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Lecture 9

MHR 749 Lecture 9: CHAPTER 9

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Human Resources
MHR 749
Margaret Yap

CHAPTER 9 Employee benefits: part of the total compensation package, other than pay for time worked, provided to employees in whole or in part by employer payments, such as life insurance, pension plan, worker’s compensation, vacation etc. Why the growth in employee benefits? For employee: tax, cost and access advantage. Employer benefits are mostly not taxable. For unions: better total compensation package for their membership. For employer: rewards loyalty, motivate and retain talents, remain competitive, satisfy EE needs, increase productivity. For government: provide minimum income upon unemployment or retirement. 3 administration issues in setting up benefits: 1. Who should be protected/benefitted? (Part timers, widows, kids, disabled) 2. How much choice should employees have among an array of benefits? 3. How should benefits be financed? Contributory benefits: method of financing benefit plans that allows costs to be shared between employer and employee Non-contributory: employer pays total costs Employee-financed: employee pays total costs for some benefits Perceived fairness is a factor that relates to employee preference in determining desirable components of a benefits package Employee handbook: most frequent used method of communicating benefits to employees Vesting: waiting period for entitlement to the employer-paid portion of pension benefits Employer Factors in Benefits Package: - Relationship to total compensation costs - Costs relative to benefits - Competitor offerings - Role of benefits in attraction, retention, motivation - Legal requirements Employer factors: equity and personal needs linked to age, sex, dependents, marital status Legally required benefits: - Workers compensation - Canada/Quebec Pension plans - Employment insurance - Government sponsored healthcare - Time off/leaves Employer sponsored benefits: - Pension - Life insurance - Medical - Income security benefits - Pay for time not worked - Miscellaneous benefits Cost Containment: - Probationary periods o New employees are excluded from receiving benefits - Benefit maximums o Is it not uncommon to limit disability income payments to some maximum percentage of income, and to limit medical/dental coverage for specific procedures to a certain fixed amount - Coinsurance: the employer pays a certain percentage and employee pays rest - Deductibles o Specified dollar amount of claims paid by the employee each year before insurance benefits begin - Coordination of benefits o Reduction of benefits by any amount paid under a spouse’s plan o Used when 2 spouses have similar coverage - Administrative cost containment o Includes such things as seeking competitive bids for program delivery Benefit cutbacks: wage concessions some employers are negotiating with employees to eliminate or reduce employer contributions to selected options Flexible benefits: disadvantage, is that increase administrative burdens and expenses Worker compensation: a mandatory, government sponsored, employer paid no- fault insurance plan that provides compensation for injuries, diseases, that arise out of and while in the course of, employment. - Compensation varies from 75 to 90% of net earnings Canada/Quebec Pension Plan (C/QPP): a mandatory government sponsored pension plan for all employed Canadians, funded equally by employers and employees - Provides benefits upon retirement, disability, or death Disability benefits are payable to contributors who sustain a severe, prolonged mental or physical disability and are payable until age 65 when the retirement pension begins Employment insurance (EI): a mandatory, government sponsored plan for all employed Canadians that provides workers with temporary income replacement as a result of employment interruptions due to circumstances beyond their control. Funded by employer and employee contributions - Basic benefit is 55% of average insurable earnings. It also provides temporary employees during adaptation leave period Supplementary Unemployment Benefit Plans: self-insured employer plans to supplement benefits received under EI. EI benefits are not reduced by any SUB benefits received and the EI commission has to approve SUB and work-sharing plans Work sharing: arrangement where employees work a reduced workweek and receive EI benefits for the remainder of the week Pension plan: plan that provides income to an employee at retirement as compensation for work performed now Employer-Sponsored Pension Plans Defined benefit plan: pension plan in which an employer agrees to provide a specific level of retirement pension, the exact cost of which is unknown - Funded by the employer alone. It is an employer-sponsored pension plan where employee benefits are calculated based on a formula using factors such as salary history and employment duration. They provide explicit benefit, which
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