dessler - human resource management 13th c2013 text 30, 2014 · 14 days after 5 years, and 17 after...

13Benefits and Services

Source: NES Rentals.

Like many companies recently, NES Rentals HoldingsInc. wants to make cost control part of its strategy.NES (www.nesrentals.com) rents and sells constructionequipment, such as the aerial lifts that roadside crews

use to lift workers to repair traffic lights.1 It s a competitivebusiness, and the question was, where could they cut costs,without undermining their reputation for great productsand service?

WHERE ARE WE NOW . . .

We ve now covered two of the three payplan components salary (or wages) andincentives. The main purpose of this chapteris to discuss employee benefits. We discussfour main types of plans: supplemental paybenefits (such as sick leave and vacation pay),insurance benefits (such as workerscompensation), retirement benefits (such as pensions), and employee services (such aschild-care facilities). Because legal considera-tions loom large in any benefits decision,we cover applicable federal laws and theirimplications for managers. This chaptercompletes our discussion of employeecompensation. The next chapter, Chapter 14(Ethics and Employee Rights), starts a newpart of this book, and focuses on anotherimportant human resource task managingemployee relations.

423

LEARNING OBJECTIVES 1. Name and define each of the main pay for time

not worked benefits.2. Describe each of the main insurance benefits.3. Discuss the main retirement benefits.4. Outline the main employees services benefits.5. Explain the main flexible benefit programs.

Access a host of interactive learning aids at www.mymanagementlab.com to help strengthen your understanding of the chapter concepts.

MyManagementLab

Company sStrategic Goals

Employee Competenciesand Behaviors Requiredfor Company to AchieveThese Strategic Goals

Employee

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StrategicandLegal

EnvironmentHR Policies and Practices

Required to ProduceEmployee Competencies

and Behaviors

424 PART 4 COMPENSATION

THE BENEFITS PICTURE TODAYWhat are your benefits? is the first thing many applicants ask. Benefits indirect

financial and nonfinancial payments employees receive for continuing theiremployment with the company are an important part of just about everyone scompensation.2 They include things like health and life insurance, pensions, timeoff with pay, and child care assistance.

Virtually all employers offer some health insurance coverage.3 Employee benefitsaccount for between 33% 40% of wages and salaries (or about 28% of total payrolls).Legally required benefits (like unemployment insurance) are the most expensivebenefits costs, followed by health insurance. Figure 13-1 summarizes the breakdownof benefits as a percentage of employee compensation.

Health care benefit costs are rising. Health benefit costs rose 8% in 2011 and anestimated 8.5% in 2012, making total 2012 health benefit costs per employee wellover $9,500.4 Employers contend that the new Patient Protection and Affordable CareAct will raise this more, as we will see.

Employees understand the value of health benefits. In one survey, 78% ofemployees cited health care benefits as most crucial to retaining them; 75% citedcompensation. But the same survey found that only 34% are satisfied with theirhealth care benefits.5

Policy IssuesEmployers therefore need to design benefits packages carefully. The list of policy issuesincludes what benefits to offer, who receives coverage, whether to include retirees in theplan, whether to deny benefits to employees during initial probationary periods, howto finance benefits, cost-containment procedures, and how to communicate benefitsoptions to employees.6

Legal issues loom large. Federal laws mandate some benefits (such as SocialSecurity) while other benefits are at the employer s discretion (see Table 13-1).However, federal law also impacts discretionary benefits such as vacation leave.And employers must adhere to the laws of the states in which they do business.For example, California requires most state contractors to provide domestic partnerbenefits for employees.7

There are many benefits and various ways to classify them. We will classify them as(1) pay for time not worked (such as vacations), (2) insurance benefits, (3) retirementbenefits, and (4) services. We will start our discussion with pay for time not worked.But in any case, the benefits should make sense in terms of supporting the employer sstrategy, as the accompanying Strategic Context feature illustrates.

FIGURE 13-1 RelativeImportance of Employer Costsfor Employee Compensation,March 2011Sourc.e: www.bls.gov/news.release/ecec.nr0.htm, accessed June 1, 2011.

Wages and salaries70.7%

Paid leave6.8%

Insurance(including health)

8.0%

Supplemental pay2.7%

Retirement & savings3.5%

Legally required8.2%

benefitsIndirect financial and nonfinancial paymentsemployees receive for continuing theiremployment with the company.

supplemental pay benefitsBenefits for time not worked such asunemployment insurance, vacation andholiday pay, and sick pay.

unemployment insurance (or compensation)Provides benefits if a person is unableto work through some fault other than his or her own.

CHAPTER 13 BENEFITS AND SERVICES 425

THE STRATEGIC CONTEXTNES RentalsAs with a company s salary and incentive plans, its benefits plan must make sensein terms of, and support, the firm s strategy. As we saw in Chapters 11 and 12,managers must align each component of the employer s total rewards program sothat each contributes in a meaningful way to fostering the employee behaviors thatthe company needs to achieve its strategic goals.

Seeking to cut costs while maintaining its reputation for great products andservice, NES Rentals sent their employees home. Today, three-fourths of theircustomer support, collections, finance, and other back-office workers attheir Chicago office work from home at least part of the week.8 They therefore nolonger have dedicated desks, but share space when in the office. The CEO says theresults have been good. Productivity has increased 20%. Employee turnoverdropped from 7% in 2009 to virtually non-existent in 2010. NES is leasing40% less office space, and will save $100,000 in real estate expenses. And heestimates NES s total savings from instituting this new telecommuting benefit atabout $350,000 annually. Introducing an employee benefit turned out to be asmart way to support NES s strategy.9

TABLE 13-1 Some Required and Discretionary Benefits

Benefits Required by Federal or Most State Law

Benefits Discretionary on Part of Employer*

Social Security Disability, health, and life insuranceUnemployment insurance PensionsWorkers compensation Paid time off for vacations, holidays, sick leave,

personal leave, jury duty, etc.Leaves under Family Medical Leave Act Employee assistance and counseling programs,

family friendly benefits for child care, elder care,flexible work schedules, etc., executive perquisites

*Although not required under federal law, all these benefits are regulated in some way by federal law, as explained in this chapter.

PAY FOR TIME NOT WORKEDPay for time not worked also called supplemental pay benefits is the most costlybenefit, because of the large amount of time off that most employees receive. Commontime-off-with-pay include holidays, vacations, jury duty, funeral leave, militaryduty, personal days, sick leave, sabbatical leave, maternity leave, and unemploymentinsurance payments for laid-off or terminated employees.

Unemployment InsuranceAll states have unemployment insurance (or compensation) laws. These providebenefits if a person is unable to work through no fault of his or her own. Thebenefits derive from a tax on employers that can range from 0.1% to 5% of taxablepayroll in most states. An employer s unemployment tax rate reflects its rate ofemployee terminations. Although they all follow federal guidelines, states have their

1 Name and define eachof the main pay for timenot worked benefits.


Unemployment insurance/compensation laws provideshort-term benefits to peoplewho lose their jobs throughno fault of their own.

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own unemployment laws. Unemployment tax rates are rising in many states. Forexample, prior to the recent recession, Maryland s unemployment insurance taxrate was 0.3% or lower. The rate now averages 2.2% to 13.5% per employee,depending upon the employer s claim history.10

Firms aren t required to let everyone they dismiss receive unemploymentbenefits only those released through no fault of their own. Thus, strictly speaking, aworker fired for chronic lateness can t legitimately claim benefits. But many managerstake a lackadaisical attitude toward protecting their employers. Employers thereforespend thousands of dollars on unemployment taxes that would not be necessaryif they protected themselves.

The main rule is to keep a list of written warnings. Beyond that, the checklist inTable 13-2 can help protect employers. Actions like these should enable you todemonstrate that the dismissal resulted from the person s inadequate performance.(Those you fire during their initial 90-day probation are eligible for unemployment,so follow that checklist for them, too.)

TABLE 13-2 An Unemployment Insurance Cost-Control Checklist

Do You:

n Keep documented history of lateness, absence, and warning noticesn Warn chronically late employees before discharging themn Have rule that 3 days absence without calling in is reason for automatic dischargen Request doctor s note on return to work after absencen Make written approval for personal leave mandatoryn Stipulate date for return to work from leaven Obtain a signed resignation statementn Mail job abandonment letter if employee fails to return on timen Document all instances of poor performancen Require supervisors to document the steps taken to remedy the situationn Document employee s refusal of advice and directionn Require all employees to sign a statement acknowledging acceptance of firm s policies and rulesn File the protest against a former employee s unemployment claim on time (usually within 10 days)n Use proper terminology on claim form and attach documented evidence regarding separationn Attend hearings and appeal unwarranted claimsn Check every claim against the individual s personnel filen Routinely conduct exit interviews to produce information for protesting unemployment claims

sick leaveProvides pay to an employee when he or sheis out of work because of illness.


Vacations and HolidaysMost firms offer vacation leave benefits. About 90% of full time workers and 40% ofpart timers get paid holidays, an average of 8 paid holidays off.11 The most commonU.S. paid holidays include New Year s Day, Memorial Day, Independence Day, LaborDay, Thanksgiving Day, and Christmas Day. Other common holidays include MartinLuther King, Jr. Day, Good Friday, Presidents Day, Veterans Day, the Friday afterThanksgiving, and the days before Christmas Day and New Year s Day.12 On average,American workers get about 9 days of vacation leave after 1 year s employment, about14 days after 5 years, and 17 after 10 years.13 Elsewhere, vacation allowances vary from 6days in Mexico to 10 days in Japan to 25 days in Sweden and France.

Firms have to address several holiday- and vacation-related policy issues. Theymust decide, of course, how many days off employees will get, and which days (if any)will be the paid holidays. Other vacation policy decisions include:* Will employees get their regular base pay while on vacation, or vacation pay based

on average earnings (which may include overtime)?* Will you pay employees for accrued vacation time if they leave before taking their

vacations?* Will you pay employees for a holiday if they don t come to work the day before

and the day after the holiday?* And, should we pay some premium such as time and a half when employees

must work on holidays?More firms are moving to a more flexible vacation leave approach. For example, IBMgives each of its 350,000 plus employees at least 3 weeks vacation. However,IBM doesn t formally track how much vacation each person takes. Instead, employeessimply make informal vacation arrangements with their direct supervisors.14

Wage surveys and Web sites like www.hrtools.com provide sample vacation policiesfor inclusion in the firm s employee manual.

SOME LEGAL ASPECTS OF VACATIONS AND HOLIDAYS Although federallaw does not require vacation benefits, the employer must still formulate vacationpolicy with care. As an example, many employers vacation policies say vacation payaccrues, say, on a biweekly basis. By doing so, these employers obligate themselves topay employees pro rata vacation pay when they leave the firm. But if the employer svacation policy requires that a new employee pass his or her first employmentanniversary before becoming entitled to a vacation, the employee gets no vacation payif he or she leaves during that first year.

One frequent question is whether the employer can cancel an employee s scheduledvacation, for instance, due to a rush of orders. Here it s important that the employerformulate its vacation policy so it s clear that the employer reserves the right to requirevacation cancellation and rescheduling if production so demands.

Sick LeaveSick leave provides pay to employees when they re out of work due to illness. Mostsick leave policies grant full pay for a specified number of sick days usually upto about 12 per year. The sick days usually accumulate at the rate of, say, 1 day permonth of service.

Sick leave is problematical for employers. The problem is that while many employeesuse their sick days only when sick, others use it whether sick or not. In one survey,personal illnesses accounted for only about 45% of unscheduled sick leave absences.Family issues (27%), personal needs (13%), and a mentality of entitlement (9%) wereother reasons cited.15 Absenteeism costs U.S. employers perhaps $100 billion per year,with personal illness accounting for about a third of the absences.16


COST-REDUCTION TACTICS Employers use several tactics to reduce excessivesick leave absence. Some repurchase unused sick leave at the end of the year bypaying their employees a sum for each sick leave day not used. The problem is thatlegitimately sick employees may come to work. Others have held monthly lotteriesin which only employees with perfect monthly attendance are eligible for a cashprize. At Marriott, employees can trade the value of some sick days for other benefits.Others aggressively investigate all absences, for instance, by calling the absentemployees at their homes.17

Many employers use pooled paid leave plans (or banks ).18 These plans lumptogether sick leave, vacation, and personal days into a single leave pool. For example,one hospital previously granted new employees 25 days off per year (10 vacation days,3 personal days, and 12 sick days). Employees used, on average, 5 of those 12 sick days(as well as all vacations and personal days).19 The pooled paid leave plan allowed newemployees to accrue 18 days to use as they saw fit. ( Catastrophic leaves short-termillnesses causing absences for more than 5 consecutive workdays, and special absenceslike bereavement leave were handled separately.) The pooled plan reduced absences.Most firms don t include federal holidays in their paid time off banks. 20

Evidence-Based HR: Tracking Sick LeaveFor many employers, sick leave is out of control simply because they don t measure it.In one survey, only 57% of employers formally tracked sick days for their exemptemployees and only 46% tracked personal days.21 Three-fourths of the employerscould not even provide an estimate of what their sick pay was costing as a percentageof payrolls. Therefore, before taking other cost control steps the employer should havea system in place for monitoring sick leaves and for measuring their financial impact.The accompanying HR as a Profit Center feature expands on this.

The same applies to controlling health care costs. Some estimate that 5% to 15%of medical plans enrollees may include ineligible dependents such as ex-spouses.Periodically auditing dependents can thus translate into significant health carecost savings.22

HR AS A PROFIT CENTERCutting Absences at the Driver and Vehicle Licensing AgencyGovernment agencies are as (if not more) susceptible to excessive sick leave claimsas are private companies. So when she came in as a director of the United KingdomsDriver and Vehicle Licensing Agency, part of the Department of Transport,Judith Whitaker saw that steps were needed to address the agency s sicknessabsence rate.23 The rate had peaked at 14 days out per employee in 2005, at a costof about $20 million per year (£10.3 million). The rate was down to 12.5 daysby 2008, but was still too high.

The new director organized a multi-faceted human resource managementinitiative to address the sick leave absence problem.24 The agency set a goalof reducing absences by 30% by 2010. Agency directors received absence-reduction goals, and their progress was tracked. The agency introduced newpolicies and procedures dealing with special leave, rehabilitation support, andkeeping in touch with absentees. They introduced new policies to make it easierfor employees to swap work shifts, and introduced a guaranteed leave daypolicy. They also introduced new smoking cessation classes and a weightmanagement program.

These and similar actions were apparently very successful. The averageannual sickness absence rate in 2010 was down to 7.5 days per employee.Improved attendance probably contributed to a 7% productivity increasein 2009 2010. This translates into a reduction in the agency s costs of about$48 million dollars (£24.4 million).


Parental Leave and the Family and Medical Leave ActParental leave is an important benefit. About half of workers are women, and about80% will become pregnant during their work lives. Furthermore, many people headsingle-parent households. Under the Pregnancy Discrimination Act, employers musttreat women applying for pregnancy leave as they would any other employee requestinga leave under the employer s policies. Beyond this, Congress passed, as noted, theFamily and Medical Leave Act of 1993 (FMLA). Among other things (see Figure 13-2),the FMLA stipulates that:25

1. Private employers of 50 or more employees must provide eligible employees(women or men) up to 12 weeks of unpaid leave for their own serious illness, thebirth or adoption of a child, or the care of a seriously ill child, spouse, or parent.

2. Employers may require employees to take any unused paid sick leave or annualleave as part of the 12-week leave provided in the law.

3. Employees taking leave are entitled to receive health benefits while they are onunpaid leave, under the same terms and conditions as when they were on the job.

4. Employers must guarantee most employees the right to return to their previousor equivalent position with no loss of benefits at the end of the leave.

FIGURE 13-2 Your RightsUnder the Family and MedicalLeave Act of 1993

FMLA requires covered employers to provide up to 12weeks of unpaid, job-protected leave to eligibleemployees for certain family and medical reasons.Employees are eligible if they have worked for theiremployer for at least one year, and for 1,250 hours over

Unpaid leave must be granted for any of the followingreasons:

to care for the employee s child after birth, or placement for adoption or foster care;

to care for the employee s spouse, son or daughter, or parent who has a serious health condition; or

for a serious health condition that makes the employee unable to perform the employee s job.

At the employee s or employer s option, certain kinds ofpaid leave may be substituted for unpaid leave.

The employee may be required to provide advance leavenotice and medical certification. Taking of leave may bedenied if requirements are not met.

The employee ordinarily must provide 30 days advance notice when the leave is foreseeable.

An employer may require medical certification to support a request for leave because of a serious health condition, and may require second or third opinions (at the employer s expense) and a fitness for duty report to return to work.

For the duration of FMLA leave, the employer must maintain the employee s health coverage under any group health plan.

U.S. Department of LaborEmployment Standards AdministrationWage and Hour DivisionWashington, D.C. 20210

the previous 12 months, and if there are at least 50employees within 75 miles. The FMLA permitsemployees to take leave on an intermittent basis or towork a reduced schedule under certain circumstances.

Upon return from FMLA leave, most employees must be restored to their original or equivalent positions with equivalent pay, benefits, and other employment terms.

The use of FMLA leave cannot result in the loss of any employment benefit that accrued prior to the start of an employee s leave.

FMLA makes it unlawful for any employer to:

interfere with, restrain, or deny the exercise of any right provided under FMLA.

discharge or discriminate against any person for opposing any practice made unlawful by FMLA or for involvement in any proceeding under or relating to FMLA.

The U.S. Department of Labor is authorized to investigate and resolve complaints of violations.

An eligible employee may bring a civil action against an employer for violations.

FMLA does not affect any Federal or State lawprohibiting discrimination, or supersede any State orlocal law or collective bargaining agreement whichprovides greater family or medical leave rights.

WH Publication 1420Revised August 2001

If you have access to the Internet visit our FMLAwebsite: http://www.dol.gov. To locate your nearestWage-Hour Office, telephone our Wage-Hour toll-freeinformation and help line at 1-866-4USWAGE (1-866-487-9243):a customer service representative is available to assist you withreferral information from 8am to 5pm in your time zone; or logonto our Home Page at http://www.wagehour.dol.gov.

Your Rights

Family and Medical Leave Act of 1993

under the

Reasons for Taking Leave:

Unlawful Acts by Employers:

Enforcement:

For Additional Information:

Advance Notice and MedicalCertification:

Job Benefits and Protection:


Employers have expressed some dissatisfaction with the FMLA. In a survey of 416human resource professionals, about half said they approved leaves they believedwere not legitimate, but felt they had to grant because of vague interpretations of thelaw.26 Tracking leaves was another problem.27

FMLA leaves are usually unpaid, but they re not costless. The costs associatedwith hiring temporary replacements, training them, and compensating for their lowerproductivity can be considerable.

FMLA GUIDELINES Therefore, the manager who wants to avoid granting non-required FMLA leaves needs to understand the FMLA. For example, to be eligible forleave under the FMLA, the employee must have worked for the employer for at leasta total of 12 months and have worked (not just been paid, as someone might be if onleave) for 1,250 or more hours in the past 12 consecutive months.28 If these do notapply, no leave is required.

FIGURE 13-3 Online Requestfor Leave Form

Source: www.opm.gov/FORMS/PDF_FILL/opm71.pdf, accessed April 28, 2009.

seve a ce aA one-time payment some employersprovide when terminating an employee.


Employers obviously need procedures for all leaves of absence (including thoseawarded under the Family and Medical Leave Act). These include:* Give no employee a leave until the reason for the leave is clear.* If the leave is for medical or family reasons, the employer should obtain medical

certification from the medical practitioner.* Use a standard form to record both the employee s expected return date and the

fact that, without an authori ed extension, the firm may terminate his or heremployment (see Figure 13-3).

* One employment lawyer says employers should kind of bend over backwardwhen deciding if an employee is eligible for leave based on an FMLA situation.29

However, employers can require independent medical assessments beforeapproving paid FMLA disability leaves.30

Some employers are enriching their parental leave plans to make it more attractive formothers to return from maternity leave. Tactics include keeping in touch throughoutthe maternity leave, offering flexible obs with reduced travel and hours, giving mothersfair access to bonuses and incentives, and facilitating longer leaves.31

Other laws apply to sick leaves. Under the Americans with Disabilities Act (ADA), aqualified employee with a disability may be eligible for a leave if such a leave is necessaryto accommodate reasonably the employee. Under various state workers compensationlaws, employees may be eligible for leave in connection with work-related in uries.Many states also have their own, more restrictive versions of the FMLA.32

Seve ance ayMany employers provide severance pay, a one-time separation payment whenterminating an employee. Severance pay makes sense. It is a humanitarian gesture,and good public relations. In addition, most managers expect employees to givethem 1 or 2 weeks notice if they plan to quit, so it seems appropriate to provideseverance pay when dismissing an employee. educing the chances of litigation fromdisgruntled former employees is another reason. Severance pay plans also helpreassure employees who stay on after a downsi ing that they ll receive some financialhelp if they re let go, too. In one survey of 3,000 human resource managers, 82%of responding organi ations reported having a severance policy.33

The reason for the dismissal affects whether the employee gets severance pay. About95% of employees dismissed due to downsi ings got severance pay, but only about athird of employers offer severance when terminating for poor performance. It isuncommon to pay when employees quit. The average maximum severance is 39 weeksfor executives and about 30 weeks for other downsi ed employees.34 About half ofemployers surveyed give white-collar and exempt employees 1 week of severance payper year of service, and about one-third do the same for blue-collar workers.35 If theemployer obligates itself (for instance, in its employee handbook) to pay severance, thenits voluntary plan will have to comply with additional rules under E ISA.36

G IDELINES In any event, there are several things to keep in mind when designingthe severance plan. These include:* List the situations for which the firm will pay severance, such as layoffs resulting

from reorgani ations. State that management will take other action as necessary.* equire signing of a knowing and voluntary waiver general release prior to remit-

tance of any severance pay, absolving the employer from employment-relatedliability.

* eserve the right to terminate or alter the severance policy.


* Make it clear that any continuing severance payments continue until only thestated deadline or until the employee gets a new job, whichever occurs first.

* Remember that as with all personnel actions, employers must make severancepayments, if any, equitably.37

Supplemental Unemployment BenefitsIn some industries such as auto making, shutdowns to reduce inventories or changemachinery are common, and laid-off or furloughed employees must depend on unem-ployment insurance. As the name implies, supplemental unemployment benefits arecash payments that supplement the employee s unemployment compensation, to helpthe person maintain his or her standard of living while out of work. They generallycover three contingencies: layoffs, reduced workweeks, and facility relocations.

INSURANCE BENEFITSMost employers also provide a number of required or voluntary insurance benefits,such as workers compensation and health insurance.

Workers CompensationWorkers compensation laws aim to provide sure, prompt income and medical bene-fits to work-related accident victims or their dependents, regardless of fault. Every statehas its own workers compensation law and commission, and some run their owninsurance programs. However, most require employers to carry workers compensationinsurance with private, state-approved insurance companies. Neither the state nor thefederal government contributes any funds for workers compensation.

HOW BENEFITS ARE DETERMINED Workers compensation can be monetaryor medical. In the event of a worker s death or disablement, the person s dependentsreceive a cash benefit based on prior earnings usually one-half to two-thirds theworker s average weekly wage, per week of employment. Most states have a timelimit such as 500 weeks for which benefits can be paid. If the injury causes aspecific loss (such as an arm), the employee may receive additional benefits based ona statutory list of losses, even though he or she may return to work. In addition tothese cash benefits, employers must furnish medical, surgical, and hospital services asrequired for the employee.

For workers compensation to cover an injury or work-related illness, one mustonly prove that it arose while the worker was on the job. It does not matter that he orshe may have been at fault; if the person was on the job when the injury occurred, heor she is entitled to workers compensation. For example, suppose you instruct allemployees to wear safety goggles when at their machines. One worker does not andexperiences an eye injury on the job. The company must still provide workerscompensation benefits.

Keep in mind that ADA provisions generally prohibit employers from inquiringabout an applicant s workers compensation history. Furthermore, failing to let anemployee who is on injury-related workers compensation return to work, or notaccommodating him or her, could lead to lawsuits under ADA.

CONTROLLING WORKERS COMPENSATION COSTS It is important tocontrol workers compensation claims (and therefore costs). The employer s insur-ance company usually pays the claim, but the costs of the employer s premiumsreflect the amount of claims.38 Workers comp claims also tend to correlate withinjuries, so fewer claims is usually a good sign of fewer accidents.

There are several ways to reduce workers compensation claims. Screen outaccident-prone workers. Reduce accident-causing conditions in your facilities.And reduce the accidents and health problems that trigger these claims for instance,

2 Describe each of the maininsurance benefits.

supplemental unemployment benefitsProvide for a g aranteed ann al in omein ertain ind stries where employers m stsh t down to hange ma hinery or d eto red ed wor . These ene its are paid

y the ompany and s pplementnemployment ene its.

ke s c e sa iProvides in ome and medi al ene its to wor -related a ident vi tims or theirdependents regardless o a lt.


by instituting effective safety and health programs and complying with governmentsafety standards. Furthermore, although many workers compensation claims arelegitimate, some are not. Supervisors should therefore watch for typical fraudulentclaim red flags. These include vague accident details, minor accidents resultingin ma or in uries, lack of witnesses, in uries occurring late Friday or very earlyMonday, and late reporting.39

Other workers comp cost-control techniques include monitoring health careproviders for compliance with their fee schedules and auditing medical bills.40 em n gement is a popular cost-control option. It is the treatment of in ured workerson a case-by-case basis by an assigned manager, usually a registered nurse, who coordi-nates with the physician and health plan to determine which care settings are the mosteffective for quality care and cost. 41

Moving aggressively to support the in ured employee and to get him or her backto work quickly is important. The involvement of an attorney and the duration of theclaim both influence the workers claim cost.42 Many firms have rehabilitationprograms. These include physical therapy, and nursing assistance to help reintegrateclaim recipients into the workforce.

Hos itali ation Healt and isa ility ns anceHealth insurance looms large in many people s choice of employer, because it is soexpensive. Hospitali ation, health, and disability insurance helps protect employeesagainst hospitali ation costs and the loss of income arising from off-the- ob accidentsor illness. Many employers purchase insurance from life insurance companies, casualtyinsurance companies, or Blue Cross (for hospital expenses) and Blue Shield (for physi-cian expenses) organi ations. Others contract with health maintenance organi ationsor preferred provider organi ations. The employer and employee usually bothcontribute to the plan. Table 13-3 illustrates the prevalence of health-related benefits.

COVE AGE Most employer health plans provide at least basic hospitali ation andsurgical and medical insurance for all eligible employees at group rates. Insurance is

L Pe ce a e E l e s O e i S e P la Heale e i s C a e Ove Ti e

Yes Yes

Prescription drug program coverage 97 96Dental insurance 95 94Mail order prescription program 90 91PPO (preferred provider organi ation) 87 84Chiropractic coverage 56 83Mental health insurance 72 82Vision insurance 80 76Employee assistance program 73 75Medical Flexible spending account 80 73HMO (health maintenance organi ation) 53 33o rce Adapted from 2011 SH M Employee Benefits Survey eport, p. 2. www.shrm.org esearch SurveyFindings

Articles Documents Emp Benefits Tables.pdf, accessed, June 1, 2011. eprinted with permission from the Society for Human esource Management. All rights reserved.

434 PART 4 C PENSATI N

generally available to all employees including new nonprobationary ones regardlessof health or physical condition. Most basic plans pay for hospital room and board,surgery charges, and medical expenses (such as doctors visits to the hospital). Somealso provide major medical coverage to meet the medical expenses resulting fromserious illnesses.

Most employers health plans also cover health-related expenses like doctorsvisits, eye care, and dental services. Other plans pay for general and diagnostic visitsto the doctor s office, vision care, hearing aids, and prescription drugs. Disabilityinsurance provides income protection for salary loss due to illness or accident.Payments usually start when normal sick leave payments end, and may continue untilage 65 or beyond. Disability benefits usually range from 50% to 75% of theemployee s base pay if he or she is disabled.

H OS Many employers offer membership in a eal ai e a ce a i a ias a hospital/medical insurance option. The HMO is a medical organization

consisting of specialists (surgeons, psychiatrists, and so on), often operating out of ahealth care center. It provides routine medical services to employees who pay anominal fee. Employees often have gatekeeper doctors who must approve appoint-ments with specialist doctors. The HMO receives a fixed annual fee per employeefrom the employer (or employer and employee), regardless of whether it providesthat person service.

PPOS e e e vi e a i a i are a cross between HMOs andthe traditional doctor patient arrangement: They are groups of health care providersthat contract with employers, insurance companies, or third-party payers to providemedical care services at a reduced fee. 43 Unlike HMOs, PPOs let employees selectproviders (such as doctors) from a relatively wide list, and see them in their offices,often without gatekeeper doctor approval. The providers agree to provide discountsand submit to certain controls, for example, on testing. Employers are shifting fromhigher-cost HMOs to PPOs.44

E TA HEA TH BE E TS The World Health Organization estimated thatmore than 34 million people in the United States between the ages of 18 and 64 sufferfrom mental illness.45 Mental illnesses represent about 24% of all reported disabilities,more than disabling injuries, respiratory diseases, cardiovascular diseases, and cancercombined.

Mental health costs are rising. Reasons include widespread drug and alcoholproblems, an increase in states that require employers to offer minimum mentalhealth benefits, and the fact that mental health claims tend to trigger other health careclaims. The Mental Health Parity Act of 1996 (as amended in 2008) sets minimummental health care benefits; it also prohibits employer group health plans from adoptingmental health benefits limitations without comparable limitations on medical andsurgical benefits.46

The Legal Side of Health BenefitsWith the U.S. introducing new health insurance laws, federal influence over healthbenefits will increase substantially in the next few years.

PROTECT O A A OR AB E CARE ACT O 2010 Signed into law byPresident Obama in 2010, employers will face a number of deadlines under the newPatient Protection and Affordable Care Act, unless Congress changes the law. Forexample, employers must begin reporting the value of health care benefits onemployee s W-2 statements, contributions to health care flexible spending arrange-ments will be limited to $2,500 as of January 1, 2013, and in 2018 a 40% excise tax onhigh-cost health insurance plans goes into effect.47 Individual and group health plansthat already provide dependent coverage must expand eligibility up to age 26.48

Among many other things, the act encourages employers with 50 or more employees

health maintenance organi ation (H O)A prepaid health are system that generallyprovides ro tine ro nd-the- lo medi alservi es as well as preventive medi ine in alini -type arrangement or employees who

pay a nominal ee in addition to the i edann al ee the employer pays.

e e e vi e a i a i s PPOsro ps o health are providers that ontra t

with employers ins ran e ompanies orthird-party payers to provide medi al areservi es at a red ed ee.


to offer health insurance or pay a shared responsibility payment if the governmenthas to subsidi e an employee s health care.

Employers in one recent survey by the consulting firm Mercer expected this actto raise their health care expenses by from 2% to 5% in 2011.49 As the act phases inover the next few years (assuming Congress makes no changes), the excise tax onhigh-cost plans was the employers main cost concern. Other cost-raisers, theemployers told Mercer, include the expanded coverage for older children, the ban onlifetime benefit dollar limits, the requirement that employers auto-enroll new hiresinto a health plan, and the rule that employers must offer coverage to employeesincluding those working less than 30 hours per week (many of whom now have nohealth benefits).50

CO A COB A the Consolidated Omnibus Budget econciliation Actrequires most private employers to continue to make health benefits available to sep-arated employees and their families for a time, generally 18 months after separation.51

The former employee must pay for the coverage.Employers ignore COB As regulations at their peril. Most importantly, you don t

want separated employees to leave and be in ured, and then claim you never toldthem they could have continued their insurance coverage. Therefore, when a newemployee first becomes eligible for your company s insurance plan, the person m treceive (and acknowledge receiving) an explanation of his or her COB A rights. And,all employees separated from the company should sign a form acknowledging thatthey received and understand those rights. Figure 13-4 provides a COB A checklist.

OTHE LA S Other federal laws are pertinent. For example, among otherthings, the m lo ee etirement ncome ec rit ct of 1974 (E ISA) sets mini-mum standards for most voluntarily established pension and health plans inprivate industry.52 e e born ot er rotection ct of prohibits employershealth plans from using incentives to encourage employees to leave the hospitalafter childbirth after less than the legislatively determined minimum stay. Employ-ers who provide health care services must follow the privacy rules of the e ltn r nce ort bilit nd cco nt bilit ct of ).53 Employers must

provide the same health care benefits to employees over the age of 65 that theydo to younger workers, even though the older workers are eligible for federalMedicare health insurance. Under the meric n it i bilitie ct the plangenerally shouldn t make distinctions based on disability. And, as explained earlier,the regn nc i crimin tion ct requires employers to treat women affectedby pregnancy, childbirth, or related medical conditions the same as any otheremployees not able to work, with respect to all benefits. Under the enetic nform tion ondi crimin tion ct of 2008 (GINA), employers need to be vigilantabout even apparently innocent situations. For example, if a health plan adminis-trator learns that a member s mother passed away from breast cancer and makes anote to send a card, making the note and sending the card could conceivablybe held as violations of the act.54

ends in loye Healt a e ost ont olEmployers are endeavoring to rein in health care costs. Many retain co t cont inment

eci li t to help reduce such costs. And most negotiate more aggressively withtheir health care insurance providers.55 Most cost-control efforts necessarily startby instituting methods for measuring and tracking health care costs.56

43 PART 4 C MPENSATI N

FIGURE 13-4 C BRA Record ee ing Com lianceChec list

Source: Reprinted fromwww.HR.BLR.com with permissionof the publisher Business and LegalResources, Inc., 141 Mill Rock RoadEast, Old Saybrook, CT © 2004. BLR®

(Business and Legal Resources, Inc.).

Do you maintain records so that it is easily determined who is covered by your group health care plan?

Detailed record keeping is crucial for COBRA compliance. The following checklist is designedto ensure that the proper records are maintained for problem-free COBRA compliance.

Yes No

Do you record terminations of covered employees as soon as terminations occur?

Do you track reduction of hours of employees covered by group health care plans?

Do you track deaths of employees covered by group health care plans?

Do you track leaves of absence of employees covered by group health care plans?

Do you track Medicare eligibility of employees covered by group health care plans?

Do you track the disability status of employees covered by group health care plans?

Do you track retirees covered by group health care plans?

Do you maintain a record of how premiums are calculated?

Do you maintain a log of those employees who are denied COBRA coverage?

Do you maintain a log of why employees are denied COBRA coverage?

Do you maintain current addresses of individuals receiving COBRA benefits?

Do you require employees to provide a written acknowledgment that they have received notice of their COBRA rights?

Do you maintain a record of changes in your plan?

Do you have a system to determine who has paid COBRA premiums on time?

Do you have a system to determine who has obtained other group health coverage so that they are no longer eligible for COBRA under your plan?

Do you maintain current addresses of employees?

Do you maintain a telephone log of calls received about COBRA?

For many employers, deductibles and co-pays are the low-hanging fruit in healthcare cost control. For example, 22% of employers imposed deductibles of at least$1,000 in 2011 for in-network services, up from 8% in 2008.57 Even more 44%imposed such deductibles for out-of-network services.58 Consumer-driven healthplans (CDHPs) are increasingly popular. These are high-deductible plans that giveemployees access to, for instance, a health savings account. (The Medicare Modern-ization Act of 2003 allows employers to establish tax-free health savings accounts(HSA).)59 After the employer, employee, or both deposit pretax (and thus taxsheltered) pay in the employees HSAs, employees or their families can use their HSAfunds to pay for low dollar (not catastrophic) medical expenses.60 The assumptionis that this will motivate employees to utilize less expensive health care options, andthus avoid big deductibles.61 Employers generally offer CDHPs as an option totraditional plans, such as PPOs.62 We ll address other important cost-control trends.

COMMUNICATION AND EMPOWERMENT Most importantly, make sureemployees know the costs of their medical benefits.63 As one expert said, the biggestcriticism of managed care . . . is that the health care consumer has little financial stake


in treatment decisions. 64 So, for example, periodically send a statement to eachemployee listing the employer s costs for each health benefit. nline election letsemployees choose the best of the employer s health care offerings, based on inputfrom other employees concerning matters like doctor visits and specialists.

ELLNESS P OG AMS Many illnesses are preventable. In one study employerswho undertook prevention programs aimed at cardiovascular disease . . . reported anaverage 28% reduction in sick leave, and a 26% reduction in direct health-carecosts. 65 Many employers therefore offer preventive services.66 linic l re entionprograms include things like mammograms, immuni ations, and routine checkups.Walgreens recently purchased two companies that provide on ite e lt c re er icesuch as mammograms for employers.67 e lt romotion nd di e e re entionprograms include seminars and incentives aimed at improving unhealthy behaviors.68

Top wellness program trends include obesity management, stress management, seniorhealth improvement, and tobacco cessation programs.69 Incentives, for instance,$50 $100, can boost wellness program participation, but may backfire.70 Whirlpoolgives nonsmoker discounts on health care premiums worth about $500. It suspended39 workers it caught smoking outside the plant after claiming on their benefits enrollmentforms that they were not tobacco users.

CLAIM A DITS It makes little sense to initiate cost cuts when employers are payingout thousands or millions of dollars in erroneous claims. Unfortunately, with healthcare plans increasingly complicated, it s easier for errors to occur. Human resourceconsultants Towers Perrin conducted a survey of claims payments. The industrystandard for percentage of claims errors is 3%, but Towers Perrin found the ct lpercentage of claims with financial errors were about 6.3%. The industry standard forpercentage of claims dollars actually paid in error was 1% the ct l percentageof claims dollars paid in error were 3.4%. So, setting standards for errors and thenaggressively auditing all claims may be the most direct way to reduce employer healthcare expenses.71

LIMITED PLANS Some employers are offering limited-benefit health care insuranceplans. Unlike health care plans that may have lifetime coverage limits of $1 million ormore, these mini medical plans have annual caps of about $2,000 $10,000 per year.The advantage, of course, is that the premiums are correspondingly lower.72

O TSO CING Benefits management ranks high on the list of H activities thatemployers outsource. For example, in one survey, 94% outsourced management offlexible spending accounts, 89% outsourced defined contribution plans, 72% outsourceddefined benefit plans, and 68% outsourced the auditing of dependents.73

OTHE COST CONT OL OPTIONS Employers are taking other steps. One isusing defined contrib tion e lt c re l n Here each employee gets a specific dollaramount allotment to use for co-payments or discretionary medical costs, rather than aspecified health care benefits package with open-ended costs.74 As noted, o t o rcing health care plan administration and employee assistance and counseling to outsidecompanies for a fee are other options.75 Many employers reduce subsidi ed healthbenefits for their future retiree 76 Small firms are oining benefit rc ing lli ncebanding together to purchase health care benefits. Other employers are encouragingmedic l to ri m, which means asking employees to have non-urgent medical proce-dures abroad, where costs are lower.77 One simple method is ust to ensure that anyde endent enrolled are actually eligible for coverage.78

Lon e a eWith baby-boomers in their 60s, long-term care insurance for things like nursingassistance to former employees in their old age is a key employee benefit. The HealthInsurance Portability and Accountability Act of 1996 lets employers and employees


deduct the cost of long-term care insurance premiums from their annual income taxes,making this benefit more attractive.7 Employers can also provide insurance benefits forseveral types of long-term care, such as adult day care, assisted living, and custodial care.

ife Insuran eIn addition to hospitali ation and medical benefits, most employers provide roup lifeinsurance plans. Employees can usually obtain lower rates in a group plan. And groupplans usually accept all employees including new, nonprobationary ones regardlessof health or physical condition.

In general, there are three key personnel policies to address: the benefits-paidschedule (the amount of life insurance benefits is usually tied to the employee sannual earnings), supplemental benefits (continued life insurance coverage afterretirement, for instance), and financing (the amount and percent the employeecontributes).

Accidental death and dismemberment coverage provides a lump-sum benefit inaddition to life insurance benefits when death is accidental. It also provides benefits incase of accidental loss of limbs or sight.

Benefits for art Time an Contin ent WorkersAbout million people work part-time (less than 35 hours a week). The recession,more phased retirements, a desire to better balance work and family life, and morewomen in the workforce help explain this phenomenon. In any case, most firmsprovide holiday, sick leave, and vacation benefits to part-timers, and more than 70offer some form of health care benefits to them.80 Again, employers should take careto not misclassify part-timers as independent contractors. 8

RETIRE ENT BENEFITSThe first contingent of baby-boomers turned 5 in 0 , and many didn t wait untilthen to retire. This presents two challenges for employers. First (as we explainedin hapter 0, Employee Retention), employers are taking steps to entice older workersto keep working in some capacity.8 Second, retirement funding is a big issue. We llfocus here on retirement benefits, including federal Social Security and employerpension retirement plans like the 0 (k).

So ial Se urityMost people assume that ocial ecurity provides income only when they are olderthan , but it actually provides three types of benefits. The familiar retirement benefitsprovide an income if you retire at age or thereafter and are insured under the SocialSecurity Act. Second are survivor s or death benefits. These provide monthly paymentsto your dependents regardless of your age at death, again assuming you are insuredunder the Social Security Act. Finally, there are disability payments. These providemonthly payments to employees who become disabled totally (and to their dependents)if they meet certain requirements. The Social Security system also administersthe Medicare program, which provides health services to people age 5 or older.Full retirement age for non-discounted social security benefits traditionally was 5

the usual age for retirement. It is now 7 for those born in 0 or later.83

A tax on the employee s wages funds Social Security (technically, Federal Old Ageand Survivor s Insurance ). As of 0 , the maximum amount of earnings subject toSocial Security tax was 0 ,800; the employer pays . and the employee pays . .8

ension lansension plans provide income to individuals in their retirement, and just over half of

full-time workers participate in some type of pension plan at work.

Discuss the main retirementbenefits.

group life insuranceProvides lower rates or the employeror employee and in l des all employeesin l ding new employees regardlesso health or physi al ondition.

Social SecurityFederal program that provides three typeso ene its retirement in ome at the age o and therea ter s rvivor s or death ene itspaya le to the employee s dependentsregardless o age at time o death anddisa ility ene its paya le to disa ledemployees and their dependents. These

ene its are paya le only i the employeeis ins red nder the So ial Se rity A t.

pension plansPlans that provide a i ed s m whenemployees rea h a predetermined retirementage or when they an no longer wor d eto disa ility.


We can classify pension plans in three basic ways: contributory versus noncon-tributory plans, qualified versus nonqualified plans, and defined contribution versusdefined benefit plans.85 The employee contributes to the contributory pension plan,while the employer makes all contributions to the noncontributory pension plan.Employers derive certain tax benefits (such as tax deductions) for contributing toqualified pension plans (they are qualified for preferred tax treatment by the IRS);nonqualified pension plans get less favorable tax treatment. (As with all pay plancomponents, employers should ensure retirement benefits support their strategicneeds. For example set guiding principles such as assist in attracting employees andassist in retaining knowledgeable employees. )86

With e ne ene p ans, the employee s pension is specified or definedahead of time. Here the person knows ahead of time the pension benefits he or shewill receive. How is this possible? There is usually a formula that ties the person spension to (1) a percentage of (2) the person s pre-retirement pay (for example, to anaverage of his or her last 5 years of employment), multiplied by (3) the number ofyears he or she worked for the company. Due to tax law changes and other reasons,defined benefit plans now represent a minority of pension benefit plans.87

e ne c n r n p ans specify ( define ) what contribution the employeeand employer will make to the employee s retirement or savings fund. Here thecontribution is defined, not the pension. With a defined benefit plan, the employee cancompute what his or her retirement benefits will be upon retirement. With a definedcontribution plan, the person only knows for sure what he or she is contributing to thepension plan; the actual pension will depend on the amounts contributed to the fundand on the success of the retirement fund s investment earnings. Defined contributionplans are popular among employers today due to their relative ease of administration,favorable tax treatment, and other factors. r a y making it easier for employeeswho leave the firm prior to retirement to take their accumulated pension funds withthem is easier with defined contribution plans.

401(K) PLANS The most popular defined contribution plans are based on section401(k) of the Internal Revenue Code, and called p ans. The employee author-izes the employer to deduct a sum from his or her paycheck before taxes, and to investit in the bundle of investments in his or her 401(k). The deduction is pretax, so theemployee pays no tax on those dollars until after he or she retires (or removesthe money from the 401(k) plan). The person can decide to deduct any amount upto the legal maximum (the IRS sets an annual dollar limit now about $15,000). Theemployer arranges, usually with an investment company such as Fidelity Investments,to administer the 401(k) plan and to make investment options available to the plan.The options typically include mutual stock funds and bond funds. As the recentdownturn intensified, more employees made hardship withdrawals from their401(k) plans (on which no taxes are due, for a time).88

Employers must choose their 401(k) providers with care. The employer has a fidu-ciary responsibility to its employees; it must monitor the fund and its administration.89

defined benefit planA plan that ontains a orm la ordetermining retirement ene its.

defined contribution planA plan in whi h the employer s ontri tionto employees retirement savings ndsis spe i ied.

portabilityInstit ting poli ies that ena le employeesto easily ta e their a m lated pension

nds when they leave employer.

401(k) planA de ined ontri tion plan ased on se tion4 1 o the Internal Reven e Code.


Furthermore, changing 401(k) providers can be grueling. 90 In addition to trustwor-thiness, the 401(k) plan provider should make it easy to enroll and participate in theplan.91 Firms such as Vanguard, Fidelity, and others can establish Web-based 401(k)plans with online tools such as an asset allocation planner even for small firms.It s also crucial that employers monitor 401(k) housekeeping issues. For example, theIRS recently reported the top 10 most common violations that 401(k) plans encounter,including late deposits and incorrect employer matching contributions.92

Under the Pension Protection Act of 2006, employers who sponsor plans thatfacilitate both automatic enrollment and allocation to default investments (such asage-appropriate lifestyle funds ) reduce their compliance burdens.93 Post-2008stories, like that of David, a 47-year-old engineer, suggest prudence. His adviser saidthat if we saved very aggressively, I might be able to retire in my early 70s. Suchexperiences underscore the need for employee education, or perhaps directing fundsinto (relatively) prudent default investments.94

OTHER DEFINED CONTRIBUTION PLANS The 401(k) plan is one example of asavings and thrift plan.95 In any savings and thrift plan, employees contribute aportion of their earnings to a fund, and the employer usually matches this contributioncompletely or in part.

As discussed in Chapter 12 (Incentives), employers use a deferred profit-sharing plan to contribute a portion of their profits in cash to a pension fund,regardless of the level of employee contribution (income taxes on those contribu-tions are deferred until the employee retires or leaves the employer). An employeestock ownership plan (ESOP) is a qualified, tax-deductible defined contributionplan in which employers contribute stock to a trust for eventual use by employeeswho retire.

CASH BALANCE PENSION PLANS One problem with defined benefits plans isthat to get your maximum pension, you generally must stay with your employeruntil you retire the formula, recall, takes the number of years you work intoconsideration. With defined contribution plans, your pension is more portable youcan leave with it at any time, perhaps rolling it over into your next employer spension plan. Without delving into all the details, cash balance plans are a hybrid;they have defined benefit plans more predictable benefits, but the portability advan-tages of defined contribution plans.96 The employer contributes a percentage ofemployees current pay to the employees pension plans every year, and employeesearn interest on this amount.97

Firms suc as a guard, Fideli ,a d o ers ca es a lis o li e,full e ased 01 pla seve for small firms wi 10 o 0 emplo ees.

Sour

ce:F

ool

ia L

L.

savi s a i laPlan in which employees contribute a portionof their earnin s to a fund the employerusually matches this contribution in wholeor in part.


ension lannin and t e LaNo one wants to wake up and discover that his or her pension has vanished. Therefore,federal laws regulate pension planning and administration. As a rule, it is impossible toformulate a plan without expert help.

The l ee e i e e c e Sec i c S is the basic law.It requires that employers have written pension plan documents and adhere to certainguidelines, such as regarding who is eligible for the employer s plan.98 E ISA protectsthe employer s pension or health plans assets by requiring that those who control theplans act responsibly. The Department of Labor says that the primary responsibilityof fid ci rie is to run the plan solely in the interest of participants and beneficiaries.

Other laws are pertinent. Employers (and employees) want their pension contri-butions to be qualified, or tax deductible, so they must adhere to the pertinentincome t code Under l bor rel tion l , the employer must let its unions partici-pate in pension plan administration. The ob re tion nd or er i t nce ctprovides guidelines regarding what rates of return employers should use in computingtheir pension plan values.

P GC E ISA established the e i e e i a a ee a i to oversee and insure a pension if a plan terminates without sufficient funds.The PBGC guarantees only defined benefit plans, not defined contribution plans.Furthermore, it will only pay an individual a pension of up to a maximum of about$54,000 per year for someone 65 years of age with a plan terminating in 2011.99

So, high-income workers may still see most of their expected pensions evaporateif their employers go bankrupt.

MEM E SHIP E I EMENTS When does the employee become eligible for apension? Under the Tax eform Act of 1986, an employer can require that anemployee complete a period of no more than 2 years service to the company beforebecoming eligible to participate in the plan. However, if it requires more than 1 yearof service before eligibility, the plan must grant employees full and immediate vestingrights at the end of that period.

VESTING e ted f nd are the money employer and employee have placed in thelatter s pension fund that cannot be forfeited for any reason. The employees contri-butions are always theirs, of course. However, until the passage of E ISA, theem lo er contribution in many pension plans didn t vest until the employee retired.So, you could have worked for a company for 30 years and been left with no pensionif the company went bust 1 year before you were to retire. That generally can t happentoday, given the PBGC s guarantees.

Employers can choose one of two minimum vesting schedules (employers canallow funds to vest faster if they wish). With cliff e ting, the period for acquiring anonforfeitable right to employer matching contributions (if any) is 3 years. So, theemployee must have nonforfeitable rights to these funds by the end of 3 years. With the

E l ee e i e e I c e Sec i AcE ISA

Si ned into law by President Ford in 1 74to re uire that pension ri hts be vestedand protected by a overnment a encythe PB C.

Pe si e e i s G a a ee C a i P GCEstablished under ERISA to ensure that pensions meet vestin obli ations alsoinsures pensions should a plan terminatewithout sufficient funds to meet its vestedobli ations.e e e i s a i la

A plan in which a certain amount of profits is credited to each employee s accountpayable at retirement termination or death.

cas ala ce la sPlans under which the employer contributesa percenta e of employees current payto employees pension plans every year and employees earn interest on this amount.

e l ee s ck e s i la ESOPA ualified ta deductible stock bonus planin which employers contribute stock to atrust for eventual use by employees.


second (graded vesting) option, pension plan participants must receive nonforfeitablerights to the matching contributions as follows: 20% after 2 years, and then 20% foreach succeeding year, with a 100% nonforfeitable right by the end of 6 years.

Pensions and Early RetirementTo trim their workforces or for other reasons, some employers are encouraging employeesto retire early. Many of these plans take the form of early retirement window arrange-ments for specific employees (often age 50*). The window means that for a limited time, the employees can retire early. The financial incentive is generally acombination of improved or liberalized pension benefits plus a cash payment.

Early retirement programs can backfire for two reasons. Some are too successful.When Verizon Communications offered enhanced pension benefits to encouragewhat it hoped would be 12,000 employees to retire, more than 21,000 took the plan.Verizon had to replace 16,000 managers.100

Discrimination is the other potential problem. Unless structured properly, olderemployees can challenge early retirement programs as de facto ways for forcing themto retire against their will. Although it is generally legal to use incentives to encourageindividuals to choose early retirement, the employee s decision must be voluntary.The Older Workers Benefit Protection Act (OWBPA) imposes limitations. Theemployee s waiver must be knowing and voluntary, and give the employee ample timeto think over the agreement and to seek legal advice, among other things.

Improving Productivity through HRISOnline Benefits Management SystemsLeft un-automated, benefits administration can require the employer to devotehundreds of human resource professionals hours to answering employees questionsabout comparative benefits and updating employees benefits information.101

Typical employee questions include, In which option of the medical plan amI enrolled? and If I retire in 2 years, what will be my monthly retirement income?Tasks like that cry out for online self-service benefits management applications.

BENELOGIC For example, when the organization that assists Pennsylvania schooldistricts with their insurance needs decided to help the school boards automate theirbenefits administration, they chose a company called Benelogic.102 The solution,called the Employee Benefit Electronic Service Tool, lets users manage all aspectsof benefits administration, including enrollment, plan descriptions, eligibility, andpremium reconciliation, via their browsers.103

Benelogic hosts and maintains the Web support application on its own servers,and creates customized, Web-based applications for each school district. The systemfacilitates Web-based employee benefit enrollment, and provides centralized callcenter support for benefit-related questions. It even handles benefits-related payroll,HRIS, and similar functions by collaborating with companies like ADP (for payroll)and Oracle PeopleSoft (which services many of the school boards human resourceinformation systems). Each school board employee accesses the Benelogic site via alink on his or her own board s Web site.

BENEFITS WEB SITES Employers everywhere are adding new services to theirown benefits Web sites. In addition to offering things like self-enrollment, the insur-ance company USAAs Web site (www.usaa.com) helps employees achieve better worklife balance. For example, click on the today, I m feeling . . . menu. Here employeescan respond to a list of words (such as stressed ). From there, they see suggestionsfor dealing with (in this case) stress. Go to my child is behaving badly, and theemployee gets access to resources like guide to addressing child behavior prob-lems. 104 Boeing s Pay & Benefits Profile site gives employees real-time informationabout their salary and bonuses, benefits, pension, and even special services such aschild care referrals.105

EAPA formal employer program for providingemployees with counseling and/or treatmentprograms for problems such as alcoholism,gambling, or stress.

Benefits such as child care and fitness facilities that make it easier for employees to balance their work and family responsibilities.


ERS NA SER ICES AN FA I FRIENBENEFITSAlthough time off, insurance, and retirement benefits account for the lion s shareof benefits costs, most employers also provide various services benefits. These includepersonal services (such as legal and personal counseling), family-friendly services(such as child-care facilities), educational subsidies, and executive perquisites (such ascompany cars for its executives).

ersonal Ser i esMany employers provide access to the sorts of personal services that employees some-times need. These include credit unions, legal services, counseling, and social andrecreational opportunities. (Some employers use the term voluntary benefits to coverpersonal services benefits that range from things like pet insurance to automobileinsurance. 0 ) We ll look at a few of these.

EMPLO EE ASSISTANCE PROGRAMS Employee assistance programs(EAPs) provide counseling and advisory services, such as personal legal and financialservices, child and elder care referrals, adoption assistance, mental health counseling,and life event planning. 07 EA s are increasingly popular, with more than 0of larger firms offering such programs. One study found that personal mental healthwas the most common problem addressed by employee assistance programs, followedby family problems. 08

For employers, EA s produce advantages, not just costs. For example, sick familymembers and problems like depression account for many of the sick days employeestake. Employee assistance programs can reduce such absences by providing expertadvice on issues like elder care referrals. 0 Few but the largest employers establish theirown EA s. Most contract for the necessary services with vendors such as MagellanHealth Services and I NA ehavioral Health. 0

In either case, employers and managers need to keep several issues in mind. Everyoneinvolved with the EA , including supervisors, secretaries, and support staff, mustunderstand the importance of confidentiality. Also, ensure files are locked, access is limitedand monitored, and identifying information is minimi ed. Be aware of legal issues.For example, in most states counselors must disclose suspicions of child abuse to stateagencies. Define the programs purpose, employee eligibility, the roles and responsibilitiesof EA and employer personnel, and procedures for using the plan. And ensure thevendors you use fulfill professional and state licensing requirements.

Family Frien ly Work ife BenefitsSeveral trends have changed the benefits landscape. There are more households whereboth adults work, more one-parent households, more women in the workforce, andmore workers older than age 55. And, there s the time bind people working more,without the time to do all they d like to do. The issues involve working men, as well aswomen.

These pressures have led many employers to bolster their family-friendly(or work life) benefits. (The number of Americans who have never married is rising,and the newer work life benefits terminology recogni es the need to improve allemployees work life situations, not just those with families.) These benefits includechild care, elder care, fitness facilities, and flexible work schedules benefits that helpemployees balance their family and work lives. 3 We ll look at some examples.

ut ine the main em o eesser ices benefits.

A type of offering by which employees areencouraged to retire early, the incentivebeing liberal pension benefits plus perhaps a cash payment.


SUBSIDI ED CHILD CARE Fulfilling work responsibilities while raising a familyis a challenge, particularly for single parents. ost working people make private pro-visions to take care of their children. For example, relatives accounted for 48 of allchild care providers in one study.114 Organi ed day care centers accounted foranother 30 of child care arrangements, and nonrelatives accounted for most of theremaining arrangements.

mployers who want to reduce the distractions associated with finding reliablechild care can help in various ways. Some employers simply investigate the day carefacilities in their communities and recommend certain ones to employees. Otheremployers set up company-sponsored and subsidi ed day care facilities, both toattract employees and to reduce absenteeism. For example, Abbott aboratories builta 10 million child care center at its headquarters north of Chicago, daytime hometo about 400 children of Abbott employees.115

y establishing subsidi ed day care, employers assumedly can benefit in severalways. These include improved recruiting results, lower absenteeism, improvedmorale, favorable publicity, and lower turnover. ut, good planning is required. Thisoften starts with a questionnaire to employees to answer questions like, What wouldyou be willing to pay for care for one child in a child care center near work

SIC CHILD BENEFITS One study found that unexpected absences climbed to about2.4 of payroll hours recently, with a cost per absence to employers of about 700 perepisode (for temp employees and reduced productivity, for instance). ore employers arethus offering emergency child care benefits, for example, when a young child s regularbabysitter is a no-show. Texas Instruments built a Web database its employees use to findlast-minute child care providers. Others, like Canadian financial services company CI C,are expanding their on-site child care centers to handle last-minute emergencies.116

ELDER CARE The responsibility for caring for an aging relative can affectthe employee s performance.117 One study found that, to care for an older relative,64 of employees took sick days or vacation time, 33 decreased work hours, 22took leaves of absence, 20 changed their ob status from full- to part-time, 16 quittheir obs, and 13 retired early. One survey found that about 120 million Americansare now caring for or in the past cared for an adult relative or friend.118

So, more employers are providing elder care services. For example, the United AutoWorkers and Ford otor Company provide elder care referral services for Ford s salariedemployees. The service provides a detailed assessment of the elderly relative s needs andrecommendations on the care that would be best.119 The ational Council on Aging hasa Web site to help elders and caregivers find benefit programs www.benefitscheckup.org.

Software giant SAS Institute,Inc., offers generous employeebenefits. The North Carolinafirm keeps turnover at 4% in anindustry where 20% is typical, partly by offering family-friendlybenefits like paid maternityleave, day care on site,lunchtime piano concerts,massages, and yoga classeslike this one.

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FAMILY F IENDLY ENEFITS AND THE OTTOM LINE It s not easy toevaluate the profitability of such programs. The costs are clear. For example, a fewyears ago Aetna found it saved $400,000 just by making employees at its lue ell,Pennsylvania, office buy their own coffee and tea.120

Measuring the program s positive consequences isn t so simple. Family-friendlyfirms such as SAS routinely turn up on best companies to work for lists. This almostundoubtedly makes it easier to recruit and retain good employees. Employees mayeven willingly forego somewhat higher pay for services like built-in day care. Andsome of the advantages to the employer are indirect. For example, employees whoexperience work family conflict may experience anger that affects performance, asituation family-type benefits may improve.121

The bottom line is that employers are carefully reviewing these benefits. Even oogle,long known for offering benefits that blow almost every other employer s away (free busesfrom the city, on-campus day care, and restaurants) has been cutting back of late.

t e o elated ene itsEmployers provide various other job-related benefits. Some provide subsidizedem lo ee tr n ort tion, such as increased mileage allowances or mass transitdiscounts.122 oogle s Web site lists benefits such as adoption assistance, the oogleChild Care Center, free shuttle service from San Francisco, on-site dry cleaning,backup child care assistance, and on-site physician and dental care. Home Depot offersa nose to tail coverage pet health insurance program. en Jerry s gives employeesthree pints of ice cream to take home every day.

ED CATIONAL S SIDIES Educational subsidies such as tuition refunds arepopular benefits. Payments range from all tuition and expenses down to a flat limitof several hundred dollars per year. One survey found that about 72% of the579 employers surveyed paid for college courses related to an employee s present job.Many employers also reimburse non job-related courses (such as a Web designertaking an accounting class) that pertain to the company business.123 Many employersprovide college programs, taught on the employer s premises. We ve seen that othereducational programs include remedial work in basic literacy.

The problem is that you may be paying your best employees to leave. Researchersstudied how employer-sponsored part-time college education reimbursementsinfluenced job mobility. They focused on the U.S. avy s tuition assistance program.Taking tuition assistance significantly decreased the probability the person stayedin the avy.124

DOMESTIC PA TNE ENEFITS When employers provide dome tic rtnerbenefit to employees, it generally means that employees same-sex or opposite-sexdomestic partners are eligible to receive the same benefits (health care, life insurance,and so forth) as do the husbands, wives, or legal dependents of the firm s otheremployees.125 For example, orthrop rumman Corp. extends domestic partnerbenefits to the 9,500 salaried workers at its ewport ews shipyard.126

ec tive e isitesWhen you reach the pinnacle of the organizational pyramid or close to the topyou will find, waiting for you, the Executive Perk. Perquisites (perks, for short) usuallyonly go to top executives. Perks can range from substantial (company planes) to relatively insignificant (private bathrooms).

Most perks fall between these extremes. These include m n gement lo n (whichtypically enable senior officers to exercise their stock options); fin nci l co n eling(to handle investments); and reloc tion benefit , often including subsidized mort-gages, purchase of the executive s current house, and payment for the actual move.As we noted in Chapter 11 (Strategic Pay Plans), publicly traded companies must nowitemize all executives perks (if they total more than $100,000).


FLEXIBLE BENEFITS PROGRAMSEmployees prefer choice in their benefits plans. In one survey of working couples, 83%took advantage of flexible hours (when available); 69% took advantage of the flexible-style benefits we ll discuss next; and 75% said that they prefer flexible benefits plans.127

The online job listing service Jobtrak.com asked college students and recent graduates,Which benefit do you desire most? Thirty-five percent sought flexible hours; 19%,

stock options; 13%, more vacation time; and 12%, a better health plan. Most of thepreferred benefits had to do with lifestyle issues rather than financial ones.128

Given this, it is prudent to survey employees benefits preferences, perhaps usinga form like that in Figure 13-5. In any case, employers should provide for choice whendesigning benefits plans.

The Cafeteria ApproachOne way to provide a choice is with an aptly named cafeteria benefits plan. (Pay special-ists use f e i e enefits n and fete i enefits n synonymously.) A cafeteriaplan is one in which the employer gives each employee a benefits fund budget, and letsthe person spend it on the benefits he or she prefers, subject to two constraints. First,the employer must of course limit the total cost for each employee s benefits package.Second, each employee s benefits plan must include certain required items forexample, Social Security, workers compensation, and unemployment insurance.Employees can often make midyear changes to their plans if, for instance, theirdependent care costs rise and they want to divert contributions.129 IRS regulationsrequire formal written plans describing the employer s cafeteria plan, includingbenefits and procedures for choosing them.130

TYPES OF PLANS Cafeteria plans come in several varieties. To give employeesmore flexibility in what benefits they use, about 70% of employers offer flexible spend-ing accounts for medical and other expenses. This option lets employees pay for certain

5 Explain the main flexiblebenefit programs.

FIGURE 13-5 Online S rvey ofEmployees enefits Preferences

Source: htt ://data.gra ev nesurve s.com/surve .as s d 200 21 0 ,accessed r l 2 , 200 .

(Continued)

In ivi uali e lans allo e em lo ers to a ommo ate em lo ee referen es for enefits

C APTER 3 ENEFITS AN SER ICES 44

benefits expenses with pretax dollars (so the I , in effect, subsidi es some of theemployee s expense). To encourage employees to use this option without laying outcash, some firms are offering debit cards that employees can use at their medicalprovider or pharmacy.1 1 Core plus option plans establish a core set of benefits (such asmedical insurance), which are usually mandatory for all employees. eyond the core,employees can then choose from various benefits options.1 2

E As we ll explain in hapter 18, many businesses particularly smaller ones don t havethe resources or employee base to support the cost of many of the benefits we vediscussed in this chapter. That s one big reason they turn to employee leasing.

In brief, employee leasing firms (also called professional employer organizations orstaff leasing firms) assume all or most of the employer s human resources chores.In doing so, they also become the employer of record for the employer s employees,by transferring them all to the employee leasing firm s payroll. The leasing firm thusbecomes the employees legal employer, and usually handles employee-related activi-ties such as recruiting, hiring (with client firms supervisors approvals), and payingtaxes ( ocial ecurity payments, unemployment insurance, and so on).

Insurance and benefits are usually the big attraction. Even group rates for life orhealth insurance can be quite high when only 20 or 0 employees are involved. That swhere the leasing firm comes in. emember that the leasing firm is the legal employerof your employees. The employees therefore are absorbed into a much larger insurable

FIGURE 13- Continue


group, along with other employers former employees. As a result, a small businessowner may be able to get insurance for its people that it couldn t otherwise afford.

le i le o k Sc ed lesFlexible work schedules are increasingly popular.133 Single parents often find themcrucial for balancing work and family responsibilities. And for many millennialemployees, flexible work schedules provide a way to pursue their careers withoutsurrendering the quality of work life they desire. There are several flexible workschedule options.

FLE TIME e e is a plan whereby employees workdays are built around a core ofmidday hours, such as 11:00 a.m. to 2:00 p.m. Workers determine their own startingand stopping hours. For example, they may opt to work from 7:00 a.m. to 3:00 p.m.or from 11:00 a.m. to 7:00 p.m. The number of employees in formal flextimeprograms from 4% of operators to 17% of executive employees doesn t tell thewhole story. Many more employees, probably almost half, actually take advantageof informal flexible work schedules.134 In practice, most employers hold fairly close tothe traditional 9:00 a.m. to 5:00 p.m. workday. Therefore, the effect of flextime for mostemployees is to give them about 1 hour of leeway before 9:00 a.m. or after 5:00 p.m.

COMP ESSED O EE S Many employees, like airline pilots, do not workconventional 5-day, 40-hour workweeks. Similarly, hospitals may want doctors andnurses to provide continuing care to a patient, or manufacturers may want to reduce theproductivity lost whenever workers change shifts. Workers like these typically havec presse r ee schedules. This means they work fewer days each week, but eachday they work longer hours. Nonconventional workweeks come in many flavors. Somefirms have 4-day workweeks, with four 10-hour days. Some workers in hospitals,for instance work three 12-hour shifts, and then are off for the next 4 days.135

EFFECTIVENESS OF FLE I LE O SCHED LE A ANGEMENTSStudies show that flexible work schedules have positive effects on employee produc-tivity, ob satisfaction, and employee absenteeism the positive effect on absenteeismwas much greater than on productivity. Compressed workweeks positively affectedob satisfaction absenteeism did not increase, and productivity was not positively

affected. Highly flexible programs were actually less effective than less flexible ones.136

Some experts argue that longer, 12-hour shifts may increase fatigue and accidents.However, one report suggests 12-hour shifts can actually be safer, in some respects.For example, 12-hour shifts reduce the general workplace confusion that oftenoccurs during shift changes, since there are fewer shift changes per day. To reducepotential side effects, some employers install treadmills and exercise bikes, and speciallight boxes that mimic daylight.

O PLACE FLE I ILITY As anyone who has flown next to someone tappingaway on a laptop knows, employees are increasingly conducting business from non-traditional settings, using technology like iPads and BlackBerry-type devices.137

r p ace e y means arming employees with the information technologytools they need to get their obs done wherever they are. For example, certain CapitalOne Bank employees received mobile technology tools such as wireless access laptopsand BlackBerry-type cell phone devices. The program seems to have led to about a41% increase in overall workplace satisfaction, a 31% reduction in time needed to getinput from peers, and a 53% increase in those who say their workplace enhancesgroup productivity.138

OTHE FLE I LE O A ANGEMENTS Employers are taking other stepsto accommodate employees scheduling needs. s ar n allows two or more peopleto share a single full-time ob. For example, two people may share a 40-hour-per-weekob, with one working mornings and the other working afternoons. About 22% of the

flextimeA work schedule in which employeesworkdays are built around a care of middayhours, and employees determine, withinlimits, what other hours they will work.

compressed workweekSchedule in which employee works fewer but longer days each week.

workplace flexibilityArming employees with the informationtechnology tools they need to get their jobs done wherever they are.


R E V I E W

1. Because benefits are so important to employees, it simportant that all managers understand the benefitspicture today. In addition to the fact that benefits arevery important to employees, the other big issue, ofcourse, is that benefits in general and health care costs inparticular are rising very fast. About 78% of employeescite health care benefits as most crucial to retainingthem.

2. Employers provide numerous pay for time not workedbenefits.

Unemployment insurance provides benefits if aperson is unable to work due to some fault otherthan his or her own. To avoid unnecessaryunemployment taxes, the main rule is to keep a list of written warnings.American workers tend to get about 9 days of leaveafter 1 year of employment.Sick pay provides pay to an employee when he or she is out of work because of illness. Minimizing sickleave pay is important, and here cost reductiontactics include repurchasing unused sick leaveor simply using paid leave plans that lump sick leave,vacation, and holidays into one leave pool.In formulating parental leave policies, the employerneeds to keep in mind the Family and Medical LeaveAct, which requires larger employers to provide upto 12 weeks of unpaid leave for family-related issues,and the Americans with Disabilities Act.

Severance pay is a one-time payment someemployers provide when terminating an employee.

3. Most employers also provide a number of required orvoluntary insurance benefits. Workers compensationlaws aim to provide sure, prompt medical benefits towork-related accident victims or their dependents,regardless of fault. Hospitalization, health, and disabilityinsurance costs are rising fast, and most employer healthplans provide at least basic hospitalization and surgicaland medical insurance for eligible employees. Manyemployers provide these plans via preferred providerorganizations or health management organizations.When an employee is terminated or terminates his or heremployment, it is essential that the employer make theperson aware of his or her COBRA rights. The basic over-all trend in health care cost control is to take steps (forinstance, in terms of communication and empowerment,health savings accounts, and claims audits) to try to keepthe rising cost of health care insurance under control.

4. Particularly with stock markets volatile, retirementbenefits are important to employees today. Social Secu-rity is a federal program that provides retirement incomeat the age of 62 and thereafter, as well as other benefits.Many employers make available pension plans; theseprovide an income when employees reach retirement ageor when they can no longer work due to disability.Defined benefit plans contain a formula for determiningretirement benefits, while defined contribution plans

job sharingAllows two or more people to share a singlefull-time job.

work sharingRefers to a temporary reduction in workhours by a group of employees duringeconomic downturns as a way to preventlayoffs.

MyManagementLab Now that you have finished this chapter, go back to www.mymanagementlab.com tocontinue practicing and applying the concepts you ve learned.

CHAPTER SECTION SUMMARIES

firms questioned in one survey indicated that they allow job sharing.139 Job sharingcan be particularly useful for retirement-aged employees. It allows them to reducetheir hours while enabling the company to retain their expertise.140 Work sharingrefers to a temporary reduction in work hours by a group of employees duringeconomic downturns as a way to prevent layoffs. Thus, 400 employees may all agreeto work (and be paid for) only 35 hours per week, to avoid a layoff of 30 workers.


are plans in which the contribution to employeesretirement savings plans is specified. 401(k) plans areperhaps the most well-known of the latter, and are basedon section 401(k) of the Internal evenue Code. TheEmployee etirement Income Security Act of 1975requires that employers have written pension plandocuments, and established the Pension BenefitsGuarantee Corporation to oversee employers pensionplans. Key pension policy issues include membershiprequirements and testing.Most employers also provide various pers na serv cesan a y r en y ene s. These include credit

unions, employee assistance programs, and subsidi edchild care and elder care.Employees prefer choice in their benefits plans, so e e

ene s pr ra s are important. Flexible benefits or cafe-teria benefits plans are individual plans that accommodateemployee preferences for benefits. Some employers turn toemployee leasing companies to capitali e on the advantageof the leasing firm s large employee base to get betteremployee benefits for their employees. Employers also areimplementing various types of flexible work schedules,including flextime, compressed workweeks, and otherflexible work arrangements such as ob sharing.

S SS S SYou are applying for a ob as a manager and are at thepoint of negotiating salary and benefits. What questionswould you ask your prospective employer concerningbenefits? Describe the benefits package you would try tonegotiate for yourself.What is unemployment insurance? Is an organi a-tion required to pay unemployment benefits to all

dismissed employees? Explain how you would goabout minimi ing your organi ation s unemploymentinsurance tax.Explain how E ISA protects employees pension rights.What is portability ? Why do you think it is (or isn t)important to a recent college graduate?What are the main provisions of the FMLA?

V L V SWorking individually or in groups, research the unem-ployment insurance rate and laws of your state. Write asummary detailing your state s unemployment laws.Assuming Company has a 30% rate of annual person-nel terminations, calculate Company s unemploymenttax rate in your state.Assume you run a small business. Working individuallyor in groups, visit the Web site www.dol.gov elaws. Seethe Small Business etirement Savings Advisor. Write a2-page summary explaining: (1) the various retirementsavings programs available to small business employers,and (2) which retirement savings program you wouldchoose for your small business and why.You are the H consultant to a small business withabout 40 employees. Now the firm offers only 5 days ofvacation, 5 paid holidays, and legally mandated benefitssuch as unemployment insurance payments. Develop a

list of other benefits you believe it should offer, alongwith your reasons for suggesting them.The H CI Test Specifications Appendix (pages633 640) lists the knowledge someone studying for theH CI certification exam needs to have in each area ofhuman resource management (such as in StrategicManagement, Workforce Planning, and Human

esource Development). In groups of four to fivestudents, do four things: (1) review that appendix now(2) identify the material in this chapter that relates tothe required knowledge the appendix lists (3) writefour-multiple choice exam questions on this materialthat you believe would be suitable for inclusion in theH CI exam and (4) if time permits, have someonefrom your team post your team s questions in front ofthe class, so the students in other teams can take eachothers exam questions.

L Sevisi e e e i s Packa e

rp se The purpose of this exercise is to providepractice in developing a benefits package for a smallbusiness.

e re n ers an n Be very familiar with the materialpresented in this chapter. In addition, review Chapter 11 toreacquaint yourself with sources of compensation surveyinformation, and come to class prepared to share with yourgroup the benefits package for the small business in whichyou work or in which someone with whom you re familiarworks.

e p e erc se ns r c nsDivide the class into groups of four or five students. Yourassignment is as follows: Maria Cortes runs a small personnelrecruiting office in Miami and has decided to start offering anexpanded benefits package to her 25 employees. At the currenttime, the only benefits are 7 paid holidays per year and 5 sickdays per year. In her company, there are 2 other managers, aswell as 17 full-time recruiters and 5 secretarial staff members.In the time allotted, your group should create a benefitspackage in keeping with the si e and requirements of this firm.

CHAPTER 13 BENEFITS AND SERVICES 4 1

APPLICATION CASESTRIKING FOR BENEFITSBy February 2004, the strike by Southern California groceryworkers against the state s major supermarket chains wasalmost 5 months old. Because so many workers were striking(70,000), and because of the issues involved, unions andemployers across the country were closely following the nego-tiations. Indeed, grocery union contracts were set to expire inseveral cities later in 2004, and many believed the Californiasettlement assuming one was reached would set a pattern.

The main issue was employee benefits, and specificallyhow much (if any) of the employees health care costs theemployees should pay themselves. Based on their existingcontract, Southern California grocery workers had unusu-ally good health benefits. For example, they paid nothingtoward their health insurance premiums, and paid only $10co-payments for doctor visits. However, supporting theseexcellent health benefits cost the big Southern Californiagrocery chains over $4 per hour per worker.

The big grocery chains were not proposing cuttinghealth care insurance benefits for their existing employees.Instead, they proposed putting any new employees hiredafter the new contract went into effect into a separateinsurance pool, and contributing $1.35 per hour for theirhealth insurance coverage. That meant new employeeshealth insurance would cost each new employee perhaps$10 per week. And, if that $10 per week weren t enough tocover the cost of health care, then the employees wouldhave to pay more, or do without some of their benefits.

It was a difficult situation for all the parties involved. Forthe grocery chain employers, skyrocketing health care costswere undermining their competitiveness; the currentemployees feared any step down the slippery slope thatmight eventually mean cutting their own health benefits.The unions didn t welcome a situation in which they d endup representing two classes of employees, one (the existingemployees) who had excellent health insurance benefits, andanother (newly hired employees) whose benefits were rela-tively meager, and who might therefore be unhappy from themoment they took their jobs and joined the union.

QuestionsAssume you are mediating this dispute. Discuss five creativesolutions you would suggest for how the grocers could re-duce the health insurance benefits and the cost of their totalbenefits package without making any employees pay more.From the grocery chains point of view, what is the down-side of having two classes of employees, one of whichhas superior health insurance benefits? How would yousuggest they handle the problem?Similarly, from the point of view of the union, what are thedownsides of having to represent two classes of employees,and how would you suggest handling the situation?

ource Based on Settlement Nears for Southern California Grocery Strike,night idder ribune usiness e s, February 26, 2004, item 04057052.

CONTINUING CASECARTER CLEANING COMPANYThe New Benefit PlanCarter Cleaning Centers has traditionally provided onlylegislatively required benefits for its employees. These includeparticipation in the state s unemployment compensationprogram, Social Security, and workers compensation (whichis provided through the same insurance carrier that insuresthe stores for such hazards as theft and fire). The principals ofthe firm Jack, Jennifer, and their families have individual,family-supplied health and life insurance.

Jennifer can see several potential problems with thecompany s policies regarding benefits and services. One isturnover. She wants to do a study to determine whether similarcompanies experiences with providing health and life insurancebenefits suggest they enable these firms to reduce employeeturnover and perhaps pay lower wages. Jennifer is also con-cerned with the fact that her company has no formal policyregarding vacations or paid days off or sick leave. Informally,at least, it is understood that employees get 1 week s vacationafter 1 year s work, but in the past the policy regarding paidvacations for days such as New Year s Day and ThanksgivingDay has been very inconsistent. Sometimes employees whohad been on the job only 2 or 3 weeks were paid fully for one

of these holidays, while at other times employees who hadbeen with the firm for 6 months or more had been paid foronly half a day. Jennifer knows that this policy must be mademore consistent.

She also wonders whether it would be advisable to estab-lish some type of day care center for the employees children.She knows that many of the employees children have eitherno place to go during the day (they are preschoolers) or haveno place to go after school, and she wonders whether abenefit such as day care would be in the best interests ofthe company.

QuestionsDraw up a policy statement regarding vacations, sickleave, and paid days off for Carter Cleaning Centers.What would you tell Jennifer are the advantages anddisadvantages to Carter Cleaning Centers of providingits employees with health, hospitalization, and lifeinsurance programs?Would you advise establishing some type of day care centerfor the Carter Cleaning employees? Why or why not?


E TER Sbenefits,supplemental pay benefits,unemployment insurance

(or compensation),sick leave,severance pay,supplemental unemployment

benefits,workers compensation,health maintenance

organization (HMO),preferred provider

organizations (PPOs),group life insurance,

Social Security,pension plans,defined benefit pension plan,defined contribution pension

plan,portability,401(k) plan,savings and thrift plan,deferred profit-sharing plan,employee stock ownership

plan (ESOP),cash balance plans,Employee Retirement Income

Security Act (ERISA),

Pension enefits uaranteeCorporation (P C),

early retirement window,employee assistance

program (EAP),family-friendly (or work life)

benefits,flexible benefits plan cafeteria

benefits plan,flextime,compressed workweek,workplace flexibility,ob sharing,

work sharing,

The New Benefits Plane o el a is s o pe i ive s a e is o se s pe io es

se vi e o di e en ia e e o el a is p ope ies and oe eb in ease e len o s a and e n a e o es s and

s boos even es and p o i abili ana e isa s no o la e n ional poli ies and a ivi ies a s p

po is o pe i ive s a e b eli i in e e i ed e plo eebe avio s and o pe en ies

Although the Hotel Paris s benefits (in terms of thingslike holidays and health care) were comparable to those ofother hotels, isa Cruz knew they weren t good enough tosupport the high- uality service behaviors her companysought. Indeed, the fact that they were roughly comparableto those of similar firms didn t seem to impress the HotelParis s employees, at least 60% of whom consistently saidthey were deeply dissatisfied with the benefits they weregetting. isa s concern (with which the CFO concurred) wasthat dissatisfaction with benefits contributed to morale andcommitment being below what they should be, and thus toinhibiting the Hotel Paris from achieving its strategic aims.

isa therefore turned to the task of assessing and redesigningthe company s benefits plans.

As they reviewed the numbers relating to their benefitsplan, isa Cruz and the CFO became increasingly concerned.They computed several benefits-related metrics for theirfirm, including bene i s os s as a pe en a e o pa oll, si kda s pe ll i e e ivalen e plo ee pe ea , bene i sos o pe i o s bene i s os a io, and o ke s o pensaion e pe ien e a in s The results, as the CFO put it, offered

a good news bad news situation. On the good side, theratios were generally similar to those of most competinghotels. The bad news was that the measures were strikinglybelow what they were when compared with the results forhigh-performing service-oriented businesses. The CFOauthorized isa to design and propose a new benefits plan.

isa knew there were several things she wanted toaccomplish with this plan. She wanted a plan that con-tributed to improved employee morale and commitment.She also wanted the plan to include elements that made iteasier for her employees to do their obs so that, as she putit, they could come to work and give their full attention togiving our guests great service, without worrying about childcare and other ma or family-oriented distractions.

One of the metrics isa and her team specifically wantedto address was the relatively high absence rate at theHotel Paris. ecause so many of these obs are front-lineobs valets, limousine drivers, and front-desk clerks, for

instance it s impossible to do without someone in theposition if there is absence. As a result, poor attendance had aparticularly serious effect on metrics such as overtime payand temporary help costs. At the urging of her compensationconsultant, isa decided to look into a system similar toMarriott s E ETRA E. ith this benefit program,employees can trade the value of some sick days for otherbenefits. As isa put it, I d rather see our employees usingtheir sick day pay for things like additional health carebenefits, if it means they ll think twice before taking a sick dayto run a personal errand.

uesti ns1. ecause employers typically make benefits available to

all employees, they may not have the motivationaleffects of incentive plans. iven this, list five employeebehaviors you believe Hotel Paris could try to improvethrough an enhanced benefits plan, and explain why youchose them.

2. iven your answer to uestion 1, explain specificallywhat benefits you would recommend the Hotel Parisimplement to achieve these behavioral improvements.

TRANSLATIN STRATE INTO HR POLICIES PRACTICES CASETHE HOTEL PARIS CASE


S1. John Plet , Workers, Go Home, rain

ica o u ine 34, no. 8 (February 21,2011), pp. 2, 14.

2. Based on Frederick Hills, ThomasBergmann, and Vida Scarpello, o enation eci ion a in (Fort Worth, T :

The Dryden Press, 1994), p. 424. See alsoFay Hansen, The Cutting Edge of Bene-fit Cost Control, or force, March 2003,pp. 36 42 Crain s Benefits Outlook 2009,www.crainsbenefits.com news survey-finds-nearly-20-percent-of-employers-plan-to-drop-health-benefits .php,accessed July 28, 2009.

3. Survey Finds 99 Percent of Employers Pro-viding Health-Care Benefits, o en ation

enefit e ie , September October2002, p. 11. See also National Compensa-tion Survey: Employee Benefits in PrivateIndustry in the United States, March 2006,U.S. Department of Labor, U.S. Bureau ofLabor Statistics, August 2006.

4. Costs This Year Increased at Highest ateSince 2004, Survey eveals, ocu 88,no. 1 (January 10, 2011) Employee MedicalCosts Expected to Increase by 8.5 Percent in2012, According to PwC , http: www.pwc.com us en pressreleases 2011 employer-medical-costs-expected-to-increase. htmlaccessed September 14, 2011.

5. Trouble Ahead? Dissatisfaction withBenefits, Compensation, rendboo ,2008, p. 16.

6. Joseph Martocchio, trate ic o en ation (Upper Saddle iver, NJ: PrenticeHall, 2001), p. 262.

7. California Domestic Partner BenefitsMandate Carries Likely Impact BeyondState s Borders, u etin to ana e

ent, November 6, 2003, p. 353.8. Plet , Workers, Go Home.9. Ibid.

10. H Plays a Ma or ole in Curbing Com-pany Unemployment Insurance Costs,Analysts Say, u etin to ana e

ent, August 3, 2010, pp. 241 242.11. www.bls.gov opub perspectives issue2.

pdf, accessed June 1, 2011.12. Ibid.13. www.bls.gov opub perspectives issue2.

pdf, accessed June 1, 2011.14. Ken Belson, At IBM, a Vacation Anytime,

or Maybe No Vacation at All, e eor i e , August 31, 2007, pp. A1 A18.

15. National Compensation Survey: EmployeeBenefits in Private Industry in the UnitedStates, March 2006, U.S. Bureau of LaborStatistics, August, 2006, p. 116. See alsoSpurious Sick-Notes Spiral Upwards, eafet and ea t ractitioner 22, no. 6

(June 2004), p. 3.16. Unscheduled Employee Absences Cost

Companies More Than Ever, o enation enefit e ie , March April

2003, p. 19 obert Grossman, Gone butNot Forgotten, a a ine 56, no. 9(September 2011), pp. 34 46.

17. Making Up for Lost Time: How EmployersCan Curb Excessive Unscheduled Absences,

u an e ource e ort, October 20,2003, p. 1097. See also W. H. J. Hassink etal., Do Financial Bonuses educeEmployee Absenteeism? Evidence from aLottery, ndu tria and abor e ation

e ie 62, no. 3 (April 2009), pp. 327 342.18. SH M Benefits Survey Finds Growth in

Employer Use of Paid Leave Pools,u etin to ana e ent, March 21, 2002,

p. 89.19. See M. Michael Markowich and Steve

Eckberg, Get Control of the Absentee-Minded, er onne ourna , March 1996,pp. 115 120 Exploring the Pluses,Minuses, and Myths of Switching to PaidTime Off Banks, u etin to

ana e ent 55, no. 25 (June 17, 2004),pp. 193 194.

20. Society for Human esource Manage-ment 2009 employee benefits survey,quoted in Martha Frase, Taking TimeOff to the Bank, a a ine, March2010, p. 42.

21. Creating Holistic Time Off Programs CanSignificantly educe Expenses, o enation enefit e ie , July August 2007,

pp. 18 19.22. See, for example, ita eidner, Strategies

for Saving in a Down Economy,a a ine, February 2009, p. 28.

23. Judith Whitaker, How H Made aDifference, eo e ana e ent 27(October 28, 2010).

24. Ibid.25. The Department of Labor updated its

revised regulations for administeringthe Family and Medical Leave Act inNovember 2008. See DOL Issues Long-Awaited ules Address a Serious HealthCondition, Many Other Issues,

u etin to ana e ent, November 18,2008, p. 369. In 2008, Congress amendedthe family and medical leave act toinclude, among other things, leave rightsparticularly for military families. SeeSarah Martin, FMLA Protection ecentlyExpanded to Military Families: ualify-ing Exigency and Service Member FamilyLeave, o en ation enefit e ie ,September October 2009, pp. 43 51.

26. Ten Years After It Was Signed into Law,FMLA Needs Makeover, AdvocatesContend, u etin to ana e ent,February 20, 2003, p. 58.

27. H Professionals Face Sundry ChallengesAdministering FMLA Leave, SurveyAsserts, u etin to ana e ent,July 20, 2007, p. 233.

28. Based on Dennis Grant, ManagingEmployee Leaves: A Legal Primer, o enation enefit e ie 35, no. 4 (2003),

p. 41. There are several unresolved issuesin what 12 months employment means.For example, several courts recently heldthat an employee can count previous

periods of employment with the employerto satisfy the 12-month requirement. SeeDaniel itter et al., ecent DevelopmentsUnder the Family and Medical LeaveAct, o en ation enefit e ie ,September October 2007, p. 33.

29. Gillian Flynn, Employers Need anFMLA Brush-Up, or force, April 1997,pp. 101 104. See also Worker Who WasEmployee for Less Than One Year CanPursue FMLA Claim, Federal CourtDetermines, air o ent ractice , April 26, 2001, p. 51.

30. Workers Who Come and Go UnderFMLA Complicate Attendance Policies,Lawyer Says, u etin to ana e ent,March 16, 2000, p. 81.

31. Sue Shellenbarger, The Mommy Drain:Employers Beef Up Perks to Lure NewMothers Back to Work, e a treetourna , September 28, 2006, p. D1.

32. Jill Fisher, econciling the Family MedicalLeave Act with Overlapping or ConflictingState Leave Laws, o en ation enefit

e ie , September October 2007, pp. 39 44.33. Severance Practices, u etin to

ana e ent, January 11, 1996, pp. 12 13and Neil Grossman, Shrinking the Work-force in an Economic Slowdown, o enation enefit e ie , Spring 2002,

pp. 12 23.34. Severance Pay, July 2007, Culpepper

Compensation Benefits Surveys.35. Terry Baglieri, Severance Pay, www.

SH M.org, accessed December 23, 2006.36. Ibid.37. Ibid.38. Workers Compensation Costs Are ising

Faster Than Wages, u etin toana e ent, July 31, 2003, p. 244.

39. Workers Comp Claims ise with Lay-offs, But Employers Can Identify, PreventFraud, u etin to ana e ent,October 4, 2001, p. 313.

40. Firms Cite Own Efforts as Key toControlling Costs, u etin to

ana e ent, March 21, 1996, p. 89. Seealso Workers Compensation Outlook:Cost Control Persists, u etinto ana e ent, January 30, 1997,pp. 33 44 and Annmarie Lipold, TheSoaring Costs of Workers Comp,

or force, February 2003, p. 42ff.41. Using Case Management in Workers

Compensation, u etin to ana eent, June 6, 1996, p. 181 for other

tactics, see for example, H. Jorgensen,Overhauling Claims Management. iana e ent 54, no. 7 (July 2007), p. 50.

42. Workers Comp esearch ProvidesInsight into Curbing Health Care Costs,

oda , February 2010, p. 18.43. Hills, Bergmann, and Scarpello, o en

ation eci ion a in , p. 137.44. Costs This Year Increased at Highest

ate Since 2004, Survey eveals,ocu 88, no. 1 (January 10, 2011).


45. Society for Human Resource anage-ment, ental Health Trends, WorkplaceVisions, no. 2, http: moss07.shrm.orgResearch FutureWorkplaceTrends ages0303.aspx, accessed uly 28, 2009.

46. ental-Health arity easure Enactedas art of Financial Rescue Signed by

ush, BNA Bulletin to Management,ctober 7, 2008, p. 321.

47. Deadlines ary for Implementing rovi-sions of Health Care aw, BNA Bulletinto Management, ay 4, 2010, p. 143.

48. Regulation Will Allow oung Adults pto Age 26 to Retain Dependent Coverage,BNA Bulletin to Management, ay 18,2010, p. 153.

49. www.mercer.com press-releases 1380755,accessed uly 25, 2011.

50. Ibid.51. See, for example, arli Dunkelberger,

Avoiding C RAs ite: Three eys toCompliance, Compensation & BenefitsReview, arch April 2005, pp. 44 48. Asan example of the direction new federalhealth insurance may take post-2009, seeA. athews, aking Sense of the Debateon Health Care, Wall Street Journal(Eastern Edition), September 30, 2009,pp. D1, D5; and atrick uldowney,Cobra and the Stimulus Act: A Sign

of Things to Come? Compensation &Benefits Review 42, no. 1 ( anuaryFebruary 2010), pp. 24 49.

52. www.D .gov, accessed December 23,2006.

53. arri Short and Eileen ahanar, nlock-ing the Secrets of the ew rivacy Rules,Occupational Hazards, September 2002,pp. 51 54.

54. evin aroney, rognosis egative?I As Interim Incentives Ruling a Con-

cern for Wellness rograms, Compensation& Benefits Review 42, no. 2 (2010),pp. 94 101.

55. Hewitt Says Employer easures toControl Increases in Health Care CostsAre Working, BNA Bulletin to Manage-ment, ctober 7, 2008, p. 323.

56. ames Curcio, Creating Standardized et-rics and enchmarking for Health, Absenceand roductivity anagement rograms:The E A Initiative, Compensation& Benefits Review 42, no. 2 (2010),pp. 109 126.

57. erry eisel, Employers Accelerate HealthCare Cost-Shifting, Business Insurance 45,no. 21 ( ay 23, 2011), pp. 3, 21.

58. Ibid.59. Christine eller and Christopher

Condeluci, Tax Relief and Health CareAct Should rompt Re-Examination ofHSAs, SHRM Legal Report, uly August2007, p. 1.

60. In contrast, with health reimbursementarrangements (HRA) only the employermakes contributions. See Types of TaxFavored Health Accounts, HR Magazine,August 2008, p. 76.

61. ichael ond et al., sing HealthSavings Accounts to rovide ow-CostHealth-Care, Compensation & BenefitsReview, arch April 2005, pp. 29 32.

62. Costs This ear Increased At HighestRate Since 2004, Survey Reveals, HRFocus 88, no. 1 ( anuary 10, 2011).

63. Alan Cohen, Decision-Support in theenefits Consumer Age, Compensation

& Benefits Review, arch April 2006,pp. 46 51.

64. Ibid., p. 40. See also Employers ExploreRange of Tactics to Rein In Rising HealthCosts for 2005 lan ear, BNA Bulletinto Management 55, no. 27 ( uly 1, 2004),p. 219.

65. Ron Finch, reventive Services: Improv-ing the ottom ine for Employers andEmployees, Compensation & BenefitsReview, arch April 2005, p. 18. otethat prevention wellness programs canrun afoul of the Americans with Disabili-ties Act. So, for instance, employersshould not make participation in suchplans mandatory or use informationobtained in such programs in such a waythat violates ADA confidentiality require-ments or discriminates against employeeswho are not physically fit. See Despite

ood Intentions, Wellness lans CanRun Afoul of ADA, Attorney Cautions,BNA Bulletin to Management 56, no. 51(December 20, 2005), p. 41.

66. Employer artners to aunch a Three-ear Wellness Initiative, BNA Bulletin to

Management, August 7, 2007, p. 255.67. n-Site Clinics Aimed at Cutting Costs,

romoting Wellness, BNA Bulletinto Management, arch 25, 2008, p. 103.

68. Ibid. See also osh Cable, The Road toWellness, Occupational Hazards, April2007, pp. 23 27.

69. eorge De ries, The Top 10 WellnessTrends for 2008 and eyond, Compen-sation & Benefits Review, uly August2008, pp. 60 63.

70. Susan Wells, etting aid for StayingWell, HR Magazine, February 2010, p. 59.

71. anessa Fuhrmanns, ops As Healthlans ecome ore Complicated,

They re Also Sub ect to a ot ore Costlyistakes, The Wall Street Journal,

anuary 24, 2005, p. R4.72. artha Frase, inimalist Health Cover-

age, HR Magazine, une 2009, pp. 107 112.73. ill Roberts, utsourcing in Turbulent

Times, HR Magazine, ovember 2009, p.45.

74. High Deductible lans ight Catchn, BNA Human Resources Report,

September 15, 2003, p. 967.75. HR utsourcing: anaging Costs and

aximizing rovider Relations, BNA, Inc.21, no. 11 (Washington, DC: ovember2003), p. 10.

76. ne in Five ig Firms ay Drop Cover-age for Future Retirees, Health SurveyFinds, BNA Bulletin to Management,

December 12, 2002, p. 393. Reducingretiree benefits requires a preliminarylegal review. See ames cElligott r.,Retiree edical enefit Developments

in the Courts, Congress, and EE C,Compensation & Benefits Review, archApril 2005, pp. 23 28; and atalie or-fus, Retiree enefits: Does an Employer s

bligation to ay Ever End? Compen-sation & Benefits Review, anuary February2008, pp. 42 45.

77. Robert Christadore, enefits urchasingAlliances: Creating Stability in an nstableWorld, Compensation & Benefits Review,September ctober 2001, pp. 49 53. etty

iddick, oing the Distance for HealthSavings, HR Magazine, arch 2007,pp. 51 55. . Wo cik, Employers ConsiderShort-Haul edical Tourism, BusinessInsurance 43, no. 29 (August 24, 2009),pp. 1, 20.

78. Dependent Eligibility Audits Can HelpRein In Health Care Costs, Analysts Say,BNA Bulletin to Management, September 9,2008, p. 289.

79. Carolyn Hirschman, Will EmployersTake the ead in ong-Term Care? HRMagazine, arch 1997, pp. 59 66. Forrecent perspective, see A. D. ostal,Industry Ramps p pposition To TCrogram In Senate Health ill, National

Underwriter ( ife Health FinancialServices Edition) 113, no. 14 ( uly 20,2009), pp. 10, 32.

80. ill eonard, Recipes for art-Timeenefits, HR Magazine, April 2000,

pp. 56 62.81. As we explained earlier in this book, do

not confuse independent contractorswith part-time workers. As three attor-neys put it, Short-term, ust-in-timeworkers provided by staffing agencies arenot an issue. However, the employer spolicy for workers who are still on the obafter 1,000 to 1,500 hours should requirethat they be provided with benefits,either through the staffing agency or byoutsourcing their administration to anadministrative employer who can pro-vide benefits. ob anza et al., egalStatus of Contingent Workers, Compen-sation & Benefits Review, uly August2003, pp. 47 60.

82. renda aik Sunoo, illions ay Retire,Workforce, December 1997, p. 48. See also

any lder Workers Choose to n-Retire or ot Retire at All, Knight Ridder/Tribune Business News, September 28,2003, item 03271012; atrick urcell,

lder Workers: Recent Trends in Employ-ment and Retirement, Journal of DeferredCompensation 8, no. 3 (Spring 2003), pp.30 54; and For any Seniors, a ob eatsRetirement, Knight Ridder/Tribune Busi-ness News, February 9, 2003, item 3040001.

83. The .S. Treasury has reportedly spentmost of the trust fund on other govern-ment programs, so that changes (for


instance, in terms of reducing benefits,making people wait longer for benefits,or making some people pay more forbenefits) will be necessary. ohn ilgour,Social Security in the 21st Century,

Compensation & Benefits Review 42, no. 6(2010), pp. 459 469.

84. In addition, tax rates under the edicareprogram are 1.45 percent for employeesand employers. http: ssa-custhelp.ssa.gov app answers detail a id 240 2011-social-security-tax-rate-and-maximum-taxable-earnings, accessed une 1, 2011

85. artocchio, Strategic Compensation,pp. 245 248; and in rensing- ophal,A ension Formula that ays ff, HR

Magazine (February 2003), pp. 58 62.86. For one recent example of how to do this,

see ail ichols, Reviewing and Redesign-ing Retirement lans, Compensation &Benefits Review, ay une 2008, pp. 40 47.

87. any employers are considering termi-nating their plans but most employers areconsidering instead either ceasing bene-fits accruals for all participants or ustfor future participants. ichael Cotter,

The ig Freeze: The ext hase in theDecline of Defined enefit lans,Compensation & Benefits Review, archApril 2009, pp. 44 53.

88. essica arquez, ore Workers ankingoney ut of 401(k)s, Workforce Manage-

ment, August 11, 2008, p. 4.89. ancy ridgen, The Duty to onitor

Appointed Fiduciaries nder ERISA,Compensation & Benefits Review, September

ctober 2007, pp. 46 51; Individual401(k) lan articipant Can Sue lan Fidu-ciary for osses, ustices Rule, BNA Bulletinto Management, February 20, 2008, p. 65.

90. indsay Wyatt, 401(k) Conversion: It s asEasy as Riding a ike, Workforce, April1997, p. 66. See also Carolyn Hirschman,

rowing ains. Employers and Employ-ees Alike Have ots to earn About401(k) lans, HR Magazine, une 2002,pp. 30 38.

91. enefit Trends: Automatic EnrollmentTakes ff, Compensation & BenefitsReview, September ctober 2008, p. 14.

92. For a discussion, see ewel Esposito,Avoiding 401(k) ERISA Disasters,

Compensation & Benefits Review 42, no. 1( anuary February 2010), pp. 39 45.

93. ack anDerhei, The ension rotectionAct and 401(k)s, The Wall Street Journal,April 20, 2008, p. 12.

94. essica arquez, Retirement ut of Reach,Workforce Management, ovember 3, 2008,pp. 1, 24.

95. Wyatt, 401(k) Conversion, p. 20.96. ew ension aw lus a Recent Court

Ruling Doom Age-Related Suits, racti-tioners Say, BNA Bulletin to Manage-ment 57, no. 36 (September 5, 2006),pp. 281 282; and www.dol.gov ebsa FA sfaq consumer cashbalanceplans.html,accessed anuary 9, 2010.

97. Harold urlingame and ichael ulotta,Cash alance ension lan Facilitates

Restructuring the Workforce at AT T,Compensation & Benefits Review, ovemberDecember 1998, pp. 25 31; Eric ekus,When Are Cash alance ension lans the

Right Choice? BNA Bulletin to Manage-ment, anuary 28, 1999, p. 7; erry eisel,IRS releases long-awaited cash balance

guidance, ensions & Investments 38 no. 22( ovember 1 2010), p. 22.

98. This is based on Eric armenter,Employee enefit Compliance Check-

list, Compensation & Benefits Review,ay une 2002, pp. 29 38.

99. www.pbgc.gov about faq pg general-faqs-about-pbgc.html, accessed une 1, 2011.

100. atrick iger, Early-Retirement lansackfire, Driving p Costs Instead of

Cutting Them, Workforce Management,anuary 2004, pp. 66 68.

101. enefits Cost Control Solutions toConsider ow, HR Focus 80, no. 11( ovember 2003), p. 1.

102. ohanna Rodgers, Web ased AppsSimplify Employee enefits, Insuranceand Technolog 28, no. 11 ( ovember2003), p. 21. See also www.benelogic.com ,accessed une 28, 2011.

103. Ibid.104. Scott Harper, nline Resources System

oosts Worker Awareness, BNA Bulletinto Management, April 10, 2007, p. 119.

105. Drew Robb, A Total iew of EmployeeRecords, HR Magazine, August 2007,pp. 93 96.

106. Carolyn Hirschman, Employees Choice,HR Magazine, February 2006, pp. 95 99.

107. oseph Connell, sing Employee Assis-tance rograms to Avoid Crises, LongIsland Business News, April 19, 2002, p. 10.

108. See Scott acDonald et al., Absenteeismand ther Workplace Indicators ofEmployee Assistance rogram Clients and

atched Controls, mplo ee Assistanceuarterl 15, no. 3 (2000), pp. 51 58. See

also aul Courtis et al., erformanceeasures in the Employee Assistance ro-

gram, mplo ee Assistance uarterl 19,no. 3 (2005), pp. 45 58.

109. See, for example, Donna wens, EA sfor a Diverse World, HR Magazine,

ctober 2006, pp. 91 96.110. EA roviders, Workforce Management,

uly 14, 2008, p. 16.111. Fathers Fighting to eep Work ife

alance Are Finding Employers Firmlyin their Corner, BNA Bulletin to Manage-ment 56, no. 24 ( une 14, 2005), p. 185.

112. Susan Wells, Are ou Too Family-Friendly?HR Magazine, ctober 2007, pp. 35 39.

113. aureen Hannay and elissa ortham,ow-Cost Strategies for Employee Reten-

tion, Compensation & Benefits Review,uly August 2000, pp. 65 72. See also

Roseanne eisel, Responding to Chang-ing Ideas of Family, HR Magazine, August2004, pp. 89 98.

114. Child Care ptions, BNA Bulletin toManagement, uly 4, 1996, p. 212. See alsoChild Care Report oasts of Its enefit

to California Economy, Knight Ridder/Tribune Business News, anuary 9, 2003,item 03009011.

115. atrick iger, A Case for Childcare,Workforce Management, April 2004,pp. 34 40.

116. ww w. S H R . o r g rew a rd s l i b r a r y,accessed December 23, 2006. See also

athy urchiek, ive s our Sick,HR Magazine, anuary 2007, pp. 91 93.

117. elli Earhart, R. Dennis iddlemist, andWillie Hopkins, Elder Care: An EmergingAssistance Issue, mplo ee Assistance

uarterl 8, no. 3 (1993), pp. 1 10. See also,Finding a alance etween Conflicting

Responsibilities: Work and Caring forAging arents, Monda Business Briefing,uly 7, 2004; and Employers Feel Impact of

Eldercare: Some Expanded enefits forWorkers, Knight Ridder/Tribune BusinessNews, une 13, 2004, item 04165011.

118. Employers ain from Elder Carerograms by oosting Workers orale,roductivity, BNA Bulletin to Manage-

ment 57, no. 10 ( arch 7, 2006), pp. 73 74.119. Rudy andrick, Elder Care rows p,

HR Magazine, ovember 2001, pp. 72 77.120. atthew oyle, How to Cut erks With-

out illing orale, Fortune, February 19,2001, pp. 241 244.

121. Susan ambert, Added enefits: Theink etween Work ife enefits andrganizational Citizenship ehavior,

Academ of Management Journal 43, no. 5(2000), pp. 801 815. Timothy udge etal., Work Family Conflict and Emotions:Effects at Work and Home, ersonnel

s cholog 59 (2006), pp. 779 814.122. Rising as rices rompting Employers

to Consider aried Computer enefitptions, BNA Bulletin to Management,

une 20, 2008, p. 201.123. ary urke, Euren Esen, and essica

Cullison, 2003 enefits Survey, SHRSHR Foundation, 1800 Duke Street,Alexandria A, 2003, p. 30. See also ichael

aff, .S. Employers Tighten Reins onTuition Reimbursement, Training &Development, uly 2006, p. 18.

124. Richard uddin and anika apur, TheEffect of Employer-Sponsored Educationon ob obility: Evidence from the .S.

avy, Industrial Relations 44, no. 2 (April2005), pp. 341 363.

125. What ou eed to now to rovideDomestic artner enefits, HR Focus 80,no. 3 (August 2003), p. 3.

126. Carolyn Shapiro, ore CompaniesCover enefits for Employee s Domestic

artners, Knight-Ridder/Tribune BusinessNews, uly 20, 2003.

127. Couples Want Flexible eave, enefits,BNA Bulletin to Management, February 19,1998, p. 53; SHR , 2003 enefits Survey,p. 14. See also aul Harris, Flexible Work


Policies Mean Business, r ining e elo ment, April 2007, pp. 32 36.

128. Money Isn t Everything, o rn l of ine tr teg 21, no. 2 (March 2000), p. 4;see also CEOs in the Dark on EmployeesBenefits Preferences, m lo ee enefit

e , September 1, 2006, item 06244007.129. Carolyn Hirshman, Kinder, Simpler

Cafeteria Rules, g ine, January2001, pp. 74 79.

130. Employers Should Update CafeteriaPlans Now Based on Proposed Regs,Experts Say, lletin to n gement, September 4, 2007, pp. 281 282.

131. Debit Cards for Health-Care ExpensesReceive Increased Employer Attention,

lletin to n gement, September 25,2003, p. 305.

132. Martocchio, tr tegic om en tion,p. 263.

133. Elka Maria Torpey, Flexible Work:Adjusting the When and Where of YourJob, cc tion l tloo rterl ,Summer 2007, pp. 14 27.

134. Slightly More Workers Are Skirting 9 5Tradition, lletin to n gement,June 20, 2002, p. 197.

135. See, for example, Compressed WorkweeksGain Popularity, but Concerns RemainAbout Effectiveness, lletin to

n gement, September 16, 2008, p. 297.136. Boris Baltes et al., Flexible and Compressed

Workweek Schedules: A Meta-Analysis ofTheir Effects on Work-Related Criteria,o rn l of lied c olog 84, no. 4

(1999), pp. 496 513. See also Charlotte

Hoff, With Flextime, Less Can Be More,or force n gement, May 2005,

pp. 65 66.137. Farrokh Mamaghani, Impact of Infor-

mation Technology on the Workforce ofthe Future: An Analysis, ntern tion lo rn l of n gement 23, no. 4 (2006),

pp. 845 850; Jessica Marquez, Connectinga Virtual Workforce, or force n gement, September 20, 2008, pp. 1 3.

138. Ann Pomeroy, The Future Is Now,g ine, September 2007, pp. 46 52.

139. SHRM, 2003 Benefits Survey, p. 2.140. With Job Sharing Arrangements, Com-

panies Can Get Two Employees forthe Price of One, lletin to

n gement 56, no. 47 (November 22,2005), pp. 369 370.

Video Title: Pay for Performance and Financial Incentives(Joie de Vivre Hospitality)

SYNOPSISChip Conley is the founder of Joie de Vivre Hospitality (JDV), a collection ofboutique hotels, restaurants, and spas in California. Conley aims to foster employeemotivation using Maslow s Hierarchy of Needs and has written books and lectured onthe subject. Joie de Vivre pays average wages, but experiences low turnover due to thenature of the relationships it has formed with each employee.

i c i e iChip Conley, founder of Joie de Vivre Hospitality, believes that most companiesframe their financial incentives in the wrong way. Explain what he means.What does JDV do differently?Why does Joie de Vivre offer free hotel stays to all employees as part of its incentive plan?According to the video, what separates a world-class organization is its abilityto care for its employees in good times and in bad? How did JDV accomplishthis during the dot-com crash and post-9/11 industry recession?Of the compensation, benefits, and incentives practices we discussed in Chapters 11, 12, and 13, which would you recommend JDV implement,and why?

Video Title: Compensation (Focus Pointe)

SYNOPSISIn this video, two HR staff members, Cheryl and Gina, must determine if an employee,Angelo, is worthy of a pay raise. The company, Focus Pointe, provides market researchservices. One of these services involves recruiting consumer, medical, and other respon-dents for the market research industry. It s important to get good, qualified respondents.To distinguish itself from its competitors, Focus Pointe uses a special triple screeningprocess to ensure that the respondents it recruits meet its clients specifications. In this

PART 4 VIDEO CASES APPENDIX