MANAGING EMPLOYEE BENEFITS

INSTRUCTOR: DR. MOHAMAD JOHDI SALLEH PRESENTED BY: EVA NOVIANA BUDIYANTI

Introduction

Compensation

Mandated benefits

Managing benefits

References

Start

End

Definition

Types of benefits

Voluntary Benefits

Conclusion

Contents

EMPLOYEE BENEFITS

INTRODUCTION

Definition

Employee benefits (also called fringe benefits, perquisites, and perks) are various non-wage compensations provided to employees

Employee benefits are a form of pay (including property, services, cash or cash equivalent) in addition to stated pay for the performance of services

Employee benefits are commonly considered to be an important part of an effective compensation program that can have a significant effect on ability of a school district to attract and retain good employees

- Compensation is the HRM function that deals with every type of reward individuals receive in exchange for performing organizational tasks -The Objective is to create system of reward that is equitable to the employer and employee alike

- The desire outcome is an employee who is attracted to the work and motivated to do a good job for the employer
- Direct and Indirect financial compensation

Compensation

(Ivancevich, 2004. Page, 297 & 298)

Compensation

Financial Direct
Wages Salaries Commissions Bonuses

Nonfinancial The Job

Skill variety Task identity Task significance Autonomy Feedback

Indirect (Benefits) Legally Required

- Social security - Unemployment Insurance - Family and medical leave

Job Environment
Sound Policies Competent Employees Flextime Job sharing Telecommuting

Voluntary
Vacations, Health, dental, educational assistance, food service, etc.

EMPLOYEE BENEFITS

The programs offered for the past 60 years (before World War II), but most benefits programs began during the war The employers offered benefits because they had the employees welfare at heart and because they wanted to keep a union out

1929: 1949: 1970s: 2001:

3 percent of total wages 16 percent 30 percent from 20 to 60 percent of payroll

The figure can be broken down as follows: 8.7 percent for social insurance payments 5.1 percent for private pension plans 9.8 percent for insurance plans 14 percent for all other types benefits

Changes in Benefits Program

THEN
Nuclear families working male with female and 2 or 3 children at home Employement for large part of career White male-dominated workforce Paternalistic employer Entitlement perception of benefits Protection for illness

NOW
Double-income families with and without children Multiple career industry Multicultural workplace Shared responsibility Benefits as part of total compentation Promotion of wellness

Why Do Employers Offer Benefits and Service

To attract and hold capable people To keep up with competition To foster good morale To keep employment channels open by providing opportunities for advancement and promotion as older workers retire To increase employees performance

Who Makes Decisions About Benefits?

The Role of Operating and HR Mangers in Benefits and Servives

Benefit and Services Function

Benefits and services budget Voluntary benefits and services Evaluation of benefits and service Administration of benefits and service programs

Operating Manager (OM)

Preliminary budget approved or adjusted by top management Programs approved by OM (Top Management) OM Cooperates with HRM

HR Manager (HRM)
Preliminary budget developed by HRM Programs recommended by HRM Done by HRM Done by HRM

Types of Employee Benefits

Mandated Benefits
(Mandated by federal and state goverments)

Unemployment insurance Social security Worker compensation

Voluntary Benefits
(Other kinds of benefits voluntarily)

Compensation for Time Off Employer-Purchased Insurance Employee Service

Unemployment Insurance
(Mandated Benefits)
In 1930s, unemployment was very high and the goverments created a program The objectives: To help the unemployment find jobs, to encourange employers to stabilize employment, and to provide periodic cash income to workers during short periode The employee must have worked a minimum number of weeks Federal unemployment tax for employers in all states account for 0.8 percent of payroll Compensation for limited period, a maximum of 26 weeks

Social Security (Mandated Benefits)

To provide income to retired people supplement savings, private pensions, and part-time work Social security taxes are paid by employers and employees on the average monthly wage Effective in 2027, an employee will not be able to retire with full benefits until age 67, if the employee dies, a family with under 18 age receives survivor benefits

Workers Compensation (Mandated Benefits)

Job-related accidents and illnesses The worker's compensation programs are administrated individually by the various states E.g. in Germany: The Sickness Insurance law paid indemnity to all private wage earners and apprentices, including those who work in the agricultural and horticultural sectors and marine industries, family helpers and students with work-related injuries, for up to 13 weeks. Workers who are totally disabled get continued benefits at 67% after this 13-week period - paid by the accident funds, financed entirely by employers.

Compensation for Time Off (Voluntary Benefits)

Holiday and Vocation (New Years Day, Hari Raya, Labor Day, Thanksgiving Day, Family day, etc) Personal Time Off (Personal-Choice Holiday, Sickness in the family, Marriage, etc) Sick Leave Family Leave

Employer-Purchased Insurance (Voluntary Benefits) Health Insurance: Includes hospitalization, surgical fees, and major medical fees (maximum benefits typically $5000 to $10,000) Life Insurance: Full-time employees Disability income replacement insurance: Who have accident at work

Source: Organization for economic Co-operation and development (OECD) Health Data 2008

Employee Service/Prerequisite

Cafeteria Saunas or Gyms Free Parking lots Commuter vans Education Programs Child care Cars Etc

Managing an Effective Benefit Programs

Set Objectives and Strategy for Benefits Involve Participants and Unions Communicate Benefits Monitor cost closely

Summary
Employers must be aware of the issues and be ready to make informed decisions when they select employee benefits Employee benefits play an increasingly important role in the lives of employees and their families and have a significant financial and administrative impact on a business The company has to identify the kinds of benefits that can be offered to employees The employee benefits have to be redesigned and the rate changed to incorporate the change happening in the environment

References
Ivancevich, J. M. (2004). Human resource management (9th.ed). Booston:McGraw. Mondy, R.W., Noe, R. M. &Premeaux, S.R. (2002). Human resource management (8th ed.)Upper Saddle River, NJ: Prentice Hall. Rebore, R.W. (2004). Human resource administration in Education (7thed.) Saint louis university: Pearson. Armstrong, M. & Stephens, T. (2005) Employee Reward Management and Practice. Kogan Page http://www.sbaonline.sba.gov/idc/groups/public/docum ents/sba_homepage/serv_pubs_pm_pdf_pm2.pdf http://www.oecd.org