© 2001 by Prentice Hall and Anne S. Tsui, 2002 12-1 November 5, 2002 Employee Benefits

© 2001 by Prentice Hall and Anne S. Tsui, 2002 12-1

November 5, November 5, 20022002

Employee Benefits

© 2001 by Prentice Hal and Anne S. Tsui, 2002 12-2

HR planning

Evaluating

Separating

Relating

Career Planning

Benefits

RewardingPaying

Training

Hiring

Job designing

The Course: HRM Activities

Attract

Motivate

Retain


Module III: Employee – Employer Relationship Protecting employees – benefits (ch. 12)

1 session plus Ms. Eileen Thom Developing employee careers (ch. 9)

2 sessions Relationship with employees (ch. 13)

2 sessions HR across borders (ch. 17)

1 session plus Mr. Bernie Au Yang (Nov. 28 evening) Separating with employees (ch. 6)

1 session including project presentations


Learning Objective – at the end of this topic, you should be able to:

Understand the significance of employee benefits to both employers and employees.

Distinguish between legally required benefits and voluntary benefits.

Explain why firms vary in employee benefits. Develop methods of communication that

achieves the HRM objectives for the benefits program.

Design a benefits package that supports the firm’s overall compensation strategy and meet employee needs.

© 1998 by Prentice Hall

Reading: see last page of the file


Total Compensation

Total Compensation

PayIncentives

(Chapter 11)

IndirectCompensation/

Benefits (Chapter 12)

BaseCompensation(Chapter 10)


It is an indirect compensation because it provides a plan rather than cash

Group membership rewards that provide security and protection for employees and their family members

Attractive benefit packages help recruit and retain talented employees

Benefits = indirect compensation


Who gave the contributions?

Contributions Payments made for benefits coverage May come form the employer, employee,

or both Vacations: employer Some types of insurance: paid partly by

employer and partly by the employees


Types of Benefits

Benefits Strategy

Communication of Benefits


Types of Benefits - HK

Voluntary BenefitsLegally Required Benefits

Sick leave

Holidays

Worker’s compensation

Annual leave (10-40 days)

Retirement (MPF)

Health insurance

Educational allowance

Housing allowance

Life insurance

Travel insurance

Rest periods

Child and elderly care

Employee services


Legally required benefits - HK Hong Kong government requires employers

to give the following benefits maternity leave, rest days, sickness allowance,

statutory holidays and annual leave provided under the Employment Ordinance and the keeping and maintenance of records as required by the Ordinance

MPF Part IV of the

Employees' Compensation Ordinance which provides for compulsory insurance in relation to compensation for work injuries


A Common Voluntary Benefit – Health insurance

Hospital costs, physician charges, and the cost of other medical services

Most UST staff Are allowed to claim $250 for each

medical consultation, with a total less than about $19, 000 per year


Housing allowance

This allowance provides extra funding for employees to buy or rent a flat

This type of benefits usually applicable to employees at senior positions

Examples: In government, the lowest position that are granted with this allowance is about $50,000 per month; the allowance is about $ 13,000 per month (last year) $11,000 per month (this year)


Education allowance

For children This type of benefits provide employees’ children

with reasonable funding for education This type of benefits usually applicable to

employees at senior positions For employee themselves

Employers may contribute all or part of the tuition fee (may only be applicable to some specified courses or programs)

Workplace English Campaign MBA/PTMBA/EMBA degree


1022

3022

2124

610

1825

2010

2030

20

0 5 10 15 20 25 30 35

United States

Sweden

Norway

Mexico

Germany

Finland

Belgium

Australia

Annual Number of Vacation Days in Various Countries for Employees with One Year of Service

Austria

Canada

France

Japan

Netherlands

Spain

United Kingdom

Hong Kong 10-42 days


Four Components of a Benefits Strategy

I. Benefit mix (appropriate)

II. Benefit amount (proportional)

III.Flexibility of benefits (effective)


I. Benefits mix (range of benefits) The complete package of benefits

that a company offers its employees Three issues should be considered

A. Total compensation strategy

B. Organizational objectives

C. Characteristics of the workforce


A. Total compensation strategy

Corresponding to the “below-market vs. above-market compensation”, that is to consider the packages offered by others

In hi-tech firm, retirement benefits are generally not so emphasized, thus, an effective total compensation strategy for a hi-tech firm could be the one that increases base compensation, but does not offer retirement benefits


B. Organization’s objectives

Some organizations’ objectives are to minimize the compensation differences between low-level and high-level employees, then benefit mix should be the same for all employees

Some are to increase the differences to encourage low-level employees to move upward, then benefit mix for the top-management should be more attractive than than for the low-level employees


C. Workforce Characteristics

For workforces consist largely of

parents with young children

child-care, family-friendly benefits

Unionized workforce retirement

plan


II. Benefits Amount (proportion of total compensation) The percentage of the total compensation

package that will be allocated to benefits compared to the other components of the package.

The more the proportion in the benefits, the more the predictability is the outcome, thus it can be considered fixed pay, rather than variable pay.

The total amount of benefits reflects the management philosophy toward employees.


Cost of Employee Benefits in the United States, 1929-1993

Ye

ar

Percent of Employer Payroll

0 5 10 15 20 25 30 35 40 45

1993

1984

1975

1965

1955

1929

41.0

33.8

30.0

21.5

17.0

3.0


How the Benefit Dollar Is Spent - US

Payment for Time Not Worked 24%Life Insurance

1%

Medical and Medically RelatedBenefits23.1%

LegallyRequired29.6%

Miscellaneous(discounts, educational assistance, etc.) 3.2%

Paid RestPeriods 5.5%

Retirement and Savings Plans 13.6%


III. Flexibility of benefits (effective use of benefit cost) The degree of freedom employees have to

decide the benefits package to suit their personal needs, as different employees may have different needs.

Flexibility increases total administrative cost but also increases more effective use of the benefit dollars.

Three common types of plans: modular, core-plus, flexible accounts


Communication of Benefits

Colorful Fliers or Newsletters

Payroll Stickers or Posters

Wallet Cards

Audio-Visual Presentations

Toll-Free Number or hotline

Computer Software Package

Benefits Web Sites


Thinking questions on employee benefits

Why do all employers provide some benefits that are not required by law?

Why do some employers provide more voluntary benefits than other employers?

What are the advantages and disadvantages of flexible benefits systems (or cafeteria benefits programs) for the employee, and for the employer?

Should companies discontinue benefits that are used by only some employees?

Should part time employees deserve the same benefits as full time employees or different ones?


Guest Speaker on Benefits

Ms. Thom has over 20 years of experience in designing and administering benefits programs

She has experience in computer industry, oil refinery, food products, and entertainment industries (Disney and Universal Music).

Her current employer Universal Music has the most interesting products.

She also has broad Asia international HRM experience.

So, ask her lots of questions …


Chapter 12 – Reading Guide

You may skip p. 398 and the section on Legally Required Benefits (mid of p. 401 to 415) – these are common benefits in the U.S. However,

You should be familiar with some basic terms on these pages, such as worker’s compensation, unemployment insurance, health insurance (HMO, PPO), defined benefits plans, defined contribution plans, disability insurance, etc. I won’t test you on these but you should know these terms as part of HR knowledge.

Documents

© 2001 by Prentice Hall and Anne S. Tsui, 2002 12-1 November 5, 2002 Employee Benefits