Module 9 Flashcards
Employee Benefits are what kind of component to compensation?
> Employee Benefits are a component of total compensation on top of pay, provided to employees and paid whole or in part by the employer.
What benefits are typically included in benefits package?
> Life insurance, pension plans, workers compensation, vacations, etc. are examples of benefits typically included in the employee package.
Employee satisfaction with benefits is associated with what? What should we keep in mind when saying this?
> employee satisfaction with benefits is associated with job satisfaction there is not a lot of available data concerning specific payoffs.
Three benefits are mandated by the provincial or federal government:
1) Worker’s Compensation Provincial);
2) Employment Insurance (Federal); and
3) Canada/Quebec pension plans (Federal/Que).
What laws affect benefit plans?
> Other laws are affected by the above such as the Income Tax Act, Human Rights Acts, and Pension Benefits Acts.
Unions have fought for the introduction of new benefits and the improvement of current plans including:
> including pattern pension plans, supplementary unemployment compensation and extended vacation plans.
Employers have also increased benefits to try to improve what elements in the workplace?
> Employers have also increased benefits to try to improve satisfaction and productivity.
> Rest breaks were added to decrease mistakes and accidents in production.
> Many benefits were added to improve the perception of the employer by the employees.
Employee Benefits are cost effective in three situations:
1) Most benefits are not taxable to avoid tax implications;
2) Many group-based benefits, like health and life insurance can be purchased at lower rates for worker groups and for individuals;
3) Benefit premiums and pension contributions are tax deductible up to certain limits.
Employees do have preferences in what types of benefits they want BUT when asked what benefits they receive what happens?
> BUT when asked what benefits they receive they often can’t list them.
> When asked what the value of the benefits are, they often undervalue them.
Employees expect benefits as part of their total compensation, but do what?
> but take them for granted and do not know their true value.
Questions to ask during Benefit Planning and Design:
> What is the role that Benefits play in Total Compensation? Is it to attract employees or to reduce turnover?
> Are the benefits externally competitive and is the cost justified?
> Are the benefits adequate from a financial liability viewpoint?
Four Major Administration Issues arise in setting up a package:
1) Who should be covered?:
- Probationary employees?
- Dependents?
- Retirees?
- Survivor benefits?
- Disabilities?
- Should coverage continue during layoffs?
- Are benefits only for full-time employees?
2) How much choice should an employee be given? In Flexible Benefits Plans, the employee is able to choose benefits that are of most valuable to them.
3) How will the benefits plan be financed?
1) Non-contributory (employer pays cost);
2) Contributory (where costs are shared between employee and employer; where the employee pays the cost of some benefits or where the employer pays the cost of some benefits (such as LTD premiums);
3) Employee financed (The employee pays total cost for some benefits.
4) Finally, it is critical to ensure compliance with legislation and regulations where the company operates.
Factors Affecting Planning - Relationship to Total Compensation Cost:
> the company decides if the money spent on benefits could be better spent elsewhere
Factors Affecting Planning - Costs Relative to Benefits:
> evaluating present and future costs of benefits determines if the organization can afford to maintain the current level of that benefit.
> This is especially true of health insurance benefits that have been difficult to maintain without increasing premium costs (required contribution by employees)
Factors Affecting Planning - Competitor Offerings:
> benefits must be considered relative to the competition to maintain external equity and maintain the pay policy of leading, matching or lagging the market.
Factors Affecting Planning - Role of Benefits in Attraction, Retention and Motivation:
> There is little actual evidence that benefits attract, retain, motivate, or impact job satisfaction or productivity. The exception is stock options which do have retention value.
Factors Affecting Planning - Legal Requirements
> Employers must ensure their benefits meet legal requirements such as vesting (the waiting period for the employer paid portion of pension benefits to become available to an employee upon termination).
Factors Affecting Planning - Absolute and Relative Costs:
> The absolute and relative costs of an entire Benefits package must be determined in order to compare the costs of the total compensation plan with the competition.
Perceived unfairness can result from what?
> can result from an employee’s perception that his/her personal needs (such as age: pension plan) are not being met or that he/she is not receiving benefits competitors are offering.
There are three main functions in administering a benefits plan:
1) Communication
> Best Method is producing an Employee Benefits Handbook.
> The Handbook needs to be accompanied by group meetings and videos.
> One on one meetings with an administrator are also valuable, as are intranet and internet postings of the plan details.
> Details must be complete, clear and free of complex jargon.
There are three main functions in administering a benefits plan:
2) Claims Processing
> A Claims Processor determines if the claim is valid. Approximately 10% of claims are denied.
> When a determination is made concerning the employee eligibility;
> If eligibility requirements are approved, the payment level is determined.
There are three main functions in administering a benefits plan:
3) Employers are increasingly looking for Cost Containment opportunities including.
> Probationary periods (waiting a specified period of time to extend benefits to a new employee);
> Benefit maximums (for example: limiting disability income payment to a maximum percentage of income);
> Coinsurance (for example: premiums are shared by employer/ee;
> Deductibles (for example: a specified dollar amount paid by the employee before a claim is paid;
> Coordination of benefits; is the reduction of any claim amount paid by a spouse’s plan;
> Administering/Delivery cost containment(for example: seeking competitive bids for program delivery);
> Denying claims for pre-existing conditions;
> Creating programs that encourage wellness;
> Outsourcing benefits administration
What are the benefits that are legally required?
1) CPP/QPP
2) Employment Insurance
3) Workers’ Compensation
4) Government-sponsored healthcare plans
5) Breaks, vacations and leaves
What is the Canada/Quebec Pension Plan?
> is a government-sponsored plan designed to replace employment income in case of retirement, death, or disability. All employees and self-employed persons must contribute to the plan, and employers match their employees’ contributions equally.
What is employment insurance?
> provides workers with temporary income replacement as a result of employment interruptions due to work shortages, sickness, non-occupational accidents, maternity leave, parental or adoption leave or compassionate care leave. Not payable with the employee is terminated for just cause or quits without a good reason.
What are Supplementary Unemployment Benefits (SUB) and Worksharing Programs?
> are voluntary, self-insured employer plans to complement benefits received under the EI plan.
> Maternity, parental, and compassionate care SUB plans can supplement up to 100 percent of earnings.
What is a pension plan?
> provide income at retirement as compensation for current work; also a security motive and tax advantage has fostered growth of company pensions through either a defined benefit or defined contribution pension plan.
What are the two types of pension plans?
1) A Defined Benefit Plan
2) A Defined Contribution Plan
What is a defined benefit plan?
> agrees to provide a specific benefit level of retirement income that may increase with years of seniority financed by actuarial formula.
What is a defined benefit contribution plan?
> requires specific contributions by the employer but the final benefit is unknown and depends on investment success.
What does pension legislation regulate?
> Most provinces and the federal government have pension legislation regarding pension benefits and the Income Tax Act provides for employer and employee tax deductions up to a certain limit.
What is life insurance?
> is a common employee benefit that typically pays out one or two times the employee’s annual salary and premiums are usually paid by the employer.
> Some plans have additional life insurance on an optional employee-paid basis.
> Other benefit plans provide retirees life insurance at little or no cost. Other types include AD and D and Dependent Life insurance.
What is medical insurance?
> Employer-sponsored medical insurance provides coverage for expenses not payable under the mandatory legislated plans such as medications and prescription drugs which can represent up to 75% of employer medical costs in Canada.
> Control of costs is obtained through deductibles, coinsurance rates, maximum benefits and coordination of benefits.
> Promoting of preventative health programs and wellness programs can bear future results and lower medical insurance costs.
What is dental insurance?
> These plans often cover the full cost of checkups and fillings; and a percentage of major restorative work (50 to 80 percent). The benefits payable are usually linked to the dental fee guide in each province.
What does vision care cover?
> These plans can cover all or part of the costs of eye exams, lenses, frames and contact lenses.
Income Security Plans include:
> STD
Sick leave plans
LTD
What is STD?
> are employer-sponsored plans that provide a continuous income of all or part of an employee’s income when an employee is absent from work due to illness or an injury that is not work-related.
What is sick leave?
> are employer-sponsored plans that cover a number of sick days paid per month or per year per employee
What is LTD?
> cover income protection from long term illness or injury that is not work related. The term begins after 26 weeks of disability.
Pay for time not worked includes;
> Paid rest periods, lunch periods, washup times, clothes-change times; get-ready time benefits;
> Paid vacations;
> Paid holidays (statutory and other);
> Jury duty, bereavement leave, paid personal leave, etc.
What are employee assistance plans?
> Provide confidential counselling for employees; employer-sponsored for personal problems including addiction, stress and mental health
What benefits are under other benefits?
> include Childcare Services (facilities or funds) and Eldercare Services (specialist assistance provided for employees)
