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Employees should take part in the

ADMINISTRATION administration of certain benefit
Definition 7. Employees must be made aware of the
♦In the past was called fringe benefits cost of the benefits. – The employees
will be aware of the costs involved and
♦Primarily the in-kind payments employees appreciate management’s efforts to
receive in addition to payments in the form of promote their welfare. With the
money employees sharing in the costs, it is
possible to adjust assessments in
♦Employee benefits are those compensation relation to the benefits received, thereby
components made available to employees that minimizing favoritism.
provide (1) protection in case of health and 8. Employee benefits and services must
accident-related problems and (2) income at suit employee needs and preferences in
some future date or occasion (upon retirement, order to provide maximum incentives.
termination of employment, or meeting of
certain objective criteria). Reasons for Granting Benefits
♦Employee services are compensation 1. Provision for the need of employees.
components that contribute to the welfare of the 2. Meeting union demands.
employee by filling some kind of demand. These 3. Maintaining the worker’s living
services usually enable the employee to enjoy a standards.
better lifestyle or to meet social or personal 4. Management’s willingness to grant
obligations while minimizing the employment- benefits.
related costs 5. Increased government regulation of
business and industry.
Principles Governing Benefits 6. Boosting employee morale.
1. The benefit should have mutual value to 7. Effects of WWII.
the employer and the employee. – 8. Effects of inflation and other economic
Whenever the employer spends an causes.
amount for benefits, he should receive 9. To attract and retain employees.
something of value in return.
2. The benefit should not interfere with the Why the Growth in Employee Benefits
operation of the business. ♦Wage and Price Controls
3. The cost of the benefit must be
calculable and its financing within the ♦Unions
capacity of the firm.
4. The benefit must be capable of being ♦Employer Impetus
uniformly and equitably administered. – ♦Cost effectiveness of benefits
The rules and procedures followed in
administering benefits should be ♦Government Impetus
uniform and equitable to all to prevent
discrimination or abuse. A poorly Benefits Administration Issues
administered benefit program can be a
source of serious employer-employee
♦Who should be protected or benefited?
relations’ problem and a drain on ♦How much choice should employees have
company finances as well. among an array of benefits?
5. Benefits should be based on something
measurable. – The conditions and ♦How should benefits be financed?
requirements for the grant of any
benefit should be made clear and Advantages of Flexible Benefit Programs
preferably in writing to avoid any •Employees choose packages that best satisfy
misunderstanding and to facilitate its their unique needs.
administration. •Flexible benefits help firms meet the changing
needs of a changing workforce.
•Increased involvement of employees and Planning
families improves understanding of benefits. ♦Key Issues that must be addressed:
•Flexible plans make introduction of new –Business Objectives
benefits less costly. The new option is added •Organization’s HRM philosophy
merely as one among a wide variety of elements
from which to choose. •Organization’s strategic business plan
•Cost containment: Organization sets dollar –Work Force Characteristics
maximum. Employee chooses within that –Competition
constraint. –Cost
–Cost Containment
Disadvantages of Flexible Benefit Programs
–Probationary Periods
–Benefits limitations
•Employees make bad choices and find
themselves not covered for predictable –Co-pay
emergencies. –Administrative cost
•Administrative burdens and expenses increase. containment
•Adverse selection. Employees pick only –Total Compensation Strategy
benefits they will use. The subsequent high
benefit utilization increases its cost.
♦involves putting the program into operation
•Subject to nondiscrimination requirements in
and outlining the necessary policies and
Section 125 of the Internal Revenue Code.
Factors Influencing Choice of Benefits ♦Employee Benefits Communication
Package –Employee benefits handbook
Employer Preferences –Benefits statement
–In-house benefits consultant
♦Relationship to Total Compensation Costs –Ad hoc employee meetings
♦Costs Relative to Benefits –Notices

♦Competitor Offerings Management

♦Role of Benefits in Attraction -it must be continuously managed to ensure that
it meets the organization’s needs
♦Legal Requirements -Through the use of audits and budgets,
♦Absolute and Relative Compensation Costs compensation managers can determine just how
effective the program really is
Employee Preferences
Categorization of Employee Benefits
♦Personal Needs of Employees 1. Legally required payments (employers’ share
Benefits Administration a.Old-age, survivors, disability, and health
insurance (employer FICA taxes) and railroad
♦Human Resource Department retirement tax
–HR director (and perhaps the compensation b.Unemployment compensation
manager) administers the firm’s compensation c.Workers’ compensation (including estimated
program cost of self-insured)
d.State sickness benefits insurance
–The Personnel, in conjunction with top
management, formulates compensation policies,
2. Retirement and savings plan payments
conducts wage surveys to find prevailing wage
(employers’ share only)
rates, implements job evaluation programs to
a. Defined benefit pension plan
determine the comparable worth of each job in
contributions (401K type)
the firm, and chooses the benefit packages for
b. Defined contribution plan payments
the firm’s employees
c. Profit sharing
d. Stock bonus and employee stock –Marriage leave
ownership plans (ESOP) –Paternity leave
e. Pension plan premiums (net) under –Maternity leave
insurance and annuity contracts (insured –Sick leave
and trusted) –Wellness leave
f. Administrative and other costs –Time off to vote
3. Life insurance and death benefits (employers’ –Blood donation
share only) –Grievance and contract negotiations
4. Medical and medical –related benefit –Lunch, rest and wash-up periods
payments (employers’ share only) Other Services
a. Hospital, surgical, medical, and major –Charitable Contributions
medical insurance premiums (net) –Counseling
b. Retiree hospital, surgical, medical, and –Tax preparation
major medical insurance premiums –Education subsidies
(net) –Child adoption
c. Short-term disability, sickness or –Child care
accident insurance (company plan or –Elderly care
insured plan) –Subsidized food service
d. Long-term disability or wage –Discounts on merchandise
continuation (insured, self- –Physical awareness and fitness programs
administered, or trust) –Social and recreational opportunities
e. Dental insurance premiums –Parking
f. Other (vision care, physical and mental –Transpoortation to and from work
fitness benefits for former employees) –Travel expenses
5. Paid rest periods, coffee breaks, lunch periods, –Clothing reimbursement/allowance
wash-up time, travel time, clothes-change time, –Tool reimbursement/allowance
get-ready time, etc. –Relocation expenses
6. Payments for time not worked –Emergency loans
a. Payments for or in lieu of vacations –Credit union
b. Payments for or in lieu of holidays –Housing
c. Sick leave pay
d. Parental leave (maternity and paternity Top Ten Companies in Employee Benefits
leave payments) •Philip Morris
e. Other
•Procter & Gamble
7. Miscellaneous benefit payments
a. Discounts on good and services •XEROX
purchased from company by employers •Intel
b. Employee meals furnished by company •TIAA_CREF
c. Employee education expenditures •Dell Computer
d. Child care
e. Other •Chevron
Employee Services •BellSouth
♦Pay for Time Not Worked •Duke Energy
–Vacations Example
–Jury Duty
–Election Official
♦Philip Morris
–Witness in court ♦Headquarters: New York City
–Civic duty ♦Industry: Tobacco
–Military duty
–Funeral leave ♦US Employees: 57,000
–Personal leave
–Sabbatical leave ♦Retirement Plans
–Illness in the family leave
–Outstanding profit-sharing plan, including
annual contributions equal to 13 percent to 15 ♦Tax-exempt system aimed at providing
percent of an employee’s pay. Employees may meaningful protection to its members and their
contribute an additional 8 percent of their salary beneficiaries against the hazards of disability,
into a tax-deferred savings plan. A traditional sickness, maternity, old age, death and other
pension plan is offered. contingencies resulting in loss of income or
♦Health Care financial burden.

–Philip Morris employees receive family health ♦Compulsory to all employees not over sixty
coverage: $77 for fee-for-service, HMO, and years of age and their employers
POS plans. There is a staff ombudsman available ♦Social Security Law of 1997
to assist employees in resolving problems with
health care providers. An employer-sponsored
health plan is offered for retirees.
♦Special Features Medicare

–The company offers free life insurance with ♦Health insurance program for SSS members
death benefit equal to twice the employee’s and their dependents who get sick and injured
annual salary, with no cap. Top and middle and require hospitalization.
managers are granted stock options. ♦Every employer is also required to pay
monthly contributions and to deduct or withhold
The Labor Code of the Philippines from the employee’s monthly compensation his
♦Book Four: Health, Safety and Social Welfare or her contribution
♦Title II Employees Compensation and State
Employees Compensation Program
Insurance Fund
♦Chapter V Medical Benefits ♦Aims to assist workers who suffer work
connected sickness or injury resulting in
–Art. 185 Medical Services disability or death
–Art. 186 Liability
–Art. 188 Refusal of examination or treatments ♦Coverage in the EC Program is compulsory
for all employers and employees (a) not over 60
–Art. 189 Fees and other charges
yrs of age, and (b) an employee over 60 yrs of
–Art. 190 Rehabilitation Services age if he/she has been paying contributions to the
♦Chapter VI Disability Benefits SSS prior to age 60 and has not been
compulsorily retired
–Art. 191. Temporary total disability
–Art. 192 Permanent total disability PAG-IBIG Fund
–Art. 193 Permanent partial disability ♦Home Development Mutual Fund
♦Chapter VII Death Benefits ♦Mandatory upon all employees covered by the
–Art. 194 Death SSS
•(d) Funeral Benefit
♦Title III Medicare Sources:
–Art. 209 Medical Care The Labor Code of the Philippines 2004 Edition
♦Title IV Adult Education
Milkovich, George T. and Jerry M. Newman.
–Art. 210 Adult Education 2002. Compensation.7th Edition. New York:
♦Apendix XX McGraw-Hill Companies Inc.
–XI Maternity Benefits Henderson, Richard I.1997. Compensation
management in a knowledge-based world.7th
Social Security System
Edition. New Jersey: Prentice-Hall Inc.
Javier, Nancy Joan M. 2000.Tourism Laws:
Focus on the Philippines.Quezon City: Lex
Tourismo Publications