CHAPTER 11
EMPLOYEE BENEFITS
CHAPTER OUTLINE
11.1 Elements of a Successful Benefits Program
11.1b Administering Benefits
11.2 Employee Benefits Required by Law
11.2a Social Security Insurance
11.2b Unemployment Insurance
11.2d COBRA Insurance
11.2f Benefits Provided under the Family and Medical Leave Act
11.3 Work-Life Discretionary Benefits
11.3a Child and Elder Care
11.3c Life Insurance
11.3d Long-Term Care Insurance
11.3e Other Benefits and Services
11.3g Domestic Partner Benefits
LEARNING OUTCOMES
After studying this chapter, students should be able to:
1. Detect cost-effective strategies companies use to develop benefits plans.
3. Describe the types of work-life benefits that employers may provide.
4. Describe the different types of retirement programs and pension plans and the
regulations related to them.
GENERATING INTEREST
One thing that stands out about the companies ranked on Fortune’s 100 Best Companies
to Work For (http://fortune.com/best-companies/) is their great benefits packages.
• Show the benefits package details of best-ranked Google (go to www.google.com
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DEALING WITH TROUBLE SPOTS
Many employers are quick to say that they struggle with how to implement the
requirements of FMLA in the “real world.” On November 17, 2008, the Department of
Labor (DOL) issued its first major overhaul of the law since its 1993 enactment. DOL
says that many of the revisions, which became law on January 16, 2009, are designed to
clarify the requirements that the FMLA imposes on both employees and employers and to
improve communication between the parties.
• The above link lists these primary changes resulting from the November 2008
revision. The circumstances necessary for a family military leave for a “qualifying
exigency” are defined: 12 weeks leave in a 12-month period.
• Family military leave to care for employees with a family member who is
LECTURE OUTLINE
Discussion Starter #1: Walk while you work? To combat obesity and other health problems,
GlaxoSmithKline, Humana, Mutual of Omaha, and Best Buy have begun utilizing treadmill desks.
The treadmills move at a slow speed so employees do not get hot and sweaty and out of breath.
What are some of the pros and cons of using treadmill desks at work?
ANSWER: Students’ answers will vary. Health benefits are an obvious reason why using treadmill
Benefits can represent more than 50 percent of the total payroll costs that an employer
pays. Some benefits are legally required, while others are voluntarily granted by
employers.
Chapter 11: Employee Benefits 3
Teaching Tip: Use Figure 11.1 to discuss the amount employers spend on benefits for employees. Ask
students if they are surprised by the cost.
11.1a Selecting Benefits
Many organizations establish committees composed of managers and employees
to administer, interpret, and oversee their benefits policies. Employees are more
likely to be satisfied with benefits if they participated in establishing benefits
policies.
Flexible Benefits
Employee benefits programs must adapt to social changes. Many organizations
11.1b Administering Benefits
11.1c Communicating Employee Benefits
Communicating the costs of benefits is a key part of an effective benefits strategy.
It helps employees realize what they are getting and why they should try to keep
benefits costs down. It is best to use multiple media techniques to convey this
information. The following pointers can help to present benefits information:
• Avoid complex language.
Cost Containment Strategies
Three strategies are used:
• Require employees to pay part of the cost of their benefits.
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Containing Medical Benefits Costs
One cause of the growth in health care costs is the overuse of costly health care
services by consumers. Firms have turned to health savings accounts and high–
Health maintenance organizations (HMOs) are organizations of physicians and
health care professionals that provide a wide range of services to subscribers and
dependents on a prepaid basis. Employees use a primary-care physician.
A preferred provider organization (PPO) is a network of physicians who
establish an organization that guarantees lower health care costs to employers and
Containing Dental, Optical, and Mental Health Benefits Costs
Dental plans are designed to help pay for dental care costs and to encourage
employees to receive regular dental attention. Optical benefits generally cover or
Containing Additional Costs
The aging U.S. population and high obesity rates are causing health care costs to
rise. Companies are offering lower health care premiums for employees who
adopt healthy habits and activities. Some companies may waive deductibles and
copays for medical tourism.
Teaching Tip: Use Figure 11.2 to discuss costs of medical care in different countries. Ask students to
evaluate the value of medical tourism.
Value-Based Health Initiatives
Value-based health initiatives enable employers to target benefits and health
programs at the medical care employees most use and need.
Chapter 11: Employee Benefits 5
Wellness Programs
Wellness programs are employer-sponsored programs designed to encourage
employees to maintain and improve their health and wellbeing by getting regular
Disease Management Programs
Disease management programs are programs that provide patients and their
caregivers with information on monitoring and treating medical conditions, while
coordinating communication between them, their health care providers,
employers, and insurers.
Employee Assistance Programs
Employee assistance programs (EAPs) are services provided by employers to
Counseling Services
EAPs also provide professional counseling services, marriage counselors, and
mental health clinics.
Video Highlight #1: Section 11.1c: Communicating Employee Benefits
VIDEO: 7 Key Benefits to a Health Savings Account (8:04)
EOC Discussion Question #1: Many organizations are concerned about the rising cost of
employee benefits and question their value to the organization and to the employees. In your
opinion, what benefits are of greatest value to employees? To the organization? Why?
11.2 Employee Benefits Required by Law
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EOC Discussion Question #2: Employers are required by law to provide specific benefits to
employees. What laws mandate benefits to employees, and what are the provisions of those laws?
11.3 Work-Life Discretionary Benefits
11.3a Child and Elder Care
Elder care is care provided to an elderly relative by an employee who remains
11.3b Payment for Time Not Worked
The United States is the only country that does not require paid time off.
Teaching Tip: Refer to Figure 11.1 to discuss the amount an employer spends on paid time off. Ask
students if the amount spent is surprising.
Vacations with Pay
Vacation pay is not required in the United States, but most companies offer it.
Paid Holidays
Teaching Tip: Use Figure 11.3 to discuss federally recognized holidays.
Sick Leave
Sabbaticals
A sabbatical is paid (or unpaid) time away from a job for 4 or more weeks that
employees take off to renew themselves before returning to work.
Chapter 11: Employee Benefits 9
Severance Pay
Supplemental Unemployment Benefits
A supplemental unemployment benefits (SUB) is a plan that enables an
11.3c Life Insurance
11.3d Long-Term Care Insurance
11.3e Other Benefits and Services
Credit Unions
Credit unions serve the financial needs of employees and attract potential
employees.
Educational Assistance
Teaching Tip: Use Figure 11.4 to discuss additional benefits that organizations offer to employees.
Retirement Programs
For most professions, there is no mandatory retirement age.
Preretirement and Phased Retirement Programs
11.3f Pension Plans
Pensions reward employees with income after retirement.
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Types of Pension Plans
Pension plans are categorized in two ways: (1) according to contributions made
by the employer and 2) according to the amount of pension benefits to be paid. A
401(k) Savings Plans
A 401(k) plan allows employees to save through payroll deductions that reduce
their taxable income and have their contributions matched by the employer. It
Cash Balance Pension Plans
The employer makes a yearly contribution, based on a percentage of the
employee’s pay, into an employee’s retirement savings account.
Federal Regulation of Pension Plans
Private pension plans are subject to federal regulation, including vesting rules,
under ERISA. Vesting is a guarantee of accrued pension benefits to participants
Discussion Starter #3: Describe 401(k) pension plans, listing their advantages and disadvantages.
ANSWER: Advantages of 401(k) pension plans are that (1) employees save through payroll
EOC Discussion Question #4: Describe 401(k) pension plans, listing their advantages and
disadvantages.
Chapter 11: Employee Benefits 13
b. While no company policy can cover all of the situations that are likely to arise, at
a minimum the policy should cover the following points:
• Identify the need for the request
• Access the justification for the request
3. Students’ answers will vary. Janis must maintain the performance of her department
while attempting to balance the professional and personal lives of her employees. Janis
needs to determine exactly how many account managers she requires to cover the work.
Once the work is covered, Janis can evaluate the merits of the various needs of her
employees. This is exactly why employees are requested to document and justify the
Case Study 2: Evaluating the Work-Life Climate in Your Company
After students have completed the questionnaire, have them discuss their finding in a
class discussion. Have students describe programs their employers have which facilitate a
work/life climate. Students’ answers will vary.
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FLIP TIPS
Group Activity:
Step 1: Before participating in this activity, visit the following website: