Human Resource Management 13th Edition Chapter 10 Indirect Financial Compensation (Benefits) and Nonfinancial Compensation Copyright © [2014] Pearson Education 10-1 Learning Objectives • Describe some unique employee benefits, define indirect financial compensation (benefits), and explain what is included in a total reward package • Describe legally required benefits • Define discretionary benefits and explain the various types of discretionary benefits • Explain the different kinds of health care legislation and describe the relationship between smoke-free workplaces and the Patient Protection and Affordable Care Act • Explain premium pay Copyright © [2014] Pearson Education 10-2 Learning Objectives (Cont.) • Explain voluntary benefits • Describe customized benefit plans • Describe the importance of communicating information about the benefits package • Describe the job itself and the job environment as components of nonfinancial compensation • Describe workplace flexibility (work-life balance) factors and global customized benefits Copyright © [2014] Pearson Education 10-3 HRM in Action: Unique Employee Benefits • More and more companies are providing unique benefits • Companies were trying out use of unique benefits • Used employee benefits to clearly differentiate them from their competitors Copyright © [2014] Pearson Education 10-4 Indirect Financial Compensation (Benefits) All financial rewards that are not paid directly to the employee Copyright © [2014] Pearson Education 10-5 Discretionary Versus Voluntary Benefits • Discretionary benefits: Benefits made as a result of unilateral management decisions in nonunion firms and from labor–management negotiations in unionized firms • Voluntary benefits: Usually entirely paid by employee, but employer typically pays administrative cost Copyright © [2014] Pearson Education 10-6 Indirect Financial Compensation (Benefits) in a Total Compensation Program External Environment Internal Environment Compensation Direct Financial Indirect (Benefits) Nonfinancial The Job Job Environment Legally Required Benefits Social Security Unemployment Compensation Workers’ Compensation Discretionary Benefits Payment for Time Not Worked Health Care Life Insurance Retirement Plans Disability Protection Employee Stock Option Plans Employee Services Premium Pay Voluntary Benefits Copyright © [2014] Pearson Education 10-7 Total Rewards • All ways in which people are rewarded when they come to work • Pay, benefits, and other non-financial rewards • Put together to make coherent and integrated whole • Directed toward maximum attainment of corporate goals • All items that add value to an employee Copyright © [2014] Pearson Education 10-8 Mandated Benefits (Legally Required) • Social Security • Unemployment compensation • Workers’ compensation Copyright © [2014] Pearson Education 10-9 Social Security • System of retirement benefits • Federal payroll tax to fund unemployment and retirement benefits • Amendments include disability insurance, survivors’ benefits, and Medicare Copyright © [2014] Pearson Education 10-10 Customized Benefit Plans • Employees make yearly elections to determine benefit package • Choose between taxable cash and benefits • 20 years ago, firms offered uniform package that reflected typical employee • Today’s workforce more heterogeneous Copyright © [2014] Pearson Education 10-55 Communicating Information About the Benefits Package • Workers need to fully understand benefits • Organizations often not have to improve benefits to keep best employees • Employee Retirement Income Security Act • Patient Protection and Affordable Care Act Copyright © [2014] Pearson Education 10-56 Nonfinancial Compensation in a Total Compensation Program External Environment Internal Environment Financial Direct Nonfinancial Indirect (Benefits) The Job Meaningful Appreciated Satisfying Learning Enjoyable Challenging Job Environment Sound Policies Capable Managers Competent Employees Congenial Co-workers Appropriate Status Symbols Working Conditions Workplace Flexibility Flextime Compressed Workweek Job Sharing Telecommuting Parttime Work Copyright © [2014] Pearson Education 10-57 The Job Itself as a Nonfinancial Compensation Factor • Job itself can be very powerful motivational factor • Some jobs can be so stimulating the employee is anxious to get to work each day • Given prospect of getting a generous raise by leaving this job, this worker may quickly say “No” Copyright © [2014] Pearson Education 10-58 Job Environment as a Nonfinancial Compensation Factor • • • • • • Sound policies Capable managers Competent employees Congenial coworkers Appropriate status symbols Working conditions Copyright © [2014] Pearson Education 10-59 Work-Life Balance • Focus on solving personal issues that detract from employee’s work • Can be key factor in attracting and retaining employees • Moved from being a great benefit to a business necessity • Workforce today not homogeneous Copyright © [2014] Pearson Education 10-60 Work-Life Balance Factors: Flextime • Practice of permitting employees to choose, with certain limitations, their own working hours • Work same number of hours per day as they would on standard schedule • Many firms are using flextime Copyright © [2014] Pearson Education 10-61 Illustration of Flextime Flexible Time a.m Core Time a.m Flexible Time (Lunch) Noon Core Time Flexible Time p.m p.m Bandwidth Copyright © [2014] Pearson Education 10-62 Work-Life Balance Factors: Compressed Work Week • Permits employees to fulfill their work obligation in fewer days than typical 5day workweek • Four 10-hour days • Often greater job satisfaction Copyright © [2014] Pearson Education 10-63 Work-Life Balance Factors: Job Sharing • Two part-time people split duties of one job • Partners must be compatible, have good communication skills • Trust must exist between job sharers and their manager Copyright © [2014] Pearson Education 10-64 Work-Life Balance Factors: Two in a Box • Give two executives the same responsibilities and same title and letting them decide how the work is to be divided • Full-time job for both executives • Requires work and constant communication Copyright © [2014] Pearson Education 10-65 Work-Life Balance Factors: Telecommuting • Employees are able to remain at home, or away from office, and perform work using computers and other electronic devices • More popular in recent years Copyright © [2014] Pearson Education 10-66 Work-Life Balance Factors: PartTime Work • Some not want or need full-time employment • Highly educated professionals are often choosing part-time opportunities • Recent recession caused many workers to take part-time jobs Copyright © [2014] Pearson Education 10-67 A Global Perspective: Global Customized Benefits • Global company may find a standardized benefits program for all employees impractical and unsuccessful • Must understand culture of each country because culture will have major impact on benefits workers desire Copyright © [2014] Pearson Education 10-68 10-69 [...]... states • Payroll tax paid solely by employers Copyright © [2014] Pearson Education 10- 11 Workers’ Compensation • Expenses resulting from job-related accidents or illnesses • Administered by states • Program paid for by employers • Premium expense directly tied to past experience Copyright © [2014] Pearson Education 10- 12 Discretionary Benefits • • • • • • • Payment for time not worked Health care Life... services Copyright © [2014] Pearson Education 10- 13 Payment for Time Not Worked: Paid Vacations • Provide workers with opportunity to rest, become rejuvenated, and thus more productive • Encourage employees to remain with firm • Typically increases with seniority • Americans do not take full advantage of their vacation benefits Copyright © [2014] Pearson Education 10- 14 Payment for Time Not Worked: Sick... year that employees can use for any purpose Copyright © [2014] Pearson Education 10- 15 Results-only Work Environment • Allows employees to work wherever and whenever they wish as long as they complete projects on time • There is no schedule and no limit for earned vacation and leave time Copyright © [2014] Pearson Education 10- 16 Payment for Time Not Worked: Sabbaticals • Temporary leaves of absence from... and prevents burnout Copyright © [2014] Pearson Education 10- 17 Payment for Time Not Worked: Other Forms • • • • • • • Perform civic duties Handle personal affairs Jury duty National Guard or military reserve Voting time Bereavement time Rest periods, coffee breaks, lunch periods, cleanup time, and travel time Copyright © [2014] Pearson Education 10- 18 Factors Contributing to the High Cost of Health Care... Pearson Education 10- 21 Consumer-Driven Health Care Plans • Each employee given set amount of money annually with which to purchase health care coverage • Involves high-deductible insurance coverage combined with a tax-advantaged account like a health saving account (HRA), health reimbursement accounts (HRA), and flexible saving account (FSA) Copyright © [2014] Pearson Education 10- 22 Health Savings... Not use HSA for over-the-counter drugs Copyright © [2014] Pearson Education 10- 23 Health Reimbursement Accounts • Allow employer to set aside funds to reimburse medical expenses paid by participating employees • No limit on employer’s contributions • Can be rolled over from year to year Copyright © [2014] Pearson Education 10- 24 Flexible Spending Account (FSA) • Health benefit plan established by employers... over-the-counter medications Copyright © [2014] Pearson Education 10- 25 On-Site Health Care • Way of curbing health care costs while providing an employee benefit • Permits employers to better manage and at times reduce growth of health care costs • Assists in treating minor illnesses and injuries and provides follow-up care Copyright © [2014] Pearson Education 10- 26 Major Medical Benefits Provided to cover extraordinary... serious health problems Use of deductibles is a common feature Copyright © [2014] Pearson Education 10- 27 Dental and Vision Care •Dental and vision care are popular benefits •Employers typically pay the entire costs for both types of plans except for a deductible Copyright © [2014] Pearson Education 10- 28 Health Care Legislation • Employee Retirement Income Security Act (ERISA) • Consolidated Omnibus... Affordable Care Act (PPACA) Copyright © [2014] Pearson Education 10- 29 Employee Retirement Income Security Act of 1974 (ERISA) • Strengthens existing and future retirement programs • Intended to ensure when employees retire they receive deserved pensions • Does not force employers to create employee retirement plans Copyright © [2014] Pearson Education 10- 30 Consolidated Omnibus Budget Reconciliation Act of... © [2014] Pearson Education 10- 31 Older Workers Benefit Protection Act of 1990 (OWBPA) • Amendment to Age Discrimination in Employment Act • Prohibits discrimination in administration of benefits on basis of age • Permits early retirement incentive plans as long as they are voluntary • Establishes wrongful termination waiver requirements Copyright © [2014] Pearson Education 10- 32 Health Insurance Portability ... [2014] Pearson Education 10- 4 Indirect Financial Compensation (Benefits) All financial rewards that are not paid directly to the employee Copyright © [2014] Pearson Education 10- 5 Discretionary Versus... Benefits • Discretionary benefits: Benefits made as a result of unilateral management decisions in nonunion firms and from labor management negotiations in unionized firms • Voluntary benefits: Usually... [2014] Pearson Education 10- 8 Mandated Benefits (Legally Required) • Social Security • Unemployment compensation • Workers’ compensation Copyright © [2014] Pearson Education 10- 9 Social Security