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Understanding Employee Benefits: Differentiating from Compensation and Importance to Companies

This chapter explores the distinction between employee benefits and compensation, the reasons behind companies offering benefits, and the role of employee benefits in total compensation. It also covers the mandatory benefits required by law, such as Social Security Act, Unemployment Compensation, Worker's Compensation, and Family Medical Leave Act. Additionally, it delves into optional benefits like retirement plans, family-friendly benefits, child care, and the process of selecting and communicating benefits to employees.

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Understanding Employee Benefits: Differentiating from Compensation and Importance to Companies

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Presentation Transcript

  1. Chapter 13 Providing Employee Benefits

  2. How are benefits different from compensation? Why do companies offer benefits? The Role of Employee Benefits MGMT 422 - Chapter 13

  3. Benefits as a Percentage of Total Compensation MGMT 422 - Chapter 13

  4. Benefits Required by Law • Social Security Act of 1935 • Established a system providing old age, survivor’s, disability, and retirement benefits. • Federal payroll tax on both the employer and the employee. • Benefit payments are based on employee’s lifetime earnings. MGMT 422 - Chapter 13

  5. Benefits Required by Law (cont) • Unemployment Compensation • State unemployment system funded by payroll tax • Involuntary unemployment and actively seeking work • Pay based on experience rating • Worker’s Compensation • Benefits provided to persons injured on the job • No-fault liability • Employees are covered unless injury is self-inflicted or caused by a “willful disregard of safety rules”. MGMT 422 - Chapter 13

  6. Benefits Required by Law (cont) • Family Medical Leave Act (FMLA) • Covers employers with 50 or more employees within a 75-mile radius • Eligible employees can take up to a total of 12 weeks of unpaid leave within a 12-month period • Employees have the right to continued health benefits and the right to return to their job MGMT 422 - Chapter 13

  7. Optional Benefits MGMT 422 - Chapter 13

  8. Retirement Plans • Contributory plan vs. non-contributory • Defined benefit plan vs. defined contribution MGMT 422 - Chapter 13

  9. Retirement Plans MGMT 422 - Chapter 13

  10. Family Friendly Benefits • Family Friendly Benefits serve two purposes • Assist employees manage work and family roles • Increases loyalty to companies who show they care • Family leave – paid time off for newborn or adopted children MGMT 422 - Chapter 13

  11. Child Care MGMT 422 - Chapter 13

  12. Selecting Employee Benefits • Decisions about which benefits to include should take into account: • The organization’s goals • The organization’s budget • The needs and expectations of the current and future employees MGMT 422 - Chapter 13

  13. Selecting Employee Benefits • Cafeteria-style plan • Offers employees a set of alternatives from which they can choose the types and amounts of benefits they want MGMT 422 - Chapter 13

  14. Communicating Benefits to Employees MGMT 422 - Chapter 13

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