indirect compensation & employee benefit plans

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indirect compensation & employee benefit plans

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  • 1. Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.

2. ChapterIndirect Compensation: 9Employee Benefit PlansCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 3. Strategic Considerations in the Design ofBenefits Programs The organizations stage of development Projected rate of employment, growth, or downsizingCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Geographic redeployment Acquisitions Expected changes in profitability Each of these conditions suggests a change in the optimum mix ofbenefits to be consistent with long-term business plans 4. Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.Classifying Benefits Three broad categories exist for classifying benefits Security and health Payments for time not worked Employee services 5. Security & Health BenefitsCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Life Insurance Workers compensation Disability Insurance Hospitalization, surgical, and maternity coverage Health maintenance organizations (HMOs) Other medical coverage (dental, mental health, substance abuse) Sick leave Pension plans Social Security Unemployment insurance & supplemental unemployment insurance Severance pay 6. Payments for Time Not WorkedCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Vacations Holidays Reporting Time Personal excused absences Grievances and negotiations Sabbatical leaves 7. Copyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved.Employee Services Employee Services a broad range of benefits that employeesqualify for purely by virtue of their membership in the organization,and not because of merit Some examples include tuition aid, credit unions, auto insurance,company car, food service, stock-purchase plans, parking, fitness andwellness programs 8. Gaining Control Over the Cost ofHealth Care Band together with other companies to form a purchasingcoalition to negotiate better rates with insurers Deal with hospitals and insurers as with any other suppliers Induce employees to choose reduced medical coverage voluntarilythrough flexible-benefits plansCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Negotiate directly with doctors Require pre-admission certification 9. Cafeteria, or Flexible, Benefits Cafeteria Benefits instead of all workers at a company getting thesame benefits, each worker can pick and choose among alternativeoptions cafeteria style Workers are offered a package of benefits that include basic andoptional itemsCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 10. Basic and Flexible Credits in theCafeteria Benefits PlanCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Basic modest medical coverage life insurance equal to a years salary vacation time based on length of service some retirement pay Flexible credits toward additional benefits Full medical coverage Dental and eye care More vacation time Additional disability income Higher company payments to the retirement fund 11. Employer Advantages inOffering Cafeteria Benefits Under conventional plans, employers risk alienating employees ifthey cut benefits, regardless of increases in the costs of coverage Flexible plans allow employers to pass some of the increases on toworkers more easily Instead of providing employees a set package of benefits, the employerand employee agree on a set amount of the employees salary to beused toward benefits If the employee wants more, he/she paysCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. 12. Communicating Benefits to EmployeesCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Make employees aware of them Help employees understand the benefits information they receive inorder to take full advantage of the plans Make employees confident that they can trust the information theyreceive Convince present and future employees of the worth or value of thebenefits package 13. Communicating the Valueof Benefits Programs to EmployeesCopyright 2003 by The McGraw-Hill Companies, Inc. All rights reserved. Alternative metrics: Annual cost of benefits for all employees Cost per employee per year Percentage of payroll Cents per hour