You are the HR Supervisor responsible for developing the company objectives that will be listed in the new benefits package. What needs to be considered when selecting employee benefits?

Your response should be at least 75 words in length. You are required to use at least your textbook as source material for your response. All sources used, including the textbook, must be referenced; paraphrased and quoted material must have accompanying citations.

444 PART 4 Compensating Human Resources

L*? Explain how to choose the contents ol an employee benefits pa c kage.

the employee’s current job or {uture careet at tl’rc organization. Ernployees are reirn- bursed for rhese expenses a{ter rhey demonstrate rhey have .o,,lpl”r”j an approvecl course.

– .Especially for demanding, high-stress jobs, organizarions rnay look for benefits rhat help employees put in the necessary |or-r* hours and alleyiate stress. Recreational acriv- ities such as on-sire basketball courts or con-)pany-sponsored sofrball teams provide for social interaction as u’ell as physical activity. Ernployers may reward hard-working groups or individuals with a rip for a weekend, a meai, or any acrivity empl0yees arr iikely to enjoy. Some companies, including Minneapolis design agency Sevlthsil ar-rcj Vancouver Web site designer Mezine, ailow ernployees to b.ilg their pets to work. Mezine cofounder Dean Gagnon explains the benefitr “lt’s almoir impossible to have a bad day u’irl-r a dog i,valking around rhe office.”Jl

Seleetf mg Hmp{oys# ffisffieffts Aithor”rgh the governtnent requires certain benefits, employers have r.vide latitude in creating the toral benefits prackage rhe1, sffgr employe”s.sz Decisions about rvhich benefits to inciude shor-rld take into account the organization’s goals, its budget, and the expectarions of the organization’s current emploJ,e.s and thole it wishes to recruir in the future. Employees have corne to expecr ceriain things from employers. An orga- nization that does r-rot offer the expected benefits rvill have rnore difficulty attractlng and keeping talented workers. Also, if ernployees believe their ernployer feels ,’ro .o*l mitment to their ivelfare, they are less likely to feel committed to-their employer.

The Organ fzaf ion’s Objectfves A logicai place to begin selecting employee benefits is to establisl-r objectiyes for rhe ber-refits package. This helps an organization select the most effective benefits ar-rd monitor whether the benefits are doing what they should. Table 13.2 is an example of one organizationt benefits objectives. tJr-rfortunately, research suggesrs that 6rost organizations do not have written benefits objectives.

_ Among cotnpanies that do set goals, the rnost common objectives include coirtrol- ling the cost of health care benefits and retaining ernployeer.i’ Th” firsr goal explains the growing use of wellness progralns and consumei.directed health plur-,s. Fo, the second goal, empioyers need to learn r.vhat employees care abogt. I1 soroe .nser, the approach rnay be indirect, helping the cornpany distinguish itself as an employer that certain kinds of employees wiil be attracted to and cornmitted ro. For .”uir1pl”, , company that establishes itself as committed to the environment could offer benefits in line rvitir that. goal-say, bicycle storage for cornrnuters and vouchers for takilg the bus-to *otk’14 Employees with a passion for the environrnenr rvould be especialli engaged by such offerings.

Employees’ Expectations and Values ErnPloYees expect to receive benefits that are legally required ar-rd widely ayailable, and they value benefirs rhey are likely ro use. For example, rhe ,,HR oopri” box illus- trates the vaiue ernployees. place on product discounti. To rneet ernpioyee expecra- tions alrour benefits, it can be helpftrl to see lvhat orher organizarions off.r. E*pioy.r, can purchase survey inforrnation about benefits packagei from private .o.,r,-,1tur-rtr. In addition, the Bureau of Labor Statistics garhers bet-tefits data. The BLS Web site (u’ri’urbls.gov) is therefole a good place to check for free infonnarion aborrt employee

{

I

ol I

ol €

ol

r* fscus on $*tr’fff

resp*nsfbifity

SOURC Dearbo rights re

benefir benefir cially c emplo1 or visit emplol thernse

Ernp

is likel, factors older rv insuran ing age women general olvn elr Llse sLlr\ be carel all the I

The affect tl kinds o1 has stro of to th

CHAPTER ‘1 3 Providing Employee Bene{its 405

‘l*i:i* 1″i^;1.

An 0rganization’s

Benelits 0biectives

I are re11n- appror,ed

nefits that rnal actir’- rrovide for d-rl’orking rloyees are rthsin and s to rvork. le to have

e latitr-rde rr-rt u,hich rdget, and to recnrit An orga.

attracting s no colll- 1t11,s1.

es for the refits and exanrpie hat most

: control- explains

. For the tases, the oyer rhar ample, a benefirs

rr taking :speciaily

vailable, rox illus- expecta- nploysl5 sultants. Veb site rnployee

. To establish and maintain an employee benefit program that is based primarily on the employees’ needs f0r leisure time and 0n protection againstthe risks of old age,

l0ss 0f

health, and loss of life.

. To establish and maintain an employee benefit program that complements the efforts of employees on their own behalf.

. T0 evaluate the emplOyee benefit plan annually for its effect on employee morale and productivity, giving’consideration io turnover, unfilled positions, attendance, employees’

complaints, and employees’ 0pinions. . To compare the employee benefit plan annually with that of other leading companies in

the same {ield and to maintain a benefit plan with an overall level of benefits based on

cost per employee that falls within the second quintile of these companies.

. To maintain a level of bene{its for nonunion employees that represents the same level of expenditures per employee as for union employees’

. To determine annuallythe costs 0f neW changed, and existing pr0grams as.percentaqes of salaries and wages and to maintain these percentages as much as

possible.

. To self-fund benefits t0 the extent that a l0ng-run cost savings can be expected for the firm and catastrophic losses can be avoided’

. To coordinate all benefits with social insurance programs to which the payments.

company makes

. To provide benefits on a noncontributory basis except for dependent coverage, for which employees should pay a portion of the cost.

. To maintain cOntinual cOmmunications with all employees concerning benefit programs.

soURCE: Adapted from B. T. Beam Jr. and J. J. McFadden, Employee Benefits,3rd ed. @ 1992 by

Dearborn Financial Publishing, Inc. Published by Dearborn Financial Publishing, lnc, Chicago All

rights reserved.

benefits in the United States. !flith regard to value, medical insurance is a high’r’alue benefit because ernployees usually ,.alir. tl-rat sulgery or a majo[ ilh-Less can be finan-

cialiy deyastarir-rg. Vision a1d deltal care tend to be much less expensive’ bLlt many

.r11plioy.., appreciate tl-Lis type of coyerage because so many people recei\re dental

o. uirior-r .^.. ir-, the course of ” y.”.. As a result, rnany employers ale finding that

ernploVees are e\/en happy ttt pay the rnoclest prelliums for clental and vision coverage

rhemselr,es because of ii-r. u”l.,e’tl-re1, place on this benefit.li Enplol,ers shoulcl also consitler thal the valre etlployees place on various benefits

is likeb, to cliffer frorn one employee ro another. At a broad let’el, basic ciernographic iactors sr-ich as age ancl sex cal-1 influence the kinds of benefits emplo1’ggs want. An

olcler u,orkforce is more 1ikely to be concerned about (antl use) rnedical col’erage’ life

insnrance, and ;rensions. A workforce $’ith a high lrercelltage of s’omen of childbear’ ilrg :rge tna)/ cafe more abolrt clisabiiity or farnilv leave. Yor-rug, untnarried men and

r,,Jrr-rJr-, often place more t,alue on p:ry than on benefits’ Hon’ever, these are or-rly

general obseryations; organizatiols sfiould check rvhich consideratrons apply to their

3r’,,,r-r “roployees

ancl identifi,’rnore specific nee’i]s and .’litfer..ences’ One approach is to

ur. ,.,.u”1,, to usk errployees about t-he kinds of benefits lhel i’alue. The survey should

be carefpl11′ \\,orcled so as not to raise emplo;’ss5′ expectatiolls b)- seemir-ig to prornise

all tl-re benefits askecl about at no cost to tire emplolee’

The choice of benefits may infl*e’ce cllrrent emlrlsl’gtt’ satisfaction and rnay also

affect the organization’s recruiting, in lelms of boih the ease of recrttiting and the kincls of ernpl”oy””, orr.”.te.l to the organizatiot-t’ For exarnple, a benefits package that

has srrong medl.ul benefits and pensions n-ray be parriculally altractive to older people

or to rho;e ,,r,itir many depenclents. Such benefits ma)’ attract people u’ith extensil’e

.- .i-: a- .-. .. … L,. . -… .. t … “iij.j. :,,,:-l)

r.::t j i_:r::.::,:t : jti::.ii”,,-.il : j l,.::.

Part of knowing what employees employees flooded the site with highly valued benefit at Best value is knowing what they don’t 54 pages of comments, most of Buy?Why or why not?What want to lose. Brian Dunn learned them furious. kinds of employees would this that the hard way as an executive Just five days later, Dunn benefit attract? of Best Buy. reviewed the reaction with senior 2. Suggest a way that Best Buy

Dunn hoped to improve prof- management. The decision was could have reduced the costs itability by cutting costs, and he easy: Best Buy backed down and of benefits without sparking thought employees would accept restored the employee discount employee anger. a smaller employee discount. To to its original level.

1″”,”:”1iil;:::, :””ii,’:Iff:: ouestions source: Based on Matthew Bovre’

sociar-networkins site, the water- 1. Are you surprised that ;tJ,-‘j,$:ff”t:;r:Y,t-:ili:{:r?, cooler. The results were soon in: employee discounts are a 2009, www.businessweek.com.

experience and those who wish to make a lor-rg-term commitment to the organization. This strategy rnay be especially beneficial when turnover costs are very high. On the other hand, offering generous heaith care benefits may attract and retain people with high health care costs. Thus, organizations need to consider the signals sent by their benefits package as they set goals for benefits and select benefits to offer.

Organizations can address differences in employees’ needs and empou’er their employees by offering flexible benefits plans in place of a single benefits package for

Cafeteria-Style Plan all employees. These plans, often called cafeteria-style plans, offer employees a Abenefitsplanthat set of altematives from ivhich they can choose the types and amounts of benefits offers employees a set they want. The plans vary. Some impose minimum levels for cerlain benefits, such of alternatives from as health care coverage; some allow better employees to receive money in exchange which they can choose for choosing a “light” package; and some let employees pay extra for the privilege of the types and amounts receiving Jor. uJt-t”rlm. For”example, some pla.ri l.i

“*ploy.”r give up vacation days

of benefits they want ro, ,oor”-prv or to purchase extra ,racation d’ays in

“*.hu.rg” fo. , .ed.r.tion in pay.

Cafeteria-styl” pl”.rr have a number of advantager.36 Th. selection process can make employees more aware of the value of the benefits, particularly when the plan assigns each employee a sum of money to allocate to benefits. Also, the individual choice in a cafeteria plan enables each empioyee to match his or her needs to the cornpanyt benefits, increasing the plan’s actual value to the empioyee. And because employees would not select benefits they don’t want, the company avoids the cost of providing employees u’ith benefits they don’t value. Another way to control costs is to give employees incentives to choose lou,er-cost options. For example, the employ’ ee’s deductible on a higher-cost health plan could be larger than on a relatively lou’- cost HMO.

A drawback of cafereria-style plans is that they have a higher administrative cost. especially in the design and start’up stages. Organizations can avoid some of the higher cosr, however, by using softu,ate packages and standardized pians that have been developed for employers wishing to offer cafeteria-style benefits. Another possi- ble drawback is that employee selection of benefits wiil increase rather than decrease cosrs because employees will select the kinds of benefits they expect to need the most’

406

For exi up for empiol employ

Bene. Employ informa cost dar L-rstltutt melce s terlns.

Empl .rifer. Bu tfirs, the :ng for u :he most 1!’e notei rion by ir lifficuit-

In rec, because t of option rional her ro emplo, Jmployee ior servic, :n cost be aoverage

r

;osts. Eml “.i.ith risk I ir disease

Legal .1s ri,e dis, :iLluirelner -,i-ays to cc :r minimiz :ng new en

=mpioyees .:”lntractors :tquiremen :;i’for non -iervice stri :es cannot :rganizatior nents invol !enefirs.

n n It le

ie of is

v’

‘st,

he rve

isi- ase

lst.

CHAPTER 13 Providing Employee Bene{its 407

For example, an employee expecting to-need.a 1ot of dental work is more iikely to sign

up for a de.tal pt”r-,. ci.- il;;;;: l? ,n. a”r-,,”I coverage u,ould then drive up the

employer,s premiums r.r-tr-r”a coverage. costs can also be clifflcult to estimate when

.ropioy””t select their benefits’

Benefits’Costs Er,rployers also need to consider benefits cos6. one

place to start is rvith general

i’rformarion about the average costs of rurio*-b”rr”fits types. \fidelv used sources of

cosr dara include th. Br.”ui of Labor S,”rit,l.t igls),’i*pto’ee,Renefit Research

l.rsrirure, and U.S. Ch;;t., of Cominerce. Annual slrrveys by the Chamber of Corn’

nerce stare rhe cost of benefits as a percentage of total payroll costs and in dollar

tttillolor.rs can use data about costs to help them t:l”tl :l:,

klnds of benefits to

oifer. But in balancing these decisions against organizational goals-and employee ben-

efits, the organization -uy d..id” ,o ofl”, ..rol]’, high-cost b”r-re{itt while also look-

ing for ways ro .orrrrol-,h. cost of those bene{its. The highest’cost items tend to offer

rhe mosr room foffur*gr, uri “”rv if the items permit choice or negotiation. Also,

as

ri,e noted earlier, “.g””i**, .ur-, .ot-r,rol certain costs such as r’r’orkers’ compensa’

rion by irnproving ,h”;;^;;;;;;;,-,.” ,”rir,,gr. corilo.rrtol is especiallv important-and

Jifficuit-when economic growtil siows or declines’

ln recent y.urr, f”r-t”f iJ'”tt'”a to health cate have attracted particular attenlion

because these costs f-r”t'” tO.” very rapidly and because employers harre a number

of options. Concern over costs hu’ p’o-ptJ many employ”tt- to shift from rradi-

tional health inr.,r”r-ri ,o ppO’ u”d COHp” Some’employers shift more of the cost

ro employees’ They ;; 1;*”; the empioyer’s payments by increasing the amounts

.;;d””: puy fo, j.du.tibles and coinsurance ith” “mployee’s share of the payrnent

tor services). O, ,’,”i-ttny ‘”q’i'” employees io puy some or all of the difference

in cost between ,ruairi’or-rut i.rr,,rar-rc. ar-rd ” loo,”i’cost plan. Excluding or limiting

coverage for certain ;;, ;i .l;ims also can slow rhe increase in health insurance

costs. Employee wellness programs, especialiy rvhen they are targeted to employees

*,ith risk factors ur-,a’ir’r.t.,a”-folio*-.,p and encouragement’ can reduce risk factors

tbr disease.3T

Legal R*quirernents fcr Empl*yee Benefits As we discussed earlier in this chapter, some benefits are required

by law’ This

;.;,,1.-“j;;;”aa, ,” t6e cost of to*pe”suting employees’ organizations iooking for

;;;;.o’t*ol ,tuffi,’tg.o”‘ ‘ouy iook fo’i”uyt’o structLlre tnt l:::|t:lt^t^t”tr3:

to mininize the expense of benefits. They nay require o\’e{time’ Iather tt]an aoo-

;;g;;; “*ploy””r,’hi.”-part-time

rath.er rhan full’ti*-ie q’orkers (because parl-tirrle

employees generally .;i;; ;”.h smaller benefits packages), and use independent

conrfactors rarher than hire empioyees. so*. nf th.r” .hoi.”s are limited by legal

requirementr, hor””,r”.. For e*ample, the Fair Labor Standards Act requires overtime

pay for nonexempt *’oit”.,, ” dist””d in Chapter 11′ Also’ the Internal Revenue

Serrrice strictly fi*ir, ii-r” d”fir’ri,ior-t of “independellt contractors,” stl that employ-

ees cannor auoid 1egol ;b1;;;;, by classifyr’g ,,r,orkers.as self-employed when the

r.)rganizarion recei’es the fienefits of ” p”r*rienr employee’ Other legal require’

rurents in’olve tax treat;ent of benefits, antidiscrimir”‘aiion larvs’ and accounting for

benefits.

!-*E Summarize the

regulations affecting

how emploYers design and administer

benefits Programs.

‘t; 1. :l ,ir ii 4

+l i :r3i

❓

::.

:-r,.