Graduate School of Management
Master in Business Administration
Human Resource Management
Donn Enrique Moreno
MBA 621
December 01, 2018
Dr. Cecile Santiago
Written Report
Topic: Employee Benefits
Learning Objectives: At the end of the discussion, the class should be able to:
Discuss the growth in benefits costs and the underlying reasons for the growth.
Explain the major provisions of employee benefits programs.
Explain the employer objectives and strategies on benchmarking and cost
control of implementing employee benefits.
Describe the regulatory constraints that affect the way employee benefits are
designed and administered.
Introduction – Discuss a case study about Starbucks.
Reasons of Benefits Growth
a. Role of Employee Benefits - As a part of the compensation paid to
employees, benefits serve functions similar to pay. Benefits contribute to
attracting, retaining, and motivating employees.
Offering a robust benefits package is a good tool for attracting and retaining
people, but it’s a Commitment. A lot of companies are adamant about having
100% coverage in order to be competitive as employers, especially in
industries where there’s a shortage of talent.
But for new companies, I always suggest starting benefits at 80% coverage.
The last thing you want is to implement a plan and then realize you can’t
afford it and have to either scale it back or cut it out entirely.
b. Benefits Growth – One of the most important components of running a
successful business is keeping employees happy. While there are different
ways to make them happy, offering your employees benefits that go beyond
the legal requirements tends to be effective. Here are some reasons for
benefits growth:
Minimize Turnover Rate - It’s difficult for a business to make serious
progress when employees are constantly coming and going. When this
happens, it’s hard to establish a veteran team of experts, and the overall
talent level will lack. Fortunately, offering benefits packages is often enough
to make employees stick around for the long run.
Boost Morale - Another advantage of offering benefits is the boosting of
employee morale. By understanding and addressing the needs of your
workforce, it’s likely that employees will be dedicated and take their jobs
more seriously. Showing that you care about your workers is a natural way
to increase their loyalty and often to get their best work in return.
Healthier Employees - Employees who have health insurance will likely see
their doctors more regularly than those who are uninsured. They will treat
illnesses rather than coming into work sick and potentially infecting the
entire office. They will have well-visit exams annually, which can catch any
serious illnesses early.
Competitive Advantage – According to research about 57% of private
employers offer more than the legally required benefits. For this reason,
providing benefits can put you above 43% of competitors who don’t offer
extra benefits. Source: Insurance Quotes
Better Job Performance - By offering benefits, you give employees more of a
reason to care about your company and remain loyal. As a result, they should
be willing to work harder, which can lead to greater productivity and higher
quality. According to Insurance Quotes, 57 percent of private employers offer
more than the legally required benefits.
Other reasons for benefits growth are:
 Discourage Unions
 Benefits are not always taxed
 Easier to negotiate than wages
Benefits Program - Employee benefits are any kind of compensation provided in a
form other than direct wages and paid for in whole or in part by an employer, even
those provided by a third party. Benefits programs usually fall into the following
Educational Benefits (Supplementary)
 Training/Continuing Education
 Tuition Reimbursement
 Personal Development
 Scholarships
Employee Incentive Benefits (Supplementary)
 Anniversary Programs
 Bonuses
 Parking
 Food Services
 Profit Sharing
 Discount Program
Family Benefits
 Child Care (Supplementary)
 Family/Maternity Leave (Mandatory)
 Flextime (Supplementary)
 Accident Insurance for Children and Spouse (Supplementary)
 Home Purchasing Assistance (Supplementary)
 Relocation Assistance and Subsidies
Government Benefits (Mandatory)
 PhilHealth
 PAG-Ibig
Health Benefits (Supplementary)
 Medical Coverage
 Dental Coverage
 Vision Coverage
 Physical Examinations
 Sick Days
 Health Club Memberships
 Fitness Center
Lifestyle Benefits (Supplementary)
 Funeral Leave
 Dependent Life Insurance
 Life Insurance
 Paid Holidays
 Vacation
 Transportation Allowance
Recreational Benefits (Supplementary)
 Athletic Teams
 Country Club Membership
 Entertainment Bonuses: Theatre or Sports Tickets
 Social Functions
Retirement and Savings (Supplementary)
 Pension Programs
 Retirement Advice
 Credit Union
Matching Savings
Stock Options
a. Government Mandated Benefits
i. SSS - The SSS was created to provide private employees and their
families protection against disability, sickness, old age, and death. The
Government Service Insurance System (GSIS) is the equivalent system
for Philippine government employees.
ii. PhilHealth - The employee and his/her employer(s) are to contribute
for the medical insurance of the said employee in accordance to the
Republic Act 7875 on Medicare Program which is administered by the
Philippine Health Insurance Corporation (Philhealth). Monthly
employee contribution depends on the employee's actual monthly
Effective January 2018 onwards, monthly premium contributions to
PhilHealth will be 2.75% of the employee’s basic monthly salary and
will be shared equally by both employer and employee.
iii. PAG-Ibig - The Home Development and Mutual Fund promotes home
ownership through the extension of affordable housing loans. It also
provides small and short term loans, other benefits and assistance
iv. 13th Month Pay - It is prescribed by Philippine labor laws as a
mandatory benefit and should not be confused with the “Christmas
bonus” commonly practiced in the local business setting. The
Christmas bonus is not a demandable and enforceable obligation, and
can only be released upon an employer’s voluntary discretion.
All rank-and-file employees in the private sector who have worked for
at least one (1) month during the calendar year are entitled to receive
13th month pay regardless of their position, designation or
employment status. Monetary compensations such as the following
may not be regarded as part of the computation for this mandatory
 cost-of-living allowances;
 profit-sharing payments;
 cash equivalent of unused vacation and sick leave credits;
 overtime pay;
 night shift differential;
 holiday pay; and
 other allowances and monetary benefits not considered part of
an employee’s basic salary.
However, if some or all of the items enumerated in the list above are
treated as part of the basic salary, then they shall be included in the
final computation.
Although not stipulated by PD 851, by accepted practice, managerial
employees are also provided with an equivalent of the 13th month
v. Service Incentive Leave - Article 95 of the Labor Code mandates
employers to give their employees a yearly service incentive leave of
five days with pay. The SIL shall be granted to a worker who has been
in service within 12 months, whether continuous or broken, reckoned
from the date the employee started working, including authorized
absences and paid regular holidays.
“Notwithstanding this provision, our laws do not preclude employers
from giving similar or more, beneficial leave benefits to their
employees. The common practice nowadays is that employees in the
private sector are given monthly sick and vacation leave credits which
they may use as the need arises,” said Baldoz.
According to Secretary Baldoz, the Labor Code provides that the rule
on service incentive leave does not apply to the following:
 those of the government and any of its political subdivisions,
including government-owned and controlled corporations;
 domestic helpers and persons in the personal service of
 managerial employees as defined in Book 3 of the Labor Code;
 field personnel and other employees whose time and
performance are not supervised by the employer;
 those who are already enjoying the benefit;
 those enjoying vacation leave with pay for at least five days;
 those employed in establishments regularly employing less
than ten employees.
Are part-time workers entitled to the full five days SIL, or should the
entitlement be on pro-rata basis? Part-time workers are entitled to
full five days SIL. (BWC Advisory Opinion) Answer: The reason is that
the Labor Code speaks of number of months worked in a year, not
number of hours worked in a day, as basis for entitlement.
vi. Meals and Rest Periods - Every employer is mandated by the Labor
Code to give their employees not less than sixty (60) minutes’ time-off
for their regular meals. During day shifts, this time-off is usually
during 12:00 PM.
The normal hours of work an employee has to render must not exceed
eight (8) hours a day and should be exclusive of the one (1) hour daily
lunch break. Philippine laws, however, do not prohibit work done for
less than eight hours.
Working hours shall include:
 all time during which an employee is required to be on duty
and/or to be at a prescribed workplace;
 all time during which an employee is permitted to work; and
 rest periods of short duration during working hours.
Art. 93. Compensation for rest day, Sunday or holiday work.
Where an employee is made or permitted to work on his scheduled
rest day, he shall be paid an additional compensation of at least thirty
percent (30%) of his regular wage. An employee shall be entitled to
such additional compensation for work performed on Sunday only
when it is his established rest day.
b. Fringe Benefits - any good, service, or other benefit furnished or granted by
an employer, in cash or in kind, in addition to basic salaries, to an
individual employee such as, but are not limited to the following:
Expense Account
Vehicle of any kind
Household Personnel (maid, driver, etc)
Interest Loans (at less than the market rate)
Membership Fees, Dues, others (social and athletic clubs)
Expense for Foreign Travel
Holiday and Vacation Expenses
Educational Assistance (employee or dependents)
Life and Health Insurance and other non life insurances
Objectives and Strategies - The Company should know what the competition is
doing. Surveys are available from private consultants and some government
agencies. Costs data are available from the annual survey conducted by the Chamber
of Commerce.
Survey - While informal discussions with employees can highlight desired benefits,
a structured approach is more reliable. Conducting a survey of your employees is
important. Tie in the results with what other employers are offering in your region.
You want to make sure your benefits are competitive. Your survey should assess the
willingness of employees to contribute a portion of their pay to desired benefits.
Cost Control – Employers need to not only assess their budget, but also the legal,
regulatory, and tax impact of proposed benefits and the company's ability to
effectively manage their programs.
Communicating – Organizations must communicate benefits information to
employees so that they will appreciate the value of their benefits. This is essential so
that benefits can achieve their objective of attracting, motivating, and retaining
employees. Employees are interested in their benefits, and they need a great deal of
detailed information to take advantage of benefits.
General Regulatory Issues - Employers need to not only assess their budget, but
also the legal, regulatory, and tax impact of proposed benefits and the company's
ability to effectively manage their programs.
a. Favorable Tax Treatment - All benefits packages must meet certain rules to
be qualified for more favorable tax treatment. These rules discourage top
management from developing plans that benefit only themselves. Under the
Tax Code, fringe benefits are taxable. As an employer, you have to withhold
tax for the fringe benefits in order for it to become deductible from business
income in computing income tax.
b. Discrimination and Prohibited Acts – Book III of the Philippine Labor Code
Article 135. Discrimination Prohibited . Section (a) - Payment of a lesser
compensation, including wage, salary or other form of remuneration and
fringe benefits, to a female employee as against a male employee, for work of
equal value...
Article 137. Prohibited Acts. It shall be unlawful for any employer: (1) To
deny any woman employee the benefits provided for in this Chapter or to
discharge any woman employed by him for the purpose of preventing her
from enjoying any of the benefits provided under this Code...
c. Monitor Future Benefits Obligations – The Philippine Financial Reporting
Standard prescribes the accounting and disclosure for employee benefits. It
requires an entity to recognize:
 (a) a liability when an employee has provided service in exchange for
employee benefits to be paid in the future; and
 (b) an expense when the entity consumes the economic benefit arising
from service provided by an employee in exchange for employee
a. Benefits Help Employers Attract, Motivate, and Retain Employees - Like
pay, benefits help employers attract, retain, and motivate employees. The
variety of possible benefits also helps employers tailor their compensation
packages to attract the right kinds of employees.
b. Create a Competitive Employee Benefits Package - Employees expect at
least a minimum level of benefits, and providing more than the minimum
helps an organization compete in the labor market.
c. Balancing Cost and Employee Satisfaction - Benefits are also a significant
expense, but employers provide benefits because employees value them and
many benefits are required by law.
1. Top 5 Reasons to Offer Employee Benefits by Cassie Tolhurst. June 2013. Retrieved
2. How much should your company spend on employee benefits? by Catherine
McIntyre. November 2016. Retrieved from:
3. Mandatory Employee Benefits and Contributions in the Philippines by Kittelson
Carpo Consulting. Retrieved from:
4. Jenks, James M., and Brian L. P. Zevnik. Employee Benefits: Plain and Simple. New
York: Collier Books, 1993
5. Tax Treatment of Fringe Benefits in the Philippines by Vincent Perdiguez. Retrieved
6. Philippine Financial Reporting Standards (Adopted by SEC as of December 2011)
7. Handbook on Workers Statutory Monetary Benefits 2018 Edition
8. Labor Code of the Philippines 2016 fulltext DOLE Edition
9. Hollenbeck, Noe, Wright, and Gerhart. Fundamentals of Human Resource
Management, 6th Edition.
10. Julie Stich Image used from:
11. All Image used was retrieved from:
12. All icons used was retrieved from: