Managing Human
Resources
Eighth edition
Jackson and Schuler
Chapter 13:
Providing Benefits and Services
© 2003 South-Western College Publishing. All rights reserved.
Chapter Outline
 Employee Benefits and Services Within an Integrated








HR System
The Strategic Importance of Employee Benefits &
Services
Public Protection Programs
Private Protection Programs
Health Care Benefits & Services
Paid Leave
Work-Life Balance
Other Benefits & Services
Administrative Issues
© 2003 South-Western College Publishing. All rights reserved.
13–2
Terminology
 Benefits and Services
 In-kind payments to employees
 For membership or participation in the organization
 Public Protection Programs
 Legally required
 Social Security, unemployment, workers’
compensation
 Private Protection Programs
 Voluntary for employers
 Health care, life insurance, disability, retirement
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13–3
Benefits and Services within
an Integrated HR System
Total Compensation
Monetary….Nonmonetary
Other HR
Activities
• Fairness/Legal
• Recruitment
• Compensation
• Safety/Health
Global
Environment
Objectives for
Total
Compensation
• Communicate
Values
• Support Objectives
• Attract, Retain
• Motivate
• Contain Costs
Organizational
Environment
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Provide Mandatory
Benefits & Services
• Social Security
• Unemployment/Wkrs Comp
Provide Voluntary
Benefits and Services
• Retirement, Medical
• Paid Leave, Life Cycle
Communicate
and Administer
Monitor Health and Safety
13–4
External Influences
Expansion of social security
Social legislation
Competition
Wage controls
Employee
Benefits
Inflation
Health care costs
Union bargaining
Federal tax policies
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13–5
Internal Influences
Employee wants
Human
resource
philosophy
Employee
Benefits
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Business
strategy
and
objectives
13–6
Average Annual Monetary Benefits
and Earnings
7%
2%
Pay for Time
Worked
9%
Private Pensions,
Insurance
Paid Vacations
and Rest Periods
14%
Legally Required
Payments
68%
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Other
13–7
Percentage of Who Rank Each Benefit
Most Important
Stock Options
Disability
Long-term care
Life Insurance
Pension
Retirement Savings
Health Insurance
0
10
© 2003 South-Western College Publishing. All rights reserved.
20
30
40
50
60
70
13–8
The Strategic Importance of
Benefits and Services
 Benefits and Services May:
 Attract good employees
 Increase employee morale
 Reduce turnover
 Increase job satisfaction
 Enhance the organization’s
image
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13–9
Benefits, Services and Business Strategy
 Are generally not considered motivators
 Benefits and services are not contingent on
performance
 Innovative packages may attract and retain
employees
 Communication is important
 Many employees don’t know the worth of benefits
they receive
 Employees may view benefits as entitlement
 Employees differ on the relative value they place
on particular benefit
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13–10
Business Objectives Addressed by
Benefits and Services
 Objective: To unify a company acquired from a
merger
 Benefits Response: Analyze immediate versus
gradual transfer of subsidiary employees into
corporate benefits plan.
 Objective: To cut accident rates 10% by year
end
 Benefits Response: Establish employee assistance
program. Set up literacy training to ensure
employees can read safety signs.
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13–11
Benefits Costs
 In 1929, total benefits
averaged 5% of total
pay, in 2000: 30% of
 Wages and salaries are
40 times greater than 60
years ago
 Benefits and services
are 500 times greater
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13–12
Public Protection Programs
 Social security system
 Unemployment

© 2003 South-Western College Publishing. All rights reserved.
compensation benefits
Workers’ compensation
and disability
13–13
Social Security
 Social Security Act of 1935; Medicare was

added in 1966
Federal Insurance Contributions Act (FICA)
 6.2% of the first $68,400 income for retirement
and disability
 1.45% of total income for hospital insurance
(Medicare)
 Equal contributions from the employer and the
employee
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13–14
Unemployment Compensation
 Jointly administered by Federal and State


governments
Tax rates for employers vary based on
number of people using benefits
Level of benefits ranges
50-70% of base salary
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13–15
Workers’ Compensation
 Covers costs and lost income due to injury or



illness that result from on-the-job events
Administered by states
Fully financed by employers
Managing workers’ compensation costs:
 Use health care cost-containment strategies (audit
bills, develop preferred providers, etc.)
 Implement job safety programs
 Combine with disability management
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13–16
Relevant Laws
 Pregnancy Discrimination Act of 1978
 Pregnancy is defined as a disability.
 Female employees (and spouses)
must receive same benefits for
pregnancy as for other disabilities.
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13–17
Family and Medical Leave Act of 1993
 Covers employers with 50 or more workers
 Required to grant up to 12 weeks of unpaid
leave annually
 For birth/adoption
 To care for immediate family member with serious
health condition
 For employee with serious health condition
 Employee keeps preexisting health coverage
and must be allowed to return to same or
equivalent job
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13–18
Relevant Laws (cont’d)
 Economic Recovery Tax Act of 1981
 Employees allowed to make tax deductible
contributions to employer-sponsored plan or
individual retirement account (IRA)
 Encouraged employee stock ownership
 Health Insurance Portability and
Accountability Act of 1996
 Facilitates employees’ transfer of
coverage when they change jobs
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13–19
Economic Growth and Tax Relief
Reconciliation Act of 2001
 Raises contribution limits for IRAs and employersponsored retirement plans
 Reduces (to 3 yrs) length of service before employer
contributions to retirement programs must be
available
 Shortens pension vesting waiting periods
 Eliminates federal taxes on
withdrawals from college
savings plans
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13–20
Private Protection Programs
 Are not required by law
 Include
 Retirement income plans
 Capital accumulation plans
 Savings and thrift plans
 Supplemental unemployment
 Guaranteed pay
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13–21
Pension Plans
 Qualified Plan:
 Covers broad class of employees
 Receives favorable tax treatment
 ERISA (Employee Retirement Income
Security Act of 1974)
 Protects benefits for workers covered by private
pension plans; prohibits unfunded plans
 Specifies provisions for vesting (time when
employer’s contribution belongs to employee)
© 2003 South-Western College Publishing. All rights reserved.
13–22
Types of Pension Plans
 Defined Benefit Plan
 Benefits vary with age and length of service
 Provides predictable income after retirement
 Penalizes employee mobility
 Regulated by ERISA
 Cash Balance Plan
 Pays a lump sum upon employees’
departure
 Has become more popular as
employee mobility has increased
© 2003 South-Western College Publishing. All rights reserved.
13–23
Types of Pension Plans (cont’d)
 Defined Contribution Plans
 Each employee has separate account
 Employer may contribute (contributory) or not
(noncontributory)
 Money purchase plans
• Employer makes regular contributions
 Tax-deferred profit-sharing plans
• Employees share profits and
investment risk
© 2003 South-Western College Publishing. All rights reserved.
13–24
Supplemental Plans
 401K Plans
 Employer and employee contribute to fund
 Employee makes investment decisions
 Employee stock and stock option plans
 Recent trend is to offer to all employees
© 2003 South-Western College Publishing. All rights reserved.
13–25
Health Care Benefits and Services
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Medical Coverage
Wellness Programs
Employee Assistance Programs
Disability Insurance
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13–26
Medical Care
 Most employees underestimate cost and view

medical care as an entitlement
Companies that provide health insurance
spend more than 13 cents of every dollar they
make to pay for coverage.
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13–27
Medical Care Approaches
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Insurance Companies
Provider Organizations
Health Maintenance Organizations (HMOs)
Preferred Provider Networks
Self-Funded Plans
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13–28
Medical Cost Containment Strategies
 Hospital utilization
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© 2003 South-Western College Publishing. All rights reserved.
programs
Coordination of benefits
Data analysis
Case management
Cost sharing with
employees
Incentives to promote
employee health
13–29
Wellness Programs
 Proactive programs to prevent health

problems
May include:
 On-site exercise programs
 Stress-management training
 Assistance to stop smoking
 Weight-loss programs
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13–30
Employee Assistance Programs
 Assist employees with chronic personal


problems that hinder job performance and
attendance
Employees referred to confidential counseling
services
Includes help with alcohol and drug
dependencies, domestic problems, mental
disorders, financial problems
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13–31
Paid Leave
 Off the job:
 Vacations and holidays
 Paid absences
 On the job
 Lunches, rest periods
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13–32
Managing Absenteeism
 In U.S., average daily absenteeism rate 2-3%


of payroll.
Programs that reward attendance may be
more effective than disciplinary approaches.
Personal Time Off (PTO) benefits may prevent
unscheduled absenteeism.
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13–33
Work-Life Balance
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Child Care Services
Dependent care reimbursement accounts
Resource and referral programs
On-site care facilities
Flexible scheduling
 Backlash from child-free
workers tends to be
limited in scope
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13–34
Work-Life Balance
 Elder Care Services
 Information and referral programs
 Long-term care insurance
28% of employees over 30
spend an average of 10
hours a week giving care
to an older relative
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13–35
Work-Life Balance (cont’d)
 Other Life Cycle and Life Style Benefits
 Benefits for spousal equivalents
 Educational expense allowances
 Relocation and housing assistance
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13–36
Administrative Issues
Determining
the benefits
package
Communicating
the benefits
package
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Providing
benefits
flexibility
Managing
& reducing
benefits
costs
13–37
Determining the Benefits and
Services Package
 Employee preferences vary considerably and


are difficult to predict, based on demographic
characteristics.
Corporate size, ability to pay, strategy and
culture affect benefits decisions.
Flexible plans, which allow employee choice
of benefits, are very effective.
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13–38
Communicating the Benefits and
Services Package
 Most companies use
passive, impersonal
techniques
 New approaches
include:
 Voice response
systems (call
centers)
 Intranet web sites
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13–39