7 Chapter 7: EMPLOYEE BENEFITS

Learning Objectives

*Understand the value of voluntary benefits

*Identify various types of voluntary benefits

*Generate awareness of preparing one’s life after retirement

Introduction

When employees have financial concerns, oftentimes, their productivity and morale will decrease. Since employee service providers are responsible for helping employees balance their work and personal lives, offering and supporting appropriate benefits may ease employees’ worries and troubles. If employers want to move employees beyond superficial acceptance of benefit changes, they need to focus on organization’s change process and support employee decision making (Hart & Arian, 2007). Employers believe there are strategic advantages for the organization to offer employee benefits programs. These programs will boost employee retention and satisfaction, help the organization remain competitive, and help meet employee’s needs, which strongly support the strategic value. Traditionally, benefits are within the province of employer’s control. Companies like IKEA, Reebok, Goldman Sachs, Facebook, and Scripps Health are well recognized for their generous benefits offered to the employees (Dishman, 2016; Glassdoor, 2017).  Evidently, employees’ role in the active management of their benefits continue to grow in today’s workplace. Many employers admit that they are struggling at managing benefit costs. They are afraid of recent program changes not only cost-management, but also the impact of change on organizational culture and employee behavior. Managing and offering effective benefit communications and support are essential because these practices enhance employees’ perception about how much the company cares about their well-being. The research has shown employee benefits (when needs are met) strengthen employees’ commitment to do a good job for the organization and increase their trust in senior leadership (Hart & Arian, 2007).

About Employee Benefits

According to a survey by the International Society of Certified Employee Benefits Specialists (ISCEBS, http://www.iscebs.org/Pages/Default.aspx), 73% of 554 employee benefits specialists have offered voluntary benefits plan (2-4 years) to their employees. About 60% of employers offer non-core benefits, which employees have expressed interest (Sawyer, 2001). Life insurance was the first voluntary product on the market. Popular voluntary benefits programs offered by corporate organizations include dependent insurance, life insurance, supplemental life coverage, long- and short-term disability plans, and dental plans (Sawyer, 2001). The biggest excuse for employers not offering voluntary benefits (account for 25% of responses) is that they have provided a wide range of benefits in the sponsored package already.

Non-Negotiable Benefits

Benefits are defined as a form of compensation paid by employers to employees over and above the amount of pay specified as a base salary or hourly rate of pay. In general, the benefits package offered by the employers can be categorized into two types: non-negotiable benefits and voluntary benefits. The non-negotiable benefits are also known as the core-benefits that are mandatorily required by the federal laws. Common items in the core-benefits package include medical health insurance (additional options for dental and vision care), pay time off (PTO), sick pay (ranging from 10 to 14 days), vacation pay (7 to 30 days based on length of work experience) and holiday pay (ranging from 6 to 23 days), and short term & long term disability coverage, unemployment and worker’s compensation, and other miscellaneous leave (i.e., funeral leave, military duty, Family Medical Leave Act, voting, jury duty, court duty, and personal business).

The medical health insurance is a vital protection for any working Americans, because it is only offered to full-time working employees. It is also viewed as a great luxury item, because many people cannot afford to purchase it. Although there is always a share cost that is responsible by the employees when seeking for medical service (the portion is known as co-pays, 20-30% of total cost), a greater amount of service cost will be paid by the employers (70-80%). The total amount of insurance cost depends on the selected the level of coverage (different level of deductibles). When an employee picks a high deductible plan, the total cost will be less (it means a cheaper coverage), but he/she will need to pay beyond the deductible limit before the insurance finally kicks in for large medical cost. It is not uncommon for an individual worker to pay as much as $200 per month to cover a family of four people.  At the Morehead State University (MSU), an employee’s single plan premium for 2014 was $876 (about $73 per month). The university paid about $4,992 (85% of total cost) for covering the individual. In 2015, the MSU’s total employee health care premium cost was about $8.7 million. The medical health care package will cost about 33% of the worker’s salaries. It is indeed a heavy burden for the employer to bear.

The 2008 economic recession severely impacted the financial status of corporate America, thus we witnessed a tremendous backlash on the health benefits offered by these companies to their employees. It was estimated the annual average deductible for health insurance was $1,135 in 2013 (Pickert, 2013). In 2013, about 78% of workers paid a co-pay more than $20 for each of their primary-care doctor visit. In 2006, only 49% workers had to pay such a high amount. From 1999 to 2013, the increase of worker’s contribution to premiums jumped about 196%, yet their annual earning only increased around 50% (Pickert, 2013). It is clearly the health insurance really has become an expensive benefit for the employer to cover. Employees are gradually feeling the pain and burden for sharing their contribution (Fronstin & Greenwald, 2018).

Here is a breakdown on how Americans get their health insurance:

Video Clip: Employee Benefits

https://www.youtube.com/watch?v=hwd5Ry9zXFA (Employee Benefits 101 -What are employee benefits? By Groupperk ZA)

Section 1322 of Patient Protection and Affordable Care Act

Despite a lot of controversies and blocking attempts through legislative effort of state and federal congress representatives, the Affordable Care Act (ACA, also known as the Obama Care) really brings in an economic option for many individuals in terms of the selections of health coverage. This act provides few positive reforms on the current existing health insurance landscape. First, it broadens the choices of health plans by adding public sector to the private exchanges, therefore, it creates more access to health care to more Americans. The maximum amount of annual out-of-pocket medical and drug expenses was capped at $6,400 for individuals, and $12,800 for families. Another great advantage for insurance clients is that the act eliminates lifetime limits on essential medical expenses. It also prohibits insurers from dropping one’s coverage, raising premiums, or denying coverage due to a serious illness or preexisting condition. Finally, the act ensures a child of an employee can stay on the parents’ health plan until age 26. In supplementing the ACA, new federal rules have granted the employer for establishing employee wellness programs with a larger financial rewards.

There are several positive aspects of Section 1322 of Patient Protection and Affordable Care Act which impact female population and certain disability group. For example, the act specifically address the coverages for maternity care and mental illness. Four different levels of insurance coverages varied on premium, deductible, and copays are available to suit people’s need. The coverage also provides 15 preventive services/measures for young ladies (until age of 22). Unfortunately, we don’t really sure if this beneficial plan will be able to stick around, since many states are still trying to repeal or undermine this act. About 37% of working Kentuckians do not receive work-based health insurance coverage. It makes people wonder why many legislators would try to take away an affordable insurance option from “poor” people. When the ACA was passed, there are a lot of speculation about whether it would cause a lot employer opt out of their health care responsibility. In fact, according to the survey results of Kaiser (2013), nearly 90% of large firms (with 200 employees or more) still remain committed in offering employee benefits and health care coverages.

Voluntary Benefits

Voluntary benefits are negotiable benefits that can enhance an employee’s benefits package. In Table 1, readers can find common examples of voluntary benefits offered by various industries.

Table 1. Various Types of Voluntary Benefits (Dishman, 2016, JLG, n.d.; Nally, 2012)

Facts about Employees’ Needs and Employer’s Attitudes

The use of voluntary, employee-paid insurance products is rising. About same amount of the employer and employees (61%) believe that they should be mutually or at least equally share the responsibilities of saving retirement, income security, and preparing health care expenses (Hart, & Arian, 2007). Statistics has proven that employees believe voluntary benefits enrich a benefits package and are more likely to appreciate voluntary benefits than their employers realize. It is crucial to remember employees’ voice and needs should be heard and respect in non-union enterprises (Lewin, 2018). Allowing the offer of voluntary benefits could be important mutual gains to satisfy the employees.

About Life Insurance

Many sources indicates that life insurance is a popular benefit (Hart & Arian, 2007; Sawyer, 2001), because most employees are under insured. About 45% of widows and 37% of widowers state their spouse was inadequately insured (New York Time, 2007). The need for supplemental life insurance is real. If an employee rely solely on the company group insurance, this leaves the individual vulnerable when losing his/her job. After the September 11 terrorist attacks, adult Americans who have life insurance protection had dropped to 61%, a decline from 70% in 1984 (New York Life, 2007). Like the issue of elder care, people often dodge or neglect the discussion about needing a life insurance. However, when accident or premature death occurs, household income and assets are hit very hard (a loss of at least $10,000 on family income in years) and can leave a huge financial burden for the surviving spouse and children (New York Life, 2007). If an individual can afford to do so, it is recommended to have a life insurance coverage of 12 times annual incomes for a couple and 20 times annual incomes for a family with children, respectively. In general, there are two major types of life insurance, term policies and permanent. When purchasing a life insurance, the insurers would need to consider issues such as coverage (size of death benefits), immediate cost, ongoing expenses/premium, personal condition/situation, wavier, and term. It is ideal to check how employer can help through certain types of group benefits and discount.

To Gain Support for Offering Voluntary Benefits

According to Withers (2016), several terrible choices and decision making can keep Human Resources professional awake all night. Employees can be ignorant enough to assume that they will never be that old and unable to care for themselves. They may also assume Medicare will cover enough or long-term care insurance is just for old people. An even bigger nightmare is that employer would decide to opt out the medical plan to save money.

To avoid the aforementioned mistakes, it is important that both employers and employees recognize the need and values that voluntary benefits may offer. Here are a few suggestions that employees can provide to their employers and convince them about the positive effect of voluntary benefits.

(1) Know what programs work. The most attractive programs are dependent life insurances and follow by term life and supplemental coverage. Be sure to offer them.

(2) Employees would perceive voluntary benefits as favorable offering. Employer like to see that the offered noncore benefits are of the interests of employees.

(3) Permit insurers to meet with workers during work hours, so employees don’t feel extra burden when decide to pursue voluntary products.

(4) Convince the employer that there is still much they can offer through evaluation, benchmarking data, and statistics.

Quiz Questions

Q1. According to the survey, the most commonly offered voluntary benefit is:

1. Supplemental life coverage
2. Short-term disability plan
3. Dependent and life insurance
4. Homeowner insurance

Q2. Employees are more likely to appreciate the availability of voluntary insurance products and payroll deductions than many employers realize. True/False

Q3. The Affordable Care Act ensures a child of an employee can stay on the parents’ health plan until age ____.

1. 18
2. 26
3. 21
4. None of the above

Q4. Which of the following is not considered as a non-negotiable benefit?

1. Medical health insurance

• short term & long term disability coverage

1. retirement insurance

• Sick pay

Q5. The main reason for employers not offering voluntary benefits is that they have provided a wide range of benefits in the sponsored package already. True/False

Brainstorming Activity  

Your organization is a minor league (1-A level) franchise which employs about 25 full-time staff with 15 part-time workers and 4-5 interns during the season. As the CEO of the club, could you address the type of employee benefits that you may offer to serve your employees and make your club more attractive in recruiting talents??

Suggested Answers:

(1) Milestone recognitions; (2) 25% discount for the team store items; (3) rewards for outstanding employees (in areas of sales or service)

Dishman, L. (2016). These are the best employee benefits and perks.

https://www.fastcompany.com/3056205/these-are-the-best-employee-benefits-and-perks

Glass Door (n.d.). MiLB employee benefits and perks. https://www.glassdoor.com/Benefits/MiLB-US-Benefits-EI_IE381037.0,4_IL.5,7_IN1.htm.

https://www.milb.com/about/faqs-business#13

https://www.glassdoor.com/Benefits/MiLB-US-Benefits-EI_IE381037.0,4_IL.5,7_IN1.htm

https://www.sbnation.com/mlb/2018/6/5/17251534/mlb-draft-minor-league-baseball-union-phpa

https://www.loophealth.com/post/top-10-employee-benefits

References

Birdthistle, W., & Hemel, D. (2018). The view, Finance: The 401(k)’s midlife crisis. Time, 192(21), 25.

Dishman, L. (2016). These are the best employee benefits and perks. https://www.fastcompany.com/3056205/these-are-the-best-employee-benefits-and-perks

Fronstin, P., & Greenwald, L. (2018). The state of employee benefits: Findings from the 2017 health and workplace benefits survey. https://www.ebri.org/docs/default-source/ebri-issue-brief/ebri_ib_448_wbs-10apr18.pdf?sfvrsn=3935342f_2

Glassdoor Team (2017). Top 20 employee benefits & perks for 2017.  https://www.glassdoor.com/blog/top-20-employee-benefits-perks/

Hart, D., & Arian, M. (2007). Employee responsibility in benefit change. Benefit Quarterly,      23(2), 7-12.

JLG Industries (n.d.). Careers.  www.jlg.com/en-us/careercenter.companybenefits.html

Lewin, D. (2018). Employee voice and mutual gains. Available at https://www.researchgate.net/publication/284106450_Employee_Voice_and_Mutual_Gains

Nally, H. (2012). Morehead State University employee benefits. A paper presented at Faculty      Orientation. Morehead, KY.

Pickert, K. (2013, December 2). Is your plan in play? No matter what promises have been made, employer-provided health plans are changing. https://pubmed.ncbi.nlm.nih.gov/24640321/

Sawyer, T. H. (2001). Employee services management: A key component of human resource            management. Champaign, IL: Sagamore.

Semuels, A. (2021, August 2-9). Wage rage: Workers want higher pay, generous benefits and better treatment. And They’re getting it. Time, 198(5-6), 34-40.

Sieweke, J., Kollner, B., Sub, S. (2017). The relationship between employee’s objective internal and external pay standing and their job performance: A within-person analysis. Journal of Business and Psychology, 32(5), 547-560.

The New York Life (2007). The need and value of life insurance.             http://www.newyorklife.com/cda/0,3254,14114,00.html

Time (2015). Work perks. Time, 187(6-7), 23.

Withers, M. (2016). What keeps HR professional awake at night? https://www.linkedin.com/pulse/what-keeps-hr-awake-night-mandy-withers/