Chapter 12: Employee Benefits
Reviewing Important Concepts
1. Explain the advantages of offering employee benefits from the perspectives of the employee
and the employer. (LO 1)
Employers offer benefits to employees to attract and retain them. Benefits are expected
Benefits, while necessary for attracting and retaining employees, typically have very little
impact on employee work behavior. Benefits are linked to employment rather than
2. Explain the function and purpose of four legally required benefits. (LO2)
Legally required benefits are Social Security, unemployment compensation, workers’
compensation, leaves specified under the Family and Medical Leave Act and Health
Insurance Continuation. Social Security is a transfer program, funded by current
employees to support workers who are disabled or retired. Social Security also serves as
a minimum level of retirement income for most workers employed in the United States.
3. Describe the differences in the types of health insurance plans from the perspective of an
employee. (LO3)
HMOs limit choice of providers as a trade-off for cost savings. Insured persons must
HDHP plans are really expensive for the employee because of the high deductibles paid
when services are received.
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4. Explain the ways ERISA and PBGC provides protection for workers with pensions. (LO 4)
The Employment Retirement Income Security Act (ERISA) has had a significant effect
on retirement programs. Its primary emphasis is to ensure that employees have a vested
right to their retirement monies, to ensure that appropriate guidelines are followed in the
5. What are the major differences between defined benefit pension plans, defined contribution
plans and 401k accounts. Which would you prefer and why? (LO 4)
In a defined benefit plan, a specific amount of money, based on an actuarial calculation,
is set aside each year in a trust fund for the employees by the employer. The pension
With a defined contribution plan, each employee has an individual account to which both
the employee and the employer may make contributions. There may be some options on
The defined benefit plans are the best deal for employees because there is a guaranteed
6. Why is PTO such a popular option over sick leave? (LO 5)
Employees appreciate the freedom to use paid days off for any reason without being
7. How do benefits for employees in other developed countries compare to employees in the
U.S.? (LO 6)
They seem to be significantly more generous. Before jumping to conclusions about the
Evaluating Alternatives
8. When interviewed about his new business venture, a local entrepreneur told a
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reporter “I’ll provide every benefit I’m required to by law, and the minimum
amount of health insurance I can buy to stay legal. He went on to explain that
“voluntary benefits like life insurance, paid vacations, retirement and crazy perks
like fitness centers, daycare, massages and nap rooms are gimmicks employers use
to get recognized on ‘Best Employer’ lists. Just pay them a great wage and they can
buy their own life insurance and save for their own retirement. It’s money they
want. Not frills.” Evaluate his point of view from both sides. Explain which side you
agree with and why. (LO 1, 3, 4, 5)
Agree: Organizations need to select benefits that support their strategy, culture and talent
management needs. If the employer is in an industry where employees are driven
Disagree: Employees are also driven by intrinsic rewards. Benefits provide a number of
flexibility and family friendly benefits that support work-life balance. Research shows
9. “Social Security should serve as a foundation for employee retirement programs.
Therefore, Congress should explore more extensive revisions to the program to
ensure that the next generation of retirees will receive the benefit.” Do you agree or
disagree with this statement? Explain your response. (LO 2, 4)
Student responses may/will vary. Some suggestions:
Agree: Social Security was never intended to provide a person’s total retirement income,
only to serve as a beginning. It needs to remain in place. As the population ages, it is
Disagree: With the changing population demographics in the United States, the majority
of today’s employees want to invest their own money and most could probably get a
10. Employers in many other countries are required to provide generous paid leaves
compared to the U.S. Evaluate the advantages and disadvantages of requiring U.S.
employer to provide a minimum amount of paid time off. (LO 5, 6)
Advantages: Employees who are allowed time off with pay are less likely to come to
work when sick, reducing “presenteeism” and the risk of spreading illness. Workers who
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Disadvantages: Paid time off is an additional employer expense that may reduce the
Research and Communication Skills
These activities require students to research a topic and report the findings to the instructor or the
class. They can be assigned to either individuals or groups and are designed to develop critical
thinking, research and presentation skills necessary for HR.
Activity Summaries
11. The chapter opener discusses the benefits of allowing employees to being their dogs to
12. Students search YouTube for a video on an employee benefit topic and present it to the
13. Local employers are surveyed about the benefits they offer. Students accumulate and
14. Benefits offered by several different local industries are compared and presented in a
Making a Difference: Service Learning Projects
Overview: Service Learning Projects provide students with opportunities to develop and
demonstrate HR skills and build a professional network that will assist in getting a job in HR.
The activities that relate to this chapter on employee benefits are a variety of projects that
involve volunteering with local healthcare providers to develop a better understanding of their
issues. A sample assignment with requirements and grading materials is available at the front of
the Instructor’s Manual and as a download from the text website.
Case Application 12 – A: Trouble at Paradise
Elena, an HR Director at a casino, meets with Sienna, an employee with family and financial
problems. Sienna wants a raise, which Elena can’t accommodate. Elena suggests ways the
casino’s benefits offerings could help Sienna, who is tough to convince.
Questions:
1. Evaluate Elena’s suggestion to change to the CDHP. What does Sienna need to
consider when selecting her health insurance plan? (LO 3)
The CDHP involves a lower premium and higher deductibles. It would be a good
alternative if Sienna’s kids don’t require lots of visits to the doctor or emergency room
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Chapter 12: Employee Benefits
Sienna needs to compare how much she will save in premiums with the increased amount
2. What expenses can Sienna pay out of a flexible spending account? Explain how the
account can save her money. (LO 3)
Childcare and medical expenses for her child’s asthma medication can be paid out of the
FSA. She will save money because the expenses are paid out of money deducted before
3. How can Paradise Grand communicate employee benefit options more effectively to
employees? (LO 1)
In addition to meetings and e-mails, employees should be reminded of benefits on social
4. Research: Paradise Grand belongs to an Employee Assistance Program (EAP).
What services do EAPs provide that might help Sienna? (LO 3)
If a local EAP or Student Assistance Program is available, encourage students to go to
Case Application 12 – B: Perks and Profits
Genentech, a California pharmaceutical company, and Zappos, an online shoe retailer, are firms
with employee retention strategies that result in low turnover rates. Employee benefits are a key
component of both organizations’ HR strategy.
1. Describe the importance of employee benefits as a strategic component of fulfilling
the goals of HRM at Genentech and Zappos.
Clearly, both Genentech and Zappos acknowledge that employee turnover affects the
bottom line. By identifying creative benefit solutions that appeal to their individual
2. Explain how Genentech and Zappos use employee benefits as a motivating tool.
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Chapter 12: Employee Benefits
Encourage students to visit the web sites of both companies (www.genentech.com and
www.zappos.com) noting the list of benefits each offers to employees. Using this list,
3. Research: Review the findings of three different lists of excellent workplaces such as
“Best Places to Work”. What role do benefits seem to play in these workplaces? Do any
Online Case Application 12 – C: TEAM FUN
Questions:
1. As Tony’s intern, make a list of ways to reduce the cost of health insurance coverage.
(LO 2)
2. How does TEAM FUN!’s vacation package differ from most U.S. companies? How
would converting the vacation and sick leave to PTO address the concerns voiced by
Tony and Edna? (LO 3)
3. What type of retirement plan would be most appropriate for TEAM FUN? (LO 4)
4. How could TEAM FUN provide more flexibility in their benefits package without adding
to the expense? (LO 1, 5)
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