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Chapter 14
Providing Employee Benefits
The chapter begins by discussing the important role of benefits as a part of employee
compensation. Then, it defines major types of employee benefits such as benefits required by
law, paid leave, insurance policies, retirement plans, and other benefits. Next, the chapter
discusses how to choose which of these alternatives to include in an employee benefits package
so that it contributes to meeting the organization’s goals. The following section summarizes the
regulations affecting how employers design and administer benefits programs. Finally, the
chapter explains why and how organizations should effectively communicate with employees
about their benefits.
Chapter Outline
The Role of Employee Benefits
• Like pay, benefits help employers attract, retain, and motivate employees.
• Employees expect at least a minimum level of benefits, and providing more than
minimum helps an organization compete in the labor market.
• Benefits are also a significant expense, but employers provide benefits because
employees value them and many benefits are required by law.
Benefits Required by Law
• Employers must contribute to Social Security through a payroll tax shared by employers
and employees.
• Employers must also pay federal and state taxes for unemployment insurance.
• State laws require that employers purchase workers’ compensation insurance.
• Family and Medical Leave Act (FMLA)
• Patient Protection and Affordable Care Act
Optional Benefits Programs
• Major categories of paid leave are vacations, holidays, and sick leave.
• Medical insurance is one of the most valued employee benefits.
• To manage costs of health insurance, many organizations offer coverage through a health
maintenance organization or preferred provider organization, or they may offer flexible
spending accounts.
• Retirement plans may be contributory or noncontributory and defined benefit plans or
defined contribution plans.
• Employers have responded to work-family role conflicts by offering family-friendly
benefits.
Selecting Employee Benefits
• In deciding contents of a benefits package, organizations need to establish objectives and
select benefits that support those objectives.
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• Organizations should also consider employees’ expectations and values.
Legal Requirements for Employee Benefits
• Other legal requirements involve tax treatment of benefits, antidiscrimination laws, and
accounting for benefits.
Communicating Benefits to Employees
• Communicating information about benefits is important so that employees will appreciate
the value of their benefits.
• Communicating their value is the main way benefits attract, motivate, and retain
employees.
Learning Objectives
LO 14-1: Discuss the importance of benefits as a part of employee compensation.
LO 14-2: Summarize the types of employee benefits required by law.
LO 14-3: Describe the most common forms of paid leave.
LO 14-4: Identify the kinds of insurance benefits offered by employers.
LO 14-5: Define the types of retirement plans offered by employers.
LO 14-6: Describe how organizations use other benefits to match employees’ wants and needs.
LO 14-7: Explain how to choose the contents of an employee benefits package.
LO 14-8: Summarize the regulations affecting how employers design and administer benefits
programs.
LO 14-9: Discuss the importance of effectively communicating the nature and value of benefits
to employees.
Society for Human Resource Management Body of Competency &
Knowledge
This chapter contains content, which may be identified within the following content areas:
• Total Rewards
• Business & HR Strategy
• U.S. Employment Law & Regulations
• Risk Management
Fundamentals of Human Resource Management, 8e Instructor’s Manual
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• Employee Relations
Human Resource Certification Institute’s A Guide to the HR Body
of Knowledge
This chapter contains content, which may be identified within the following content areas:
• Business Management & Strategy
• Employee and Labor Relations
• Compensation and Benefits
• Risk Management
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Question Guidance to Vignettes and Discussion Questions
HR How To
Keeping Up with U.S. Health Care Laws
1. A company has 120 employees, but they all work half time. Does this company meet the
threshold of employing 50 full-time workers? Why or why not?
2. Why might an employer offer employees health insurance even if paying the Employer
Shared Responsibility Payment would cost less?
Best Practices
How Microsoft Made Financial Health Contagious
1. What differences would you expect in the outcome if Microsoft had only increased its
contribution cap and not made the other changes?
2. What changes made Microsoft’s benefits more valuable from an employee’s perspective?
HRM Social
Crowdfunding for College Savings Plans
1. How does a system such as Spryng affect the value of 529 plans as an employee benefit?
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2. What kinds of employees would you expect to welcome the employee benefit of a 529
savings plan with a crowdfunding feature?
HR Oops!
Some Companies Are Clueless about Wellness ROI
1. Does it matter whether wellness programs contribute to business success? Why or why
not?
2. Suggest one way employers could improve their decision making about whether to offer
wellness programs.
Did You Know?
Many Employees Need Help to Understand Their Benefits
1. Why should it matter to employers if employees don’t understand the benefits they
receive?
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End of Chapter Questions and Cases
Thinking Ethically
Is It Fair Part-Timers Rarely Get Benefits?
1. If an employer offer health insurance and paid vacation to full-time but not part-time
employees, who is helped? Who is harmed? Weighing the help against the harm, would
you consider this policy ethical?
2. Imagine an organization where managers work full-time and receive health insurance,
retirement plans, and paid time off, while the staff members work part-time and do not
receive these benefits. How would you evaluate the justice of this situation?
Review and Discussion Questions
1. Why do employers provide employee benefits, rather than providing all compensation in
the form of pay and letting employees buy the services they want? (LO 14-1)
2. Of the benefits discussed in this chapter, list the ones you consider essential—that is, the
benefits you would require in any job offer. Why are these benefits important to you?
(LO 14-1)
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Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw–
Hill Education.
Answer: The responses provided by the students will vary contingent upon their personal
viewpoints. Instructors should implement this into an activity learning exercise where
students interview each other and learn more about what is important to their peers.
3. Define the types of benefits required by law. How can organizations minimize the cost of
these benefits while complying with the relevant laws? (LO 14-2)
4. What are some advantages of offering a generous package of insurance benefits? What
are some drawbacks of generous insurance benefits? (LO 14-3)
5. Imagine that you are the human resource manager of a small architectural firm. You learn
that the monthly premiums for the company’s existing health insurance policy will rise
by 15% next year. What can you suggest to help your company manage this rising cost?
(LO 14-4)
6. In principle, health insurance would be the most attractive to employees with large
medical expenses, and retirement benefits would be most attractive to older employees.
What else might a company include in its benefits package to appeal to young, healthy
employees? How might the company structure its benefits so these employees can take
advantage of the benefits they care about most? (LO 14-6)
Fundamentals of Human Resource Management, 8e Instructor’s Manual
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Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw-
Hill Education.
Answer: Possible responses could include providing some form of child care or elder
care, providing personal days off from work with pay, and offering paid days off such as
holidays and vacations.
Companies could offer cafeteria-style benefits where the employees can select those
benefits they find most appealing.
7. What issues should an organization consider in selecting a package of employee benefits?
How should an employer manage the trade-offs among these considerations? (LO 14-7)
8. How do tax laws and accounting regulations affect benefits packages? (LO 14-8)
9. What legal requirements might apply to a family leave policy? Suggest how this type of
policy should be set up to meet those requirements. (LO 14-8)
10. Why is it important to communicate information about employee benefits? Suppose you
work in the HR department of a company that has decided to add new benefits—dental
and vision insurance plus an additional two days of paid time off for “personal days.”
How would you recommend communicating this change? What information should your
messages include? (LO 14-9)
Fundamentals of Human Resource Management, 8e Instructor’s Manual
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Copyright © 2020 by McGraw-Hill Education. All rights reserved. No reproduction or distribution without the prior written consent of McGraw–
Hill Education.
Most communication programs are in written form. Some alternative techniques include
videos, benefits fairs, and telephone hotlines. The positive result may be an informed and
satisfied workforce with a lower turnover rate. The information included in messages to
employees should describe the benefit, how to use it effectively, its cost, and why it is
being offered to the employee in the first place.
Taking Responsibility
Kronos Trust Employees Enough to Give Unlimited PTO
1. What business benefits is Kronos seeking from providing an unlimited-vacation benefit?
2. Imagine you worked in Kronos’s HR department when it launched this benefit. What
would you say in messages explaining the new benefit to employees?
Managing Talent
Investing in Young Workers at Credit Suisse
1. How do Credit Suisse’s actions to offer family-friendly benefits relate to its business
objectives?
2. How are employees who are not expecting to become new parents likely to react to the
decision descried here? What should Credit Suisse do for these other employees?
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HR in Small Business
Why Kickstarter Kicked Out Unlimited Vacation
1. Of the employee benefits mentioned in this case, which do you think are the most
important for keeping Kickstarter’s workforce engaged?
2. If you were responsible for human resource management at a start-up company such as
Kickstarter, would you recommend a limit on vacation days or unlimited vacation time?
Explain.
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Recommended Connect Activities
Selecting Employee Benefits
Learning Objective: 14-02 Summarize the types of employee benefits required by law.
Activity Summary: The case analysis details the creation and implementation of an employee
benefits program.
Follow-Up Activity: Students should be able to run a very similar exercise to what was done by
Books to Go. Select one industry for the entire class to research and first come up with the
benefit package criteria that would be important. Next, small groups will take specific companies
inside of that industry and compare the benefit packages to what was summarized in the first
step. By comparing industry assumptions to actual employer programs, students will gain a
better understanding of how to construct an employee benefit program.
The Cost of Benefits
Learning Objective: 14-02 Summarize the types of employee benefits required by law.
Activity Summary: In this case analysis, students will practice the examination of benefit
packages to ensure they are meeting employee needs.
Follow-Up Activity: Have students learn about the most desirable employee benefits, as rated by
the employees in a real-time environment. The article The Most Desirable Employee Benefits
from Harvard Business Review details the responses of 2,000 U.S. workers and how they rank
the employee benefit offerings. Cost of the benefits is also provided in context, and students
could continue the conversation by comparing expectations, desires, and costs.
HealthNut University’s Benefit Program
Learning Objective: 14-08 Summarize the regulations affecting how employers design and
administer benefits programs.
Activity Summary: The goal of this case analysis is to test students on their understanding of
the types and regulations of employee benefits.
Follow-Up Activity: As an extension of the previous activities, this one will give students the
ability to gather and analyze data. One activity that would be more in-depth is the creation of an
employee benefits survey that could go out to other sections of the same courses. Students,
working as an entire class, would write the survey, use Survey Monkey or Google Forms to send
and receive responses, and then, working in small groups, create what they believe to be the best
version of an employee benefits package.
Fundamentals of Human Resource Management, 8e Instructor’s Manual
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CHRO Conversations: CEO Robert Andrews, Health Transformation
Alliance (HTA)
Learning Objective: 14-01 Discuss the importance of benefits as a part of employee
compensation.
Activity Summary: The video case provides understanding on how the health care industry
impacts the costs of health insurance benefits.
Follow-Up Activity: One of the areas discussed in the video was the use of data analytics in
preventing health-related problems. Read the article 10 High-Value Use Cases for Predictive
Analytics in Healthcare from Health IT Analytics to learn more about some of the biggest impact
areas for analytics in health care. As a classroom discussion, in small groups, or assigned
individually, have students discuss which of these factors can have the biggest impact on
employee benefit packages.
Fundamentals of Human Resource Management, 8e Instructor’s Manual
Classroom Exercises
Students may benefit from exercises that illustrate the concepts of the chapter. Use these along
with CONNECT activities.
1. Understanding Benefits
Instructors may engage students in a general discussion meant to support the
understanding of benefits. Review and Discussion questions #1 and #2 may be used to
facilitate this discussion. Furthermore, instructors may wish to engage students in
discussion concerning the HR in Small Business vignette as they discuss the range of
benefits and their potential impact on the workforce.
2. Required Benefits
Students may be asked to discuss the role that required benefits play within society. The
instructor may ask students to review Table 14.1 and discuss the rationale for providing
benefits such as unemployment insurance and social security. The instructor may pose
Review and Discussion question #3 to further assist in identifying these required benefits.
3. Employee Wellness and Premiums
Instructors may facilitate a discussion on implementing wellness initiatives and overall
health care costs. First, the HRM Social vignette may help start the conversation
concerning initiatives meant to facilitate healthy habits. Next, the instructor may ask
students to discuss the Thinking Ethically vignette. Finally, students may be asked to
consider Review and Discussion question #5 while considering the balance of employer
and employee costs and the alternatives as discussed in the first two exercises.
4. HRM Career Considerations
Instructors may wish to have students identify components in Chapter 14 within both the
Society for Human Resource Management Body of Competency & Knowledge and the
Human Resource Certification Institute’s A Guide to the HR Body of Knowledge.
Discussion could focus on how these chapter concepts are important to the development
of their careers and potential certification.
5. Vignette Discussions
Any of the vignettes (see above), may be employed for classroom discussion. Students
could be asked to respond as individuals or placed into groups for discussion. Individuals
and/or groups may then be asked to defend their responses and rationale when comparing
and contrasting other responses.