Designing and planning employee benefit program

1. Designing and Planning Benefit
Program
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor

2. Process of Benefit Planning
Determining the goals and objectives
Assessing and/or selecting benefits
Designing the benefits Package
Monitoring the plan

3. Determining Goals & Objectives of Benefit Plan

4. Selecting Benefits
Assess current benefits to see where improvements
needed or new ones need to be added
Selecting & evaluating benefits is the 1st step in
translating goals and objectives of a benefit program
Organizations have some choices in benefits they offer
There are benefits as required by legislation
There are customary benefits common to almost all
organization and
There are benefits those can make benefit package
unique

5. Selecting Benefits -
Legislation
Social legislation requires that employer make
expenditures for health & safety of employees
Insurance to be made to indemnify employee’s loss of
income from illness, injury, unemployment & old age
Law also requires how organization will develop &
operate specific benefits, like retirement plans
These expenditures are to be incurred, whether
employer wants to incur it or not and whether employee
desires the benefit or not
Legally required benefits currently cost employers in
excess of 10% of payroll cost

6. Selecting Benefits
Assessing Competition
• knowing what benefits other employers are offering
Organizational Benefit Plan Analysis
• comparison of benefits offered currently with needs &
preferences of employees
Organizational Financial Analysis
• comparison between direct wages & benefits including
its cost and employee need and
• employer's ability to pay

8. Selecting Benefits
Collective Bargaining and Benefits
• through collective bargaining employees receive the
benefits they want and
• unions are motivated to convince employees about the
value of benefits bargained for
Who Should Receive Benefits
• part time employees/dependents of employees/retired
employees/survivors of deceased employees
Employee Choice in Benefits
• each person to decide what benefits to include & how
much to allocate for each, as per flexible benefit plans

9. Flexible Benefit Plans
Mix and Match Plans
• employee is offered an amount based on salary, seniority
& age and he can choose from various benefit options
Modular Plans
• Organization offers various optional benefit programs
and employee can choose those which best fits his needs
Core-Plus-Option Plans have two parts
• core part provides health and retirement benefits to all
employees &
• Optional part provides various benefits - employee can
choose from

10. Flexible Benefit Plans
Pre-tax Salary Reduction Plans
Permits employees to set aside a portion of wages each
year on a pre-tax basis to pay for qualified expenses
There are two major types of plans:
• Flexible spending Accounts
- allows employee to pay for expenses, such as, medical
expenses, reducing employee's gross income
• Premium-Only Plans
- allows employee to pay for insurance premiums

11. Reducing Costs of Benefits
Health Plans
• Changing an insurance plan to a Preferred Provider
can reduce costs
Time Off
• holidays can be adjusted if organization grants holidays
those are not required by law
Retirement
• changing defined benefit plans to defined contribution
plans

12. Cost Sharing
Health Plans
• employees to pay a part of their monthly health
insurance premiums
Time Off
• pay only a portion of salary for certain types of time
off or share costs with an insurance plan, as in
disability
Retirement
• all types of retirement plans can be made
contributory on the part of the employee

13. Reducing Administrative Cost
Health plans can contain 3 features that help in controlling
costs
• Wellness Programs
- programs are intended to reduce future medical claims by
keeping employees healthy
• Utilization Reviews
- reviews evaluate frequency of employee usage and quality of
service received
• Case Management
• Overseeing the expenses of illnesses which add up very rapidly
and balancing care and cost
Outsourcing the Benefits Function to reduce and control
operating costs

14. Monitoring Benefits
Organization keeps careful track of what is happening
both externally & internally
Needs & preferences of employees likely to change due
to change in organization's work force
 Surveying employee needs and preferences should be a
continuing exercise and not a one-time project
Organization can not monitor change in costs of benefits
provided by outside Insurance Companies
Hence, organizations are developing alternative ways of
providing the benefits to employees at lower/stable cost