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Designing and planning employee benefit program
1. Designing and Planning Benefit
Program
Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor
2. Process of Benefit Planning
Determining the goals and objectives
Assessing and/or selecting benefits
Designing the benefits Package
Monitoring the plan
4. Selecting Benefits
Assess current benefits to see where improvements
needed or new ones need to be added
Selecting & evaluating benefits is the 1st step in
translating goals and objectives of a benefit program
Organizations have some choices in benefits they offer
There are benefits as required by legislation
There are customary benefits common to almost all
organization and
There are benefits those can make benefit package
unique
5. Selecting Benefits -
Legislation
Social legislation requires that employer make
expenditures for health & safety of employees
Insurance to be made to indemnify employee’s loss of
income from illness, injury, unemployment & old age
Law also requires how organization will develop &
operate specific benefits, like retirement plans
These expenditures are to be incurred, whether
employer wants to incur it or not and whether employee
desires the benefit or not
Legally required benefits currently cost employers in
excess of 10% of payroll cost
6. Selecting Benefits
Assessing Competition
• knowing what benefits other employers are offering
Organizational Benefit Plan Analysis
• comparison of benefits offered currently with needs &
preferences of employees
Organizational Financial Analysis
• comparison between direct wages & benefits including
its cost and employee need and
• employer's ability to pay
7.
8. Selecting Benefits
Collective Bargaining and Benefits
• through collective bargaining employees receive the
benefits they want and
• unions are motivated to convince employees about the
value of benefits bargained for
Who Should Receive Benefits
• part time employees/dependents of employees/retired
employees/survivors of deceased employees
Employee Choice in Benefits
• each person to decide what benefits to include & how
much to allocate for each, as per flexible benefit plans
9. Flexible Benefit Plans
Mix and Match Plans
• employee is offered an amount based on salary, seniority
& age and he can choose from various benefit options
Modular Plans
• Organization offers various optional benefit programs
and employee can choose those which best fits his needs
Core-Plus-Option Plans have two parts
• core part provides health and retirement benefits to all
employees &
• Optional part provides various benefits - employee can
choose from
10. Flexible Benefit Plans
Pre-tax Salary Reduction Plans
Permits employees to set aside a portion of wages each
year on a pre-tax basis to pay for qualified expenses
There are two major types of plans:
• Flexible spending Accounts
- allows employee to pay for expenses, such as, medical
expenses, reducing employee's gross income
• Premium-Only Plans
- allows employee to pay for insurance premiums
11. Reducing Costs of Benefits
Health Plans
• Changing an insurance plan to a Preferred Provider
can reduce costs
Time Off
• holidays can be adjusted if organization grants holidays
those are not required by law
Retirement
• changing defined benefit plans to defined contribution
plans
12. Cost Sharing
Health Plans
• employees to pay a part of their monthly health
insurance premiums
Time Off
• pay only a portion of salary for certain types of time
off or share costs with an insurance plan, as in
disability
Retirement
• all types of retirement plans can be made
contributory on the part of the employee
13. Reducing Administrative Cost
Health plans can contain 3 features that help in controlling
costs
• Wellness Programs
- programs are intended to reduce future medical claims by
keeping employees healthy
• Utilization Reviews
- reviews evaluate frequency of employee usage and quality of
service received
• Case Management
• Overseeing the expenses of illnesses which add up very rapidly
and balancing care and cost
Outsourcing the Benefits Function to reduce and control
operating costs
14. Monitoring Benefits
Organization keeps careful track of what is happening
both externally & internally
Needs & preferences of employees likely to change due
to change in organization's work force
Surveying employee needs and preferences should be a
continuing exercise and not a one-time project
Organization can not monitor change in costs of benefits
provided by outside Insurance Companies
Hence, organizations are developing alternative ways of
providing the benefits to employees at lower/stable cost