Chapter 10 Flashcards
What is direct and indirect comepnsation?
Direct Compensation: Pay based on critical job factors or performance
Indirect Compensation:
- Benefits and services extended as a condition of employment
- Not directly related to performance
- Approaching 25 to 40% of annual payroll expenses
What are the objectives of employee benefits?
Societal objectives: Intended to support the general welfare of society. They aim to reduce the financial burden on employees
Organizational objectives: Employee benefits are a key component of attracting, retaining, and motivating staff. Offering competitive benefits packages helps companies maintain a loyal workforce and enhances overall organizational effectiveness. Employers can deduct the costs of benefits as a business expense
Employee objectives: Employee benefits give many employees financial security against illness, disability, and retirement. Employees may have preexisiting medical conditions that would make it had to get these benefits
What are some examples of legally required benefits?
Financial security:
- CPP/QPP: A mandatory, contributory, and portable pension plan applicable to all employees and self-employed persons in Canada. Public service employees have their own pension plan, the Public Service Pension Plan (PSPP), but it is coordinated with the Canada Pension Plan. Employer and employee equally contribute.
- EI: A program to help alleviate the financial problems of workers in Canada during the transition from one job to another when it is not the employees fault. employer pays 1.4 times employee.
- Workers comp: Compensation payable by employers collectively for injuries sustained by workers in the course of their employment. Industries are grouped based on their hazards and are collectavly liable for payment of workers comp.
Health insurance: Health and medical insurance provided by provincial governments with assistance from the federal government. this portion is paid for by taxes at the federal level.
Holidays and vacations: Minimum vacation requirements and stat holidays.
What are some examples of voluntary benefits?
Insurance: Spreading the financial risk by pooling funds in the form of insurance premiums so when an insured risk occurs, employee is comensated.
- Life insurance: Two types of plans, one that pays a luimp sum and one that pays a smaller lump sum and payments to spouse indefinatly. Employers general;ly pay for life insurance plans
- Health insurance: These are supplementry to the government mandated health benefits. (Ex: dental, prescriptions and massage therapy) most cases both the employee and employer pay for the costs of these plans.
-** Disability insurance**: Short term plans allocate days for sick leave. Long term plans are for workers that are disabled for a long time, generally employees have a wait time of up to 6mths and will be paid less than total wage (pays 50-60% of normal income)
Income security benefits: Seeks to ensure an income before and after retirement
- Employment income security: Unemployment benefits, severance pay, and other forms of financial support aimed at safeguarding employees’ income during periods of job loss or transitions. There is also supplemental unemployment benefits (SUB) Private plans providing compensation for wage loss to laid-off workers.
Retirement security benefits: 2 problems: 1) If employers go out of business plan is left unfunded or partially funded. 2) Some companies minimize their pension costs by having very long vesting (give employees rights to benefits) periods
- Defined benefit plans: Based on amounts contributed by the employer and the employee, with the final pension depending on amounts contributed, investment income, and economic conditions at retirement. Know in advance what benifit will be.
- Defined contribution plans: Based on amounts contributed by the employer and the employee, with the final pension depending on amounts contributed, investment income, and economic conditions at retirement.
-Group RRSP’s: Employer-sponsored retirement savings plan where employees can contribute a up to 18% of their income, often through payroll deductions, to build retirement savings. Contributions are tax-deductible, reducing taxable income, and may receive matching contributions from the employer.
- TFAS’s: Under the employees control and is available to all canadians. Some emploiers provide money for employees intended to be placed in a TFSA.
Paid time off benefits:
- On-job beaks: rest breaks, meal breaks and washup breaks, may icrease productivity but employees may try to stretch these breaks.
- Paid sick leave: Limited number of days per year, one of the most abused benefits. Some companies ask for medical documentation or pay employees for unused days to control this.
- Holidays and vacations: Most grant additional days than legally required.
Employee assistance programs:
- Educational assistance: Employers partially or completely reimburse employees for furthering their education.
- Financial services: Products from the company at a discount or giving an employee a phone/data plan for work or personal use. There is also some stock purchasing programs.
- Social services: bowling leagues to employee assistance programs designed to assist employees with personal problems
What are flexable benefits?
Programs that allow employees to select the mix of benefits and services that will answer their individual needs. Also known as cafeteria benefit programs.
Workers are provided a benefit and services account with a specified number of dollars in the account.
Additional administrative cost and obligation for HR to advise employees, but increased employee participation (employees better understand what employer is offering in terms of benefits)
What are emerging employee assistance programs?
Providing employees with a health spending account tword eligible medical and dental expenses not covered by health coverage. These programs focus on supporting employees’ mental, emotional, and social well-being. These programs have expanded beyond traditional counseling to include services like stress management, financial advice, legal support, wellness coaching, and resources for balancing work-life responsibilities. They are designed to help employees handle various life challenges that can affect work performance, fostering a supportive work environment that values holistic well-being. Emerging EAPs reflect a shift toward more comprehensive support, recognizing the diverse needs of a modern workforce.
Some major examples of emerging employee assistance programs:
- Health Spending Account
- Wellness Accounts
- Concierge Services
- Paid Leaves e.g. Education
- Child & Elder Care
- Same-Sex Benefits
- Benefits for Part-Time
- Buy More Vacation
What are some issues when managing benefit and service programs?
Administration complexity of increasingly complex benefit packages is a major challange for HR. Eased by web administration and health plan providers (e.g., Blue Cross Canada)
Communication of benefits to workers has been a challenge. Employees want more benefits, but are often unaware of the benefits already provided (increasing costs and complaints)
increase awareness through publicity.
What are the implications of benefits for HR?
- Comply with all legal requirements and maintain accurate employee records
- Avoid duplication (Consider what is already available to employees by CPP, EI, workers comp or insurance)
- Reducing accidents to lower the cost of workers’ compensation
To control ballooning costs, consider cost/benefit of each type of benefit offered along with coverage rates (e.g., prescriptions costs at 80% rather than 100%, 30-day maximums for travel insurance, maximums for paramedical coverage)
Retention of key employees has become a major issue
- Innovative and flexible benefits are very effective tools to attract and retain highly skilled staff
Benefit audit is a system to control the efficiency of a benefit program:
- Identify opportunities for savings
- Ensure insurers and third-parties are effective
- Exert effective control over benefits area
- Identify who is in control of benefits budget
- Compare claiming patterns to other employers
What are the tax implications for benefits?
Generally, GST has to be paid on the following benefits:
- Company cars
- Car operating costs
- Tax return preparation
- Short-term residential accommodation
- Holiday trips within continental
- North America
- Frequent flyer points
- Financial counselling
- Parking
