BU354 Chapter 10: Employee Benefits and Services
Chapter 10: Employee Benefits and Services
Employee Benefits
● To many, compensation = pay, and anything else an employer provides is considered so
minor that it is called a “fringe benefits”
● Nowadays, employers make benefits an important part of the total compensation package
and increasingly use it as a tool to attract, motivate, and keep key personnel
o Some employers make benefit packages tailors for individual employees to satisfy
their special needs
● Direct compensation: based on critical job factors or performance; pay
● Indirect compensation: extended as a condition of employment and aren’t directly
related to performance; benefits and services
o i.e. Insurance, income security, time off, scheduling benefits, and educational,
financial, and social services
Benefits and Corporate Strategy
● benefit policies can have a significant impact on the issue of attracting and retaining key
and high-performing employees
● benefits won’t replace performance incentives as motivators, but health and pension
benefits can make a great difference in corporate loyalty
The Role of Indirect Compensation
● Employee benefits seek to satisfy societal, organizational, and employee objectives
Societal Objectives
● Industrial societies have changed from rural nations of independent farmers and small
businesses to urban nations or interdependent wage earners
● Interdependence formed due to the mass unemployment of the Great Depression of the
1930s, and since industrial societies have sought group solutions to societal problems
● Governments rely on the support of employers to provide employees with security and
solutions to social problems
● Today, benefits and services give many employees financial security against illness,
disability, and retirement
Organizational Objectives
● In order to recruit high-quality successful applicants in the labour market, companies must
offer benefits that appeal to them
o If companies don’t offer retirement plans and paid vacations, recruits and present
employees would simply go work for competitors who offered these fringes
● Many employees stay with companies because they don’t want to give up their benefits =
lowered employee turnover
● Benefits can improve worker productivity and reduce fatigue, and if benefits were not
available to employees they may elect to form a union and collectively bargain with the
employer
● Hence, indirect compensation:
o Reduces fatigue
o Discourages labour unrest
o Satisfies employee objectives
o Aids recruitment
o Reduces turnover
o Minimize overtime costs
Employee Objectives
● Employees usually seek employer-provided benefits and services because of lower costs
and availability
o i.e. company insurance is less expensive because the employer pays some/all of
the costs
● The objectives of society, organizations, and employees have encouraged rapid
growth of benefits and services
o Growth has affected all areas of benefits and services (i.e. insurance, income
security, and time-off benefits)
● There are 2 types of benefits and services:
o Those that are legally required
o Those that an employer voluntarily gives
Legally Required Benefits
● Benefits and services that are imposed upon organizations by the government, and
employers must comply with these laws and their procedures
● Most of the legally required benefits are designed to help employees
● The government seeks to ensure minimum levels of financial security for the nation’s
workforce
o The objective of providing financial security is to ease the monetary burdens
of retirement, death, LT-disability, and unemployment
o The loss of income from these (^^) causes is cushioned by security provisions
● Legally required benefits and services are important to the HR department because:
o Top management holds the HR department responsible for meeting these legal
obligations; HR must ensure to meet the responsibility and comply with the law
o If the responsibilities are improperly handled, the result can be severe fines and
taxes
Financial Security
● To protect the well-being of society, governmental regulations on retirement plans, EI,
disability compensation, and health care are imperative
● Many of these regulations are provincially administered, and to suit the specific work
environments, these statutes vary from province-to-province
● The Canadian Pension Plan (CPP) and the Quebec Pension Plan (QPP):
o CPP: mandatory contributory, and portable pension plan applicable to all
employees and self-employed persons in Canada; public service employees have
their own pension plan: The Public Service Pension Plan (PSPP) which is
coordinated with the CPP
▪ Contributory plans: benefits that require the employer to contribute to the
cost of the benefit
▪ Portability clauses: allow accumulated pension rights to be transferred to
another employer when an employee changes employers
▪ The plans are also tied to cost-of-living changes
o QPP: mandatory contributory and portable pension plan in Quebec
o In 1999, the Supreme Court of Canada ruled that governments can’t limit benefits
by discriminating against same-sex common-law relationships b/c it goes against
the Charter and CHRA
▪ Modernization of Benefits and Obligations Act: ensures that common-
law relationships (same- and opposite-sex) are treated equally under
federal law
● Employment Insurance (EI):
o EI: program to help alleviate the financial problems of workers in Canada during
the transition from one job to another
o Most salaried and hourly workers who are employed for a minimum number of
hours, depending on regional unemployment rates, are covered by EI
o In 2009, the Fairness for the Self-Employed Act made self-employed workers
eligible for maternity, parental, adoption, medical, and compassionate-care
benefits
o The Employment Act became fully implemented in 2001-02, and has the following
key features:
▪ Benefits based on hours vs. weeks worked
▪ Collections of premiums based on first dollar earned
▪ Increased eligibility requirements for people entering the labour market
▪ Reduction in benefit rate based on an individual’s claim history
▪ A family income supplement top-up for claimants in low-income families
▪ A lower income threshold for the clawback of benefits
● Worker’s Compensation Acts:
o Worker’s compensation: compensation payable by employers collectively for
injuries sustained by workers during their employment
o Administration is done provincially, and all the provincial acts are of the collective
liability: compensation is payable by employers collectively
▪ Industries covered by the act are classified according to their special
hazards, and all employers in each group are collectively liable for payment
of compensation to all workers employed in said group
Health Insurance Plans
● Health Insurance Plans: health and medical insurance provided by provincial
governments with assistance from federal governments
Holidays and Vacations
● Vacations are usually based on the employee’s length of service, but federal and provincial
laws specify a 2-week minimum vacation entitlement
● In some regions, this increases to 3-weeks after 5, 6, or 10 years of service
● Holidays are federally and provincially regulated
Voluntary Benefits
Insurance Benefits
● Insurance benefits spread the financial risks encountered by employees and their families
● These risks are shared by pooling funds in the form of insurance premiums, and when an
insured risk occurs, the covered employees or their families are compensated
● Life Insurance:
o The first form of insurance offered to workers by employers
Document Summary
To many, compensation = pay, and anything else an employer provides is considered so minor that it is called a (cid:1688)fringe benefits(cid:1689) Direct compensation: based on critical job factors or performance; pay. Indirect compensation: extended as a condition of employment and aren"t directly related to performance; benefits and services i. e. insurance, income security, time off, scheduling benefits, and educational, financial, and social services. Benefit policies can have a significant impact on the issue of attracting and retaining key and high-performing employees. Benefits won"t replace performance incentives as motivators, but health and pension benefits can make a great difference in corporate loyalty. Employee benefits seek to satisfy societal, organizational, and employee objectives. Industrial societies have changed from rural nations of independent farmers and small businesses to urban nations or interdependent wage earners. Interdependence formed due to the mass unemployment of the great depression of the. 1930s, and since industrial societies have sought group solutions to societal problems.
