Benefit Cost Analysis | Employee Benefits | Welfare

Benefit Cost Analysis

Sridhar Varadharajan – 09020241047 Vishal Singla – 09020241048

Benefit Costs

Cost incurred by an organization towards the welfare programs of its employees. it eats into a large part of the company’s profit margins. costs should be managed effectively by the company so as to maintain a profitable business.

Today 


Overview of Benefits to employee
Employee Benefits Employee Benefits
Mandatory Mandatory Voluntary Voluntary

Provident Fund Provident Fund

Gratuity Gratuity

Life Life Insurance Insurance

Leave Leave Encashment Encashment SuperSuperannuation annuation

Personal Personal Accident Accident

Mediclaim Mediclaim

Common Benefit Costs

Uncommon Benefit Costs

Benefit Costs : Trend

Indian Scenario

As per the study by the Watson Wyatt India :
Average 10% rise in the premium over last 3 Years. 58 per cent of the companies did not deduct any premium costs out of employee salaries. 46 per cent did not plan to share the costs with the employees even in the coming year

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Source: Business Line Dec. 30 2009 Edition  DNA News Daily Dec. 28 2009 Edition

Indian Scenario Cont…

40% of Indian companies consider health care cover as a value differentiator for employees. use it in the hiring and retention strategy. 17% of the companies cover post retirement medical expenditure. of the companies are stressing on employee education around health care.

  Companies

  74%

Means of Controlling Benefit Cost

Cost sharing
 All employees contribute to the cost of their benefits  Cost sharing is an increasingly popular method used by

companies.  It includes sharing the costs of the benefits with the employees

Co pays, deductibles and lifetime limits
 Co pays are the flat amount paid by the employee at

• •

the time of medical service or while receiving medication  A deductible is a fixed amount of money you have to pay before most, if not all, of the policy's benefits can be enjoyed.

Means of Controlling Benefit Cost

Changing to a tiered prescription drug program
 Cost sharing by employees increases if they use a

brand name drug  It decreases if they choose formulary or generic drug

Means of Controlling Benefit Cost
 Enhancement

of Voluntary benefit


 Setting

up of Flexible spending accounts

 Win-win situation for both employees and

employers  As it encompasses non-taxation of the amount spent on medical or childcare expenses •
 Other

measures include

 Preventive health care programs  Employee education programs

Means of Controlling Benefit Cost
 Different


cost reduction methods depend

 Company size  More effectively employed by smaller companies  Type of industry

 Areas

to be considered for more effective control of health care costs
 Generating greater use of generic drugs  Minimizing number of visits to the infirmary  Identifying chronic conditions for developing

more cost effective disease management programs

Means of Controlling Benefit Cost

  

Essential for employers to obtain in depth data about the drug costs, usage rate and health risks posed to their employees enables systematic benefits planning process companies also utilizing employee surveys to redesign their benefits package. needs to be provided to employees highlighting the reasons why companies cannot absorb the entire benefit cost of the employee

 This

 Many

 Education

Means of Controlling Benefit Cost

a culture of wellness is essential for reducing the benefit costs of the organization

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