Managing Employee
Benefits
Benefits
• Benefit
 An indirect compensation given to an employee or
group of employees as a part of organizational
membership.
• Strategic Perspectives on Benefits
 Benefits absorb social costs for health care and
retirement.
 Benefits influence employee decisions about
employers (e.g., recruitment and retirement).
 Benefits are increasingly seen as entitlements.
 Benefit costs average over 40% of total payroll costs.
How the Typical Benefits Dollar Is Spent
Source: Based on information from the U.S. Department of Labor, Bureau of Labor Statistics,
National Compensation Survey: Employee Benefits in Private Industry in the United States, 2003;
and Employee Benefits Study, 2003 ed. (Washington, DC: U.S. Chamber of Commerce, 2004).
Strategic Benefits Considerations
Benefit Design
• Decisions Affecting Benefit Design:
 How much total compensation?
 What part of total compensation should benefits
comprise?
 What expense levels are acceptable for each benefit?
 Which employees should get which benefits?
 What are we getting in return for the benefit?
 How will offering benefits affect turnover, recruiting,
and retention of employees?
 How flexible should the benefits package be?
Common Measurements of Benefits Effectiveness
 Benefits as a percentage of payroll (pattern over a multiyear period)
 Benefits expenditures per full-time equivalent (FTE)
employee
 Benefits costs by employee group (full-time vs. part-time,
union vs. non-union, office, management, professional,
technical, etc.)
 Benefits administration costs (including staff time
multiplied by the staff pay and benefits costs per hour)
 Health-care benefits costs per participating employee
Security Benefits
• Worker’s Compensation
 Benefits provided to persons injured on the job.
• Unemployment Compensation
 A Federal/state payroll tax that funds state
unemployment systems.
 Involuntary unemployment and actively seeking work
is required for persons to claim benefit.
• Supplemental Unemployment Benefits (SUB)
 A union-negotiated benefit provision that pays a
supplemental amount to laid-off employees who are
drawing unemployment compensation.
Security Benefits (cont’d)
• Severance Pay
 A security benefit voluntarily offered by employer to
employees who lose their jobs.
 Payments are determined by the employee’s level
within the organization and years of employment.
 Other benefits (e.g., outplacement and continued
health insurance) may be offered in lieu of cash
severance payments.
Retirement Benefits
• Book VI of the Labor Code of the Philippines, under the
heading Post Employment covers the employee's
retirement and benefits and social insurance. The
section covers the support and funds an employee
benefits for retirement from the Government under the
stipulation of the Philippine law, either through pensions
or savings.
The term 'employee' represents an individual who is
legally employed under the Philippine law, or any person
compulsorily covered by the SSS under Republic Act
1161 or any person compulsorily covered by the GSIS
under the Commonwealth Act 186.
REPUBLIC ACT NO. 7641
REPUBLIC ACT NO. 7641
• The term 'retirement plan' (or superannuation)
refers to a pension (benefits in retirement)
granted when an employee retires from work
upon reaching the retirement age established in
the collective bargaining agreement or other
applicable employment contract.
Characteristically, the retirement benefit plan is a
life annuity, a financial contract wherein the life
insurance company GSIS or SSS makes a
series of payments to the annuitant in the future
in exchange for a series of regular immediate
payments, prior to the onset of the annuity.
REPUBLIC ACT NO. 7641
• Under existing laws and any collective
bargaining agreement and other agreements,
when the annuity is in effect, the employee is
entitled to receive the employee retirement
benefits, or in the strictest sense, the pension
according to the amount as he/she has earned.
Provided, however, that the employee's
retirement benefits shall not be less than those
provided therein under any collective bargaining
and other agreements.
NATIONAL HEALTH INSURANCE ACT OF 1995
• AN ACT INSTITUTING A NATIONAL HEALTH INSURANCE
PROGRAM FOR ALL FILIPINOS AND ESTABLISHING THE
PHILIPPINE HEALTH INSURANCE CORPORATION FOR THE
PURPOSE.
• There is hereby created the National Health Insurance Program
which shall provide health insurance coverage and ensure
affordable, acceptable, available and accessible health care
services for all citizens of the Philippines, in accordance with
policies and specific provisions of this Act. This social insurance
program shall serve as the means for the healthy to help pay for the
care of the sick and for those who can afford medical care to
subsidize those who cannot.
• There is hereby created a Philippine Health Insurance Corporation,
which shall have the status of a tax-exempt government corporation
attached to the Department of Health for policy coordination and
guidance.
REPUBLIC ACT NO. 7841
HOME DEVELOPMENT MUTUAL FUND LAW OF 1980
• The government, in pursuit of the constitutional
mandates on the promotion of public welfare
through ample social services, as well as its
humanist commitment to the interest of the
working groups, in relation particularly to their
need for decent shelter, has established the
Home Development Mutual Fund - a system of
employee-employer contributions for housing
purposes.
THE GOVERNMENT SERVICE INSURANCE SYSTEM
ACT OF 1997
• Compulsory Membership. - Membership in the GSIS shall be
compulsory for all employees receiving compensation who have not
reached the compulsory retirement age, irrespective of employment
status, except members of the Armed Forces of the Philippines and
the Philippine National Police, subject to the condition that they must
settle first their financial obligation with the GSIS, and contractuals
who have no employer and employee relationship with the agencies
they serve.
• Except for the members of the judiciary and constitutional
commissions who shall have life insurance only, all members of the
GSIS shall have life insurance, retirement, and all other social
security protections such as disability, survivorship, separation, and
unemployment benefits.
REPUBLIC ACT NO. 8291
SOCIAL SECURITY ACT OF 1997
REPUBLIC ACT NO. 8282
Other Benefits
Credit Unions
Purchase Discounts
Stock Investment
Family-Care
Benefits
Family-Oriented
Benefits
Social and
Recreational
Relocation
Expenses
Benefits
Life, Disability,
Legal Insurances
Educational
Assistance
Time-Off Benefits
• Holiday Pay
 Eligibility
• Vacation Pay
 Eligibility and scheduling
• Leaves of Absence
• Paid Time-Off (PTO)
Plans
 Combine all sick leave,
vacation time, and holidays
into a total number of hours
or days that employees can
take off with pay.
Flexible Benefits
• Flexible Benefit Plan
 A plan (flex or cafeteria plan) that allows employees
to select the benefits they prefer from groups of
benefits established by the employer.
• Problems with Flexible Plans
 Inappropriate benefits package choices
 Adverse selection and use of specific benefits by
higher-risk employees
 Higher administrative const