EMPLOYEE BENEFITS AND SERVICES
Employees should take part in the
ADMINISTRATION
Definition
♦In the past was called fringe benefits
♦Primarily the in-kind payments employees
receive in addition to payments in the form of
money
♦Employee benefits are those compensation
components made available to employees that
provide (1) protection in case of health and
accident-related problems and (2) income at
some future date or occasion (upon retirement,
termination of employment, or meeting of
certain objective criteria).
♦Employee services are compensation
components that contribute to the welfare of the
employee by filling some kind of demand. These
services usually enable the employee to enjoy a
better lifestyle or to meet social or personal
obligations while minimizing the employment-
related costs
Principles Governing Benefits
1. The benefit should have mutual value to
the employer and the employee. –
Whenever the employer spends an
amount for benefits, he should receive
something of value in return.
2. The benefit should not interfere with the
operation of the business.
3. The cost of the benefit must be
calculable and its financing within the
capacity of the firm.
4. The benefit must be capable of being
uniformly and equitably administered. –
The rules and procedures followed in
administering benefits should be
uniform and equitable to all to prevent
discrimination or abuse. A poorly
administered benefit program can be a
source of serious employer-employee
relations’ problem and a drain on
company finances as well.
5. Benefits should be based on something
measurable. – The conditions and
requirements for the grant of any
benefit should be made clear and
preferably in writing to avoid any
misunderstanding and to facilitate its
administration.
6.
administration of certain benefit
programs.
7. Employees must be made aware of the
cost of the benefits. – The employees
will be aware of the costs involved and
appreciate management’s efforts to
promote their welfare. With the
employees sharing in the costs, it is
possible to adjust assessments in
relation to the benefits received, thereby
minimizing favoritism.
8. Employee benefits and services must
suit employee needs and preferences in
order to provide maximum incentives.
Reasons for Granting Benefits
1. Provision for the need of employees.
2. Meeting union demands.
3. Maintaining the worker’s living
standards.
4. Management’s willingness to grant
benefits.
5. Increased government regulation of
business and industry.
6. Boosting employee morale.
7. Effects of WWII.
8. Effects of inflation and other economic
causes.
9. To attract and retain employees.
Why the Growth in Employee Benefits
♦Wage and Price Controls
♦Unions
♦Employer Impetus
♦Cost effectiveness of benefits
♦Government Impetus
Benefits Administration Issues
♦Who should be protected or benefited?
♦How much choice should employees have
among an array of benefits?
♦How should benefits be financed?
Advantages of Flexible Benefit Programs
•Employees choose packages that best satisfy
their unique needs.
•Flexible benefits help firms meet the changing
needs of a changing workforce.
•Increased involvement of employees and
families improves understanding of benefits.
•Flexible plans make introduction of new
benefits less costly. The new option is added
merely as one among a wide variety of elements
from which to choose.
•Cost containment: Organization sets dollar
maximum. Employee chooses within that
constraint.
Disadvantages of Flexible Benefit Programs
•Employees make bad choices and find
themselves not covered for predictable
emergencies.
•Administrative burdens and expenses increase.
•Adverse selection. Employees pick only
benefits they will use. The subsequent high
benefit utilization increases its cost.
•Subject to nondiscrimination requirements in
Section 125 of the Internal Revenue Code.
Factors Influencing Choice of Benefits
Package
Employer Preferences
♦Relationship to Total Compensation Costs
♦Costs Relative to Benefits
♦Competitor Offerings
♦Role of Benefits in Attraction
♦Legal Requirements
♦Absolute and Relative Compensation Costs
Employee Preferences
♦Equity
♦Personal Needs of Employees
Benefits Administration
♦Human Resource Department
–HR director (and perhaps the compensation
manager) administers the firm’s compensation
program
–The Personnel, in conjunction with top
management, formulates compensation policies,
conducts wage surveys to find prevailing wage
rates, implements job evaluation programs to
determine the comparable worth of each job in
the firm, and chooses the benefit packages for
the firm’s employees
Planning
♦Key Issues that must be addressed:
–Business Objectives
•Organization’s HRM philosophy
•Organization’s strategic business plan
–Work Force Characteristics
–Competition
–Cost
–Cost Containment
–Probationary Periods
–Benefits limitations
–Co-pay
–Administrative cost
containment
–Total Compensation Strategy
Implementation
♦involves putting the program into operation
and outlining the necessary policies and
procedures
♦Employee Benefits Communication
–Employee benefits handbook
–Benefits statement
–In-house benefits consultant
–Ad hoc employee meetings
–Notices
Management
-it must be continuously managed to ensure that
it meets the organization’s needs
-Through the use of audits and budgets,
compensation managers can determine just how
effective the program really is
Categorization of Employee Benefits
1. Legally required payments (employers’ share
only)
a.Old-age, survivors, disability, and health
insurance (employer FICA taxes) and railroad
retirement tax
b.Unemployment compensation
c.Workers’ compensation (including estimated
cost of self-insured)
d.State sickness benefits insurance
2. Retirement and savings plan payments
(employers’ share only)
a. Defined benefit pension plan
contributions (401K type)
b. Defined contribution plan payments
c. Profit sharing
 d. Stock bonus and employee stock –Marriage leave
ownership plans (ESOP) –Paternity leave
e. Pension plan premiums (net) under –Maternity leave
insurance and annuity contracts (insured –Sick leave
and trusted) –Wellness leave
f. Administrative and other costs –Time off to vote
3. Life insurance and death benefits (employers’ –Blood donation
share only) –Grievance and contract negotiations
4. Medical and medical –related benefit –Lunch, rest and wash-up periods
payments (employers’ share only) Other Services
a. Hospital, surgical, medical, and major –Charitable Contributions
medical insurance premiums (net) –Counseling
b. Retiree hospital, surgical, medical, and –Tax preparation
major medical insurance premiums –Education subsidies
(net) –Child adoption
c. Short-term disability, sickness or –Child care
accident insurance (company plan or –Elderly care
insured plan) –Subsidized food service
d. Long-term disability or wage –Discounts on merchandise
continuation (insured, self- –Physical awareness and fitness programs
administered, or trust) –Social and recreational opportunities
e. Dental insurance premiums –Parking
f. Other (vision care, physical and mental –Transpoortation to and from work
fitness benefits for former employees) –Travel expenses
5. Paid rest periods, coffee breaks, lunch periods, –Clothing reimbursement/allowance
wash-up time, travel time, clothes-change time, –Tool reimbursement/allowance
get-ready time, etc. –Relocation expenses
6. Payments for time not worked –Emergency loans
a. Payments for or in lieu of vacations –Credit union
b. Payments for or in lieu of holidays –Housing
c. Sick leave pay
d. Parental leave (maternity and paternity Top Ten Companies in Employee Benefits
leave payments) •Philip Morris
e. Other
•Procter & Gamble
7. Miscellaneous benefit payments
a. Discounts on good and services •XEROX
purchased from company by employers •Intel
b. Employee meals furnished by company •TIAA_CREF
c. Employee education expenditures •Dell Computer
d. Child care
e. Other •Chevron
•Boeing
Employee Services •BellSouth
♦Pay for Time Not Worked •Duke Energy
–Holidays
–Vacations Example
–Jury Duty
–Election Official
♦Philip Morris
–Witness in court ♦Headquarters: New York City
–Civic duty ♦Industry: Tobacco
–Military duty
–Funeral leave ♦US Employees: 57,000
–Personal leave
–Sabbatical leave ♦Retirement Plans
–Illness in the family leave
–Outstanding profit-sharing plan, including
annual contributions equal to 13 percent to 15
percent of an employee’s pay. Employees may
contribute an additional 8 percent of their salary
into a tax-deferred savings plan. A traditional
pension plan is offered.
♦Health Care
–Philip Morris employees receive family health
coverage: $77 for fee-for-service, HMO, and
POS plans. There is a staff ombudsman available
to assist employees in resolving problems with
health care providers. An employer-sponsored
health plan is offered for retirees.
♦Special Features
–The company offers free life insurance with
death benefit equal to twice the employee’s
annual salary, with no cap. Top and middle
managers are granted stock options.
The Labor Code of the Philippines
♦Book Four: Health, Safety and Social Welfare
Benefits
♦Title II Employees Compensation and State
Insurance Fund
♦Chapter V Medical Benefits
–Art. 185 Medical Services
–Art. 186 Liability
–Art. 188 Refusal of examination or treatments
–Art. 189 Fees and other charges
–Art. 190 Rehabilitation Services
♦Chapter VI Disability Benefits
–Art. 191. Temporary total disability
–Art. 192 Permanent total disability
–Art. 193 Permanent partial disability
♦Chapter VII Death Benefits
–Art. 194 Death
•(d) Funeral Benefit
♦Title III Medicare
–Art. 209 Medical Care
♦Title IV Adult Education
–Art. 210 Adult Education
♦Apendix XX
–XI Maternity Benefits
Social Security System
♦Tax-exempt system aimed at providing
meaningful protection to its members and their
beneficiaries against the hazards of disability,
sickness, maternity, old age, death and other
contingencies resulting in loss of income or
financial burden.
♦Compulsory to all employees not over sixty
years of age and their employers
♦Social Security Law of 1997
Medicare
♦Health insurance program for SSS members
and their dependents who get sick and injured
and require hospitalization.
♦Every employer is also required to pay
monthly contributions and to deduct or withhold
from the employee’s monthly compensation his
or her contribution
Employees Compensation Program
♦Aims to assist workers who suffer work
connected sickness or injury resulting in
disability or death
♦Coverage in the EC Program is compulsory
for all employers and employees (a) not over 60
yrs of age, and (b) an employee over 60 yrs of
age if he/she has been paying contributions to the
SSS prior to age 60 and has not been
compulsorily retired
PAG-IBIG Fund
♦Home Development Mutual Fund
♦Mandatory upon all employees covered by the
SSS
Sources:
The Labor Code of the Philippines 2004 Edition
Milkovich, George T. and Jerry M. Newman.
2002. Compensation.7th Edition. New York:
McGraw-Hill Companies Inc.
Henderson, Richard I.1997. Compensation
management in a knowledge-based world.7th
Edition. New Jersey: Prentice-Hall Inc.
Javier, Nancy Joan M. 2000.Tourism Laws:
Focus on the Philippines.Quezon City: Lex
Tourismo Publications