Business
Employee Benefits
Employee benefits are non-wage compensations provided to employees in addition to their regular salary or wages. These benefits can include health insurance, retirement plans, paid time off, and other perks such as wellness programs or tuition reimbursement. Offering attractive employee benefits can help businesses attract and retain top talent, as well as improve overall employee satisfaction and well-being.
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11 Key excerpts on "Employee Benefits"
eBook - PDF- Max Messmer, Anne M. Bogardus, Connie Isbell(Authors)
- 2015(Publication Date)
- Wiley(Publisher)
9.1 Identifying the Role of Employee Benefits Strictly speaking, a benefit is any form of indirect compensation that isn’t part of an employee’s basic pay (that is, direct compensation)—and that isn’t tied directly to either the requirements of their jobs or their performance in those jobs. Specific Employee Benefits today take a multitude of forms—everything from the basics that you find in every benefits package (Social Security, workers’ com- pensation, and unemployment insurance) to highly specialized offerings ranging from multiple-option healthcare coverage, tuition reimbursement, and childcare and eldercare assistance at one end of the spectrum to in-house concierge serv- ices, health club memberships, and on-site auto repair services at the far end of the spectrum. Exactly which benefits you offer and how much of your payroll expense goes to pay for benefits are decisions that your company’s financial health and business philosophy must determine. Your job in taking on the HR function is to make sure that both your company and its employees are getting the best deal. THINKING OUTSIDE THE BENEFIT BOX When most employees think about their benefit packages, they think of medical and dental insurance, vacation and sick leave, and the retirement plan, but employers provide many other benefits that employees often overlook. These include such things as the location of their facilities and the length of the daily commute for employees, “dress down” days, and salaries that are competitive with the industry and profession. These are all factors taken into consideration by candidates when considering whether or not to accept an offer. However, it’s often up to an employer to make employees aware of the value of the benefits provided for them because they rarely consider these costs when they think about their total income.
eBook - PDF- Vickie L. Bajtelsmit(Author)
- 2020(Publication Date)
- Wiley(Publisher)
Some employers are very generous in what they offer their employees, and others are more stingy. The types of benefits provided will often depend on the size of the company and the management’s attitude about compensation and employee satisfaction. Employee Benefits include both tangible and intangible elements. Tangible benefits are those that have a financial or dollar value. They may include any or all of the following: • Wage or salary compensation, commissions, and bonuses • Cash-equivalent benefits, including contributions to retirement plans, health and life insurance, paid vacation, sick leave, paid maternity or paternity leave, personal leave, and education reimbursement • Noncash benefits, such as the use of a company car, unpaid vacation, sick leave and personal leave, wellness programs, and access to child-care facilities or a health club membership Although this chapter focuses on tangible benefits, your employment choices may also differ in important ways that are not readily quantifiable in money terms. Intangible benefits, which may still have an actual cost to your employer and a significant value to you, may include any or all of the following: (continued) The Value of Employee Benefits 9-3 • Flexible work hours • Opportunities for training and advancement • Job location • Pleasant working environment • Quality and personality of coworkers Although some employers offer more comprehensive packages, employee benefit pack- ages commonly include vacation and sick days, various types of insurance (health, dental, vision, disability, and life), and retirement plans. Some employers offer a cafeteria plan, in which they provide a sum of money that can be applied to purchase benefits from a menu of options that they have selected. What options your employer will offer depends on the compa- ny’s size, the type of position you hold, benefit packages being offered by competing firms, and competition in the labor market for qualified workers.
eBook - PDF- Susan L. Verhulst, David A. DeCenzo(Authors)
- 2021(Publication Date)
- Wiley(Publisher)
Nearly two-thirds of workers indicate that their benefits are an important reason for job satisfaction and the decision whether to stay with their current employer. 3 Since benefits are an important HR responsibility, let’s examine the types of benefits available and how they accomplish the goals of employers and employees. Effective Use of Benefits In Chapter 11, we discussed total rewards as a comprehensive view of compensation that includes pay, training, health and wellness management, benefits, paid time off (PTO) with nonmonetary rewards such as work–life balance, challenging and fulfilling work assignments, supportive work culture, autonomy, and opportunities for advancement. Although all are important, salary and benefits are the largest business expense in many industries, making it critical to plan carefully and spend benefit money wisely. 4 Strategic Value of Benefits You may have heard about employers such as Google who offer extravagant Employee Benefits such as free gourmet food, massages, beer and wine, freedom to bring dogs or babies to work, and personal concierges who do everything from getting your bicycle fixed to arranging for your Halloween costume. 5 As crazy as they sound, they accomplish the strategic purposes of attracting, motivating, and Employee Benefits Membership-based, nonfinancial rewards offered to attract and keep employees. 342 Chapter 12 Employee Benefits retaining good employees in a competitive environment. Maintaining a package of benefits that supports organizational culture is also a priority for many employers. If any of those benefits proved counterproductive for Google, they would be a waste of money and would quickly disappear. Benefits play an important role in achieving these strategic goals for employ- ers but tracking their effectiveness or return on investment can prove difficult.
eBook - PDF- Janice Loftus, Ken Leo, Sorin Daniliuc, Belinda Luke, Hong Nee Ang, Mike Bradbury, Dean Hanlon, Noel Boys, Karyn Byrnes(Authors)
- 2022(Publication Date)
- Wiley(Publisher)
Employee Benefits typically represent a significant component of an entity’s expenses. Employees are remunerated for the service they provide in the form of salary or wages (which may be paid weekly, fortnightly or monthly) and entitlements such as sick leave, annual leave, long service leave and post‐employment benefits (i.e. superannuation or pension plan contributions). Employee Benefits arise from formal agreements, which are often referred to as ‘workplace agreements’, between an entity and its individual employees. Alternatively, Employee Benefits may arise from agree- ments between an entity and groups of employees or their representatives. These agreements are often referred to as enterprise bargaining agreements. Employee Benefits also include requirements specified by legislation or industry arrangements (e.g. for employers to contribute to an industry, state or national superannuation plan). Internal organisational practices that generate a constructive obligation, such as payment of annual bonuses, also fall within the scope of Employee Benefits. AASB 119/IAS 19 Employee Benefits applies to all Employee Benefits except those relat- ing to share‐based payments (which are covered under AASB 2/IFRS 2 Share‐based Payment). Chapter 15 considers share‐based payments, including share‐based employee remuneration. The purpose of AASB 119/IAS 19 is to prescribe the measurement and recognition of expenses, assets and liabilities arising from service provided by employees. Paragraph 8 of AASB 119/IAS 19 defines Employee Benefits as: all forms of consideration given by an entity in exchange for service rendered by employees or for the termination of employment. Employee Benefits are usually paid to employees, but the term also includes amounts paid to their dependants or to other parties. Liabilities arise when employees provide employment service in exchange for benefits payable by the employer.
- Christopher G. Reddick, Jerrell D. Coggburn(Authors)
- 2008(Publication Date)
- Routledge(Publisher)
Because governments discriminate less than private sector companies do, even its pay policies have often been attractive. Benefits are a major component in compensation. Tey can compose from 20 to 40 percent of the total compensation package. Yet, benefits are a hodgepodge. Mainly composed of healthcare and retirement pension programs, benefits also include a vast array of miscellaneous services. Further complicating matters is the fact that not all bene-fits are tangible; many offer intrinsic incentives that are difficult to place a dollar value on. Furthermore, the value of benefits, even those with clear price tags, actually will vary from individual to individual depending upon the actual use. However, benefits still serve the same set of purposes that pay does—to attract, retain, and motivate employees. Because benefits compose a growing proportion of the total compensation package, it is necessary to treat benefits with the same strategic considerations as wage and salary decisions are subjected to. Although benefits are more likely to satisfy attraction and retention needs than to be motivational, this latter role should not be overlooked. Hence, organizationally specific information on benefits desired by employees, whether public and private is important (Moore, 1991; Bergmann, Bergmann, and Grahn, 1994; Davis and Ed Ward, 1995; Streib, 1996). Strategic Benefits in Human Resource Management � 17 Clayton Alderfer (1972) in his Existence-Relatedness-Growth (ERG) theory has modified Abraham Maslow’s needs hierarchy. Maslow’s five stages have been “turned on their side” and regrouped into three concepts. No longer are we dealing with a vertical hierarchy of “lower” and “higher” level needs, but with a horizontal arrange-ment of equal needs. Existence combines Maslow’s physiological and safety needs. Relatedness encompasses the social and esteem needs.
eBook - PDF- Ronald R. Sims(Author)
- 2005(Publication Date)
- Information Age Publishing(Publisher)
They provide benefits over and above state employment compensation for three categories: layoffs, reduced workweeks, and relo-cations. Such benefits are most popular in heavy manufacturing opera- Employee Benefits 475 tions such as in the auto and steel industries. Here weekly or monthly plant shutdowns are normal, and some plan for guaranteeing minimum annual income is more appropriate. Group Life Insurance One of the oldest and most popular Employee Benefits is group term life insurance, which provides death benefits to beneficiaries and may also provide accidental death and dismemberment benefits. This type of insurance is usually yearly renewable term insurance; that is, each employee is insured one year at a time. The premium costs are normally paid by the employer, with the face value of the life insurance equal to two times the employee’s yearly wages. This amount provides a reasonable financial cushion to the surviving spouse during the difficult transition to a different way of life. These programs frequently allow employees to pur-chase additional amounts of insurance for nominal charges. About 95% of companies offer this benefit (SHRM, 2004). To discourage turnover, almost all of them cancel if an employee terminates. Where employers operate a cafeteria benefits program, selection of extra insurance may be part of the choices offered employees. OTHER DISCRETIONARY BENEFITS In addition to protection plans and paid time off, many organizations also offer a growing array of other kinds of benefit programs, some of which provide innovative opportunities for employees. This section discusses some of the other important benefits organizations make available to their employees. Employee assistance programs (EAPs). Many organizations have estab-lished EAPs to help employees cope with a variety of problems that inter-fere with the way they perform their jobs.
eBook - PDF- Greg L. Stewart, Kenneth G. Brown(Authors)
- 2019(Publication Date)
- Wiley(Publisher)
Because benefits are not taxable, the total value of the compensation to the employee increases. With an average tax rate of 25 percent, the additional value for the employee is $750 ($3,000 × 0.25). In addition, the cost of purchasing things like healthcare insurance is usually higher for individuals than for large organizations. Using benefits is thus a way for organizations to provide greater rewards to employees without increasing overall labor costs. Providing good benefits is an important tool that helps an organization attract and retain high-quality employees. 20 Unfortunately, many organizations fail to obtain the maximum value from Employee Benefits. Most employees sig- nificantly underestimate the amount of money that organizations spend on benefits. 21 Clearly communicating the monetary value of Employee Benefits is thus an important step toward maximizing the contribution of the benefits package to the overall compensation strategy. Employee Benefits can be placed into two broad categories. One category includes benefits that are required by law. The other category consists of ben- efits that organizations voluntarily provide to employees. LEGALLY REQUIRED BENEFITS Legally required benefits are mandated by government regulations. The reg- ulations are designed to protect people from hardship associated with not being able to work and earn a living. Protection is given to workers who are injured, laid off, or past the age when they might be expected to work. Also, legislation in the form of the Affordable Care Act—often referred to as Obamacare—requires large organizations to provide healthcare benefits to full-time employees. Because legally required benefits must be given to all workers in specified amounts, it is difficult for an organization to use them to create a workplace that is more attractive than competitors. However, there What Are Common Employee Benefit Plans? LEARNING OBJECTIVE 3
eBook - PDF- Scott Snell, Shad Morris(Authors)
- 2018(Publication Date)
- Cengage Learning EMEA(Publisher)
385 CHAPTER 11 Employee Benefits Learning Outcomes After studying this chapter, you should be able to Detect cost-effective strategies companies use to develop benefits plans. Identify and explain the Employee Benefits required by law. LO 1 LO 2 Describe the types of work-life benefits that employers may provide. Describe the different types of retirement programs and pension plans and the regulations related to them. LO 3 LO 4 wavebreakmedia/Shutterstock Copyright 2019 Cengage Learning. All Rights Reserved. May not be copied, scanned, or duplicated, in whole or in part. Due to electronic rights, some third party content may be suppressed from the eBook and/or eChapter(s). Editorial review has deemed that any suppressed content does not materially affect the overall learning experience. Cengage Learning reserves the right to remove additional content at any time if subsequent rights restrictions require it. 386 Part 4 Implementing Compensation and Security A pproximately three in five people report benefits and perks being among their top considerations before accepting a job. 1 Maybe this is why companies like Netflix provide one paid year of maternity and paternity leave to new parents, or why Spotify covers costs for egg freezing and fertility assistance, or why Airbnb gives its employees an annual stipend of $2,000 to travel and stay in an Airbnb listing anywhere in the world. 2 Despite how cool many of these benefits may be, the cost of provid-ing them has been climbing sharply. Due to increased access to employer information through social media and search engines, employees are increasingly aware of the ben-efits they receive and how they compare to what other companies are offering. Hence, benefits act as a key source of advantage (or disadvantage) for companies. 11.1 Elements of a Successful Benefits Program Benefits can represent more than 50 percent of the total payroll costs an employer pays, depending upon the types of benefits it offers.
- Ronald R. Sims(Author)
- 2002(Publication Date)
- Praeger(Publisher)
Child care, health care costs and cover- age, flexible benefits, and changes in pension benefits are among the most dynamic compensation topics today. Whereas the issue of executive com- pensation has receded some from the front page over time, issues related to benefits continue as news of the day. A major reason for the increased attention to benefits is costs. Fifty years ago, indirect compensation cost less than 5 percent of the direct compen- sation offered to most employees. More recently, benefits equal 44 percent of the cost of direct compensation for companies with 500 or more em- ployees (Bureau of Labor Statistics, 1998). Most of the increase does not reflect new benefits but rather the higher costs of legally required payments (e.g., the employer's share of Social Security) and of optional benefits (es- pecially health insurance). The costs for both doubled over a 20-year pe- riod. Because benefits are contingent on membership in the organization, they help an organization attract and retain employees. Benefit programs do not directly motivate increased employee performance, for the link between performance level and benefit level is virtually zero. All employees receive similar benefit coverage, regardless of their performance levels. Employees gain several advantages by receiving part of their compensa- tion in this indirect form. For example, even though employees may con- tribute to or even pay the entire cost of benefits such as insurance, the cost associated with the group coverage of all employees is likely to be consid- erably lower than equivalent insurance purchased individually. In addition, some benefits are given favorable tax treatment; the employee need not pay tax on the value of health insurance, for example. The following section reviews many of the common benefit plans currently in use and discusses related issues such as cost containment and legal considerations.
eBook - PDFStrategic Compensation and Talent Management
Lessons for Managers
- Jed DeVaro(Author)
- 2020(Publication Date)
- Cambridge University Press(Publisher)
Although health insurance is the most important example of this second reason for offering benefits to your workers, there are other examples. For example, you can usually purchase gym memberships at a bulk rate that’s lower than what your workers would be charged to buy their own memberships. 11.4.3 Tax Considerations Tax law creates other reasons to voluntarily provide benefits to your workers. From a talent management standpoint, your goal as a manager is to compensate your stars generously enough to retain them but to do this as cheaply as you can, because every dollar that you save the company adds to the bottom line. Suppose that you need to pay one of your stars an extra $1000 annually to retain her. One approach is to increase her salary by $1000, but another approach is to offer $1000 worth of tuition reimbursement. Such education benefits are provided by the Federal Reserve Bank of Richmond, as explored in an online case discussion. Starbucks goes even further by providing its workers with free tuition for a four-year undergraduate online degree program at Arizona State University. 11.4 Why Do Employers Offer Benefits? 249 A downside to offering education benefits is the “sweaters problem” from section 11.3. But let’s set that aside for the moment and assume that your star worker values education benefits basically the same as cash, because she plans to take some courses anyway, regardless of who pays for them. An advantage of paying her via tuition reimbursement is that workers are often not taxed on benefits, whereas they always pay income tax on wages and salaries. So if you give her $1000 in cash compensation, that only gives her $(1-t)×1000 in actual “take-home” value, where t represents her marginal income tax rate, whereas if you give her $1000 in benefits compensation, she gets the whole $1000 in “take-home” value.
eBook - PDF- David A. DeCenzo, Stephen P. Robbins(Authors)
- 2014(Publication Date)
- Wiley(Publisher)
An Integrative Perspective on Employee Benefits 321 Travel Insurance Travel insurance policies cover employees’ lives in the event of death while traveling on company time. A typical policy would pay five times the employee’s salary up to $1 million. Depending on any unique policy provisions, the insurance typically will be paid as long as an employee is conducting business-related activities when the death occurs. An employee who normally commutes to work would not be covered under an employer-paid travel insurance benefit if an accident happened on the way. Employers that require extensive international travel may also provide air ambulance service to return ill or injured employ- ees back to the United States. Employee Services and Family-Friendly Benefits Employees may receive these services at no cost or at a cost shared with the organization. Services may include such benefits as sponsored social and recreational events, employee assistance programs, credit unions, housing, tuition reimbursement, gym memberships, paid jury duty time, uniforms, military pay, company-paid transportation and parking, free food, child-care services or referrals, and even repair services for bicycles, cars, and appliances. Companies can be as creative as they like in putting together their benefits program—many offer on-site fitness centers, and some have even added free massages and haircuts for their employees! The crucial point is to provide a package containing benefits in which employees have expressed some interest and perceive some value. Employees appreciate efforts to help them balance their career and personal life. For example, working parents at Best Buy’s Richfield, Minnesota, headquarters love the on-site day care, and an on-site doctor and pharmacy really help provide work-life balance. A growing number of employers are even allowing new parents to bring infants to work until they reach crawling stage.
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