BU354 Chapter Notes - Chapter 10: Credit Union, Interactive Voice Response, Drug Rehabilitation
Chapter 10- Employee Benefits and Services
Employee Benefits
- To many people, compensation means pay.
oAnything extra is a “Fringe” benefit
oThese are increasingly used as a tool to attract, motivate and keep key personnel
- Pay is called direct compensation, as it is based on critical job factors or performance
oBenefits and service are known as indirect compensation a they are usually
extended as a condition of employment ans aren’t directly related to
performance
Benefits and Corporate Strategy
- Benefits programs become a very significant part of the company’s compensation
system, slowly approaching the 50% mark of payroll expenses
oWhat were once called “fringe” benefits aren’t “fringe” anymore
- Benefit policies can have a significant impact on the issue of attracting and retaining key
and high-performing employees
oBenefits will not replace performance incentives as motivators, but health and
pension benefits make a great difference in corporate loyalty
The Role of Indirect Compensation
- Employees seek benefits and services to satisfy the following objectives:
oSocietal
oOrganizational
oEmployee
Societal Objectives
- Industrial societies have gone major changes
- To solve social problems and provide security for interdependent wage earners,
governments rely on the support of employers
oThrough favourable tax treatment these benefits can be tax free
- Today, benefits and services give many employees financial security against illness,
disability and retirement.
oThe growth of benefits since WW2 leaves benefits being 30% of its payroll costs
oIf this trend continues, it will lead to be 50%
Organizational Objectives
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- Compnaies must offer some benefits if they are able to recruit successfully in labour
markets
oIf they weren’t offered employees wouldn’t work for them
- Lower turnover as people don’t want to lose the benefits that they have
- Vacation, holidays and rest breaks reduce fatigue and enhance productivity during the
hours the employees do work.
oSimilarly, retirement, health care and etc. allow productivity by reducing worry
about these costs.
- Therefore: reduced fatigue, discouraged labour unrest, satisfy employee objectives, aid
recruitment, reduce turnover and minimize overtime costs are reslts of compensation
Employee Objectives
- Employees seek employer-provided benefits and services because of lower cost and
availability
- For some employees the primary objective may be to obtain benefits and services – e.g.
healthcare
oWithout employer provided insurance, these policies may not be attainable
because of previous health conditions
- The objectives of society, organizations and employees have encouraged the rapid
growth of benefits and services
- There are two types of benefits and services:
oLegally required
oVoluntarily given
Legally Required Benefits
- Legally required benefits and services are imposed upon organizations by the
government – employers must comply with the law and its procedures
- In general, the government seeks to ensure minimum levels of financial security for the
nations workforce
- Legally required benefits and serves are important to the HR department for two
reasons:
oTop management holds the HR department responsible for meeting these legal
obligations
oIf the obligations are improperly handled the result can be more sever fines and
taxes
Financial Security
- A large majority of Canadians are financially dependent on their monthly paycheques
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oTo protect the well-being of society, government regulations on retirement
plans, employment insurance, disability compensation and health care are
imperative
The CPP
-Canada Pension Plan: a mandatory, contributory and portable pension plan applicable
to all employees and self employees persons in Canada
oPublic service employees have their own pension plan, but it is coordinated with
CPP
oContributory Plan: benefits that require the employer to contribute to the cost
of the benefit
oPortability Clause: allows accumulate pension to be transferred from employer
to employer
Employment Insurance
-Employment Insurance: a program to help alleviate the financial problems of workers in
Canada during the transition from one job to another
- Most salaried and hourly workers who are employed for a minimum number of hours,
depending on the regional rates are covered by employment insurance
- Key features:
oBenefits are based on hours not on weeks worked
oCollection of premiums based on the first dollar earned
oReduction in the maximum benefit entitlemtn period
oIncreased eligibility requirements for people entering the labour market
oReduction in benefit rate based on individuals clain history
oA family income supplement top-up for claimants in low income families
oA lower income threshold or the clawback of beneifts
Workers Compensation
- Workers Comp: compensation payable by employers collectively for injuries sustained
by works in the course of their employment
oContribution is based on payroll figures for the organization
Health Insurance
- Provided by the provincial government, with federal assistance
Holidays and Vacations
- Usually based on length of service, but have a minimum two-week entitlement
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