Employee Benefits

Chapter 10Krista Uggerslev, NAIT

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 Learning Objectives
1. Describe the objectives of providing benefits to employees.
2. Explain how government furthers employee security and
which major Canadian laws relate to it.
3. Discuss the types of benefits organizations may provide to
their employees.
4. Discuss the major types of pension plans.
5. Discuss flexible benefit packages and emerging employee
assistance programs.
6. Describe the costs of employee benefits and ways to control
them.
7. Explain the implications of employee benefits for HR.

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 Benefits and Corporate Strategy
Direct Pay
Compensation Based on critical job factors or
(Chapter 9) performance

Indirect Benefits and services extended as a

Compensation condition of employment
(Chapter 10) Not directly related to performance
Approaching 25 to 40% of annual
payroll expenses

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 The Role of Benefits: Societal
Objectives
To solve social problems and provide security for
interdependent wage earners
Employers can deduct the costs of benefits as a
business expense
Employees receive most benefits tax-free
Benefits and services give many employees financial
security against illness, disability, and retirement

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The Role of Benefits: Organizational
Objectives
Must offer benefits to recruit and retain
Help reduce fatigue and may enhance productivity
(e.g., rest breaks, vacations)
Discourage labour unrest
Satisfy employee objectives
Aid recruitment and reduce turnover
Minimize overtime cost

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 The Role of Benefits: Employee
Objectives
Lower costs and availability
Lower income taxes
Partial protection from inflation
Primary objective may be to obtain benefits and
services (e.g., supplemental health and life insurance)

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 Legally Required and Voluntary
Benefits
Legally Required Voluntary
CPP/QPP
Employment Insurance
Workers’ Compensation
Health Insurance Plans
Holidays & Vacations
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Life & Health Insurance
Disability Insurance
Salary Continuation
Retirement Security
Paid Time-Off Benefits
Employee Services
 Voluntary Benefits: Insurance
Insurance Benefits
.

Life insurance – almost a universal benefit

Health-related insurance
Supplemental health coverage for prescriptions,
dental care, paramedical, ambulance services, vision
care, travel insurance, etc.
Disability insurance
Salary continuation for short-term and long-term
disability

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 Voluntary Benefits: Income
Security Benefits
Employee Security Benefits
.

Employment income security

Severance
Guaranteed Annual Wage (GAW)
Supplemental Unemployment Benefits (SUB)

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 Voluntary Benefits: Retirement
Security
.

Registered Pension Plans (RPP)

Defined Benefits (DB) Plans
A plan whose benefits are defined by a formula based on age and length
of service, with the employer assuming responsibility for funding
Defined Contribution (DC) Plans
Two problems administering pension plans:
If employers go out of business – plan is left unfunded
Some companies minimize their pension costs by having very long vesting
(right to pension after as determined number of years) periods
Pension Benefits Standards Act (Federally regulated pension plans
in industries under government jurisdiction)
Group RRSPs
Tax Free Savings Accounts

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 Voluntary Benefits: Paid Time-Off
.

On-the-job breaks (e.g., rest breaks, meal breaks)

Paid sick leave
Holidays and vacations

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 Voluntary Benefits: Employee Services
.

Educational assistance (e.g., tuition refund)

Financial services (e.g., employee discount plans)
Social services
Employee Assistance Programs (EAPs)
Relocation programs
Caregiver programs

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 Flexible Benefits
Traditional benefit plans were “one size fits all”
E.g., pension and maternity benefits were given to all employees
Flexible benefits programs allow employees to select
benefits and services to match their needs, cafeteria style
Workers are provided a benefit and services account with a
specified number of dollars in the account.
Additional administrative cost, but increased employee
participation

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 Flexible Benefits Example
Worker A Worker B
27, married woman with 56, married male. Spouse
one child. Partner in does not have a benefit
graduate school. package.
Paramedical services $1,000 $1,500
(massage, physio, chiro,
etc.)
Dental care  890 1,090
Extended health care  1,035 760
(e.g., prescription drug
coverage, out-of-
province)
Optional life insurance  235 300
($100,000)
Spousal life insurance  250 0
($50,000)
Long-term disability  300 0
insurance
Short-term disability   1,270 305
insurance
Accidental
© death
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Schwind 13th Edition, Figure 10-3 200
 Emerging Services
Health
Benefits for Spending
Buy More
Part-Time Account
Vacation
Emerging
Same-Sex Services & Trends Wellness
Benefits Accounts

Child & Concierge

Elder Services
Paid Leaves
Care
e.g.
Education
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 Management of Voluntary Benefit
and Service Programs
Administration complexity of increasingly complex
benefit packages
.

Eased by web administration and health plan providers (e.g., Blue

Cross Canada)
Communication of benefits to workers has been a
challenge
.

Employees want more benefits, but are often unaware of

the benefits already provided

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 Implications for HRM
Comply with all legal requirements and
maintain accurate employee records
Avoid duplication
Reducing accidents to lower the cost of
workers’ compensation
To control ballooning costs, consider
cost/benefit of each type of benefit offered
along with coverage rates (e.g., prescriptions costs at
80% rather than 100%, 30-day maximums for travel
insurance, maximums for paramedical coverage)

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 Implications for HRM cont’d

Retention of key employees

.

Innovative and flexible benefits are very effective tools to

attract and retain highly skilled staff
Benefit audit to examine claims and trends:
.

Identify opportunities for savings

Ensure insurers and third-parties are effective
Exert effective control over benefits area
Identify who is in control of benefits budget
Compare claiming patterns to other employers

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 Tax Application to Benefits
Generally, GST has to be paid on the following
benefits:
.

Company cars
Car operating costs
Tax return preparation
Short-term residential accommodation
Holiday trips within continental North America
Frequent flyer points
Financial counselling
Parking

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 Benefits & Strategy Implications
To ensure benefits are leading to desired
organizational outcomes:
.

Define the objectives of the organization

Link HR and organizational objectives
Assess the needs of employees
Assess and comply with legal requirements
Compare company’s benefits with competitors
Make sure benefits are valued by employees
Conduct an annual benefit audit

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 Employee Benefits Summary
10
After mastering this chapter content, you should be able to:
1. Describe the objectives of providing benefits to employees.
2. Explain how government furthers employee security and which major
Canadian laws relate to it.
3. Discuss the types of benefits organizations may provide to their
employees.
4. Discuss the major types of pension plans.
5. Discuss flexible benefit packages and emerging employee assistance
programs.
6. Describe the costs of employee benefits and ways to control them.
7. Explain the implications of employee benefits for HR.

© 2022 McGraw-Hill Education Ltd.