HRM gaining a competitive advantage chapter 013 3rd ed

Objectives • Discuss the growth in benefits costs and the underlying reasons for that growth.. • Explain the major provisions of employee benefits programs.. • Explain how employee ben

Objectives

• Discuss the growth in benefits costs and the

underlying reasons for that growth.

• Explain the major provisions of employee

benefits programs.

• Explain how employee benefits in the U.S

compare with those in other countries.

• Explain the importance of effectively

communicating the nature and value of benefits

to employees.

• Describe the regulatory constraints that affect

the way employee benefits are designed and

Employee Benefits: Unique

Aspects

13-2

 Legal Compliance

 Tend to become institutionalized

 Complexity

 Legal Compliance

 Tend to become institutionalized

 Complexity

Growth of Employee Benefits:

Percentage of Wages and Salaries

13-3

Percentage

1929 55 65 75 86 88 90 93 96

40%

30%

20%

10%

3.0

17.0

21.5

30.0

35.5

41.3 37.9

36.7

41.3

Reasons for benefits Growth

13-4

 New Deal legislation

 Wage and price controls -WW II

 Favorable tax treatment

 Cost advantages of group purchases

 Negotiation objective of unions

 New Deal legislation

 Wage and price controls -WW II

 Favorable tax treatment

 Cost advantages of group purchases

 Negotiation objective of unions

Benefits Programs

13-5

• Social insurance

• Private group insurance

• Retirement

• Pay for time not worked

Social Insurance (legally required)

13-6

Social Security

About 8% employer and employee tax on wages

Additional Medicaid tax of 1.45%

Also includes dependent coverage and Long-term Disability

Unemployment Compensation

Tax on employers based on use

Eligibility: work 1 year - not on strike, quit or fired for cause

Workers Compensation

Disability,medical care, death benefit & rehabilitation

2/3 of earnings are tax free

Based on risk and experience rating

Social Security

About 8% employer and employee tax on wages

Additional Medicaid tax of 1.45%

Also includes dependent coverage and Long-term Disability

Unemployment Compensation

Tax on employers based on use

Eligibility: work 1 year - not on strike, quit or fired for cause

Workers Compensation

Disability,medical care, death benefit & rehabilitation

2/3 of earnings are tax free

Based on risk and experience rating

Private Group Insurance

13-7

 Life

 Health - most offer

 COBRA - provides continuation of health insurance up to 36 months

 Disability - short and long term

 Life

 Health - most offer

 COBRA - provides continuation of health insurance up to 36 months

 Disability - short and long term

13-8

 Defined Benefit v Defined Contribution

 ERISA (1974)

 funding

 vesting

 communication

 portability

 Defined Benefit v Defined Contribution

 ERISA (1974)

 funding

 vesting

 communication

 portability

Value of Savings at Age 65 for Different

Portfolios

13-9

Value of Savings at 65

(Millions of Dollars)

1.00

0.75

0.50

0.25

$837,434

$357,003

21-29 31-39 21-29 31-39

$128,253

$214,957

It pays to save early and take some risk

Investment portfolio (60% stocks, 30% bonds, 10% cash) Investment portfolio of 100% cash(money market )

Payment For Time Not Worked

13-10

 Vacations - not mandated

 usually 10 days per year in U.S.

 30 days mandatory in Europe

 Holidays

 Family and Medical Leave Act of

1993

 Sick leave

 Vacations - not mandated

 usually 10 days per year in U.S.

 30 days mandatory in Europe

 Holidays

 Family and Medical Leave Act of

1993

 Sick leave

Normal Annual Hours Worked in Manufacturing

Relative to the U.S.

13-11

Annual Hours Does this account for

competitive differences between Pacific Rim countries and Europe?

Japan U.S France Germany

150

- 150

168

-141

-245

Family-Friendly Policies

13-12

 Family and Medical Leave

 Pregnancy Discrimination Act of 1978

 Child Care

Managing Benefits

13-13

 Cost controls

- Managed Care

- Coinsurance

- Use of HMOs and PPOs

- Employee wellness programs

 Flexible Benefit (Cafeteria) Plans

 Surveys and Benchmarks

 Cost controls

- Managed Care

- Coinsurance

- Use of HMOs and PPOs

- Employee wellness programs

 Workforce Demographics

 Communicating with employees

 Flexible Benefit (Cafeteria) Plans

Employee Wellness Programs

Effort to raise overall health levels of all employees

13-14

Two types of programs:

•Passive

•emphasis on building awareness

•people identify own problems & take action

•physical fitness facility program

•Active

•emphasis on reinforcement & support

•example: outreach and follow-up model

Flexible Benefits (Cafeteria)

Plans

13-15

Advantages

 more appreciation of benefits offered

 better match between benefits and employee preference

 cost reduction to employee

Disadvantages

 increased design and start-up costst-up

costs

Advantages

employee preference

Disadvantages

costs

General Regulatory Issues

13-16

• Sex, age, and disability

• Monitoring future benefits obligations