Human Resource

Management
TWELFTH EDITION

GARY DESSLER
BIJU VARKKEY

Part 4 | Compensation

Chapter
13
Benefits and Services
Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd
Authorized adaptation from the United States edition of Human
Resource Management, 12/e
 After studying this chapter, you should be able to:

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.

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–2
 Benefits

Types of Employee
Benefits

Supplemental Insurance Retirement Employee

Pay Benefits Benefits Services

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–3
 FIGURE 13–1 U.S. Health Care Cost Increases

Sources: Eric Parmenter, “Controlling Health Care Costs,” Compensation and Benefits Review, September/October 2002, p. 44;
Leah Carlson, “Health Care Cost Increases Easing,” Employee Benefit News, Oct. 1, 2004, Item 04274002; Trevor Thomas, “Studies
Hint at Slowing Health Care Cost Increases,” National Underwriter Life & Health, Oct. 24, 2005, vol. 109, p. 8; “Health Care Cost
Increases Expected to Slow in 2006,” Managing Benefits Plans, April 2006, p. 9.

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–4
 FIGURE 13–2 Private-Sector Employer Benefits Costs by Category, March 2009

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–5
 Policy Issues in Designing Benefit Packages

Which benefits to offer Who will be covered

Whether to include retirees Coverage during probation

Policy Issues

How to finance benefits Degree of employee choice

Cost containment Communicating benefits

procedures options

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–6
 Employee Benefits in India

 Integral part of the compensation package.

 Determined by labor legislations, location, and tax
laws.
 Generally, benefits include loans, housing, and
transport.
 Other activities include celebrations, health
programs, various allowances, family involvement,
flexi timings.
 Fringe benefit tax (FBT).

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–7
 TABLE 13–1 Some Required and Discretionary Benefits

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–8
 Pay For Time Not Worked

Unemployment Vacations and

Insurance Holidays

Supplementa
Sick Parental
Leave l Pay Leave
Benefits

Supplemental
Severance
Unemployment
Pay
Benefits

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–9
 Pay for Time Not Worked
• Unemployment Insurance
 Provides for benefits if a person is unable to work
through no fault of his or her own.
 Is an employer payroll tax that is determined by an
employer’s rate of personnel terminations.
 Tax is collected and administered by the state.

• Vacations and Holidays

 Number of paid vacation days varies by employer.
 Number of holidays varies by employer.
 Premium pay for work on holidays.
Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd
Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–10
 TABLE 13–2 An Unemployment Insurance Cost-Control Checklist

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–11
 Pay for Time Not Worked (continued)
Sick Leave
 Provides pay to an employee when he or she is out
of work because of illness.
 Costs for misuse of sick leave
 Pooled paid leave plans

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–12
 Pay for Time Not Worked (continued)
• Severance Pay
 A one-time payment when terminating an employee.
 Reasons for granting severance pay:
 Acts as a humanitarian gesture and good public relations.
 Mirrors employee’s two week quit notice.
 Avoids litigation from disgruntled former employees.
 Meets Worker Adjustment and Retraining Notification (“plant
closing”) Act requirements.
 Reassures employees who stay on after the employer
downsizes its workforce of employer’s good intentions.

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–13
 Pay for Time Not Worked (continued)
• Supplemental Unemployment Benefits (SUB)
 Payments that supplement the laid-off or furloughed
employee’s unemployment compensation.
 The employer makes contributions to a reserve fund from
which SUB payments are made to employees for the time
the employee is out of work due to layoffs, reduced
workweeks, or relocations.
 SUB payments are considered previously earned
compensation for unemployment calculation purposes.

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–14
 FIGURE 13–3
Your Rights
Under the
Family and
Medical Leave
Act of 1993

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–15
 FIGURE 13–4
Online
Request for
Leave Form

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–16
 Insurance Benefits
• Workers’ Compensation
 Provides income and medical benefits to work-
related accident victims or their dependents,
regardless of fault.
 Death or disability: a cash benefit based on earnings per
week of employment.
 Specific loss injuries: statutory list of losses.

 Controlling workers’ compensation costs

 Screen out accident-prone workers.
 Make the workplace safer.
 Thoroughly investigate accident claims.
 Use case management to return injured employees to work
as soon as possible.
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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–17
 Insurance Benefits (continued)
• Hospitalization, Health, and Disability Insurance
 Provide for loss of income protection and group-rate
coverage of basic and major medical expenses for
off-the-job accidents and illnesses.
 Accidental death and dismemberment
 Disability insurance

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–18
 Insurance Benefits (continued)
• Health Maintenance Organization (HMO)
 A medical organization consisting of specialists
operating out of a health care center.
 Provides routine medical services to employees
who pay a nominal fee.
 Receives a fixed annual contract fee per
employee from the employer (or employer and
employee), regardless of whether it provides that
person with service.

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–19
 Insurance Benefits (continued)
• Preferred Provider Organizations (PPOs)
 Groups of health care providers that contract to
provide services at reduced fees.
 Employees can select from a list of preferred
individual health providers.
 Providers agree to discount services and to submit
to utilization controls.
 Employees using non-PPO-listed providers may
pay all costs or only costs above the reduced fee
structure for services.

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–20
 Trends in Health Care Cost Controls

Cost-Control
Trends

Communication,
Premiums and Prevention Health Savings Claim
Involvement, and
Co-Pays Programs Accounts Audits
Empowerment

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–21
 Other Cost-Control Options

Automating health care

plan administration

Defined contribution
health care plans

Controlling Health Outsourcing health care

Care Costs plan administration

Eliminating retiree
health care coverage

Benefits purchasing
alliances

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–22
 Other Benefits Issues
• Life Insurance
 Types
 Group life insurance
 Accidental death and dismemberment

 Personnel policies
 Benefits-paid schedule
 Supplemental benefits
 Financing

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–23
 Retirement Benefits
Social Security
 A federal payroll tax (7.65%) paid by both the
employee and the employer on the employee’s
wages
 Retirement benefits at the age of 62
 Survivor’s or death benefits paid to the employee’s
dependents
 Disability payments to disabled employees and their
dependents
 The Medicare program
 Provident Fund
 Gratuity
 Pension
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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–24
 Retirement Benefits (continued)

Policy Issues In
Pension Planning

Membership Benefit Plan

Vesting
Requirements Formula Funding

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–25
 Personal Services
• Credit Unions
 Separate businesses established with the employer’s
assistance to help employees with their borrowing
and saving needs.
• Employee Assistance Programs (EAPs)
 Provide counseling and advisory services:
 Personal legal and financial services
 Child and elder care referrals
 Adoption assistance
 Mental health counseling
 Life event planning
Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd
Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–26
 Personal Services (continued)

Steps for Launching an EAP Program

1 Develop a policy statement.

2 Ensure professional staffing.

3 Maintain confidential record-keeping systems.

4 Be aware of legal issues.

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–27
 Family-Friendly Benefits
• Subsidized child care
• Sick child benefits
• Elder care
• Time off
• Subsidized employee transportation
• Food services
• Educational subsidies
• Fitness and medical facilities
• Flexible work scheduling

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–28
 FIGURE 13–6
Online Survey
of Employees’
Benefits
Preferences

Source: Michelle Buckley, “Checkup

for Health Benefit Offerings,”
Compensation and Benefits Review,
September/October 2000, p. 43.
Reprinted by permission of Sage
Publications, Inc.

Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd

Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–29
 Figure 13-6 (continued)

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Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–30
 Flexible Benefits Programs
• Cafeteria (Flexible Benefits) Approach
 Each employee is given a limited benefits fund
budget to spend on preferred benefits.
 Types of plans
 Flexible spending accounts
 Core plus option plans

• Flexible Work Arrangements

 Flextime schedules
 Compressed workweek schedules
 Job sharing
 Work sharing
 Telecommuting
Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd
Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–31
 KEY TERMS
benefits savings and thrift plan
supplemental pay benefits deferred profit-sharing plan
unemployment insurance
sick leave employee stock ownership plan (ESOP)
supplemental unemployment benefits cash balance plans
workers’ compensation Employee Retirement Income Security Act
case management (ERISA)
health maintenance organization (HMO) Pension Benefits Guarantee Corporation
preferred provider organizations (PPOs) (PBGC)
group life insurance vested funds
Social Security
early retirement window
pension plans
defined benefit pension plan employee assistance program
defined contribution pension plan family-friendly benefits
portability flexible benefits plan/cafeteria benefits plan
401(k) plan flextime
Provident Fund
compressed work week
Gratuity
Pension job sharing
work sharing
Copyright © 2011 Dorling Kindersley (India) Pvt. Ltd telecommuting
Authorized adaptation from the United States edition of Human
Resource Management, 12/e 13–32