Module 8 - Benefits Perks

Examples of Benefits that Save Employees Time and Money and Minimize Costs to the Organization

- An organization that cannot afford to provide health insurance may consider annual cash bonuses that employees can apply toward their insurance costs. - An organization that cannot offer a benefit due to cost may think about offering popular lower-cost benefits, such as flexible work schedule, telecommuting and casual dress. - Offering the opportunity to access discount programs or concierge-type services may not cost an employer anything but the time to communicate the service availability to employees through internal communication channels. - Benefit perception can vary between countries, cultures, and government benefit offerings.

Categories of Employee Departure

- Voluntary Termination - Involuntary Termination

Deciding Which Benefits to Offer

- Which benefits are required by law? - Which benefits enable an employer to compete for employees? - Which benefits are cost-effective to purchase and to administer? - Which benefits do employees prefer? - Which benefits provide creative choices?

Which benefits provide creative choices?

Constantly monitor the marketplace to decide if legislation or other changes have made desirable benefits more affordable.

Purpose of Gap Analysis

The HR Professional performs a gap analysis to identify the set of benefits that best matches the needs of the organization and its employees.

Types of Retirement Plans

1. Defined Benefit 2. Defined Contribution

Two Types of Programs Related to Health Benefits

1. Employee Assistance Programs 2. Wellness Programs

Gap Analysis Issues and Suggested Actions

1. Needs that are not being met by existing benefits Research new benefits or revise existing benefits. 2, Benefits that are not addressing organizational or employee needs Drop or revise benefits that are not meeting needs. 3. Benefits that overlap each other Revise benefits that overlap or conduct utilization review and keep only the used benefit(s). 4. Benefits that are underutilized Do further research and then drop or revise benefits that are not being used enough. 5. Benefits that are too costly but are heavily used by employees Adopt cost-containment strategies and reevaluate each benefit.

Benefit Needs Assessment Activities

1. Review the organization's strategy 2. Review the organization's total rewards philosophy 3. Analyze the demographics of the organization's workforce 4. Analyze the design and utilization data on all benefit plans

Wellness Programs

A wellness program is intended to promote and support the health, safety, and well-being of employees. There are many types of wellness programs, along with just as many incentives to entice employees to participate in them. Some examples are; helping employees stop smoking, diabetes management programs, with loss programs, and preventive health screenings. An employer may offer employees premium discounts, cash rewards, gym memberships, and other incentives to participate.

Analyze the Demographics of the Organization's Workforce - Benefit Needs Assessment

An organization's benefits plan must address the needs of various categories of employees. These categories include the following: · Full-time versus part-time status · Active versus retired status · Age · Marital status · Family status

Benefit Programs

Are part of "social contract" between the government, employers, and employees to protect the financial and physical well-being of workers and their families.

Maternity and Paternity or Parental Leave

At least some portion of maternity leave is paid in most countries. This leave is sometimes supplemented by a required period of unpaid time off. The individual may have the right to return to work on a part-time basis if desired.

Description of Tax Treatment of Benefits

Benefits are taxed differently in different countries. Examples: include different tax rates and schemes for cash and noncash compensation, benefits, or perquisites.

Description of Benefits that are Voluntary or Discretionary

Benefits provided voluntarily by the employer may not be totally discretionary; competitive practice or employee relations may put pressure on the employer. Examples: An organization may offer additional health-care benefits where government-supplied health care is not satisfactory. Or additional annual vacation days may be awarded.

Public, National, Bank Holidays

Each country has these days where firms may be required to shut down, there are also various local holidays to take into consideration, and public holidays may only be customary.

Benefits

In addition to direct compensation, employers also provide employees with indirect compensation, commonly known as employee benefits. They are tangible payments or services provided to broad groups of employees to cover common issues, such as those related to retirement, private health coverage, sick pay/disability schemes, life insurance, and paid time off, in addition to those required by law. Benefit programs are designed to reward continued employment, promote loyalty, and enable employees to live healthier, less worrisome lives.

Fiduciary Responsibility (Fiduciary Obligation)

In administering retirement plans, organizations must be aware of the concept of fiduciary responsibility. Implies a legal obligation of one party to act in the best interest of the another. The obligated party is typically referred to as a "fiduciary". Legal systems may have a broad or narrow views of this responsibility.

Workers' Compensation

In many jurisdictions, insurance against work-related accidents or illnesses is called workers' compensation. This wording can be a bit misleading because the benefit is more of an insurance policy against accidents than a form of compensation for work; only a person who has an approved work-related accident would be eligible to collect this benefit. - The goal is to offer employees and employers a financial buffer if an employee is unable to work for a period time because of an approved work-related accident or illness. - Employer is usually exempt from paying the employee's salary or wages during the accident related leave period; but employee receives a portion of his or her salary during the same period. - The employer usually has a no fault insurance policies-being the employer is protected against being sued by the injured employee (provided the employer was not negligent). - Employers usually need to have a form of medical coverage to protect against employee income loss as permanently disabled costs can be significant.

Paid Time Off Across Countries

In most countries, vacations or holiday time tends to be provided equally to all employees, regardless of job status or seniority. In some situations, additional vacation or holiday time may be used to attract scarce talent or reward senior managers. Even in emerging and developing countries, it is common for all employees to be allotted a minimum number of days of annual leave plus holidays.

Compensation for Termination

In some countries, support is required for terminated employees, even when they have been terminated for a cause. To the extent that the employer bears the burden of the cost of this support, as they often do to at least some degree, this can be very expensive. It can be even more expensive if support requirements are ignored, because fines and penalties for noncompliance can be costly. Where country laws dictate the terms of termination and end-of-service calculations, organizations have little room for discretion even if the payments and benefits are significantly more generous than company policy would award in unregulated jurisdictions. The amount of compensation paid to a terminated employee varies by country, although there are some similarities within regions. Regardless of the circumstances across countries, all organizations must ensure that severance pay is compliant and fairly compensates terminated employees to avoid discrimination lawsuits and regulatory fine and penalties.

Additional Perquisites

Include financial and legal counseling and, to a lesser extent, medical check-ups, vaccinations, immunizations, subsidized/low interest loans for the purchase of a house or car, and travel allowances.

Which benefits are cost-effective to purchase and to administer?

Organizations usually have a limited budget for benefits, they must always assess the cost of the benefits and the associated administrative burden. Benefits such as paid holidays are easy to administer, but pension and health-care plans are more time-consuming and costly to administer.

Leave Related to Illness

It is common to take time off due to illness. Sick leave policies vary primarily in terms of the number of days allowed away from work, the amount of wages paid during that time, the entity that pays for these wages, and the waiting period required before being eligible for payment. Sick leave policies may be set by law, by collective bargaining, or by the employer, depending on the country.

Which benefits are required by law?

Laws require that employers provide certain benefits to their employees. These benefits must be included in your organization's total compensation package.

Health Care Laws and Regulations are Often Interlocking

Local conditions can have a large impact on the availability and cost of health care. Some organizations many chose to provide additional health care to their employees to maintains a healthy workforces and reasons of social consciences. Some companies start their own community clinics. Costs (rather than insufficient health care) is a main reason for services not being available.

Which benefits do employees prefer?

Maintaining a well-qualified, motivated workforce is important to the organization's success. Surveying employees regularly and understanding the make-up of the workforce allows the organization to identify benefits that employees value.

Unemployment Insurance

Many jurisdictions collect premiums from employers and sometimes employees - to be applied toward paying a percentage of an employee's salary in the case of the employee losing his or her job through no fault of the employee. Unemployment Insurance can also be called: · Unemployment Insurance · Employment Insurance · Job seekers' allowance/benefit · Redundancy funds

Health Benefits

Most countries have a statutory universal access/universal coverage health-care system in which health care is paid for through some sort of social insurance, funded by employers, employees, general taxation, or combinations of these. In some countries, employers offer employer-sponsored health insurance. It is rare, however, for employees not to be at least partially covered by some form of government-supported health care.

Involuntary Termination

Occurs typically when employers discharge particular employees for cause. These reasons may include poor performance, inability to manage subordinates, inability to work with management, and violations of employer policy. Employers may also discharge employees to reduce or adjust the workforce in response to downturns in business, reorganizing or restructuring, mergers, acquisitions, and etc.

Voluntary Termination

Occurs when an employee resigns or retires. When an employee decides to quit or leave.

Paid Time Off (PTO)

Provides needed relief from the physical and mental demands of work. The program structure may reward long-term employees for their seniority and service.

Retirement Benefits

Retirement plans differ widely by country. Many retirement programs are mandated by the government and paid for through employee and employer contributions. Supplemental government support is sometimes provided.

Which benefits enable an employer to compete for employees?

Some benefits, such as paid time off, have become so common that organizations that do not offer them will have a problem finding and keeping workers. Offering these benefits allows an organization to compete for the best employees. Also, if an organization offers an attractive benefit that is not commonly offered by competitors, such as child allocation (child care), the organization will have an advantage over its competitors.

Life Insurance

Some life insurances, payable on the death of the employee, is usually provided by social security in most countries. In some countries government mandates life insurance must be provided by the employers. -which is not sufficient-small lump sums-sufficient to cover burial expenses.

Perquisites

Special incidental payments, benefits, or privileges given to individual employees, over and above their regular rewards. When awarded to senior-level job positions, may also be called executive perks or fringe benefits.

Terminations and Severance Packages

The circumstances under which an organization can terminate employment and the amount of payment the terminated employee receives is prescribed by law and differs by country. Laws in various countries may include additional aspects, including: · Issuing warnings for misbehavior · The reasons for which termination can occur · The amount of severance payments provided to an employee · How long wages must continue to be paid to an employee after termination Terminating employees without a thorough understanding of these requirements puts an employer at risk.

Disability

The concept of disability benefits takes on different meanings in different countries. In general, it refers to payments made to employees who are physically unable to perform their jobs because of illness or injury. Sometimes it covers only incapacitation due to job-related injuries or illnesses; other times it also covers causes outside the workplace. Short-term, long-term, and permanent disability are usually differentiated. Depending on the country, the characteristics of each disability category may vary in terms of the source of funding and the length and amount of the benefit.

Employee Assistance Programs

The employee assistance program (EAP) is a health-care offering that has spread around the world. EAP services are intended to help identify and resolve employee concerns related to personal matters or work-related issues that, in some instances, can affect health or performance in the workplace.

Gap Analysis

The final step in a benefits needs assessment is to compare the following: · Organizational needs (including budget) · Employee needs · Existing set of benefits

Review the Organization's Strategy - Benefit Needs Assessment

The organization's market strategy has a direct effect on the benefits it offers employees: • Organizations that want to lead the market will offer their employees a more extensive benefits package. • Organizations that have a lagging or matching market strategy will offer their employees a simple benefits package.

Review the Organization's Total Rewards Philosophy - Benefit Needs Assessment

The organization's total rewards philosophy will provide an understanding of how benefits fit into that philosophy. HR professionals will need to find out how much can be spent on benefits and their actual impact on the organization's cash flow. Benefits must be balanced with the other elements in the total rewards program.

Private Health Insurance

The role of private health insurance varies, usually depending on the amount and quality of health care provided by the local government or the employer. Private health care insurance varies by government and employers, usually government health care is less than desired. Therefore, companies can purchase additional insurance to the be seen by private health care facilities. Private health care is expensive for most employees is less-developed countries and is generally available to upper management. Cultural values also play a role in the provision of health-care benefits.

Other Types of Leave

There are other types of leave depending on the country. For example: • Employers may be obligated to provide paid leave to trade union officials and representatives for participation in trade union duties, education-related union projects, or other trade union activities. • Both union and nonunion employees may be granted leave to undergo relevant training. • Workers who are getting married may receive paid days off. • Parents may be given paid time off for the marriage of a child. • In many countries with large Muslim populations, employees are given paid time off for prayer. • Reasonable time off is often granted to employees to allow them to carry out specified public duties and activities (e.g., campaigning as an official candidate for an election, voting in an election, or jury duty).

Health and Welfare Benefits

There are significant differences between countries in the type of medical, disability, and life insurance coverage available and/or required for workers. The role of private organizational coverage varies depending in the national statutory coverage provided.

Description of Benefits that are Government-Provided

These benefits are administered and provided directly by the government, usually paid for through taxes. Examples: usually, they are health-care and retirement benefits, but they may include other benefits, such as life, disability, or unemployment insurance.

Description of Benefits that are Market Practices

These benefits are offered and adjusted compared to the external market. Examples: include providing a car or transportation allowance, child-care vouchers, or meal vouchers.

Description of Benefits that are Government-Mandated

These benefits are provided by employers because the law requires them to do so. Examples: country law often requires employers to provide specific types of leave, a certain amount of vacation each year, and time off for statutory holidays.

Purpose of a Benefit Needs Assessment

To decide on a benefits package that will: • Match the overall organizational strategies • Support the organization's mission and vision • Meet employee needs

Benefits Metrics

Understanding how benefit costs are calculated can help HR professionals analyze the requirements of a particular benefits program, understand the cost-benefit ratio of a particular program, prioritize the money spent, and communicate with employees.

Short Term Disability

Usually refers to absences of up to six months, often requiring a minimum waiting period.

Long Term Disability

Usually starts where short term disability ends. Sometimes treated the same as a permanent disability. Funding for disability payments usually involves some combination of employee, employers, and government contributions. Payments can be made directly from an accumulated fund or through a private or government sponsored insurances.

Analyze the Design and Utilization Data On All Benefit Plans - Benefit Needs Assessment

Utilization data needs to look at specific benefits plan usage (for example, relevance of defined benefit schemes for a workforce that has a lower-than-average age and a high turnover). This analysis may result in design changes to a plan. Based on employee lifestyle and employee mix, types of benefits will vary and may include the following: · Retirement · Medical expenses · Insurance · Dependent care assistance · Capital accumulation

Social Security

Varies by country, but generally refers to: • Social insurance, where people receive benefits or services in recognition of contributions to an insurance program. • Services provided by government or designated agencies responsible for social security provisions. • Basic security irrespective of participation in specific insurance programs where eligibility may otherwise be an issue.

Key Factor in Compensation for Termination

Years of service. Other factors of compensation for termination include employee position, employment agreements, and employer policies and practices.

General Benefits Variations Across Countries

• Benefits that are government-provided • Benefits that are government-mandated • Benefits that are voluntary or discretionary • Benefits that are market practice • Tax treatment of benefits

Examples of Family-Oriented Benefits

• Flexible Work Hours (Just Flex Time) • Child Care - Establishing discounts at "near-site" day-care centers. - Providing referral services to aid parents in locating child-care providers. - Developing after-school programs for older school-age children, often in conjunction with local public and private school systems. - Arranging with hospitals to offer sick-child programs. - Allowing parents to use accumulated sick leave to care for sick children. • Elder Care (accumulated sick leave to care for elders) • Domestic Partner Benefits - Unmarried couples, of the same or opposite sex, who live together and seek economic and noneconomic benefits comparable to those granted to their married counterparts. - Common offerings include: • Health, dental, and vision insurance. • Sick and bereavement leave.

Common Perquisites

• Free or discounted products or services • Mobile devices • Professional organization certifications • Training programs • Education fees

Examples of Benefits Employees Prefer

• Health insurance ranks high with employees of all ages. • Some benefits, like tuition reimbursement, may appeal more to younger workers. • Older workers may also be interested in life insurance and retirement benefits.

Less Common Perquisites

• Housing • Company car and/or cash car allowances • Club memberships • Meal allowances

Additional Information about Terminations

• Involuntary terminations can be complex and difficult to manage in many countries, even if it's for poor economic conditions. • The decision to terminate an employee may require prior notification to government agencies or labor organizations. • Notice periods many be determined by law (In some Western European countries, employers may be required to give notice six months in advance of termination, depending on factors such as seniority or management level).

Payments for Retirement Plans

• Made in the form of annuity, paid monthly until death. • Other countries paid in a single lump sum. • The formulas for payment for retirement vary and are often complicated. • The may depend on government funding strategies or variations that depend on such factors as age, level in the organization, and family characteristics. Managers should understand them and be clear before making any changes or making a plan, experts need to consult the organizations long-term liability. Should also happen after mergers and acquisitions.

Defined Benefit Plan

• Promises specific benefit amount upon retirement • Vesting schedule is set up (vesting is the process by which employees gain permanent claim to a portion or all of their benefit. employees are always 100% vested in their own contributions; employer contributions usually vest over time). • Provided benefits based on service and perhaps on salary. • Amount of benefit is decided by a formula. • Provides a pre-specified level of benefits. • Employer bears the investment risk.

Defined Contribution Plan

• The amount of money that is to be regularly contributed to the fund is specified. • No promises are made about the future value of the benefit. • Employees will be entitled to 100% of their investment and the vested portion of the employer's contribution upon retirement. • Requires individual accounts for each employee. • The amount of the benefit at retirement will depend on the investment return. • Employee bears the investment risk.

Benefit Needs Assessment Allows HR to Build a Business Case for Important Recommendations Such As

• The type of benefits provided • Who is covered under the plan (for example, employees, dependents, retirees). • What options employees have (for example, flexible spending accounts, cafeteria plans). • How the plan will be financed and whether employees will share in the costs. • Who should administer the plan (for example, the organization, an insurance carrier, a third-party administrator). • How the benefit plan will be communicated to all affected individuals.

Categories of Paid Time Off

• Vacation or holiday leave • Public or national or bank holidays • Maternity and paternity or parental leave • Leave related to illness • Other types of leave