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Benefits

MHR 3200Dr. Larry InksDepartment of Management and Human ResourcesFisher College of BusinessThe Ohio State University

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Benefits have grown in importance and variety

While benefits dont directly affect an employees performance,

inadequate benefits can lead to dissatisfaction, disengagement,

turnover, etc.

Benefits add approximately 40% to an organizations payroll costs

They can easily (and commonly) become the focus of negotiations

when large wage/salary increases are not possible or feasible

The nature of benefits here in the U.S. has changed significantly

over the past 25+ years, with problematic consequences

Progressive benefits programs reflect the diversity of the work force

BenefitsAn Overview

The challenge is designing flexible, attractive and legal benefits programs

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Social Security: people are living longerthan before so running out

Unemployment Compensation: money

company pays if you get fired when not yourfault

Workers Compensation

Family and Medical Leave Act (FMLA)

Legally-Required Benefits

Implementation of the Affordable Care Act will be making a change here

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Goal is to expand coverage, control health care costs, and improvethe systems used to deliver health care

Requires U.S. citizens and legal residents to have health coverage,

with those not purchasing coverage to pay an escalating penalty

Creates state-based Exchanges through which individuals canpurchase health care insurance of varying costs and benefits

Requires organizations with 50 or more full-time employees to offer

health care coverage or pay a penalty based on number of employees

(exempts employers with up to 50 full-time employees)

Rolling, phased implementation over time

The Affordable Care Act

A highly controversial and polarizing law; time will tell its effectiveness

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Premiums are pre-tax; subtracted from incomeHealth Maintenance Organizations (HMOs): lower premiums but restrictivenetwork

Preferred Provider Organizations (PPOs): similar; costs more but lessbroader network

State-specific Exchanges (via the Affordable Care Act)

High Deductible Health Plan (HDHP)

Consolidated Omnibus Budget Reconciliation Act (COBRA)

Other coverage (dental, vision, etc.)

Catastrophic plan: tiny premium, limited coverage, comes in in case ofemergency

Health InsuranceDifferent Approaches

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Employee Retirement Income Security Act (ERISA)

Defined Benefits Plans: pension, social security (you knowwhat youll receive)

Defined Contribution Plans

- Individual Retirement Accounts (IRAs)

- Roth IRAs

- 401k (403b) Programs: company matches have a vestingperiod; only get to keep contributions if pd is over; benefit isuntaxed if taken out while retired

Retirement Benefits

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Vacation and Holiday Leave

Military Leave

Disability Insurance (short-term and long-term disability)

Group Term Life Insurance

Travel Insurance

Services

Flexible spending accounts: put in money pre-tax, draw outlater but risk is if it goes unused

Other Types of Benefits

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Benefits and YOU

Understand what benefits your employer (or potential employer!) makesavailable, and their cost to you.

Take the time to think through what benefits fit best with your current/short-term needs and plan accordingly.

Even though it may be painful and/or tedious, work through the costs ofdifferent benefits programs (e.g., cost of prescription drugs, etc.)

Remember the difference between passive and active enrollmentveryimportant!

Keep benefits conditions/deadlines in mind (e.g., for flexible spendingaccounts)

Do as much as you can to maximize the benefits of benefits!

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Summary Thoughts About Benefits

Benefits have become a very important (and contentious) topicin business today.

The rising cost of benefits has forced organizations to make changesin the nature and magnitude of benefits offerings. These costs areunlikely to fall.

Organizations need to find the right balance in offering competitivebenefits while also adequately controlling costs.

Benefits offerings vary tremendously around the world

An organizations approach to benefits (e.g., flexibility, fit with memberneeds, costs, etc.) have strong implications for organizational behavior

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What Questions Do You Have?