UB MGI 301 - CHPT 13 STUDENT (29 pages)

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CHPT 13 STUDENT



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CHPT 13 STUDENT

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Pages:
29
School:
University at Buffalo, The State University of New York
Course:
Mgi 301 - Human Resources Mgt
Unformatted text preview:

How Companies Increase Total Compensation Employee Benefits Introduction Average cost of benefits is about 31 3 of total compensation package Benefits are unique because o more regulation of benefits than direct pay o almost obligatory for employers to provide o complex for employees to understand o Employers pass health care cost increases on to employees 13 2 Benefits Programs 13 3 Social Security Social Security provides old age insurance unemployment insurance survivors insurance disability insurance hospital insurance and supplementary medical insurance o Social Security retirement benefits free from federal tax and state tax in all but 13 states CO CT KS MN MO MT NE NM ND RI UT VT WV o Full benefits begin at age 66 or reduced benefit at 62 Social Security provides old age insurance unemployment insurance survivors 13 4 Unemployment Insurance Objectives o o o o Offset lost income during involuntary unemployment Help unemployed workers find new jobs Provide incentive for employers to stabilize employment Preserve investments in skills by providing workers with income during short term layoffs Unemployed workers eligible o o o o o Worked steadily in past usually 52 weeks Available and actively seeking work Were not discharged for cause Did not quit voluntarily Not out of work because of a labor dispute 13 5 Worker s Compensation Covers job related injuries and death Covers families of workers who accidentally die on job Covers 90 of U S workers Categories of Benefits o Disability income medical care death benefits rehab Reducing claims o Improve safety hold managers accountable monitor employee treatment 13 6 Private Group Insurance Offered at employer s discretion not legally required Types medical and disability insurance o Medical is most important so most orgs offer to FT employees o Disability includes short term and long term plans Group rates lower because of economies of scale ability to pool risks and greater bargaining power of a group Consolidated Omnibus Budget Reconciliation Act COBRA requires employers to permit employees to extend health insurance coverage at group rates for up to 36 months following a qualifying event 13 7 Employer Sponsored Retirement Plans Possible benefits of plans include o savings directly deducted from your paycheck o tax breaks o in some cases an employer matching of your contributions aka free money Most common include o 401 k plan o Defined benefit pension plan o 403 b plan 13 8 Defined Benefit Pension Plan Known as traditional retirement plans Most common type of employer sponsored retirement plan until 1970s but today is rare replaced by defined contribution plans Employee receives fixed monthly benefit at retirement and will not be responsible to make any contributions to the plan All contributions supplied by the employer who bases the monthly benefit on employee s income and years of service All investment decisions made by the employer not employee Plan is entirely administered by employer so employee has no control over the funds upon reaching retirement age 13 9 Defined Benefit Pension Plan Known as traditional retirement plans Most common type of employer sponsored retirement plan until 1970s but today is rare replaced by defined contribution plans Employee receives fixed monthly benefit at retirement and will not be responsible to make any contributions to the plan All contributions supplied by the employer who bases the monthly benefit on employee s income and years of service All investment decisions made by the employer not employee Plan is entirely administered by employer so employee has no control over the funds upon reaching retirement age 13 10 401 k Plan Most common employer sponsored retirement plan today primarily offered by large for profit businesses Is a defined contribution plan funded primarily by employee but often includes at least partial employer match Employee chooses which investments to put funds into and has complete control over the money when reach retirement Employee contributions are tax deductible in the year they are made and investment earnings accumulate on tax deferred basis Once employee retires and begins taking distributions those distributions are taxable as ordinary income 13 11 401 k Plan Should the employee withdraw the funds prior to retirement funds can be rolled over either into a traditional IRA or into 401 k plan of another employer without incurring taxes or early withdrawal penalties Any funds withdrawn but not rolled over into another qualified plan will be subject to ordinary income taxes as well as 10 early withdrawal penalty Annual contributions limited to 18 000 for 2016 If employee is age 50 or older there is a catch up provision allowing additional contributions of 6 000 for 2016 13 12 403 b Plan Virtually identical to 401 k plan except designed for nonprofit organizations Includes public schools systems hospitals home health service agencies welfare service agencies churches and conventions and associations of churches The plans funded primarily by employees and contributions are tax deductible when made Employers can match contributions up to a certain percentage Investment earnings accumulate on a tax deferred basis and contribution limits are identical to those of 401 k plans 13 13 Pay For Time Not Worked Vacation o US has no legal minimum 10 days is common o Europe 20 days minimum vacation mandated Sick Leave programs provide full salary replacement for limited period of time usually not exceeding 26 weeks based on length of service accumulating with service Paid public holidays o US has no legal minimum 8 days is common Many companies moving to Paid Time Off PTO of bundling vacation and sick time as one 13 14 13 15 Family Friendly Policies To ease conflict between work and home responsibilities Family and Medical Leave Act FMLA o o o o o o Up to 12 weeks of unpaid leave Applies to organizations with 50 employees Applies to childbirth or adoption To care child spouse parent or self during serious illness Employees guaranteed same or comparable job when return to work Employees with less than a year of service or those who work less than 25 hours a week are not covered Parental Leave o US has no legal minimum 13 16 13 17 Managing Benefits Employer strategies Surveys and Benchmarking o What is the competition doing o Survey information available from private consultants Bureau of Labor Statistics BLS and Chamber of Commerce Cost control o Larger the cost of the


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