PART FOUR COMPENSATION

C H A P T E R T T h i r t e e n
Benefts
And
Services
13
Lecture Outine
213
Str!te"ic Overvie#
The Benefts Picture Today
Pay for Time Not Worked
Unemployment Insurance
Vacations and Holidays
Sick Leae
Parental Leae and the !amily and "edical
Leae #ct
Seerance Pay
Supplemental Unemployment Benefts
Insurance Benefts
Workers$ %ompensation
Hospitali&ation' Health' and (isa)ility
Insurance
Life Insurance
Benefts for Part*Time and %ontin+ent
Workers
,etirement Benefts
Social Security
Pension Plans
Pension Plannin+
Pensions and the La-
Pension #lternaties
Personal Serices and !amily*!riendly Benefts
Personal Serices
!amily*!riendly Benefts
./ecutie Per0uisites
!le/i)le Benefts Pro+rams
The %afeteria #pproach
%omputers and Benefts #dministration
!le/i)le Work #rran+ements
In Brief: This chapter discusses the
different benefits and services that
companies might offer to employees.
These benefits and services are
offered to entice employees, retain
employees, and to help make them
more productive during their service.
Interesting Issues: More and more
companies are moving to flexible
benefits packages. Students might
well be prodded to understand the
dynamics driving this, as well as the
costs and benefits to the employer.
ANNOTATE$ OUTLINE
I. The Benefits Picture Today Benefits can be classified by 1) pay for time not
worked; 2) insurance benefits; 3) retirement benefits; and 4) services.
Know Your Employment Law: Benefits !ere are a myriad of
laws t!at affect benefits. "t is important t!at e#pert assistance be
secured w!en formulatin$ benefits and benefits policies.
II. Pay for Time Not Worked
%. &nemployment "nsurance %ll states !ave unemployment insurance or
compensation acts 't!at follow federal $uidelines)( w!ic! provide for weekly
benefits if a person is unable to work t!rou$! some fault ot!er t!an !is)!er own.
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!e benefits derive from an unemployment ta# on employers t!at can ran$e from
*.1+ to ,+ of ta#able payroll in most states. %n employer-s unemployment ta#
rate reflects its rate of personnel terminations.
B. .acations and /olidays !e number of paid employee vacation days and
!olidays varies considerably from employer to employer. 0irms !ave to address
several !oliday1 and vacation1related policy issues.
2. 3ick 4eave provides pay to employees w!en t!ey-re out of work due to illness.
5ost sick leave policies $rant full pay for a specified number of permissible sick
days. o minimi6e employees usin$ t!eir sick leave as e#tensions to t!eir
vacations( some employers are repurc!asin$ unused sick leave at t!e end of t!e
year by payin$ t!eir employees a daily e7uivalent sum for eac! sick leave day
not used or creatin$ a leave bank or paid time off '89).
:. 8arental 4eave and t!e 0amily 5edical 4eave %ct stipulates t!at: 1) private
employers of ,* or more employees must provide eli$ible employees up to 12
weeks of unpaid leave for t!eir own serious illness( t!e birt! or adoption of a
c!ild( or t!e care of a seriously ill c!ild( spouse( or parent; 2) employers may
re7uire employees to take any unused paid sick leave as part of t!e 121week
leave provided in t!e law; 3) employees takin$ leave are entitled to receive
!ealt! benefits w!ile t!ey are on unpaid leave( and 4) employers must $uarantee
employees t!e ri$!t to return to t!eir previous or e7uivalent position wit! no loss
of benefits at t!e end of t!e leave; !owever( t!e law provides a limited e#ception
from t!is provision.
;. 3everance 8ay a one1time payment w!en terminatin$ an employee( is a
!umanitarian $esture( and $ood public relations. 5ost mana$ers e#pect
employees to $ive t!em at least one or two weeks- notice if t!ey plan to 7uit; it
t!erefore seems appropriate to provide at least one or two weeks- severance if
an employee is bein$ dismissed.
0. 3upplemental &nemployment Benefits supplement t!e employee-s
unemployment compensation( and !elp t!e person maintain !is)!er standard of
livin$ for a time w!ile !e)s!e is out of work due to layoffs( reduced workweeks(
and relocations. !ey are becomin$ more prevalent in union a$reements.
NOTES ;ducational 5aterials to &se
III. Insurance Benefits
%. <orkers- 2ompensation refers to t!e sure( prompt income and medical benefits
provided in work1related accidents to t!e victims or t!eir dependents( re$ardless
of fault. ;very state !as its own worker-s compensation law and administrative
commission( and some run t!eir own insurance pro$rams. 5ost states re7uire
employers to carry worker-s compensation insurance. =eit!er t!e state nor t!e
federal $overnment contributes any funds for worker-s compensation.
1. /ow Benefits are :etermined <orkers- 2ompensation can be monetary or
medical. 5onetary awards are based on a formula re$ardin$ t!e disability
involved and t!e worker-s avera$e weekly wa$es. 3ome disabilities or losses
also receive monetary awards based on a sc!edule of t!ose losses.
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2. 2ontrollin$ <orker-s 2ompensation 2osts !e costs of insurance premiums
depend on t!e number and dollar amount of claims( t!us minimi6in$ suc!
claims is important. 3ome ways to reduce suc! claims is to screen out
accident1prone workers; reduce accident1causin$ conditions in your facilities;
and institute effective safety and !ealt! pro$rams( and comply wit!
$overnment standards on t!ese matters. 5any firms institute re!abilitation
pro$rams to $et in>ured employees back on t!e >ob as fast as possible( since
worker compensation cost accumulate as lon$ as t!e person is out of work.
B. /ospitali6ation( 5edical( and :isability "nsurance is aimed at providin$
protection a$ainst !ospitali6ation costs and loss of income arisin$ from accidents
or illness occurrin$ from off1t!e1>ob causes( and is offered by most employers
because medical care and insurance are so e#pensive. ;mployer !ealt! and
!ospitali6ation plans must comply wit! t!e %mericans wit! :isabilities %ct.
%ccidental deat! and dismemberment covera$e provides a lump1sum benefit in
addition to life insurance benefits w!en deat! is accidental. :isability insurance
provides income protection for loss of salary due to illness or accident. % !ealt!
maintenance or$ani6ation '/59) is a medical or$ani6ation consistin$ of several
specialists operatin$ out of a community1based !ealt! care center. 8referred
provider or$ani6ations '889s)( a cross between /59s and t!e traditional
doctor)patient arran$ement( are $roups of !ealt! care providers t!at contract to
provide medical care services at a reduced fee.
1. =ew rends in /ealt! 2are 2ost 2ontrol many employers are c!an$in$
t!eir medical plans by: 1) movin$ away from 1**+ medical cost payments
and includin$ a deductible; 2) increase annual deductibles; 3) re7uire
medical contributions; 4) use $atekeepers; ,) encoura$e preventive !ealt!
care; ?) form !ealt! care coalitions; and @) mana$e t!e cost of aids.
2. 5ental /ealt! Benefits !e costs of mental !ealt! treatment are risin$
because of widespread dru$ and alco!ol problems. !ere is an increase in
t!e number of states re7uirin$ employers to offer a minimum packa$e of
mental !ealt! benefits. !e 5ental /ealt! 8arity %ct of 1AA? sets minimum
mental !ealt! care benefits at t!e national level.
3. !e 8re$nancy :iscrimination %ct '8:%) pro!ibits se# discrimination based
on pre$nancy( c!ildbirt!( or related medical conditions( t!us employers must
treat women affected by pre$nancy( c!ildbirt!( or related medical conditions
t!e same as any employee not able to work( wit! respect to all benefits(
includin$ sick leave and disability benefits( and !ealt! and medical
insurance.
4. 29BB% '2ompre!ensive 9mnibus Bud$et Beconciliation %ct)
re7uirements are t!at most private employers must make continued !ealt!
benefits available to terminated or retired employees and t!eir families for a
period of time( $enerally 1C mont!s. !e former employee must pay for t!e
covera$e( if desired( as well as a small fee for administrative costs.
,. 4on$1erm 2are is a new benefit aimed at supportin$ people in t!eir old
a$e. !e /ealt! "nsurance 8ortability and %ccountability %ct( enacted in
1AA?( lets employers and employees deduct t!e cost of lon$1term care
insurance premiums from t!eir annual income ta#es.
2. 4ife "nsurance 5ost employers provide $roup life insurance plans( w!ic! usually
accept all employees( re$ardless of !ealt! or p!ysical condition.
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:. Benefits for 8art1time and 2ontin$ent <orkers 3ome firms provide !oliday( sick
leave( vacation benefits( and some form of !ealt! care benefits for employees
w!o work less t!an 3, !ours a week.
NOTES ;ducational 5aterials to &se
IV. Retirement Benefits
%. 3ocial 3ecurity provides t!ree types of benefits: retirement benefits( survivor-s
'deat!) benefits( and disability payments. Betirement benefits provide an income
if you retire at a$e ?2 or t!ereafter and are insured under t!e 3ocial 3ecurity %ct.
3urvivor 'deat!) benefits provide mont!ly payments to your dependents
re$ardless of your a$e at deat! if you were insured under t!e 3ocial 3ecurity %ct.
:isability payments provide mont!ly payments to employees w!o become totally
disabled 'and t!eir dependents) if t!ey work and meet certain specified work
re7uirements. !e 3ocial 3ecurity system also administers t!e 5edicare
pro$ram( w!ic! provides a wide ran$e of !ealt! services to people ?, or older.

B. 8ension 8lans !ere are a variety of pension plans. :efined contribution plans
specify w!at contributions t!e employer will make to t!e employee-s retirement or
savin$s fund. 4*1 'k) plans are w!ere an employee aut!ori6es t!e employer to
deduct a certain amount of money from !is)!er payc!eck before ta#es and to
invest in t!e 4*1'k) plan. 5any federal laws $overn pensions. ;mployers !ave
to consider several policy issues in developin$ pension plans: members!ip
re7uirement; benefit formula; plan1fundin$; and vestin$.
1. 4*1'k) 8lans a popular defined contribution plan in w!ic! t!e employee can
!ave money deducted from !is or !er payc!eck and deposited in t!e account
before payroll ta#es.
2. 9t!er ypes of :efined 2ontribution 8lans in a savin$s a t!rift plan(
employees contribute a portion of t!eir earnin$s to a fund. !e employer
usually matc!es t!is contribution in w!ole or in part. "n deferred profit
s!arin$ plans( employers contribute a portion of t!eir profits to t!e pension
fund. %n employee stock owners!ip plan ';398) is a ta#1deductible stock
bonus plan.
2. 8ension 8lannin$ !e ;mployee Betirement "ncome 3ecurity %ct "ncome
3ecurity %ct ';B"3%) restricts w!at companies can( cannot( and must do in
re$ards to pension plans. "n developin$ pension plans( employers must
consider: members!ip re7uirements( benefit formula( plan fundin$( and vestin$.
:. 8ensions and t!e 4aw &nder t!e ;mployee Betirement "ncome 3ecurity %ct
';B"3%)( participants in pension plans must !ave a non1forfeitable ri$!t to 1**+
of t!eir accrued benefits after 3( ,( or @ years of service. &nder t!e a# Beform
%ct of 1AC?( an employer can re7uire t!at an employee complete a period of no
more t!an 2 years- service to t!e company before becomin$ eli$ible to participate
in t!e plan. "f you re7uire more t!an 1 year of service before eli$ibility( t!e plan
must $rant employees full and immediate vestin$ ri$!ts at t!e end of t!at period.
;. 8ension %lternatives
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1. ;arly Betirement <indows mean t!at t!e company opens up 'for a limited
time only) t!e opportunity for employees to retire earlier t!an usual( wit! a
financial incentive( w!ic! is $enerally a combination of improved or
liberali6ed pension benefits plus a cas! payment.
2. 8ortability of pension plans refers to makin$ it easier for employees to take
t!eir retirement income w!en t!ey leave( and roll it over into a new
employer-s savin$s plan by switc!in$ from defined benefit to defined
contribution plans.
3. 2as! Balance 8ension 8lans are defined benefit plans under w!ic! t!e
employer contributes a percenta$e of employees- current pay to t!e
employees- pension plans every year( and employees earn interest on t!is
amount.
Improving Productivity Through HRIS: Benefits 5ana$ement
3ystems Benefits administration can be an enormously labor1
intensive and time consumin$ activity for an /B department. 9ne of
t!e main ways /B mana$ers are increasin$ t!e productivity of t!eir
benefits dollars is by increasin$ t!e utili6ation of tec!nolo$y.
NOTES ;ducational 5aterials to &se
V. Personal Services and FamilyFriendly Benefits
%. 8ersonal 3ervices are bein$ provided by many companies.
1. 2redit &nions are usually separate businesses establis!ed wit! t!e
employer-s assistance to !elp employees wit! t!eir borrowin$ and savin$
needs.
2. ;mployee %ssistance 8ro$rams ';%8s) provide employees wit! counselin$
and)or treatment for problems suc! as alco!olism( $amblin$( or stress.
B. 0amily10riendly Benefits !ere are more families in w!ic! bot! adults work(
more one1parent !ouse!olds( more women workin$( and more people over ,,
workin$. 9n1site c!ild care( fitness and medical facilities( fle#ible work
sc!edulin$( telecommutin$( occasional sabbaticals( loan pro$rams for !ome
computers( stock options( concier$e services( even insurance for t!e family pet
are all part of t!e compensation packa$e in t!e new workplace.
1. ;ffects on 8erformance !ere is not a lot of evidence to su$$est t!at
family1friendly benefits improve productivity. 5any firms implement t!em as
part of broader commitment1buildin$ pro$rams.
2. 3ubsidi6ed 2!ild 2are is an increasin$ly desirable benefit( w!ic! tend to
improve recruitin$ results( lower absenteeism( improve morale( $arner
favorable publicity( and lower turnover.
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3. ;lder 2are pro$rams are bein$ offered to employers to !elp employees
w!o must care for elderly w!o can-t fully care for t!emselves.
4. 9t!er Dob1Belated Benefits employers provide include subsidi6ed
employee transportation( food services( and educational subsides.
,. 3eptember 11 t!is terrorist attack !ad two effects: 1) many firms e#panded
t!eir trauma counselin$ services( and 2) insurance became muc! more
e#pensive to obtain.
The New Worplace: :omestic 8artner Benefits 5any companies
are e#tendin$ benefits covera$e to same se# domestic partners.
Because "B3 $uidelines do not include suc! partners in t!e definition
of Edependents(F t!ere is considerable doubt t!at t!ese benefits will
be ta# free.
2. ;#ecutive 8er7uisites 'perks( for s!ort) include mana$ement loans( salary
$uarantees( protection for e#ecutives if t!eir firms become tar$ets of ac7uisitions
or mer$ers( financial counselin$( relocation benefits( time off wit! pay(
outplacement assistance( company cars( c!auffeured limousines( security
systems( company planes and yac!ts( e#ecutive dinin$ rooms( p!ysical fitness
pro$rams( le$al services( ta# assistance( liberal e#pense accounts( club
members!ips( season tickets( credit cards( and c!ildren-s education.
NOTES ;ducational 5aterials to &se
VI. Fle!i"le Benefits Pro#rams <!en $iven t!e opportunity to c!oose( employees do
prefer fle#ibility in t!eir benefits plan.
%. !e 2afeteria %pproac! 'cafeteria benefits plan is $enerally synonymous wit!
fle#ible benefits plan) is w!ere eac! employee is $iven a benefits fund bud$et to
spend on w!ic!ever benefits !e)s!e wants once t!e employer limits t!e total cost
for eac! benefits packa$e and includes certain non1optional items. 0le#ible
spendin$ accounts let employees pay for certain benefits e#penses wit! preta#
dollars. 2ore plus option plans establis! a core set of benefits( w!ic! are usually
mandatory for all employees; t!en t!e employees can c!oose from various
benefits options.
The HR Scorecard! Strategy and Re"ult": !e =ew Benefits 8lan
!e /otel 8aris implements a new family1 friendly benefits plan. "ts
centerpiece was a proposal for dramatically improved family1friendly
benefits. Because so many of eac! !otel-s employees were sin$le
parents( and because eac! !otel !ad to run 24 !ours a day( t!ey set
aside a room in eac! !otel for an on1site c!ild1care facility.
B. 2omputers and Benefits %dministration 2omputes( includin$ 821based
systems and t!e "nternet( enable employees to update and manipulate t!eir
benefits packa$es.
2. 0le#ible <ork %rran$ements
1. 0le#time is an arran$ement by w!ic! employees !ave fle#ibility in
sc!edulin$ t!eir workday around core !ours.
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2. 2ompressed <orkweeks may consist of four 1*1!our days( t!ree 121!our
days( or ot!er suc! combinations.
3. ;ffectiveness of 0le#time and 2ompressed <orkweek 8ro$rams reviews
indicated t!at t!ey increase employee satisfaction and productivity. 3ome
critics are concerned t!at fati$ue and accidents may increase.
4. 9t!er 0le#ible <ork %rran$ements t!ere are many ot!er arran$ements t!at
employers may offer. Dob s!arin$ is w!en two people s!are one full1time >ob.
<ork s!arin$ is w!en a w!ole $roup reduces its !ours to prevent layoffs.
elecommuters work at !ome and use p!ones and internet to conduct
business.
When $ou%re &n $our &'n( )R for *ine +ana#ers and
,ntre-reneurs: Benefits and ;mployee 4easin$ 0irst <ei$!
5anufacturin$( a 4*1employee firm( si$ned up wit! %:8 otal 3ource
to enable its employees to receive employee benefits and /B
services as if t!ey worked for a lar$e firm. ;mployee leasin$ firms
are assistin$ smaller firms to !andle t!eir employee1related activities.
NOTES ;ducational 5aterials to &se
$ISCUSSION %UESTIONS
.. $ou are a--lyin# for a /o" as a mana#er and are at the -oint of ne#otiatin# salary and "enefits.
What 0uestions 'ould you ask your -ros-ective em-loyer concernin# "enefits1 2escri"e the
"enefits -acka#e you 'ould try to ne#otiate for yourself. Gou s!ould ask sufficient 7uestions
about all aspects of t!e benefits packa$e suc! t!at you will come away knowin$ e#actly w!at benefits
you will and will not !ave. !ese can be p!rased in many ways( but s!ould cover all areas important
to t!e potential employee. /opefully( students will be far1si$!ted enou$! to understand t!e
importance of benefits t!at mi$!t not appear to be critical at t!is sta$e of t!eir lives. 0or e#ample( if
students are youn$ and sin$le( t!ey s!ould reali6e t!e importance of a $ood family medical plan as
well as a well1funded retirement plan.
3. What is unem-loyment insurance1 Is an or#ani4ation re0uired to -ay unem-loyment "enefits
to all dismissed em-loyees1 ,!-lain ho' you 'ould #o a"out minimi4in# your or#ani4ation5s
unem-loyment insurance ta!. &nemployment insurance provides benefits to an individual w!o is
unable to work t!rou$! some fault ot!er t!an !is)!er own. %n or$ani6ation is not re7uired to pay
unemployment benefits to all dismissed employees. Gou could minimi6e your or$ani6ation-s
unemployment insurance ta# by makin$ sure t!at all your mana$ers understand t!e unemployment
insurance code( train mana$ers and supervisors on discipline and disc!ar$e( conduct e#it interviews(
verify employment claims( file t!e protest a$ainst a former employeeHs claim on a timely basis( know
your local unemployment insurance official( and audit t!e annual benefit c!ar$es statement.
6. ,!-lain ho' ,RIS7 -rotects em-loyees% -ension ri#hts. &nder ;B"3%( pension ri$!ts must be
vested under one of t!ree formulas. %lso( ;B"3% establis!ed t!e 8ension Benefits Iuarantee
2orporation to !elp ensure t!at pensions meet vestin$ obli$ations; t!e 8BI2 also insures pensions
s!ould a plan terminate wit!out sufficient funds to meet its vested obli$ations.
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8. What is 9-orta"ility91 Why do you think it is :or isn5t; im-ortant to a recent colle#e #raduate1
8ortability is t!e ability of an employee to take !is or !er retirement income w!en t!ey leave an
or$ani6ation and roll it over into a new employerHs savin$s plan or "B%. odayHs colle$e $raduate may
not t!ink about it( but it is important to consider t!e 7uestion of portability. 5ost colle$e $raduates
can e#pect to c!an$e employers several times durin$ t!eir career. /avin$ portable retirement plans
can !elp ensure t!at t!ey end up wit! a reasonable retirement income. "f t!e plans are not portable(
it will take e#ceptional plannin$ on t!e employeeHs part to ensure ade7uate retirement income.
<. What are the -rovisions of the F+*71 !e 054% provides t!e followin$: 1) private employers of
,* or more employees must provide eli$ible employees up to 12 weeks of unpaid leave for t!eir own
serious illness( t!e birt! or adoption of a c!ild( or t!e care of a seriously ill c!ild( spouse( or parent; 2)
employers may re7uire employees to take any unused paid sick leave or annual leaves as part of t!e
121week leave provided in t!e law; 3) employees takin$ leaves are entitled to receive !ealt! benefits
w!ile t!ey are on unpaid leave( under t!e same terms and conditions as w!en t!ey were on t!e >ob;
4) employers must $uarantee employees t!e ri$!t to return to t!eir previous or e7uivalent position
wit! no loss of benefits at t!e end of t!e leave; !owever( t!e law provides a limited e#ception from t!is
provision to certain !i$!ly paid employees.
$ESSLER COMPANION &EB SITE
We invite you to visit the Dessler homepage (!ttp:))www.pren!all.com)dessler) on the
Prentice Hall Web site for the best online business support available This site
provi!es professors "ith a customi#e! course Web site$ inclu!ing ne"
communication tools$ one%clic& navigation of chapter content$ an! great resources$
such as 'nternet (esources$ an H()' E*am Prep +ui!e$ assessment e*ercises$ an!
more
IN$I'I$UAL AN$ (ROUP ACTI'ITIES
.. Workin# individually or in #rou-s( find out the unem-loyment rate and la's of your state.
Write a summary detailin# your state%s unem-loyment la's. 7ssumin# =om-any > has a 6?@
rate of -ersonnel terminations( calculate =om-any >%s unem-loyment ta! rate in your state.
3u$$est t!at t!e students use t!e "nternet to researc! t!e unemployment rate and laws for your state.
3. 7ssume you run a small "usiness. Workin# individually or in #rou-s( visit the We" site
www.dol.$ov)elaws. Write a t'o-a#e summary e!-lainin#A :.; the various retirement savin#s
-ro#rams availa"le to small"usiness em-loyers( and :3; 'hich retirement savin#s -ro#ram
you 'ould choose for your small "usiness and 'hy. Based on w!at t!ey learned from t!e
c!apter and t!e results of t!eir "nternet searc!( t!e students s!ould include at a minimum a 4*1'k)
plan t!at can be assessed online.
6. $ou are the )R consultant to a small "usiness 'ith a"out 8? em-loyees. 7t the -resent time
the firm offers only five days vacation( five -aid holidays( and le#ally mandated "enefits such
as unem-loyment insurance -ayments. 2evelo- a list of other "enefits you "elieve they
should offer( alon# 'ith your reasons for su##estin# them. !e specific ones to recommend
would depend partly on t!e profile of t!e employees of t!e firm. "n t!e absence of t!at information(
t!e least costly addition of benefits would be to add some sick leave 'or personal days) and consider
additional vacation and)or !olidays. !e ne#t benefit t!at t!ey mi$!t look to would be to add t!e
availability of some kind of !ealt! plan t!at could include a contributory cost to t!e employee. !is
would be less e#pensive to t!e company and add real value to t!e employees because of $roup
discounts.
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8. The )R=I BTest S-ecificationsC a--endi! at the end of this "ook :-a#es DE<DF3; lists the
kno'led#e someone studyin# for the )R=I certification e!am needs to have in each area of
human resource mana#ement :such as in Strate#ic +ana#ement( Workforce Plannin#( and
)uman Resource 2evelo-ment;. In #rou-s of four to five students( do four thin#sA :.; revie'
that a--endi! no'G :3; identify the material in this cha-ter that relates to the re0uired
kno'led#e the a--endi! listsG :6; 'rite four multi-le choice e!am 0uestions on this material
that you "elieve 'ould "e suita"le for inclusion in the )R=I e!amG and :8; if time -ermits( have
someone from your team -ost your team%s 0uestions in front of the class( so the students in
other teams can take each others% e!am 0uestions. !e material in t!is c!apter t!at relates to t!e
/B2" certification e#am includes: unemployment insurance( vacations and !olidays( sick leave(
parental leave and 054%( severance pay( supplemental unemployment benefits( workers-
compensation( !ospitali6ation( !ealt!( and disability insurance( life insurance( benefits for part1time
workers( social security( pension plans( pension plannin$( pensions and t!e law( pension trends(
e#ecutive per7uisites( and fle#ible benefits pro$rams. 5ultiple c!oice 7uestions s!ould reflect
material in t!is c!apter and s!ould !ave answer c!oices w!ic! could appear plausible.
E)PERIENTIAL E)ERCISES * CASES
,!-eriential ,!erciseA Revisin# the Benefits Packa#e
3tudents are $iven a scenario of a small business and its benefits packa$e. 3tudents are to devise a
benefits packa$e Ein keepin$ wit! t!e si6e and re7uirements for t!is firm.F !is means t!at t!ey need to
carefully balance t!e costs and t!e administration re7uirements wit! t!e resources t!at t!e small firm !as.
7--lication =aseA Strikin# for Benefits
.. 7ssume you are mediatin# this dis-ute. 2iscuss five creative solutions you 'ould su##est for
ho' the #rocers could reduce the health insurance "enefits and the cost of their total "enefits
-acka#e 'ithout makin# any em-loyees -ay more. "t is su$$ested t!at you consider $ivin$ t!is
e#ercise as a $roup assi$nment. 0indin$ five creative solutions will be c!allen$in$( but t!in$s t!at
s!ould be considered include: alterin$ deductibles but providin$ $randfat!ered employees e#tra pay
to compensate; alterin$ t!e pay sc!edule by increasin$ t!e pay for e#istin$ employees to
compensate for additional !ealt! care costs passed on to t!em( but new employees not $ettin$ t!at
pay increase; etc.
3. From the #rocery chains% -oint of vie'( 'hat is the do'nside of havin# t'o classes of
em-loyees( one of 'hich has su-erior health insurance "enefits1 )o' 'ould you su##est
they handle the -ro"lem1 5orale is a critical problem. %nytime t!ere are two classes( >ealousy and
resentment increase and morale decreases. %lso( administration costs increase. 3ome of t!e
su$$estions in 7uestion J1 mi$!t avoid t!e two classes.
6. Similarly( from the -oint of vie' of the union( 'hat are the do'nsides of havin# to re-resent
t'o classes of em-loyees( and ho' 'ould you su##est handlin# the situation1 !e Elower
classF employees will feel t!at t!ey were Esold outF by t!e union and may loose fait! in t!e value of
t!e union. "nitially t!e union will be safe because of t!e lar$er number of employees in t!e EbetterF
$roup( but eventually t!at will c!an$e.
=ontinuin# =aseA =arter =leanin# =om-any The Ne' Benefits Plan
.. 2ra' u- a -olicy statement re#ardin# vacations( sick leave( and -aid days off for =arter
=leanin# =enters. !e students are likely to create different policy statements( w!ic! will reflect
t!eir different preferences for benefits. Gou s!ould $et t!e students to discuss !ow
4earn"n5otion.com mi$!t allow for fle#ibility in t!eir pay for time not worked.
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3. What 'ould you tell Hennifer are the advanta#es and disadvanta#es to =arter =leanin#
=enters of -rovidin# its em-loyees 'ith health( hos-itali4ation( and life insurance -ro#rams1
!e student s!ould refer to t!e !ospitali6ation( medical( and disability insurance section of t!e
c!apter to develop t!eir lists of advanta$es and disadvanta$es.
6. Would you advise esta"lishin# some ty-e of day care center for the =arter cleanin#
em-loyees1 Why or 'hy not1 % better approac! for a small company suc! as 2arter would be to
locate a licensed day care provider t!at would be willin$ to $ive a discount to 2arter employees.
0rom t!at startin$ point( s!e could t!en consider w!et!er to subsidi6e c!ildcare.
PART+EN$IN( 'I$EO CASE C,-.ens!ti,n
%n$elo /ernande6( a recruiter for 0ocus 8ointe( is dissatisfied wit! !is
incentive plan. /e feels !is current plan( w!ic! is based on t!e 7uantity
of recruits !e brin$s to t!e company( does not fairly reward !im for !is
efforts. %n$elo speaks wit! 2!ona 2astillo in t!e /B department about
reevaluatin$ !is incentive plan( and e#plorin$ ot!er forms of
compensation. !is se$ment discusses !ow and w!en incentive plans
are best used( as well as alternative met!ods of compensation: benefits(
services( rewards( etc.
0or full video case and discussion 7uestions( please visit t!e 0aculty
Besource section of t!e :essler 2ompanion <eb 3ite at:
!ttp:))www.pren!all.com)dessler
/E0 TERMS
"enefits "ndirect financial and nonfinancial payments employees receive for
continuin$ t!eir employment wit! t!e company.

su--lemental -ay Benefits for time not worked suc! as unemployment insurance( vacation(
"enefits and !oliday pay and sick pay.
unem-loyment 8rovides benefits if a person is unable to work t!rou$! some fault ot!er
insurance t!an !is or !er own.
sick leave 8rovides pay to an employee w!en !e or s!e is out of work because of
illness.
severance -ay % one1time payment some employers provide w!en terminatin$ an
employee.
su--lemental 8rovide for a $uaranteed annual income in certain industries w!ere
unem-loyment "enefits employers must s!ut down to c!an$e mac!inery or due to reduced work.
!ese benefits are paid by t!e company and supplement unemployment
benefits.
'orker5s com-ensation 8rovides income and medical benefits to work1related accident victims or
t!eir dependents re$ardless of fault.
health maintenance % prepaid !ealt! care system t!at $enerally provides routine round1t!e1
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or#ani4ation :)+&; clock medical services as well as preventative medicine in a clinic1type
arran$ement for employees( w!o pay a nominal fee in addition to t!e
fi#ed annual fee t!e employer pays.
-referred -rovider Iroups of !ealt! care providers t!at contract wit! employers insurance
or#ani4ation :PP&; companies( or t!ird1party payers to provide medical care services at a
reduced fee.
#rou- life insurance 8rovides lower rates for t!e employer or employee and includes all
employees( includin$ new employees( re$ardless of !ealt! or p!ysical
condition.
Social Security 0ederal pro$ram t!at provides t!ree types of benefits: retirement income
at a$e ?2 and t!ereafter; survivorHs or deat! benefits payable to t!e
employeeHs dependents re$ardless of a$e at time of deat!; and disability
benefits payable to disabled employees and t!eir dependents. !ese
benefits are payable only if t!e employee is insured under t!e 3ocial
3ecurity %ct.
-ension -lans 8lans t!at provide a fi#ed sum w!en employees reac! a predetermined
retirement a$e or w!en t!ey can no lon$er work due to disability.
defined "enefit % plan t!at contains a formula for determinin$ retirement benefits.
-ension -lan
defined contri"ution % plan in w!ic! t!e employerHs contribution to employeeHs retirement or
-lan savin$s funds is specified.
8?.:k; -lan % defined contribution plan based on section 4*1'k) of t!e "nternal
Bevenue 2ode.
savin#s and thrift -lan 8lan w!ere employees contribute a portion of t!eir earnin$s to a fund;
t!e employer usually matc!es t!is contribution in w!ole or in part.
deferred -rofitsharin# % plan in w!ic! a certain amount of profits is credited to eac! employee-s
-lan account( payable at retirement( termination( or deat!.
em-loyee stock % 7ualified( ta#1deductible stock bonus plan in w!ic! employers
o'nershi- -lan :,S&P; contribute stock to a trust for eventual use by employees.
,m-loyee Retirement 3i$ned into law by 8resident 0ord in 1A@4 to re7uire t!at pension ri$!ts
Income Security 7ct be vested( and protected by a $overnment a$ency( t!e 8BI2.
:,RIS7;
vestin# 8rovision t!at money placed in a pension fund cannot be forfeited for any
reason.
Pension Benefits ;stablis!ed under ;B"3% to ensure t!at pensions meet vestin$
Iuarantee =or-oration obli$ations; also insures pensions s!ould a plan terminate wit!out
:PBI=; sufficient funds to meet its vested obli$ations.
early retirement % type of offerin$ by w!ic! employees are encoura$ed to retire early( t!e
'indo' incentive bein$ liberal pension benefits plus per!aps a cas! payment.
cash "alance -lans :efined benefits plans under w!ic! t!e employer contributes a
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of employees- current pay to t!e employees- pension plans every year(
and employees earn interest on t!is amount.
em-loyee assistance % formal employer pro$ram for providin$ employees wit! counselin$ and)
-ro#ram :,7P; or treatment pro$rams for problems suc! as alco!olism( $amblin$( or
stress.
fle!i"le "enefits -lan J "ndividuali6ed plans allowed by employers to accommodate employee
cafeteria "enefits -lan preferences for benefits.
/o" sharin# %llows two or more people to s!are a full1time >ob.
'ork sharin# % temporary reduction in work !ours by a $roup of employees durin$
economic downturns as a way to prevent layoffs.
telecommutin# <!ere employees work at !ome( usually wit! computers( and use
p!ones( and t!e internet to transmit letters( data and completed work to
t!e !ome office.
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