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Chapter 10_Employee Benefits.docx

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McMaster University
Frances Tuer

Chapter 10—Employee Benefits INTRODUCTION • Employee benefits are part of an organization’s total compensation package and include both mandatory government-sponsored benefits and voluntary benefits such as life and disability insurance, extended health coverage, additional vacation pay, and a range of other options • Flexible benefits plan are benefits plans that provides employees the chance to choose (within limits) among benefits offered by the employer, to help ensure the plan will more effectively meet the needs of the employees, and to help the employer contain costs • There are three unique aspects to benefits: o 1. There is a question of legal compliance—there is lots of regulation in terms of benefits o 2. They are so common now that they have become institutionalized o 3. They are very complex when a benefits package is made REASONS FOR BENEFITS GROWTH • Benefits have steadily became more popular over the years: o 1. After WWII there was a labour market shortage which meant employers had to find more ways to attract and retain employees o 2. Tax rates are not as heavy on benefits—the marginal tax rate refers to the percentage of an additional dollar of earnings that goes to taxes o 3. Benefits programs are cheaper if you have more employees (buy insurance in bulk for employees and get discount) o 4. Unions help make benefits happen o 5. Help attract employees BENEFITS PROGRAMS • Most benefits fall into one of the following categories: mandatory government-sponsored benefits, voluntary employer-sponsored benefits, retirement, pay for time not worked, and family-friendly policies Mandatory Government-Sponsored Benefits Canada/Quebec Pension Plan (CPP/QPP) • The Canada/Quebec Pension Plan (CPP/QPP) is a mandatory government-sponsored pension plan funded by employers and employees that provides a basic level of income and security for working Canadians when they retire of become disabled; administered separately in Quebec Employment Insurance (EI) • Employment Insurance (EI) is a mandatory, government sponsored plan funded by employee and employer contributions that offsets lost income to eligible employees for reasons of job loss, illness, or compassionate leave, and that provides maternity and parental benefits and a variety of other employment initiatives Workers’ Compensation • Workers’ compensation is a mandatory government-sponsored insurance plan funded by employers that provides wage-loss benefits, health care, survivor benefits, and rehabilitative services to eligible employees with work-related injuries or diseases Voluntary Employer-Sponsored Benefits Private Group Insurance • Group insurance rates are lower because of economies of scale, the ability to pool risks, and the greater bargaining power of a group o These are not legally required—it is up to the employer Extended Medical Insurance • Surveys insist medical insurance as the
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