entering # mkt re"uction in benefit rate base" on in"i!s claim history0 family income supplement top-up for claimants in low-income families0 lower income threshol" for clawback of benefits )or*ers+ Compensation ,cts & compensation payable by employers collecti!ely for in'uries sustaine" by wkrs in the course of their employment0 all pro!s & territories ha!e these

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Aorkers Compensation ?ct replace" by Aorkplace Safety & 7nsurance ?ct0 a"ministration "one pro! pro! acts % of Bcollecti!e liability type )compensation payable to employers collecti!ely+ & in"ustries co!ere" classifie" into groups accor"ing to special ha/ar"s & employers in each group collecti!ely liable for payment of compensation to all wkrs employe" in that group0 annual contribution rate base" on cs total annual payroll figs )c can be charge" higher rate if many AC claims+ -ealth Ins$rance &lans & health & me"ical insurance pro!i"e" by pro!incial go!ernments w$ assistance from the fe" go!0 Ce"ical Care ?ct inclu"es all of Can. )ma' part me" care pai" by ta(es collecte" at fe" le!el+ -olidays & vacations & base" on empls length of ser!ice but fe"$pro! laws specify 2-week min !acation entitlement0 holi"ays fe" & pro! regulate"

.ol$ntary Benefits:
7nsurance Denefits* risks share" by pooling fun"s in form of insurance premiums & then when insure" risk occurs co!ere" empls or their families are compensate" "ife ins$rance & 1st form of insurance offere" to wkrs by cs & group life insurance % uni!ersal element in corporate empl benefit progs 2 types life insurance plans & 1+ "ecease" family recei!es lump sum payment 2+ family recei!e" lower lump sum than in 1+ plus a sur!i!ors pension payable to "ecease"s spouse for life sometimes supplemente" by family allowance benefits ie. C>> AC )if "eath is in'ury relate"+ or auto insurance benefits )if "eath is auto relate"+0 employers gen pay cost of life insurance plans co!erage base" on empls pay ie. 1---2--. of annual pay -ealth/related ins$rance & all Can. citi/ens & lan"e" immigrants co!ere" by pro! health-care progs thus employers offer supplementary health insurance plans only group life & "isability insurance wi"ely pro!i"e" as empl benefit0 e(ten"e"$ma' me" insurance for empls who tra!el out of country & many orgs gi!e "ental insurance )costs often share" btwn employer & empl+ Salary Continuation >lans* if empl becomes "isable" for long time perio" & Can cs offer S5 & #5 "isability plans Short/0erm 1isability &lan & cre"iting a @ of "ays to be use" as sick lea!e )for nonoccupational acci"ents$illnesses+ & cre"its may be cumulati!e )insure" cre"its earne" "uring one year may be transferre" to the following year+$noncumulati!e )empls entitlement is renewe" on a yearly basis or after each illness+ "on!/0erm 1isability &lan & benefit plan pro!i"ing the empl w$ an income in the case of #5 illness or in'ury0 plans ha!e long waiting perio" )ie E mos+ & pay empl smaller amt ),--E-.+ reg pay & payments ma"e until normal retirement age reache"

Employee Sec$rity Benefits:

noninsurance benefits & seek to ensure an income before & after retirement Employment 7ncome Security*

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Severance &ay & payment to a wkr upon permanent separation from a c & usu e4uals 2 wks reg wages0 can be up to E$12 mos compensation for e(ecs layoffs may be ease" by accrue" !acation pay 2$aranteed ,nn$al )a!e '2,)( & an employer assures empls that they will recei!e a min annual income regar"less of layoffs of a lack of wk0 wkrs get min amt of wk or pay S$pplemental 3nemployment Benefits 'S3B( & pri!ate plans pro!i"ing compensation for wage loss to lai"-off wkrs0 pai" form SUD fun"s assures co!ere" empls income almost e4ual to pre!ious earnings for as long as SUD fun"s remains sol!ent <etirement Security* originally "esigne" to rewar" long-ser!ice empls Re!istered &ension &lans 'R&&( & all Can. empls co!ere" by <<>s )registere" w$ Can Customs & <e! ?gency for ta( consi"erations+ & most cs contribute to plans0 7ntegrate" <<>s take into account benefits recei!e" from Can. >ension >lan 1efined Benefits &lan '1B( & benefits "efine" by formula base" on age & length of ser!ice w$ employer assuming resp for fun"ing & empl recei!es fi(e" "ollar amt & pre"ictable outcomes thus like" by empls$unions & plans reg" by >ension Denefits Stan"ar"s ?ct & a"!ans* empls know retirement benefits in a"!ance & c a"!an* promotes wkr loyalty & helps retain !aluable wkrs 1efined Contrib$tion &lans '1C( & base" on amts contribute" by employer & empl final pension "epen"ing on amts contribute" in!estment income an" ec con"itions at retirement & )if only employer contributes calle" a non/contrib$tory plan+ & ie. empl allows monthly$weekly "e"uctions from salary employer matches$ups amt to certain le!el & after retirement F put into an annuity etc. that pays regular income to retiree GC plan % greater benefits to empls )esp if starte" at younger age+ accumulations continue in account e!en if empls lea!e firm0 in GD plan benefits fro/en if empl lea!es firm benefits lose !alue w$ inflation0 GC % more control o!er in!estment for in"i! empls b$c own retirement accounts in"i! & its portable 2 probs w$ pension plan a"min* 1+ some cs go out of bi/ lea!ing pension plan unfun"e" 2+ some cs min pension costs by ha!ing long !esting perio"s .estin! & a pro!ision in employer-pro!i"e" retirement plans that gi!es wkrs right to a pension after specifie" @ of yrs of ser!ice e!en if they lea!e a c0 empl who is fire"$4uits before !esting perio" has passe" has no pension rights &ension Benefits Standards ,ct & fe" act regulating pension plans in in"ustries un"er 'uris"iction of 8o! of Can. ie. banks railways shipping cs ra"io$comm cs0 re4uires pension fun"s be hel" in trust for members & the fun"s not be hel" un"er the complete custo"y & control of either c or empls0 fun"ing must be carrie" out !ia one or more of following means* - an insurance contract w$ a c authori/e" to con"uct life insurance bi/ in Can.0 - a trust in Can whose trustees % trust c or group of in"i!s )at least 3 li!ing Can & 1 is in"epen"ent of c & empls+0 - a corporate pension society0 - an arrangement a"ministere" by 8o! of Can. or pro! go! 8 pro!inces ha!e own benefits acts

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&aid 0ime/4ff Benefits:

time perio"s "uring which empl isnt wkng but is getting pai" are result of time-off benefits0 inclu"e legal benefits )stat holi"ays !acay+ & !oluntary benefits )wash-up time+0 these benefits often costliest ma' category of benefits on/the/ ob/brea*s & common form of time-off benefits foun" on the 'ob & ie. rest breaks meal breaks wash-up-time0 can increase pro"ucti!ity )but prob % empls stretch these breaks+ paid sic* leave & one of most buse" benefits & many wkrs consi"er sick lea!e as e(tra "ays off & if ;< policies prohibit cre"iting unuse" sick lea!e to following yr absence increases near yr en" & some cs re4uire me"ical !erifications of illness$pay empls for unuse" sick "ays0 some cs offer Bpersonal lea!e "ays & skip wk for any reason & get pai" allow empls to Bborrow e(tra "ays abo!e specifie" @ when use up in"i! allocation holidays & vacays & most cs grant holi"ays abo!e legally re4uire" @ of "ays & sub'ect to abuse & policies that re4uire atten"ance the "ay before & after a holi"ay as con"ition of holi"ay pay lessen this prob0 some cs allow empls to recei!e !acation pay as bonus instea" of take time off

Empl Services:
some cs pro!i"e e"$fin$social ser!ices for empls ed$cational assistance & ie. tuition refun" progs % common & may be limite" to 'ob-relate" courses or may ha!e no restrictions financial services & ol"est ser!ice % empl "iscount plans )common among retail stores$cust goo"s manufacs+ & allow wkrs to buy gs from c at "iscount0 cre"it-unions )interest collecte" by cre"it union on loans$in!estments is "istribute" to members as "i!i"en"s in proportion to amt in in"i! empl accts+ & lower interest rate on loans % higher interest on "eposits & payroll "e"uctions for sa!ings or loan repayments are the ma' empl a"!ans0 stock purchase progs )enable empls to buy c stock !ia payroll "e"uctions & empl outlays may be matche" by c contribs+ social services & from simple interest groups ie. softball teams to comprehensi!e Employee and %amily ,ssistance &ro!rams 'E%,&( )seek to help empls & family members o!ercome personal & wk-relate" probs+0 empl ser!ices can lessen probs & offer potential "i!i"en"s in empl performance loyalty & re"uce" turno!er many ;< "epts. successfully implement alcohol$"rug rehab progs womans absenteeism greater than menHs )mostly "ue to family role as well+0 Ithe best benefit for working women may actually be as simple as creating a wk en!iron & comm strat that con!eys the message that orgs recogni/e that men ha!e personal & family commitments tooJ Relocation &ro!rams & a c-sponsore" benefit that assists empls who must mo!e in connection w$ their 'ob )support in F$ser!ice c pro!i"es to transferre" or new empls+ & ie. payment for mo!ing e(penses0 transferre" empl may be able to sell home to employer for appraise" !alue to a!oi" selling it on the mkt E6?>s tra"itionally in!ol!e" personal interaction & w$ 7nternet$tech employers respon"ing to empls nee"s faster$effecti!ely$efficiently & best !ia online service delivery )E6?> ser!ices a!ailable to empls !ia 7nternet & intranet+0 goal of online assistance progs not to replace counseling 'ust enhance it

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Emer!in! Services & 0rends:

types of benefits possibly in G o!er ne(t 1- yrs* increase" me" co!erage )w$ "ental plans optometrists ser!ices more me" co!erage by employers+0 more$longer !acations )re"uce" length-of-ser!ice re4uirements & more holi"ays+0 increase" pension co!erage greater contrib by empls0 cost-of-li!ing a"'ustments of pension plans0 impro!e" portability of pension rights$earlier !esting0 sabbatical lea!es for managers & pai" e" lea!e for rank-an"-file empls0 chil" care )partially$fully subsi"i/e" by employer+0 el"er care0 pro! legislation granting benefits to same-se( couples0 granting of benefits to pt-time empls & retirees some cs offer nontra" benefits ie. free laun"ry back-up chil" care "og-walking ser!ices in future in"irect compensation will form a greater proportion of total compensation offere"0 it will be critical for top management to a"opt a total compensation approach when "ecisions ha!e to be ma"e relating to pay0 orgs cant affor" to treat empl benefits & ser!ices in"epen"ent of "irect compensation b$c theyre growing at twice the pace of wages & salaries0 management must consi"er changes in # force & a!g age will increase & greater emphasis on pension as part of benefits pkg

5ana!ement of .ol$ntary Benefit & Service &ro!s:

serious shortcoming of ;<C % poor management of in"irect compensation0 costly supplements intro"uce" in response to social tren"s union "eman"s empl pressure & management wishes & gen. not well$strategically planne" out & thus cause" Kral probs* probs in administration & central prob is supplementary compensation % lack of empl in!ol!ement & ie. pensions & maternity benefits grante" to all wkrs e4ually but younger empls see pensions as "istant & irrele!ant ol"er wkrs fin" maternity benefits not nee"e" & uniformity fails to recogni/e in"i! "iffs & wishes though "oes lea" to a"min & actuarial economies0 b$c empls ha!e little choice in in"i! benefit pkg most wkrs unaware of all the benefits to which theyre entitle"0 a!g wkr cant recall 1,. of employer-pro!i"e" benefits0 this ignorance & inability to influence benefits lea"s empls to "eman" more benefits to meet their nee"s traditional remedies & tra" reme"y to benefit probs % increase empl awareness !ia publici/ing empl benefits & orientation sessions han"books special mailings c newspapers empl meetings bulletin boar" announcements responses to empl 4uestions proactive solution: flexible benefits & fle6ible benefits pro!s )aka cafeteria benefit progs & allow empls to select the mi( of benefits & ser!ices that will answer their in"i! nee"s+ & empls get benefits account w$ specifie" "ollar amt then shop for benefits among those offere" by employer & approach creates a""itional a"min costs & an obligation for ;< "ept to a"!ise empls there are Kral a"!ans* empl participation )better match benefits w$ nee"s+ can purchase or sell more !acation time along w$ choices of better #5 "isability insurance "ental$!ision care prescription "rug co!erage life insurance group legal ser!ices etc. & cafeteria plans now offer same choices in"epen"ent of martial status &

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many cs use interactive voice response systems (IVRs) & web-base" technologies for a"min of fle(ible benefit plan making comm process more effecti!e implications for HR management & retirement pans un"er constant legal re!iew ta( reforms a""e" comple(ity health-care policies change" & e(ps gone up0 tech a"!ans allowe" ;< people to be able to "e!elop own applications to fin" right approach for a"min of benefits plans nee"s analysis % essential first step & shoul" "eal w$ , basic =s* 1+ what tasks performe" how often & how 4uicklyL 2+ who currently "oes these tasks cost now to perform themL 3+ what alt ways of performing these tasks are possible$practicalL 9+ what will each alt cost to install & maintainL ,+ how long will it take to implement each option & can it e!er be truly complete"L ob' of nee"s analysis % i"entify best a"min metho"s to meet #5&S5 nee"s of employer & report shoul" result to be use" as reference by "ecisionmakers Kral implications of fin security plans - firm must a"here to all pro!isions relating to min wage & pension "e"uctions & ie. Can. # Stan"ar"s regs re4uire each empls social insurance @ se( occupational classification be recor"e" & kept for inspection0 a!oi" "uplication by consi"ering empl C>> & other benefits when "esigning their firms own fringe benefit$ser!ice plans )some items inclu"e" in pri!ate plans alrea"y co!ere" un"er pro! wkrs comp & health insurance plans+0 concerne" about re"ucing acci"ents in or"er to lower cost of AC can challenge un'ustifie" claims for employment compensation ma"e against employers & if successfully challenge" they may re"uce costs in the future to keep health costs un"er control employers shoul"* not ha!e a set empl-pai" "e"uctible but ask staff to pay 2-. of any treatment stop out-ofcountry me" co!erage for personal tra!el )or set 3--"ay F-ma(+ monthly "ental checkups not necessary pay only for generic "rugs when can )sa!e E. a!g on "rug plans+ ask empls to get larger amts of Bmaintenance "rugs ie. DC pills to sa!e on "ispensing fees Retention & a cs ability to keep its empls0 inno!ati!e & fle(ible benefit plans % effecti!e in attracting & retaining highly skille" staff & benefits become increasingly important as comp a"!an if cant negotiate aroun" total comp pkg & tips for "esigning a successful benefits plan* in!ol!e your empls "ont un"erestimate the amt of time re4uire" "ont rush spen" F on getting e(pertise Benefit ,$dit & system to control the efficiency of a benefit prog & rea"ily i"entifies inefficiencies & 2 components* claims a$dit )e(amines claims & claim tren"s+ or!ani7ation a$dit )e(amines efficiency & effecti!eness of han"ling empl benefits w$in employers org inclu"ing "ealings w$ an insurer or 3r" party0 benefit au"it enables cs to* i"entify opps for fin & ;< sa!ings ensure insurers$3r" party a"ministrators "oing goo" 'ob e(ert effecti!e control o!er benefits bu"get check how empl claiming habits compare against other Can. employers !oods & services ta6 application to benefits & 8S5 applies to some benefit s& not to others & must be pai" on* company cars )if also use" for pri!ate purposes+ car operating costs ta( return preparation S5 resi"ential accommo"ation holi"ay trips w$in continental M? fre4uent flyer points fin counseling parking0 "ont pay 8S5 on* awar"s health benefits stock options low-

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interest or no-interest loans tuition fees chil" care Christmas turkey gifts un"er F1-benefits & strat implications & take following steps* "efine ob's of org link ob's of ;< "ept w$ org ob's assess empl nee"s asses legal re4uirements to ensure laws followe" compare cs benefits w$ those of competition ensure benefits !alue" by empls con"uct annual benefit au"it ;< managers must integrate benefits into age & salary pkg & pkg must fulfill S5&#5 goals )S5 % high moti!ation & pro"ucti!ity & usu satisfie" w$ merit pay & incenti!e systems that rewar" high performers+ )#5 & retain goo" empl achie!e" by !alue" pension$profit-sharing plan