Assignment: Benefits and Services

Subject: Human Resource Management

Submitted To: Mr. Mohammad

Submitted By: Sadaqat Khan (2547)
Class: BBA (H.O.N.S)
th
5 Semester, section-A
Student ID: 2547
Date: Feb/20/2010

Qurtuba University
Of Science & Information Technology
Peshawar Campus

Prepared By Sadaqat Khan

Employee Benefits and Services
Compensation
“The purpose of compensation is to attract, motivate & maintain employees.”
Total compensation consists of direct and indirect compensation & the components of
total compensation are following:-

Indirect Security, safety & health (Legally mandated Benefits)

Compensation Benefits & Services (“Fringe” Benefits)
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Direct Incentives & Gain Sharing (Pay for Performance)
Compensation Compensation Management (Base wages & salaries)

Benefits and Services are called indirect compensation & are also known as ( Fringe
benefits and Perks).Perks is something in addition to the payment like car fuel &
clothing. Whereas fringe means marginal or at the edge of pay because they were
neglected in the past but now they are simply known as “benefits and services” as it has
gained a lot of importance.
Example:-
Indirect Compensation accounts for nearly 40% of the average firms
compensation costs in the USA & even more in other European countries.

Benefits and services are used to persuade or motivate employees and are not linked with
the employee’s performance. It includes any benefits that the employee receives in
addition to their total direct remuneration which increase their wealth or well-being at
some cost of the employer.

The Role of Indirect Compensation

Societal Objectives:-
To help & provide security & benefits to lower the burden on society when ill
health, retirement or death occurs.

Organizational Objectives:-
The main objective is to recruit & retain workers.
 Reduce fatigue.
 Aid recruitment.
 Minimize overtime cost
 Reduce Turnover
 Boosting Employee morale etc….

Employee Objectives:-
The main objective of employee is that these benefits & services are provided at
lower cost & its availability.
The objectives of society, organization & employees have encouraged rapid growth of
benefits & services.

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Major Types of Benefits
Following are the major types of Benefits:-
1) Insurance Benefits.
2) Security Benefits.
3) Time-off Benefits.
4) Work Scheduling Benefits.

1. Insurance Benefits:-
The financial risks encountered by employees & their families
can be spread by insurance. These risks are shared when funds are pooled in the form
of insurance premiums. Then when insured risk occurs, the covered employees or
there families are compensated.
It may be defined as a contract or agreement between two parties by which one of
them (called insurer) agrees to indemnify the other (called insured) against a loss
which may occur to other (insured) on the happening of some event. The agreement
or contract is put in writing & is known as “Insurance Policy.”

Following are the main types of insurance

1) Health-Related Insurance:-
2) Life Insurance:-
3) Disability Insurance:-

1. Health-Related Insurance:-
In which employers provide payments for health insurance.
a) Medical Insurance:-
Medical insurance pays for sickness accident & hospitalization expenses up to
the dollar limits (not less than or high up to) or “policy ceiling” of the policy.
Most policies contain a schedule of benefits. This schedule sets forth which sickness,
accident or hospitalization cost are covered & how much of the expenses will be paid.
Medical insurance may contain:-
• Deductible Clause:-
Deductible clause requires the covered employee to pay a specified amount
(usually 200$ to 300$ or more) before insurer is obligated to pay.
• A coinsurance clause:-
A coinsurance clause requires the employee to pay a percentage of the
medical expenses.(typically 20% of the expenses)

b) Managed Care:-
It is a health maintenance act of 1973 in which firms with more than 25 or
more employee’s health maintenance organization.
1. Health maintenance Organization (HMOs):-
Provide their own doctors & facilities where members receive services from those
employed by HMO.
2. Preferred Provider Organizations (PPOs):-
Allows subscribers to select doctors & hospitals from an approved list.

c) Vision Insurance:-

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 Vision insurance provides vision care or vision correction
which includes examination and eye glasses.
d) Dental Insurance:-
As the name amplifies insurance policies which deal with dental problems.
e) Mental Health Insurance:-
Mental health insurance pays for psychiatric care & counseling (guiding).

2. Life Insurance:-
Firstly “burial policies” were introduced to help to cover funeral expenses but
life insurance means to protect the family from the loss of the worker’s income. Life
insurance is designed to cover the death & offers financial protection to the
dependents (family) incase of death of the insured.
Life insurance is defined as “a contract where by the insurer in consideration of a
premium paid in lump sum or in periodic installments undertakes to pay a specified
sum either on the death of the insured or on the expiry of specified number of years in
the policy.”

3. Disability Insurance:-
Disability insurances are meant to compensate employees if they become
disable or they are unable to work.
Disability insurances may be either for short term or long term disabilities:-
1) Short Term Disability (STD):
Providing a partial replacement of wages & salaries for up to six months or year.
I.e. For accident & sickness or payment for pregnant women.

2) Long-Term Disability (LTD):

When a worker is unable to work for a prolonged period (more than 1 year),
most companies provide some form of LTD insurances. In which they pay only (50%
to 60%) of his/her wages or salary.

3. Security Benefits:-
Following are some ways to provide security benefits to the employees:-
1) Employment Income security:-
The loss of a job holds potentially severe economic consequences for an
employee which can be solved by employer provided benefits, like
 Severance Pay:-
These benefits entitle the worker to pay a lump-sum payment at the time of
separation from the company.
 Golden Parachutes:-
It is an agreement by a company to compensate executives with bonuses &
benefits, if they are displaced by merger or acquisition.

2) Retirement Security:-
Retirement plans are designed to reward long-service employees.
Developing a Retirement plan:
For the purpose of developing a retirement plan some
important questions must answered:-
Q: Who develops retirement plan? Answer is HR Department.
Q: Who will pay for it? Answer is that it depends on HR Plans followed:-

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 1. Non-Contributory Plan:-
The employer pays the entire amount.
2. Contributory plan:-
Contributory plan requires both employee and employer to contribute.
Q: When the pension rights will vest (when employee becomes eligible)?
Ans: Pension rights usually vest after several years of service.
Q: How will firm meet its financial obligations?
Ans: Most companies pay pension out of current income when employees retire.

Other Retirement Benefits

a) Early Retirement:-
It allows worker to retire before the traditional retirement age of 65.
Benefits are normally reduced due to his less contribution towards organization.

b) Retirement counseling:-
The primary purpose of pre-retirement counseling is to encourage an employee to
plan for retirement emotionally & financially.

3. Time-Off Benefits:-
These benefits provide rest from the physical and mental effort of a job to
increase employee productivity.
Time-Off benefits include:-

1) On the Job Breaks:-

The most common form of time-off benefits are breaks during the working hours.
I.e. Rest breaks, Meal breaks, Tea Beaks & wash up time etc……

2) Sick days and Well Pay:-

Some absences from the work are unavoidable. Today most companies pay
workers when they are absent for medical reasons by granting a limited no.
Of sick days per year.
Payment for unused sick leave is sometimes called “Well Pay” which may
serve as an incentive for attendance.

3) Holidays and Vacation:-

Holidays: Time-benefits can be offered to employees inform of holidays who
meet productivity or other goal.
Vacations: Vacations are usually based on the employee’s length of service.
I.e. 1 week = 1 year of service & 2 weeks = 2 years of service.

4) Leaves of Absence:-
Leaves of absence are often granted for pregnancy, extended illness, funeral
service and accidents and other reasons in a company HR Policies.
Extended Leaves…………Given without pay.
Shorter Leaves…………...Granted with pay.

5) Family and Medical leave Act 1993:-

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 Firms with more than 50 employees are legally bound in which
workers are entitled to 12 weeks (2.7months) of unpaid leave during any 12
months of the year.

Example:-
• Employees are entitled to a leave to take care of baby including birth, adoption &
placement of child in foster care. <Or>
• Employees in serious health condition & are unable to work or when there is a
need for the employee to take care of spouse, parent or children with a serious
health condition.

4. Work scheduling Benefits:-

Scheduling means to create time table & Work scheduling means to create time
table where u can allocate exact amount of work to employees.
Following are different types of work scheduling benefits offered to employees:-
1) Shorter work times:-
2) Flex time:-
3) Job Sharing:-
1) Shorter Work Times:-
Shorter workdays & work weeks are new ways to increase employee productivity.
A shorter work week compresses forty hours of work less than 5 full days
(8hurs/day) and some may plan even shorten the work week less than 40 hours
i.e.37.5 or even 35 hours per 5 day week.
One version has been 40 hours of work compressed into 4 days. (10hours/day).

2) Flextime:- (Flex = Flexibility)

Flextime eliminates rigid starting & ending times for the workday, Instead
employees are allowed to report to work at any time during a range of hours
called “Core Hours”
For example:-
Starting time may be from 7:00 AM to 9:00 AM with all employees expected to
work the core hours of 9:00 AM to 3:00 PM.

3) Job Sharing:-
“Job sharing involves one or more employees doing the same job but working
different hours, days or even weeks.”
Mostly two people handle the duties of one full-time job.
Example: - General example of Doctors / Nurses Shifting Duties etc…….

Major Types of Services:-

Some companies go beyond pay and traditional benefits & provide services to
their employees. The most common ones are Educational, Financial & Social services:-

1) Educational Assistance:-
These programs are especially designed for employees for furthering their
education but may be limited to courses that are related to an employees job.

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 2) Financial Services:-
Financial services can be offered to employees in the form of “Discount Plan”
which allow workers to buy products from the company at a discount.
Example:-
Discount plans are common among retailer Stores & consumer goods Manufacturers.

3) Social Services:-
A wide range of services are provided by employers as they adapt to a
changing & diverse work force.
At one Extreme are simple interest groups such as Cricket Teams, Bowling Leagues etc.
At the other extreme are comprehensive employee assistance programs (EAPs) designed
to help employees with personal problem ranging from drug & alcohol issues to other
family problems dealing with employees. Such as given below……..

a) Child Care:-
Programs are offered to working mothers to look after and or to take
care of children.

b) Elder Care:-
Elderly (old) presents a special problem because of limited day care options
available to their working children.

c) Relocation Programs:-
It includes payment for moving expenses to new location, To reduce stress of
the employees.

d) Social Service Leave Program:-

Social service leave provides fully paid leaves to employees who wish to work
full-time in a community program.

References:-

• Adopted from.” Human Resources and Personnel Management” Keith Davis 5th Edition.
• http://encyclopedia.farlex.com/Fringe+benefits
• http://www.scribd.com/search?cat=redesign&q=fringe+benefits
• http://search.babylon.com/web/fringe%20benefits?babsrc=client
• http://en.wikipedia.org/wiki/Employee_benefit

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Prepared By Sadaqat Khan