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Chapter 11

HR Chapter 11.docx

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Wilfrid Laurier University
Steve Risavy

Chapter 11: Employee Benefits and Services Strategic Role of Employee Benefits  Employee benefits is defined as all the indirect financial payments that an employee receives during his/her employment with an employer  benefits are indirect financial payments (such as insurance, time of pay, supplementary health and pensions) traditionally used to reward loyalty and tenure  employee services more important today in post-job security era  make employees feel good about who they are working with, what they are doing  people aren’t expecting to stay at one place for a long time – don’t expect to receive pension play, thus don’t care  for the aging workforce, health-care benefits are becoming increasingly important  benefits as a percentage of payroll are about 37% today  all employers provide group life insurance and most provide health and dental care insurance and retirement benefits Government-Sponsored Benefits (6): (1) Employment Insurance (EI)  federal program that provides weekly income benefits for individuals unable to work through no fault of their own  does not apply to workers who are self-employed  workers may be eligible for special EI benefits in cases of illness, injury, quarantine where the employer has no sickness or disability benefits, and for maternity/parental leave  employees must have first worked a minimum number of hours during a minimum number of weeks called a qualifying period  benefits are 55% of average earning during the last 14 to 26 weeks of the qualifying period  to receive EI individuals must demonstrate that they are actively seeking work  employee contributions are collected by payroll deduction and employers pay 1.4 times the employee contribution  a supplemental unemployment benefit (SUB) plan is an agreement between an employer and the employees for a plan that enables employees who are eligible for EI benefits to receive additional benefits from a SUB fund created by the employer – to employee to maintain standard of living o often found in heavy-manufacturing operations – auto and steel industries – where layoffs are common (2) Canada/Quebec Pension Plan (C/QPP) – introduced in 1966  Amount based on average salary --- if you have a higher than average salary than you pay contribution to this pension fund, you can get early retirement at age 60 and get money back then  Provide three types of benefits: retirement income (2.5% of avg. income), survivor or death benefits payable to the employees dependants regardless of age at time of death (lump sum payment), and disability benefits payable to employees with disabilities and their dependents (75% of pension benefits at the time of disability and flat-rate amount per child)  Almost all employed Canadians ages 18 to 65 are covered (including self-employed individuals)  Benefits are adjusted based on inflation each year in line with the consumer price index  Benefits are portable – meaning the pension rights are not affected by changes in job or residence within Canada (3) Workers’ Compensation  provides income and medical benefits to victims of work-related accidents and illness, regardless of fault  spending a lot of money to prevent accidents and having a safe work environment  employees and employers cant sue each other regardless the cost of workplace accidents or illness – “no fault” insurance plan  includes payment of expenses for medical treatment, rehabilitation and income benefits during the time in which the worker is unable to work  controlling workers compensation cost o compensation cost skyrocketed during the 1980s and 1990s o two approaches to reducing workers compensation claims, (1) firms try to reduce accident or illness-causing conditions in facilities by instituting effective safety and health programs and complying with government safety standards. (2) since workers compensation costs increase the longer an employee in unable to return to work, employers have become involved in instituting rehabilitation programs for injured or ill employees – physical therapy program or career counseling (4) Vacations and Holidays  specified in employment standards legislation as a minimum amount of paid time for vacation and statutory holidays  in Ontario there are 9 holidays (smallest is 5 in a province)  time usually depends on how long employees have worked at the firm o two week for first 5 years, three weeks for 6-10 years, four weeks for 11-15 years, five weeks for 16-25 years and six weeks for 25+ (5)Leaves of Absence (unpaid)  specified in employment standards legislation  maternity/pregnancy leave is 17 or 18 in each jurisdiction  paternity/parental/adoption leave o parental leave is 8-52 weeks away from the company unpaid – the company has to replace you but when you come back your job is there  bereavement leave on the death of a family member is provided for employees in some but not all jurisdictions o depends on the closeness of the relationship o usually unpaid but in some cases is can be partially or fully paid  compassionate care leave o all jurisdictions except Alberta and NWT provide compassionate leave for employees who are caring for a dying relative (6 weeks of employment insurance is payable) (6) Pay on Termination of Employment – employers must pay when terminating an employee  specified in employment standards legislation  pay in lieu of notice o must be provided in advance in a written notice (unless the employee is working on a short-term contract or is being fired for just cause) o the amount of advance notice increases with the length of employment of the employee (often one week per year of employment to a max amount) o employee ceases working immediately and the employer provides a lump sum equal to their pay for the notice – called pay in lieu of notice  severance pay o employees with 5+ years of service may be eligible if (1) the employers annual Ontario payroll is $2.5 million+ or (2) the employer is closing down the business and 50+ employees will be losing their jobs within a six-month period o amount of pay is one weeks pay for each year of employment (max 26 weeks) o in federal jurisdiction employees who have been employed for 12 months or more receive the greater of (1) two days wages per year of employment and (2) 5 days wages  pay for mass layoffs o over 50 people being laid off in the company (in NS and Saskatchewan its 10+) o more beneficial for the individuals than if they were being let go one at a time o Pay ranges from 6 weeks to 18 weeks Voluntary Employer-Sponsored Benefits  Group life insurance  Supplementary health care/medical insurance  Short-term disability/sick leave  Long term disability  Additional leaves of absence  Additional paid vacations and holidays  Retirement benefits Life Insurance  Insurance provided at lower rates for all employees, including new employees, regardless of health or physical conditions  Additional life insurance coverage is sometimes made available to employees on an optional employee-paid basis  Accidental death and dismemberment coverage provides a fixed lump-sum benefits in addition to life insurance benefits when death is accidental  Critical illness insurance provides a lump sum benefit to an employee who is diagnosed with and survives a life-threatening illness Supplementary Health Care/Medical Insurance  Deductible o Aimed at providing protection against medical costs arising form off the job accidents or illness o Provides medical coverage to meet medical expenses not covered by government health-care plans, including prescription drugs, private or semiprivate hospital rooms, private duty nursing, physiotherapy, medical supplies, ambulance services etd o Most employer sponsored drug plans, employees pay a specific amount of deductible expense per year before plan benefits begin o Reducing health benefit costs  Dramatic increase in health-care costs are the biggest issue facing benefits manager in Canada today  Canadian employers pay about 30% of all healthcare expenses in Canada (mostly for prescription drugs)  Simplest way to reduce health benefit costs is to increase the amount of health care cost paid by employees by increasing employee premiums, increasing deductibles, reducing company coinsurance levels, instituting or lowering annual maximums on some services or eliminating benefits  Another cost reduction strategy is to publish a restricted list of the drugs that will be paid for under the plan, to encourage the use of generic rather than expensive bran-name drugs  Third approach is health promotions through in-house newsletters cautioning workers to take medication properly and advertise programs on weight management, smoking cessations etc.  Fourth approach is to implement risk-assessment programs where a third party conducts a confidential survey of the health history and lifestyle choices of employees in order to identify common health risk factors  Last approach is to institute a health services spending account where the employer establishes an annual account containing a certain amount of money that the employee can spend on healthcare costs as they want o Retiree health benefits  Retiree cost benefits are already exceeding the costs for active employees  Employers are required to disclose liabilities for retiree benefits in their financial statement  As members of the baby boom generation retire with long life expectancies their cost are rapidly increasing – employers can cut costs by increasing retiree contributions, increasing deductibles, tightening eligibility requirements and reducing maximum payouts  Coinsurance: percentage of expenses (in excess of the deductible) paid for by the insurance plan o what percentage of the cost you pay, and what percentage the insurance covers Reducing Health Benefit Costs  increase the amount paid by employees  publish a restricted list of drugs covered o most common is that you must use generic drugs  even if a doctor prescribes a name brand the individual has to get the generic drug
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