Bwrr3043 Employee Benefits

BWRR3043 EMPLOYEE BENEFITS PLK-UUM-ETIQA

TABLE OF CONTENTS

1.INTRODUCTION.................................................................................................3

2.DEFINITION OF EMPLOYEE BENEFITS...........................................................3

3.TYPES OF BENEFITS........................................................................................3

3.1. BENEFITS MANDATED BY LAW..........................................................4

3.1.1.Annual paid leave..............................................................................4

3.1.2.Working hours....................................................................................4

3.1.3.Health and sickness benefits.............................................................4

3.1.4.Retirement benefits............................................................................4

3.2.BENEFIT PROVIDED BY THE COMPANY...............................................4

3.2.1.Staff loan benefits..............................................................................4

3.2.2.Staff allowances.................................................................................4

3.2.4.Staff medical......................................................................................4

3.2.5.Staff leave..........................................................................................4

3.2.6.Flexible work arrangements...............................................................4

3.2.7.Staff education assistance scheme...................................................4

3.2.8.Other benefits....................................................................................4

4.THE CHOSEN BENEFIT.....................................................................................4

5.WHAT IS FLEXI BENEFIT PLANS?...................................................................5

6.THE COMPONENTS OF FLEXI BENEFIT PLANS.............................................5

6.1.CORE BENEFITS.................................................................................6

6.2.FLEXI POINT........................................................................................6

6.3.OPTIONAL BENEFITS.........................................................................6

6.4.FLEXIBLE SPENDING ACCOUNTS (FSA)..........................................6

FLEXI BENEFITS PLAN | ASSIGNMENT 1 1


SECTION A

1. INTRODUCTION

As an employee in Malaysia we will be entitled to a number of rights and benefits,

regardless of nationality or citizenship. It is important that we have a clear

understanding of our full rights and benefits as an employee working in Malaysia.1

There are some types of employee benefits that are mandated by law, including

minimum wage, overtime, leave under the Family Medical Leave Act,

unemployment, and workers compensation and disability. Furthermore, there are

other types of employee benefits that employers are not required to offer, but choose

to provide to their employees.

2. DEFINITION OF EMPLOYEE BENEFITS

Any type of planned sponsored or initiated unilaterally or jointly by employers or

employees and providing benefits that stem from the employment relationship. It is a

compensation other than an hourly wage or salary such as benefits for death,

accident, sickness, retirement, or unemployment. All benefits and services that are

provided to employees in whole of a part by their employer for time worked.

3. TYPES OF BENEFITS

There are some types of employee benefits that are mandated by law, including

minimum wage, overtime, leave under the Family Medical Leave Act,

unemployment, and workers compensation and disability. There are other types of

employee benefits that employers are not required to offer, but choose to provide to

their employees. 1 Employment Act 1955



3.1.BENEFITS MANDATED BY LAW

3.1.1. Annual paid leave

3.1.2. Working hours

3.1.3. Health and sickness benefits

3.1.4. Retirement benefits

3.2.BENEFIT PROVIDED BY THE COMPANY

One of the most important components of running a successful business is

keeping employees happy and providing them with enough incentive to maximize

their productivity. While there are different ways to accomplish this, offering your

employees benefits that go beyond the legal requirements tends to be effective.

3.2.1. Staff loan benefits

3.2.2. Staff allowances

3.2.3. Staff official travel

3.2.4. Staff medical

3.2.5. Staff leave

3.2.6. Flexible work arrangements

3.2.7. Staff education assistance scheme

3.2.8. Other benefits

2. THE CHOSEN BENEFIT

We have chosen FLEXI BENEFIT PLANS as our main topic of discussion due to

recent changes in our employee benefits which introduced by our company, Etiqa on

1st April 2014. We take this opportunity to get to know the plans by engaging a

dialogue session with the key personnel in our Human Capital Management on 8

May 20142. We have been briefed on the key points related to the Flexi Benefit

Plans which will be explained thoroughly in this paper. We anticipate most of

employees are not aware of the benefits which may lead to confusion therefore the

beauty of the benefits may be mistreated by them.

2 Hazmy Halid, Head Employee Engagement, HCM Etiqa



3. WHAT IS FLEXI BENEFIT PLANS?

Traditionally, employees were provided by the employer a standard coverage

through out the company which usually on compulsory basis and this practice

remained unchanged for many years. They offer an equal benefits for all staffs,

relatively simple administration, they are easy for employees to understand and offer

the lowest cost possible. The disadvantage is that employees vary widely in their

use of the plan and therefore the value they place on it.

Therefore, to cater these needs, Flexi Benefit Plans was developed with the basic

purpose of providing greater choice to the employees in the late 1980’s. This plan

offers broad coverage which includes legally-required benefits, discretionary

benefits, company policies and best practices. At first, this benefit plans were

introduced in our company to cater for assistant managers position and above also

staffs of Information Technology Department back in 2002. Employees are allowed

to tailor their coverage to their own specific needs and can also re-direct the benefit

dollars to the benefit they will use. This limits the subsidization factor of traditional

plans and allows a more equal use of benefit dollars by each employee.

4. THE COMPONENTS OF FLEXI BENEFIT PLANS

A benefit system that provides you with the flexibility of customizing your benefits

package according to your own lifestyle needs. The components of Flexi Benefit

Plans comprises of 4 components as follows (Diagram 1):

Diagram 1: Components Of Flexi Benefit Plans



4.1.CORE BENEFITS

There are 5 types of core benefits namely:

a. Group Term Life – 36 month x salary amount (Core Benefit). Employee allow

to purchase additional month maximum up to 12 months.

b. Group Personal Accident – 36 month x salary amount (Core Benefit).

Employee may purchase up to 24 months.

c. Annual leave – 21 days for those services less than 5 years. For those who

services more than 5 years, entitled 21 days leave (Core Benefit) and can

purchase up to 4 days.

d. Dental & Vision benefit - RM200 for dental and RM100 for vision (Core

Benefit)

4.2.FLEXI POINT

Each employee will given flexi points accordingly based on their job grade every

early of the year. Additional points are also given to those who are married and

have childs. Employee may purchase optional benefits to suit the life style. The

balance of the unutilized points will be kept in Flexible Spending Accounts

(FSA). The points can be carry forward to 31 December of next year whereas

the unutilized carry forward points will be forfeited by 1st Jan of the following

year.

4.3.OPTIONAL BENEFITS

This has a similarity with cafeteria plans where employee were offered many

choice of other benefits such as mobile phone device, domestics helper



expenses etc. Employees are advised to carefully selected the choices offer by

the company as they are taxable and non-taxable benefits.

4.4.FLEXIBLE SPENDING ACCOUNTS (FSA)

It is a generic term for reimbursement accounts which allows employees to be

reimbursed on a pretax basis for out of pocket health care and dependant care

expenditure.

SECTION B

5. THE RATIONALE OF FLEXI BENEFIT PLANS TOWARDS AN EMPLOYER AND

EMPLOYEE

5.1.Employers most interested in Flexible Benefits are typically due to following

reasons:

5.1.1. To cater workers’ deferring needs

The benefit offerings to address the different stages in employees’ lives

can at times be achieved by restructuring the existing benefit plan

spending into more than one modular offering, with different components

that reflect the needs of particular employee demographics. The plan

design can therefore address the desire for cash, vacation time, cars and

career training for those aged 20 to 35; more work/life balance choices,

along with life and medical coverage, for those in their late 30s and 40s;

and more emphasis on pension and medical for those aged 55 and older.

For the young and single, a very basic benefit plan can be offered that

provides some money back for the other things that are important to them.

5.1.2. Retaining existing staffs and attracting new talents



In the emerging business landscape, flexible benefits have a distinct

advantage for organizations that are determined to attract the generation

of workers who value greater choice in all aspects of their lives.

Implementing a flexible benefit plan that allows more employee choice

was seen as the top benefit strategy for employee retention and

satisfaction3.

5.1.3. Competitive advantage

Flexi Benefits Plan allow employees to choose the mix of health insurance

and other benefits that suits their personal needs, while it increases the

employer’s control over total benefit spending. The cost-shifting aspect of

flexi plan can reduce employer expenditures as health care costs continue

to rise. For instance, several companies in Singapore, Malaysia, Hong

Kong, Taiwan, China and Thailand have implemented Flexi Benefits plan

that can be a powerful weapon in a strategic business collection, providing

Asia’s organizations with a truly competitive edge.

5.1.4. Costs saving

Company introduce and assign flexi points entitlement to each employee

according to the job grade. Hence, a company has set a limit to each

individual for them to spend wisely on benefits. Employee will only

purchase on benefits that they really required. In addition, management

are able to reduce the administration cost as the purchase transactions

are via online systems and self approval. Moreover, management

expenditure on benefits can be forecast and structure effectively.

5.1.5. Reduction of moral hazard

Unlimited Medical benefit is given to all employee as part of their core

benefits. However, the co-payment is chargeable for each visitation to

General and Specialist Practioner amounting to RM5 and RM10.

Employee are allowed to reimburse the amount up to RM45 and RM90

using the flexi points in the flexible spending accounts. This is to ensure

3 Mercer 2010 Talent Retention Survey



employees do not violate the medical benefits by taking false medical

certificate as this will reduce their net income.

5.2.Employees may attracted to Flexible Benefits due to following reasons:

5.2.1. Flexibility

With flexible benefits, plan members are able to choose the benefits and

the level of coverage that's right for them. Rather than provide a defined

(one size fits all) package of benefits under a traditional benefits plan, it

offers employees with several benefit options. Employee use flexi points

allocated by the plan to purchase their benefits coverage, with different

levels of coverage provided for each benefit type. They can reduce or opt

out of coverage they don’t need and enhance coverage that more relevant

to them.

5.2.2. Effective tax management

Taxable and non-taxable benefits are offered within the Flexi Benefits

Plan. Thus, employee has self-control in managing tax effectively by

selecting non-taxable benefits during purchasing decision. This may help

in increasing their net income and reducing tax payable while enjoying the

benefits that provided by the company.

5.2.3. Tailor to employees’ lifestyle

Employee should be able to plan the utilization of the Flexi Benefits Plan

according to their needs and wants. They are permitted to spend the

balance of flexi points in the flexible spending accounts to meet their

lifestyle requirement such as for youngster the points can be reimbursed

for their phone bills, fitness membership fee meanwhile for family with kids

may want

to spend their points for vacation expenses and child educations.

5.2.4. Longer period of non-forfeiture flexi points

Traditionally, employee are allowed to carry forward some of their benefits

up to Mac next year and will be forfeitured if unutilize. Conversely, flexi

points has extended it’s non-forfeiture period of the points up to 1 year,



which means employee can carry forward to the following year and to be

utilized before 31 Dec.

Diagram 1: Rationales for having Flexi Benefits plan

6. CHALLENGES IN IMPLEMENTING THE FLEXI BENEFITS

6.1.Complexity of administration

Keeping track of employees' choices adds administrative complexity to a

benefits program. Depending on the degree of choice, the plan may need to use

some sort of electronic enrollment tools. Whether you decide to use a tool

available through your insurer, consultant, third-party administrator, purchase

and Human Resource information system add-on or build something in-house,

it's going to come with a cost, which typically includes both set-up and ongoing

maintenance fees. The larger the organization, the more economical these fees

become on a per capita cost basis as fixed costs can be spread out over a larger

group. You're also going to need more resources to administer the Flexi Benefits

Plan, so you may either need more staffs, more reliance on your consultants or

both.

6.2.Cost

According to the Employee Benefits/Towers Watson Flexible Benefits Research

2012, 67% of respondents cite the cost of implementation as being a barrier to

having a Flexible Benefits Plan, while 56% say it is the cost of administration



and 46% the cost of the technology. In setting up and running a Flexi Benefits

Plan employers may need to accept a cost from an adviser or consultancy.

Employers will have to pay an ongoing licence fee for the technology. The cost

of communication will depend upon the amount and also the medium used

throughout the awareness program. A badly communicated scheme will not fulfil

its purpose of which there can be many, from employee empowerment to benefit

cost control if employees do not understand and value it. The survey mentioned

earlier highlights that around 75% of firms outsource the ongoing administration

to the third party provider or technology provider. There will, though, be a cost

for this which is usually expressed as a per-head fee, on top of any licence fee.

6.3.Resource Constraint

Excellent service providers are also key to the success of Flexi Benefits Plan as

they can ensure smooth functioning of the plan and sufficient support to

employees in terms of the selection and on-going management of their benefits.

As a comprehensive benefit platform, Flexi Benefits Plan may require many

service providers to fuel its operation such as insurance companies, medical

check-up centers, pension trust companies and flexi system operators among

others. However, considering the fact that it places higher requirements on

service providers, companies need to be more cautious in vendor selection.

Insurance companies, for instance, what needs to be evaluated are not only

their traditional services (claim settlement, insured registration and

administration, etc.), but also their capacity to connect with the flexi benefits

system and provide relevant support. Besides that employers also require a

trained or specialist staffs to roll out admintrative, processes and decision

making internally.

6.4.Demonstrating ROI

The return on investment (ROI) from a successful transition from traditional

benefits to Flexi Benefits is often linked to a high performing workforce in the

companies. When companies have the right people on board and are able to

keep them, a happy and productive workforce becomes a pillar to success. Flexi

Benefits certainly contribute to secure employee retention and high morale. The



approach has proved to be a strategy to reinvent your employee benefits

program to help meet the challenge in retainning employees.

6.5.Tax issues

The tax situation for benefits is complex and collection methods vary between

organisations. Some benefits (such as life assurance) attract no tax whereas

others are regarded as a “benefit in kind” and are taxed accordingly. Depending

on the arrangements that an employer has made with the Inland Revenue, these

benefits may be taxed at source, through an amended tax code or other. It is

important that the tax implications of any selections are made clear to

employees.

6.6.Employee communication

Increased complexity requires increased employee communications. The last

thing you want to do is spend a lot of money, time and resources to develop a

new flexi benefits plan and not follow through with a robust supporting

communications campaign. Studies have shown that employee satisfaction with

their benefits is directly correlated with their understanding of the program.

6.7.Technology

Flexible benefits technology has come a long way since it made its first tentative

appearance in the employee benefits arena more than two decades ago, and it

continues to evolve rapidly. New developments in technology, systems and

software have transformed the way Flexi Benefits are devised, administered and

used. Most notable are the changes that enable organisations to offer their staff

much greater choice, not just in terms of which benefits to choose, but also in

the way they make their choices. Today’s flexi schemes go beyond providing

access from an office desktop terminal or an employee’s home computer. The

age of internet browsing ‘on the go’ has resulted in increased demand for

platforms to be compatible with mobile devices, as well as having applications

(apps) that can be downloaded by staff. In fact, one of the key drivers of the

latest developments in flexi technology is the proliferation of smartphones and

tablets that enable people to manage their benefits choices on any device, any



time, anywhere. The trend towards mobile technology has seen more employers

invest in developing and upgrading their platforms and systems, leading to

greater competition in the industry and products that have more features than

ever before. This, in turn, has made it much easier for employees to integrate

benefits arrangements into their everyday lives.

Diagram 2: Challenges in setting up the flexi benefits plan by percentage

7. COMPARISON TRADITIONAL BENEFITS AND FLEXI BENEFITS



8. ADVANTAGES AND DISADVANTAGES OF FLEXI BENEFITS

8.1.Advantages

8.1.1. Employees choose benefits to meet their needs, and value these

benefits more highly.

8.1.2. Employers and employees share the responsibility for providing

benefits.

8.1.3. During periods of change (including merger and acquisitions),

Flexible Benefits can help to harmonise rewards.

8.1.4. Employers provide benefits at a known cost that is fixed

regardless of the choices that employees make thus allowing

them to cap future benefit costs.

8.1.5. Employees have a true idea of the full worth of the benefits

package they receive and employers do not provide benefits that

are not valued.

8.1.6. Employees are given a sense of control and involvement by

having a choice.

8.1.7. Dual career couples avoid having benefits duplicated by their

respective employers.

8.1.8. Employers are seen to be more responsive to the needs of an

increasingly diverse, demanding and ageing workforce.

8.1.9. A competitive benefits package is valuable in attracting and

retaining key personnel.

8.1.10. The awarding of benefits such as company cars becomes less

divisive.



8.1.11. Helps to align the total reward strategy to the Human R and

business strategies

8.2.Disadvantages

8.2.1. Financial hardship

Employees may delete some benefits to significantly "load-up"

on others in Flexi Benefits Plan. However, some may make poor

choices, leaving them vulnerable to financial hardship.

8.2.2. Significant cost involve for any changes in the plan

Employee benefit plans of all types are fairly complex,

particularly when there are numerous elements to the package.

For example, any time a company changes medical, vision or

dental plans, the process is generally accompanied by significant

portions of paperwork and cost to facilitate the changes.

9. IMPACT FLEXI BENEFITS TOWARDS ORGANIZATION

9.1.Employee Enggagement

According to a survey conducted by Life Insurance Marketing Research

Association (LIMRA), 63% of employees rated benefits as an important

factor when comparing job offers from two separate companies. As more

Generation Y is entering the market and Baby boomers extending their

retirement age, it is becoming more common to have workplaces where

you have both generations working together. By offering flexible

benefits, you are giving your employees the opportunity to choose

packages that best satisfy their unique needs. A conscious engagement effort

made by employers and employees in ensuring both parties are able to

determine a benefits package that is mutually beneficial will provide them with

a healthier and happier workforce while lowering the costs on benefits but

still making sure that everyone is being covered properly.

9.2.Job Satisfaction

Employer has to ensure the changes provide meaningful choice that

improvise program satisfaction for the majority of the employee



population. It is believed that in many of cases the same level of employee

satisfaction could have been achieved at a fraction of the effort and cost

by making a few minor plan modifications, adding some flexibility with a

simple heath spending account and supplementing these changes with a

solid communication campaign.

9.3.Employee Satisfaction

Flexi benefits plan may enhance satisfaction by making employees more

aware of the nature and value of the benefits. It also promote an ethical

organizational climate by providing employees with more choices as

alternatives are made available to employees to overcome the constraints

faced in the traditional plan and in ensuring quality of work life. When

employees are allowed to participate in their organization’s decision-

making processes, they often developed positive, attitudes toward the

organization, as well as they are committed to the employer, remain with

the employer, and perform their jobs well, this in turn leads to strong

organization performance4. For instance, the leading pharmaceutical

company AstraZeneca's 2010 focus group study shows that after

implementation of flex,i benefits plan the employees' engagement level

reached 93% and the satisfaction level 86%, a record high.

9.4.Organization Commitment

One of the challenges facing modern organizations involves maintaining

employee commitment in the current business environment. Research

suggested that mandatory and fringe benefits and also family-responsive

benefits were having significant and positive relationship with

organizational commitment also lowering intentions to turnover.

Employees’ perceptions about their benefits are related to job satisfaction

and organizational commitment.

9.5. Intention To Quit

Several studies have confirmed the important role of Organizational

commitment as a major antecedent of intention to leave; they found a

4 The Impact of Flexible Benefits Plan on Organization Commitment and Intention to Quit, Dr. Zoubeir Ayache, University Larbi Ben Mehidi,Oum El Bouaghi, Algeria, May 2014



significant negative relationship between organizational commitment and

intention to leave5. Research suggest that employees who are strongly

committed are those who are least likely to leave the organization. Flexi

benefit plans can enhance satisfaction, sustain loyalty, retain frontline

workers, improve service quality and discourage employees from leaving.

Firms that offer attractive benefit packages tend to retain talented

employees and reduce employee turnover.

SECTION C

10. RECOMMENDATION FOR IMPROVEMENT OF BENEFITS

10.1. Communication

Communication is the key to success. Employers must be willing to

commit significant resources to promoting and explaining the plan. To

maximize the impact of the plan, organizations are developing

sophisticated communication programs to explain to employees the

advantages of their benefits such as Flexi Benefits booklet, awareness

program, email blast, one-to-one session etc . Raising awareness before

5 The Impact of Flexible Benefits Plan on Organization Commitment and Intention to Quit, Dr. Zoubeir Ayache, University Larbi Ben Mehidi,Oum El Bouaghi, Algeria, May 2014



putting in a flexi benefits plan is the most crucial implementation elements as

this will influence the employee engagement in taking-up benefits otherwise

the entire investment is pointless.

10.2. Administrative Support

Putting in place sufficient administrative support prior to launching a flexi

benefits plan is vital. Therefore, staff specialists should be assigned to this

function. Planning out the program is not the only requirement but control

of costs should becoming a major goal.

10.3. Implementation Period

For the plan to be successful, sufficient time must be put aside to

implement it properly in order to allow a phased process of communication and

implementation to ignite employee interest. The length of time that should

be depends on organization readiness, types of industry, budget allocation

with estimates varying from12 months to as little as 3 months.

10.4. Careful Planning

A feasibility study should already have ascertained an employer's

objectives and the attitudes of staff towards the flexi benefits prior to

implementation. It is then up to the employer to decide whether to

come out with own plan or to work with a specialist provider to design,

implement and maintain the plan as they have the advantages of

experience, industry insight and contacts.

10.5. IT Advancement

Most organisations implementing flexi benefits plan today, using an online

or self-service system to reduce the cost and administrative load.

However, employers have to ensure they are using the right IT system for

their organisation. Therefore, selecting of IT vendors is also important

before committing, an User Acceptance Testing (UAT) should be

rolled out to safeguard from the technology not being able to perform the

task. On the other hand, IT project management is an essential to keep

the program implementation on track and meeting objectives.



2. CONCLUSION

In summary, the traditional benefits that people knew 10 to 20 years ago are long

gone. With a greater drive towards integration into single platforms, flexible benefits

now encompass so much more than just standard benefit selections. In Etiqa, Flexi

benefits plan is the sort of strategic Human Resource solution that can have a major

impact in winning the war for talent and containing costs. Several companies in

Singapore, Malaysia, Hong Kong, Taiwan, China and Thailand have moved into

implementing the plan. It all comes down to understanding what employees need

and value and repurposing the benefits spending accordingly. It calls for the creation

of a culture of health through wellness programs and benefit plans. Moreover, it

calls for choice in benefit plan design to address diverse workforce needs and

generate greater employee engagement within the organization. These basic

benefits strategies have the potential to address the key drivers of talent attraction,

retention and engagement—not only in Asia, where the war for talent is fiercest, but

also on a global basis, as multinational firms face a freshly competitive future in

every geography.

Diagram 3: Readiness of Flexi Benefits Plan in several countries



3. REFERENCE

3.1. The Impact of Flexible Benefits Plan on Organization Commitment and

Intention to Quit, Dr. Zoubeir Ayache, University Larbi Ben Mehidi,Oum El

Bouaghi, Algeria, May 2014

3.2. Flexible Benefits Research 2013, Tower Watson

3.3. Flexible Benefits Plans: Employees who have a choice, Monthly Labor Review,

Dec 1989.

3.4. Flexible Benefits: An Effective Prescription in China, HR Connect Asia Pacific,

Health & Benefits Practice, Aon Hewitt

3.5.The Global Added Value of Flexible Benefits, Benefits Quarterly, Fourth Quarter

2011.

3.6.Staff Medical Benefits Policy, Etiqa Insurance & Takaful Bhd, 17 May 2013

3.7.The rise of HR in the new Asia, 13-14 April 2010, Mercer

3.8.Flexible Benefits-Can you afford not to introduce them? 2011 Latin America and

Carribean HR forum, Mercer, Elva Rios Mexico City.




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Bwrr3043 Employee Benefits