Chapter_One&Two_416 - Introducing Employee Benefits&...

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Unformatted text preview: Introducing Employee Benefits & Benefit Economics Overview Legally required and discretionary benefits Regulatory and economic influences on benefits Origins of employee benefits Economics of employee benefits Fundamental Roles Protection Programs Paid Time-of Accommodation & Enhancement Information Resources Society for Human Resource Management International Foundation of Employee Benefit Plans World at Work Employee Benefit Research Institute Background of Employee Benefits Legally required benefits provided a form of social insurance that was unknown to workers Industrialization during late 19th and early 20th century and Great Depression led to design of initial social insurance programs, aimed at: Preventing destitution of unemployed or injured Stabilizing well-being of dependents Enabling retirees to maintain subsistence income National Labor Relations Act legitimized collective bargaining for benefits Growth in benefit plans exploded during World War II Benefits Required by Law Social Security Act State Workers’ Compensation Laws Pregnancy Discrimination Act and Family and Medical Leave Act Social Security Act Original Programs [1935] Retirement System Unemployment insurance administered by the federal and state governments Amendments[1965] Disability Medicare Workers’ Compensation Immediate income and medical benefits for victims Relieve the state of financial support of injured workers and their families Improve workplace safety Reduces employers’ legal expense because injured employees forfeit their right to sue the employer if they accept benefits Pregnancy & Leave Pregnancy Discrimination Act (1978) obligates employers to refrain from discrimination based on pregnancy and, for those who ofer short term disability coverage, to include pregnancy as a disability Family & Medical Leave Act (1993) provides job protection to employees in cases of serious medical emergencies afecting families and employees themselves Discretionary (?) Benefits Income protection Present Future Health protection Paid time – of There is no federal “paid holiday law” that makes paid holiday time mandatory for private sector employees. In fact, there is no federal law that requires private-sector employers to give employees any work time of for holidays (with or without pay). If employees are required to work on holidays they are not entitled to overtime (unless they meet the hourly or weekly threshold) Accommodation and Enhancement Income Protection Disability Insurance Life Insurance AD&D Non-employer options to preserve your right to control decisions afecting your care and property when you are unable to do so Retirement Plans Defined benefits plans Defined contribution plans Hybrid plans Non-employer alternatives Health Insurance Fee-for-Service Plans Managed Care Plans Point-of-Service Plans Consumer-Driven Health Care New Healthcare Overhaul law Accommodation Benefits Improve mental & physical wellbeing Provide family assistance Allow flexible work schedules Enhance employees’ human capital Employer’s Incentives Cost Advantage Employee Recruitment Tax Advantages Cost Advantage Health Insurance Cost Employer $1000 Per Employee for a large employer Each Employee To Purchase On Own $2,500 ■The employer is essentially acting as a buying agent for the employee but enjoys discounts the employee would never receive Why Insurance Works ■ As an insured group gets larger, the risk is lowered and the total medical expenses become more predictable ■ High risk patients are balanced out by healthier ones ■ Economies of scale ■ Tends keep employees healthier by ofering afordable and accessible medical care ■ The more people in the group, the more likely that total medical expenses will be close to that predicted by the characteristics of people in the group. Risk Management Individual insurance policies are subject to underwriting and a medical exam Employees have an experience rating related to your health (doctor visits, surgeries, costs) and eligibility may rely upon this rating Insurance companies are risk adverse and want healthy participants to avoid paying claims Recruiting Benefit array can reveal wants or tendencies of applicants Benefits that encourage employees to invest in their human capital attract motivated people and demonstrate a long term view of the employee relationship Adverse consequences are possible Tax Incentives Assuming an employee’s income is taxed at 25% rate, a $1,000 raise only puts $750 in his or her pocket ($250 to the IRS, ignoring state taxes) $1,000 worth of health care coverage is not taxable so the employee receives the whole benefit An employee would have to earn $1,333 to pay for individual coverage...
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