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BU354 (259)
Chapter 13

Chapter 13 BU354.docx

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John Coffey

BU354 Chapter 13 – Employee Benefits and Services Week 9 The Strategic Role of Employee Benefits -Employee benefits- indirect financial payments given to employees. They may include supplementary health and life insurance, vacation, pension plans, education plans, and discounts on company products -Generally provided to all of a firm’s employees and include such things as time off with pay, supplementary health and life insurance, and employee assistance plans -Employee benefits are an important part of most employees’ compensation -Healthcare benefits are becoming increasingly important -Administering benefits today represents an increasingly specialized task, because workers are ore financially sophisticated and demanding and because benefit plans must comply with a wide variety of laws -Most employees do not realize the market value and high cost to the employer of their benefits Government Mandated Benefits Employment Insurance (EI) -Employment insurance (EI)- a federal program intended to provide temporary financial assistance to eligible persons who experience interruption to their work through no fault of their own -Not payable when an employee is terminated for cause -The EI benefit is generally 55% of average earnings during the last 14 to 45 weeks of the qualifying period or maximum weekly rate -To continue receiving EI benefits, individuals must demonstrate that they are actively seeking work -To receive benefits, an employee must first have worked a minimum number of hours during a minimum number of weeks called a qualifying period -Funded by contributions from eligible employees and their employees -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 Pay on Termination of Employment -Employees whose employment is being terminated by the employer must be provided with termination pay when they leave Reasonable Advance Notice Periods -Pay in lieu of reasonable notice – a lump-sum equal to an employee’s pay for the notice period provided to employees who cease working immediately Severance Pay -The amount of severance pay is one week’s pay for each year of employment (maximum 26 weeks) -Employees who have been employed for 12 months or more receive the greater of either two days’ worth of wages for every year employed or a total of five days’ wage Pay for Mass Layoffs -Ontario requires that additional pay be provided when a lay-off of 50 or more employees occurs -Bigger layoffs result in longer time for re-employment Leaves of Absence -All provinces require unpaid leaves of absence to be provided to employees in certain circumstances -Maternity leave is required in all jurisdictions -The amount of maternity leave is 17 or 18 weeks but parental and adoption leaves range from 34 to 52 weeks -Parental leave benefits can be taken by one parent or split between both parents -Bereavement leave on the death of a family member is provided for employees in some but not all jurisdictions BU354 Chapter 13 – Employee Benefits and Services Week 9 -Some employers provide full or partial pay for all or part of legally required unpaid leaves by “topping up” what the employees receive from EI, such that the total amount they receive more closely matches their regular survey -An application form should be the centrepiece of any such leave of absence procedure -Although some leaves are unpaid, it is incorrect to assume that the leave is costless to the employer Canada/Quebec Pension Plan (C/QPP) -Canada/Quebec Pension Plan- programs that provide three types of benefits: retirement income, survivor or death benefits payable to the employee’s dependants regardless of age at time of death; and disability benefits payable to employees with disabilities and their dependants. Benefits are payable only to those individuals who make contributions to the plans or to their family members -Retirement pension is calculated at 25% of the average earnings and can be paid anytime starting between 60 and 70 -Disability benefits are paid for severe disabilities that are expected to be permanent or to last for an extended period – it is 75% -Survivor benefits are paid on the death of a plan member Workers’ Compensation -Workers’ compensation – workers’ compensation provides income and medical benefits to victims of work-related accidents or illnesses or their dependants, regardless of fault -A “no fault” insurance plan designed to help injured or ill workers get well and return to work -Employers collectively pay the full cost of the workers’ compensation system, which can be an onerous financial burden for small businesses -Includes payment of expenses for medical treatment and rehabilitation, and income benefits during the time in which the worker is unable to work because of his or her disability Controlling Workers’ Compensation Costs -A renewed focus on accident prevention is the best way to manage workers’ compensation costs over the long term -Try to reduce accident- or illness-causing conditions in facilities by instituting effective safety and health programs and complying with government safety standards -Since workers’ compensation costs increase the longer an employee is unable to return to work, employers have become involved in instituting rehabilitation programs for injured or ill employees Vacations and Holidays -Minimum amount of paid vacation that must be provided to employees -Ex. 2 weeks the first 5 years of service, 3 weeks for 6-10 years of service, etc. Paid Breaks -“If the employee is free to leave the workplace, then the employer does not have to pay for the time” Voluntary Employer-Sponsored Benefits -Although they are not required to do so, employers often provide many other employee benefits Life Insurance -Group life insurance- life insurance provided at lower rates for all employees, including new employees, regardless of health or physical condition -Most employers pay 100% of the base premium Supplementary Healthcare/Medical Insurance -Aimed at providing protection against medial costs arising from off-the-job accidents or illnesses BU354 Chapter 13 – Employee Benefits and Services Week 9 -Deductible- the annual amount of health/dental expenses that an employee must pay before insurance benefits will be paid Reducing Health Benefit Costs -Dramatic increases in healthcare costs are the biggest issue facing benefits managers in Canada today -The simplest approach to reducing health-benefit costs is to increase the amount of healthcare costs paid by employees -Coinsurance- the percentage of expenses (in excess of the deductible) that are paid for by the insurance plan -Another cost reduction strategy is to publish a restricted list of drugs that will be paid for under the plan to encourage the use of generic rather than more expensive brand-name drugs -Another technique is health promotion – get workers to stop smoking for example -There is also risk assessment programs – a third party assesses the health of employees and problem- specific programs are then implemented -Healthcare spending accoun
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