This document discusses employee benefits and their administration. It begins by defining benefits and their strategic value in incentivizing employee retention. It then outlines various statutory and voluntary benefits, including retirement benefits, health insurance, life insurance, and time off. The document also covers benefit administration, communicating the value of benefits to employees, and utilizing tools like cafeteria and modular plans.

1. Human Resource Management: Functions, Applications, Skill
Development by Robert N. Lussier and John R. Hendon
Chapter 13

2. video
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
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3. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Overview of Benefits Management
Benefits are indirect compensation that
provide something of value to the employee.
Some are mandatory, due to federal and
state statutes, and some are optional, based
on the desires of the firm.
 According to the U.S. Bureau of Labor
Statistics, benefits average roughly 30
percent of total employee compensation
cost.
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4. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
The Strategic Value of Benefits Programs
Because people demand more and better
benefits to match how they live, companies
add new benefits.
This requires HR to spend more time
monitoring benefits’ cost and value.
But benefits also provide incentives to
employees to continue working for the firm
because they are being cared for by the
company.
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5. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Why are benefits growing as a portion of
overall compensation?
Tax advantages.
Statutory requirements.
Influence of Organized Labor.
Buying in Bulk.
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6. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Considerations in Providing Benefits
Programs
Amounts – affordability to the firm.
Mix – various mixes include: a retirement
benefit, health insurance, life and disability
insurance, dental care, doggie day care, free
parking, public transportation vouchers, etc.
Flexibility – allows employees to choose one
type of benefit over another.
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7. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Statutory Benefits
Social Security – Old-Age, Survivors and Disability
Insurance (OASDI) programs.
Retirement.
Disability and survivor benefits.
Medicare - national healthcare program for the
elderly or disabled.
Workers’ Compensation - provides medical
treatment and temporary payments to employees
who are injured on the job or become ill because of
their job.
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8. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Statutory Benefits
Unemployment Insurance - federal program managed by
each state; provides payments for a fixed period to workers
who lost their jobs.
Family and Medical Leave Act of 1993 (FMLA) – unpaid
leave that employers must provide to eligible employees
when they or immediate family members are faced with
medical issues.
The Patient Protection and Affordable Care Act of 2010
(PPACA) – requires all employers with more than 50
employees to provide health insurance for employees or
face significant penalties levied by the federal government.
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9. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Statutory Requirements When Providing
Certain Voluntary Benefits
Consolidated Omnibus Budget Reconciliation Act
of 1985 (COBRA) – requires employers to offer to
temporarily maintain health insurance on
individuals who leave their employment.
Health Insurance Portability and Accountability
Act of 1996 (HIPAA) - if an employee had group
health insurance at a previous employer and if the
new employer has health care coverage, the firm is
required to provide the opportunity to participate
in their health insurance plan.
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10. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Employee Retirement Income Security Act of 1974
(ERISA) – major provisions:
 Eligibility – available to all employees over 21 who
have worked in the firm for one year.
 Vesting – a maximum time that a firm can retain
company contributions to the employee’s account.
 Portability – allows employees to move their funds
from the employer to another qualified fund.
 Fiduciaries – they must act under a concept called the
“prudent man”.
 PBGC - Pension Benefit Guarantee Corporation insures
retirement funds against failure.
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11. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Voluntary Benefits
Paid Time Off
 Vacation or Annual Leave
 Sick Leave
 Holiday Pay
 Paid Personal Leave
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12. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Voluntary Benefits - Group Health Insurance
Traditional health care plans typically cover a set
percent of fees for medical services.
Health Maintenance Organization (HMO) is a managed
care program that provides both health maintenance
services and medical care.
Preferred Provider Organization (PPO) is a hybrid
between traditional fee-for-service plans and HMOs.
Health or Medical Savings Accounts (HSA/MSA) allow
employers and employees to fund a medical savings
account from which employees can pay medical
expenses with pretax dollars.
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13. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Utilization Analysis
A review of the cost of a program and
comparison of program costs with the rate of
the program’s usage by the members of the
company.
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14. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Retirement Benefits
Are not mandatory, but if provided, the firm must
comply with ERISA provisions.
Defined benefit plan provides the retiree with a
specific amount and type of benefit that will be
available when the individual retires.
Defined contribution plan identifies only the amount
of funds that will go into a retirement account, not
what the employee will receive upon retirement.
A 401k retirement plan is a savings investment account
for individual employees of corporations; a 403b
retirement plan is similar but it is used for nonprofits.
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15. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Retirement Benefits (continued)
Matching contributions – many employers that offer a
401k or 403b provide a matching contribution up to a set
maximum.
IRAs and Roth IRAs – any taxpayer can make tax-free
contributions to an IRA (subject to a maximum annual
income limit); these contributions reduce the taxable
income by the full amount of the contribution in the year
in which they are placed in the account.
Simplified Employee Pension (SEP) Plans – for self-
employed individuals and members of small companies.
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16. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Employee Insurance Coverage
Life Insurance
Disability Insurance
Life and Health Insurance
Others:
Employer-sponsored automobile insurance,
homeowners and renters insurance, identity
theft, and pet insurance.
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17. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
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18. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Administration of Benefits
Flexible Benefit (Cafeteria) Plans – employees choose
from multiple options.
Modular plans – employees choose benefits from
modules, each with a different mix of insurance,
employee services and retirement options; these plans
are the easiest for HR to manage.
Core Plus Plans – core benefits are available to
everyone; employees choose from remaining benefits.
Full Choice Plans – complete flexibility for employees.
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19. Employee Benefits
Human Resource Management: Functions, Applications, Skill Development by Robert N. Lussier and John R. Hendon © 2012 SAGE Publications, Inc.
Communicate Value to Employees
So they understand the true cost and value of the
benefits they receive from the firm.
Provide information through multiple
communication channels more often than just once
a year during open enrollment.
Consider snail mail, searchable knowledge bases
and email reminders, and/or social media,
depending on the demographics of the firm.
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