Management and Organizational Studies 3342A/B Chapter Notes - Chapter 9: Canada Pension Plan, Pension, Employee Benefits

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Chapter 9 – Employee Benefits
A first class benefits plan includes some mix of: education
reimbursement and employee training, on-site childcare services,
financial counseling, concierge services, retirement benefits and no-
cost benefits such as casual dress
Introduction to employee benefits
oPart 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 plans, worker comp,
vacation, and so on
oEmployee satisfaction with benefits is positively related to job
satisfaction
oRapid rise in employee benefit costs – 15% to 40% today
oMight see benefits as a labour costs with no proven returns
oEmployees perceive benefits as a right independent of how well
the company performs – thus, reducing costs from benefits
might lead to employee resentment and dissatisfaction
oEmployee benefit costs have risen at a much greater rate than
employee wages or the consumer price index
Why the growth in employee benefits?
oGovernment impetus
Govt mandates benefits – workers compensation
(provincial), employment insurance (federal) and
Canada/Quebec Pension Plan (federal)
Most other benefits are affected by laws such as pension
benefits acts and human rights acts
Removal of mandatory retirement at age 65 caused the
need to revise benefits plans for these ppl
oUnions
Fought for the intro of new benefits and the improvement
of existing ones
oEmployer impetus
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Rest breaks were implemented in belief that fatigue
increased accidents
Many employer-initiated benefits were designed to create
a climate in which employees perceived that
management was generally concerned for their wellness
oCost effectiveness of benefits
Most employee benefits are not taxable – avoids payment
of personal income tax
Many group-based benefits can be obtained at a lower
rate than individual employees
Benefit premiums and pension contributions are tax
deductible up to limits specified
The value of employee benefits
oMedical payments – one of the most important benefits that
employees receive
oEvidence that employees frequently are unaware of, or
undervalue, the benefits provided by their org and benefits are
taken for granted
oEmployees are not really looking for more benefits but rather
greater choice in the benefits they receive
oEmployers are making more serious efforts to increase
employee awareness of benefits
Key issues in benefits planning, design, and administration
oBenefits planning and design issues
Ensuring that current benefits are adequate in a
challenging task
Planning process should include strategies in ensure
external competitiveness and adequacy of benefits –
either the firm must have a package comparable to
survey participants or a sound justification explaining why
deviation makes more sense
No magical formula in evaluating benefits adequacy
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oBenefits administration issues
Who should be protected or benefited? Companies often
differentiate treatment based on employment status – all
depends on adequacy, competition, and cost
effectiveness
How much choice should employees have? Traditionally
employees did have choice in their benefits but now
several choices are offered – depends on its evaluation of
the relative advantage and disadvantages of flexible
plans
How should benefits be financed? Non-contributory
(employer pays total costs), contributory (costs shared
between employee and employer), and employee
financed
Factors influencing benefit planning
oEmployer preferences
Relationship to total compensation costs – benefit costs
are only one part of a total compensation package and
managers must keep this in mind
Costs relative to benefits – require policy decisions on the
level of benefit expenditures that are acceptable in the
short and long term – can also compare to costs of
competitors – decide who will be contributing to the plan
Competitor offerings – benefits must be externally
equitable; policy decision must be made about the
position that the org wants to maintain in its absolute
level of benefits – conduct benefits survey or purchase
data from consulting firm
Role of benefits in attraction, retention, and motivation –
employee benefits are widely claimed to help in the
retention of workers by tying benefits to seniority –
pensions and medical coverage help reduce employee
turnover
Benefits might be more valued if there was proof
that it increased employee satisfaction – declining
satisfaction with benefits is a result of long term
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