Chapter 11: Employee Benefits

Question 1

What is the percentage of total payroll costs occupied by benefits in Canada?

Answer 1

20 to 25%

Question 2

What is the benefit of having employees participate in designing benefits programs?

Answer 2

Ensures that management is moving in the direction of satisfying employee wants

Question 3

What are the advantages to employers for having a flexible benefits plan?

Answer 3

1. Maximization of the psychological value of the benefits program by only paying for highly desired benefits
2. Limiting costs by allowing employees to buy benefits up to a maximum amount
3. Gain competitive advantage in recruiting and retention of employees

Question 4

What are the disadvantages to employers for having a flexible benefits plan?

Answer 4

1. Poor benefits selection may result in unwanted financial costs
2. Added costs for establishing and maintaining a flexible plan

Question 5

What are the advantages to employees for having a flexible benefits plan?

Answer 5

1. Employees can select benefits to match their needs
2. Benefit selections adapt to a constantly changing workforce and environmental changes
3. Greater understanding of the benefits offered and the costs incurred

Question 6

What are the disadvantages to employees for having a flexible benefits plan?

Answer 6

1. Certain benefits may be unknown if the plan is not communicated well
2. Rising cost of plan administration may be passed to employees or result in reduced plan offerings

Question 7

What are some key points for communicating benefits plans?

Answer 7

1. Use multiple media techniques to be most effective
2. Avoid complex language when describing benefits
3. Explain the purpose behind a benefit and the value it offers employees
4. Be upfront about the pros and cons of different benefits plans
5. Use graphics when possible to make information understandable at a glance
6. Provide examples to demonstrate how a benefit choice might affect different types of employees

Question 8

What are some concerns of management surrounding benefits plans?

Answer 8

1. Managing the program requires close attention to forces that must be kept in balance for the program to succeed
2. Need to consider union demands, benefits of other employers, tax consequences, and rising costs
3. Reducing costs by using deductibles, dollar limits, and using specific providers

Question 9

What percentage of benefits packages are legally required?

Answer 9

Approximately 12%

Question 10

What contributions are legally required as benefits?

Answer 10

Canada Pension Plan (CPP), Employment Insurance (EI), Workers’ Compensation Insurance

Question 11

What are the major categories of discretionary major employee benefits?

Answer 11

1. Healthcare benefits
2. Payment for time not worked
3. Life insurance
4. Retirement programs
5. Pension plans

Question 12

What could be included under healthcare benefits?

Answer 12

General healthcare, prescription drugs, dental, optical, mental healthcare

Question 13

How can organizations cut the cost of healthcare benefits?

Answer 13

By using employee assistance programs and wellness programs to be proactive about employee issues

Question 14

What is included in payment for time not worked?

Answer 14

Vacations with pay, paid holidays, sick leave, severance pay, time off for bereavement, jury duty, military duty, rest periods, maternity/paternity benefits

Question 15

What is the most common benefit provided by employers?

Answer 15

Life insurance

Question 16

What is meant by a “silver handshake”?

Answer 16

An early retirement incentive in the form of increased pension benefits for several years or a cash bonus

Question 17

What is a contributory pension plan?

Answer 17

A pension plan where contributions are made jointly by employees and employers

Question 18

What is a non-contributory pension plan?

Answer 18

A pension plan where contributions are only made by the employer

Question 19

What is a defined-benefit plan?

Answer 19

A pension plan where the amount an employee is to receive on retirement is specifically set forth

Question 20

What is a defined-contribution plan?

Answer 20

A pension plan that establishes the basis on which an employer will contribute to the pension fund

Question 21

What are the features of a defined benefit plan?

Answer 21

1. Retirement benefit is determined by a predefined formula
2. Benefit received at retirement is more predictable than defined contribution plans
3. It is more costly to employers
4. It is more difficult to administer because of complicated government regulations
5. It is becoming less common among organizations

Question 22

What are the features of a defined contribution plan?

Answer 22

1. Benefit received at retirement is determined by the amount of funds in an employee’s account at retirement which establishes the basis on which the employer will contribute to the fund
2. Benefit received at retirement is less predictable than defined benefit plans
3. Employers are more easily able to contain costs
4. Can take many forms such as profit sharing, contribution matching, employer sponsored RRSPs
5. It is increasing in popularity

Question 23

What is vesting?

Answer 23

A guarantee of accrued benefits to participants at retirement age regardless of their employment status at the time

Question 24

What is an employee assistance program (EAP)?

Answer 24

Services provided by employers to help workers cope with a wide variety of problems that interfere with the way they perform their jobs

Question 25

Why would employers offer childcare or eldercare?

Answer 25

Because employees responsible for caregiving are more likely to miss work because of the emotional and physical fatigue associated with caregiving

Question 26

How can employers use benefits as branding?

Answer 26

Organizations can use their unique and comprehensive employee benefits to position themselves as an employer of choice for top talent