Healthcare
Human Resource
Management
Flynn
Mathis
Jackson
Langan
Chapter 13
The Management of Benefits
and Variable Pay in Healthcare
PowerPoint Presentation by
Tonya L. Elliott, PHR
Learning Objectives
After you have read this chapter, you should
be able to:
 Describe the challenges that confront healthcare
employees in providing benefits and variable pay
programs
 Discuss why healthcare employers must offer
competitive benefits programs to their employees
 Identify various types of benefits
 Explain the role that healthcare HR professionals
must play in administering benefits
 Compare and contrast individual and team-based
incentives
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Goals for Benefits
Benefit
–
An indirect reward given to an employee as part of
an organizational membership, regardless of
performance
Benefits Needs Analysis
–
A comprehensive look at all aspects of benefits in
an organization
 Should consider what the employees want
 Should determine if the mix of benefits is
accomplishing what it should
3
Typical Benefit Dollar Spending
4
Figure 13-1
Types of Benefits
Government-Mandated Benefits

Mandated benefits that employers in the United
States must provide to employees by law
Voluntary Benefits

Benefits that employers voluntarily offer to compete
and retain employees
5
Types of Benefits
6
Figure 13-2
Security Benefits
Workers’ Compensation

Provides benefits to persons injured on the job
Unemployment Compensation


A tax paid by the employer to state and federal
unemployment compensation funds
Percentage paid by employers determined by
experience rates (# claims filed by people who
leave)
Severance Pay

A benefit voluntarily offered by employers to some
employees who lose their jobs
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Retirement Security Benefits
Retirement Benefits & Age Discrimination
 Age Discrimination in Employment Act (ADEA)
prohibits forcing employees to retire as a specific age
Early Retirement
 Older Workers Benefit Protection Act (OWBPA)
requires early retirement be offered on voluntary
basis only
Phased Retirement
 Program designed to help employees retire in stages
 Options such as reduced work hours / a different job
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Social Security
The Social Security Act of 1935
 Established a system providing:
 Old age benefits
 Survivor benefits
 Disability benefits
 Retirement benefits
 Employers and employees share the cost through
taxes on employees’ wages or salaries
 Administrator
Social Security Administration
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Pension Plans
Pension Plans


Retirement benefits established and funded by
employers and employees
Not a required benefit
Employee Retirement Income Security Act (ERISA)
Passed in 1974, regulates private pension plans
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Types of Pension Plans
Traditional Pension Plans
 Defined-benefit plans
– Employees’ contributions based on actuarial
calculations that consider the benefits to be received,
and the methods used to determine such benefits
 Defined-contribution plans
– Employer makes annual payment to employee’s pension
account
Cash Balance Plans
– A hybrid based on ideas from both defined-benefit
and defined-contributions plans; a hypothetical
account balance
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Pension Terms & Concepts
Contributory Plan

Both employee and employer pay in money
Non-Contributory Plan

Employer provides all the funds
Vesting

Assurance that employees have worked the
minimum number of years to qualify
Portability

The ability to move pension benefits from one
employer to another
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Individual Retirement Options
Individual Retirement Accounts (IRAs)

A special account in which an employee can set
aside funds that will not be taxed until the
employee retires
401(k), 403(b), and 457 Plans


Plans that allow the employee to reduce their
current pay by a certain percentage, which is then
used to fund a retirement plan
Available for both non-profit and for-profit
organizations
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Healthcare Benefits
Common Plans Offered




Medical
Dental
Prescription drug
Vision
Plans Offered to:


Employees
Dependents
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Controlling Healthcare Benefit Costs
Co-Payment

Employees pay a portion of both insurance
premiums and medical care
Defined-Contribution Plans for Health Benefits

Employer provides a defined contribution for
employees use in selecting offered benefit plans
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Increases in Healthcare Benefits Costs to Employers
Figure 13-3
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Controlling Healthcare Benefits Costs (cont’d)
Managed Care
 Approaches that monitor and reduce medical costs
through restrictions and market-system alternatives
Preferred Provider Organization (PPO)
 A healthcare provider that contracts with an employer
or an employer group to provide healthcare services
to employees at a competitive rate
Health Maintenance Organizations (HMO)
 Provides services for a fixed period on a prepaid
basis
 Emphasizes both prevention and correction
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Controlling Healthcare Benefits Costs (cont’d)
Utilization Review
– A review and audit of medical work, possibly
including a second option, review of procedures
used, or review of charges for procedures done
Wellness Programs
– Programs designed to maintain or improve employee
health before problems arise by encouraging
personal lifestyle changes
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Healthcare Legislation
Consolidated Omnibus Budget Reconciliation Act
(COBRA)
 Former employees and/or their spouses and qualified
dependents eligible for continuing coverage for 18 to 36
months
 Employer may charge no more than 102% of the premium
costs to insure a similarly covered employee
Health Insurance Portability & Accountability Act
(HIPAA)
Allows employees to switch their health insurance plan
from one employer to another, regardless of pre-existing
health conditions
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Financial, Insurance, & Other Benefits
Life/Disability
Insurance
Educational
Benefits
Other Benefits
Social & Recreational
Benefits
Family-Oriented
Benefits
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Family and Medical Leave Act (FMLA)
Covered Employees:

Those that worked at least 12 months and 1,250
hours in the previous year
Eligibility:

Employees allowed 12 weeks’ leave per year for:
1.
2.
3.

Birth adoption, or foster-care placement of a child
Caring for a spouse, child, or parent with a serious
health condition
Serious health condition of the employee
Employees must be able to return to the same job
or a job of equivalent status or pay
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Family Care Benefits
Adoption
Benefits
Family
Care
Benefits
Child Care
Elder Care
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Benefits for Domestic Partners & Spousal Equivalents
Domestic Partners & Spousal Equivalents
Data shows:

Increasing number of non-traditional families

Significant percentage of domestic partners live
together before marriage

Gays and lesbians are more open about their
lifestyle
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Time-Off Benefits
Holiday Pay
Vacation Pay
Paid Time-Off (PTO)
Leaves of Absence
 Personal
 Medical (FMLA)
 Military leave
 Election leave
 Jury leave
 Funeral/bereavement leave
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Benefits Administration
Benefits Communication
Benefits Statements
 A personal statement of benefits that translates
benefits into dollar amounts
HRIS and Benefits Communication
 Employee self-service kiosks allow employees to
obtain benefits information online
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Flexible Benefits
Flexible Benefits Plan


“flex” or “cafeteria plan”
Allows employees to select benefits they prefer
from groups of benefits established by the
employer
Flexible Spending Accounts

Allows employees to contribute pretax dollars to
buy additional benefits
1. Additional health care (including deductibles)
2. Life insurance
3. Disability insurance
4. Dependent care benefits
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Benefits in the Future
Continuing change
More complex
More outsourced
Internet-based
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Types of Variable Pay Plans in Healthcare
Figure 13-5
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Individual Incentives
Bonus


A one-time payment
Does not become part of the employee’s base pay
Special Incentive Programs



Special awards
Recognition awards
Service awards
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Group/Team-Based Variable Pay
Award Distribution
Same size award for each team member (equally) -- vs. -Difference size award for each team member (equitable)
Problems With Team-Based Incentives
 Distributed equally -- perceived as unfair to those who work
harder, have more capabilities, or perform more difficult
jobs
 Distributed equitably -- relatively low level of satisfaction
with rewards that are same for all
Successful Team Incentives
 Consider history of the group/team
 Consider size of team
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Organizational Incentives
Basic Concept
 Overall results depend on organizational cooperation
Purpose
 To produce better results be rewarding cooperation
throughout the organization
Effectiveness
 Should include all employees (non-exempt
employees, managers, and executives)
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