Read the case “Time Off At Superior Software Services” on pages 223-224 and answer the following questions from a third person consultant point-of-view. 1. Do you think changing Superior’s time off policies will decrease unscheduled time off? 500 words with 4 scholarly references 2. Beyond reducing occurrences of unscheduled time off are there any other benefits to offering PTO? 500 words with 4 scholarly references 3. Are there any disadvantages to offering PTO? 500 words with 4 scholarly references EMPLOYEE BENEFITS Where We Are Now: IV H PART III, DESIGNING COMPENSATION SYSTEMS, explained the concepts and methods I to build compensation systems that meet important goals G of compensation profession- G and recognition of employee als, including internal consistency, market competitiveness, S We do know that employee contributions. Our focus was on core compensation issues. benefits represent an important component of total, compensation. Now we turn to                            ! A N G E L A also give attention to designing and planning the benefits program in the discretionary benefits chapter. In PART IV, WE WILL COVER Chapter 9 DISCRETIONARY BENEFITS Chapter 10 LEGALLY REQUIRED BENEFITS ISBN 1-323-59381-0 1 1 0 MyManagementLab® 8 You can access the CompAnalysis Software to complete the online Building Strategic T Compensation Systems Project by logging into www.mymanagementlab.com. S 201 Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 9 Discretionary Benefits Learning Objectives H I 9-1. Discuss the origins of discretionary benefits. G discretionary benefits. 9-2. Explain the three categories of G 9-3. Summarize legislation that pertains to discretionary benefits. S 9-4. Discuss the fundamentals of designing and planning the benefits program. 9-5. Explain the benefits and costs, of discretionary benefits. When you finish studying this chapter, you should be able to: A N CHAPTER WARM-UP! G If your professor has assigned this, go to the Assignments section of mymanagementlab.com E and see what you already know. After reading the to complete the Chapter Warm-Up! chapter, you’ll have a chance toL take the Chapter Quiz! and see what you’ve learned. A Today, discretionary benefits represent a significant cost to companies. In 2014, on average, companies spent nearly $15,000 per employee.1 For the same period, discretionary benefits 1 accounted for nearly 23 percent of employers’ total payroll costs. As the term implies, discretionary1benefits are offered at the will of company management. Discretionary benefits fall into three broad categories: protection programs, paid time off, and 0 services. Protection programs provide family benefits, promote wellness, and guard against 8 factors as disability, serious illness, or death. Retirement income loss caused by such catastrophic plans assist employees to accumulate wealth T as an income source throughout retirement. Paid time off, not surprisingly, provides employees time off with pay for such events as vacations. Services provide such enhancements as tuitionSreimbursement and day care assistance to employees and their families. 9-1. Discuss the origins of discretionary benefits. ORIGINS OF DISCRETIONARY BENEFITS 202 Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 In the past several decades, firms have offered a tremendous number of both legally required and discretionary benefits. In Chapter 10, we will discuss how the growth in legally required benefits from a select body of federal and state legislation developed out of social welfare philosophies. Quite different from these reasons are several factors that have contributed to the rise in discretionary benefits.  _ 203 F N K The rise of retirement plans, in particular, pension plans, appeared as one of the first signs in the use of discretionary benefits. According to the Employee Benefit Research Institute,2 the first pension plan in the United States was established in 1759 to benefit widows and children of Presbyterian ministers. In 1875, the American Express Company established a formal pension plan. From that point until World War II, pension plans were adopted primarily in the railroad, banking, and public utility industries. The most significant growth occurred after the favorable tax treatment of pensions was established through the passage of the Revenue Act of 1921, and government-imposed wage increase controls during World War II in the early 1940s led more companies to adopt discretionary employee benefits. Because of the government-imposed wage freezes, companies invested in expanded discretionary benefits offerings as an alternative to pay hikes as a motivational tool. As a result, many companies began to offer welfare practices. Welfare practices were “anything for the comfort and improvement, intellectual or social, of the employees, over and above wages paid, which is not a necessity of the industry nor required by law.”3 Moreover, companies offered employees H welfare benefits to promote good management and to enhance worker productivity. I The opportunities for employees through welfare practices varied. For example, some employers offered libraries and recreational areas, and others G provided financial assistance for education, home purchases, and home improvements. In addition, employers’ sponsorships of G medical insurance coverage became common, which, until the Patient Protection and Affordable S Care Act of 2010, was made on a discretionary basis. Quite apart from the benevolence of employers, employee , unions also directly contributed to the increase in employee welfare practices through the National Labor Relations Act of 1935 (NLRA), which legitimized bargaining for employee benefits. Even today, union workers tend to have greater access to discretionary benefits than do nonunion A employees.4 Table 9-1 illustrates some of the differences in particular benefits between nonunion and union employees as well as N by major occupational groups, and full- and part-time work status. G benefits offerings in nonunion Unions also indirectly contributed to the rise in discretionary settings. As we discussed in Chapter 2, nonunion companies E often fashion their employment practices after union companies as a tactic to minimize the chance that their employees will seek L union representation5 and may offer their employees benefits that are comparable to the benefits A received by employees in union shops. ISBN 1-323-59381-0 TABLE 9-1 Percentage of Workers with Access to1Selected Employee Benefits in Private Industry: March 2014 Worker Characteristics Vacation @ Leave Total Management occupations Production, transportation, and material-moving occupations Service occupations Full-time Part-time Union Nonunion 77 88 82 61 82 56 55 91 35 91 75 40 74 24 70 60 1 0 Retirement Plans8 65 T 80 S EmployeeAssistance Plans &ƒ" %& 22ƒ" Child Care Wellness Programs 0 Workplace 70 54 54 49 11 17 5 39 54 32 6 17 5 38 74 37 92 62 38 59 38 77 50 8 12 6 16 10 24 43 25 50 37 8 12 6 16 10 Source: Based on U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 204   >N K Through many decades, discretionary benefit offerings were based on a relatively homogenous workforce, characterized by males who were the sole bread winners and provided for their wives and children. In recent decades, the labor force has become more diverse in terms of age, gender, race, ethnicity, and definition of families based on same-sex civil unions and marriage.6 Increasing diversity has given rise to flexible benefit plans, which we discuss later in this chapter. According to the U.S. Bureau of Labor Statistics, labor force diversity will continue to increase. A standardized, one-size-fits-all employer-sponsored benefits program is most effective when the workforce is relatively similar in terms of needs and preferences. For example, let’s assume a company’s workforce has 60 percent women and 40 percent men. Most of the women are of child-bearing age and most of the men range in age between their 50s and 60s. One could reasonably expect that there will be substantial differences in the needs and preferences for benefits. Chances are that most of the women in this example may place a high value on day care benefits while most of the men will not have a need for such benefits because their children are likely to be near or at adulthood. 9-2. Explain the three categories of discretionary benefits. H I G CATEGORIES OF DISCRETIONARY BENEFITS G Several benefits practices fall into the category of discretionary employee benefits. We can S the three broad goals employers hope to achieve when explore these practices by recognizing offering discretionary benefits: protection, , paid time off, and services to enhance work and life experiences. A Three important discretionary protection N programs include disability insurance, life insurance, and retirement programs. Until recently, G employer-sponsored health insurance benefits were offered on a discretionary basis, falling into the protection category. Since the passage of the E Act of 2010, the government has imposed an employer Patient Protection and Affordable Care mandate for health insurance. As such, L we will review health insurance as a legally required benefit in Chapter 10. A Protection Programs DISABILITY INSURANCE Disability insurance replaces income for employees who become Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 unable to work because of sicknesses or accidents. Employees unfortunately need this kind of 1 protection. At all working ages, the probability of being disabled for at least 90 consecutive days is much greater than the chance of dying 1 while working; one of every three employees will have a disability that lasts at least 90 days.70 Employer-sponsored or group disability insurance typically takes two forms. The first, 8 short-term disability insurance provides benefits for a limited time, usually less than 8 6 months. Approximately 40 percent sector workers had access to employerT of private sponsored short-term disability plans in 2014.9 Access was greater in more hazardous work S environments, such as manufacturing, where approximately 63 percent of workers had access. The second, long-term disability insurance provides benefits for extended periods between 6 months and life. Approximately 34 percent of private sector workers had access to employer-sponsored short-term disability plans in 2014.10 Access was greater in more hazardous work environments, such as manufacturing, where approximately 44 percent of workers had access. Disability criteria differ between short- and long-term plans. Short-term plans usually consider disability as an inability to perform any and every duty of the disabled person’s occupation. Long-term plans use a more stringent definition, specifying disability as an inability to engage in any occupation for which the individual is qualified by reason of training, education, or experience.  _ F N K Short-term disability plans classify short-term disability as an inability to perform the duties of one’s regular job. Manifestations of short-term disability include the following temporary (short-term) conditions: ISBN 1-323-59381-0 š š š š Recovery from injuries Recovery from surgery Treatment of an illness requiring any hospitalization Pregnancy—the Pregnancy Discrimination Act of 1978 mandates that employers treat pregnancy and childbirth the same way they treat other causes of disability (Chapter 2) Most short-term disability plans pay employees 60 to 70 percent of their pretax salary on a monthly or weekly basis.11 Many companies set a maximum benefit amount. In 2014, the typical maximum annual benefit amount was $2,400. Three additional features of short-term disability plans include the preexisting condition clause, two waiting periods, and exclusions of particular health conditions. Similar to health insurH ance plans, a preexisting condition is a mental or physical disability for which medical advice, I period preceding the beginning of diagnosis, care, or treatment was received during a designated disability insurance coverage. The designated period is usually G any time prior to employment and enrollment in a company’s disability insurance plan. Insurance companies impose preexisting conG ditions to limit their liabilities for disabilities that predate an individual’s coverage. S and an elimination period. The Two waiting periods include the preeligibility period preeligibility period spans from the initial date of hire to, the time of eligibility for coverage in a disability insurance program. Once the preeligibility period has expired, an elimination period refers to the minimum amount of time an employee must wait after becoming disabled before disability insurance payments begin. Elimination periods A exclude insignificant illnesses or injuries that limit a person’s ability to work for just a few days. N Short-term disability plans often contain exclusion provisions. Exclusion provisions list G Disabilities that result from selfthe particular health conditions that are ineligible for coverage. inflicted injuries are almost always excluded. Short-termEdisability plans often exclude most mental illnesses or disabilities due to chemical dependencies (e.g., addictions to alcohol or illeL gal drugs). Many employers support addicted workers through employee assistance programs, A which we will discuss shortly. Long-term disability insurance provides a monthly benefit to employees who, due to illness or injury, are unable to work for an extended period of time. Payments of long-term disability benefits usually begin after three to six months of disability1and continue for a specified number of months. Payments generally equal a fixed percentage of 1 pre-disability earnings, most typically, 50 to 60 percent.12 0 Long-term disability insurance companies rely on a two-stage definition for long-term disability. Long-term disability initially refers to illnesses or8accidents that prevent an employee from performing his or her “own occupation” over a designated T period. The term own occupation applies to employees based on education, training, or experience. After the designated S period elapses, the definition becomes more inclusive by adding the phrase “inability to perform any occupation or to engage in any paid employment.” The second-stage definition is consistent with the concept of disability in workers’ compensation programs (Chapter 10). There are four types of disabilities: temporary total, permanent total, temporary partial, and permanent partial. Full benefits usually equal 50 to 70 percent of monthly pretax salary, subject to a maximum dollar amount. As for short-term plans, the monthly maximum may be as high as $5,000. Longterm benefits are generally subject to a waiting period of anywhere from 6 months to 1 year and usually become active only after an employee’s sick leave and short-term disability benefits have been exhausted. Long-term disability plans also include preexisting condition and exclusion clauses. These are similar to the provisions in short-term disability plans. Long-term plans impose two waiting periods: preeligibility period and elimination period. The preeligibility periods for short- and Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 205 206   >N K long-term plans are usually identical. When companies offer both plans, the elimination period expires upon the exhaustion of short-term benefits. As discussed earlier, long-term plans become effective immediately following the end of short-term benefit payments, making the elimination period virtually nonexistent. When companies offer long-term plans only, the elimination period runs three to six months following a disability. Both short- and long-term disability plans may duplicate disability benefits mandated by the Social Security Act and state workers’ compensation laws (Chapter 10). These employer-sponsored plans generally supplement legally required benefits. Employer-sponsored plans do not replace disability benefits mandated by laws – workers’ compensation and disability benefits through the Social Security Act of 1935, which we will discuss in Chapter 10. LIFE INSURANCE Employer-provided life insurance protects employees’ families by paying a specified amount to an employee’s beneficiaries upon the employee’s death. Most policies pay a fixed multiple of the employee’s salary. Customarily, the multiple equals one to two times H an employee’s annual salary. Employer-sponsored life insurance plans also frequently include accidental death and dismemberment claims, which pay additional benefits if death was the result I of an accident or if the insured incurs accidental loss of a limb. In 2014, approximately 57 percent of private sector employees had accessG to employer-sponsored life insurance protection.13 G term life insurance, whole life insurance, and universal There are three kinds of life insurance: life insurance. Term life insurance, theSmost common type offered by companies, provides protection to employees’ beneficiaries only during a limited period based on a specified number of years , (e.g., 65 or 70). After that, insurance protection automati(e.g., 5 years) subject to a maximum age cally expires. Neither the employee nor his or her beneficiaries receives any benefit upon expiration. Whole life insurance pays an amount to the designated beneficiaries of the deceased A employee, but unlike term policies, whole life plans do not terminate until payment is made to N beneficiaries. As a result, whole life insurance policies are substantially more expensive than are term life policies, making the whole life insurance approach an uncommon feature of employerG sponsored insurance programs. From the employee’s or his or her beneficiary’s perspective, whole life insurance policies combineE insurance protection with a savings (or cash accumulation plan). That is, a portion of the moneyL paid to meet the policy’s premium will be available in the future. The amount will be augmented Awith a low fixed annual interest rate of usually no more than two or three percent. Universal life insurance combines features of term life insurance and whole life insurance. The insured may shift money between the insurance and savings components of the policy, making this a more 1flexible alternative to whole life insurance. 1 programs provide income to employees and their RETIREMENT PROGRAMS Retirement Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 beneficiaries during some or all of their 0 retirement. Individuals may participate in more than one program simultaneously where employers offer this option. Companies establish retirement or pension plans following one of three8design configurations: a defined benefit plan (commonly T contribution plan, or hybrid plans that combine features referred to as pension plan), a defined of traditional defined benefit and defined S contribution plans. According to the U.S. Bureau of Labor Statistics, nearly 55 percent of workers employed in the private sector participated in at least one company-sponsored retirement plan from 1992–1993.14 In 2014, the participation rate has increased to approximately 65 percent as displayed in Table 9-1.15 However, there has been a noticeable decrease in participation rates for defined benefit plans over the past several years. In 1992–1993, 32 percent of private sector employees participated in defined contribution plans, and slightly fewer participated in defined benefit plans.16 In 2014, 60 percent participated in defined contribution plans, but only 19 percent participated in defined benefit plans.17 Defined benefit plans guarantee retirement benefits specified in the plan document. This benefit is usually expressed in terms of a monthly sum equal to a percentage of a participant’s preretirement pay multiplied by the number of years he or she has worked for the employer. Employees typically forfeit their benefits if they leave their employer before meeting a minimum age and years of service requirement. Although the benefit in these plans is fixed by a formula,  _ F N K the level of required employer contributions fluctuates from year to year. The level depends on the amount necessary to make certain that benefits promised will be available when participants and beneficiaries are eligible to receive them. One of the reasons for the decline in defined benefit plans is increasing longevity. On average, a 65-year old man will live to be 86.6 years old and a 65-year-old woman will live to be 88.8 years old.18 Longevity increases an employer’s necessary to ensure that these plans have sufficient funds to support longer-living retirees. Annual benefits are usually based on age, years of service, and final average wages or salary. Retirement plan formulas specify annual retirement benefits as a percentage of final average salary. Table 9-2 illustrates these percentages for one retirement plan based on age and years of service. Looking at this table, let’s assume Mary retires at age 59 with 35 years of service. Let’s also assume her final average salary is $52,500. Mary multiplies $52,500 by the annual percentage of 68.20 percent. Her annual benefit is $35,805.00 ($52,500 * 68.20 percent). Under defined contribution plans, employees have the option to make regular contributions to separate accounts in their names, based on a formula contained in the plan document. Formulas H typically call for employers to contribute a given percentage of compensation annually with these I funds automatically deducted from pay in equal amounts. Employers invest these funds on behalf of the employee, choosing from a variety of investment vehicles G such as company stocks, diversified stock market funds, or federal government bond funds. Most often employees are given a G choice of investment vehicles based on the guidelines established by the employer. S Oftentimes, employers contribute money to defined contribution plans in the form of a company match. A recent survey revealed that 92 percent of ,companies made matching contributions to defined contribution plans. Company matches are typically expressed as a percentage of an employee’s contribution, up to a limit, and this amount varies according to employer policy. When company matches are made, a company may provideAa 50 percent match ($0.50 per dollar contributed by the employee) in the range of three to six percent of the salary. In other words, N a company will not provide matching contributions for employee contributions below 3 percent G or above 6 percent of salary. This approach challenges employees to save as much as possible. ISBN 1-323-59381-0 TABLE 9-2 E L Benefit Plan Annual Retirement Benefits for a Defined A Age N%" 2  60 59 58 5 6 7 8 9 10 … … … 13.36 15.03 16.70 … … … 12.56 14.13 15.70 35 36 37 38 39 40 +40 68.20 70.50 72.80 75.10 77.40 79.70 80.00 68.20 70.50 72.80 75.00 75.00 75.00 75.00 … … … 11.76 13.23 14.70 . . . . 68.20 70.50 72.80 75.00 75.00 75.00 75.00 1 1 0 8 T S 57 56 55 … … … 10.96 12.32 13.69 … … … 10.15 11.42 12.69 … … … 9.35 10.52 11.69 68.20 70.50 72.80 75.00 75.00 75.00 75.00 68.20 70.50 72.80 75.00 75.00 75.00 75.00 68.20 70.50 72.80 75.00 75.00 75.00 75.00 Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 207 208   >N K Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 Defined contribution plans specify rules for making contributions. Unlike defined benefit plans, defined contribution plans do not guarantee particular benefit amounts. Participants bear the risk of possible investment gain or loss. Account balances mainly depend on several factors, including contribution amounts, company matches, and investment performance. Compared to defined benefit plans, defined contribution plans are portable. That is, an employee is able to take the balance of the account from employer to employer. The Internal Revenue Code (IRC), which is the body of tax regulation in the United States, sets annual contribution amounts to these plans on a pretax basis. That is, contributions are not subject to income tax. Annual addition refers to the annual maximum allowable contribution to a participant’s account in a defined contribution plan. In 2015, annual additions were limited to the lesser of $53,000, or 100 percent of the participant’s compensation mainly based on the sum of employer and employee contributions.19 Of the annual addition, an employee’s contribution was limited to $18,000 ($24,000 for employees age 50 or above) or 100 percent of salary, whichever is less. Withdrawals in retirement are taxed. H There are a variety of defined contribution plans. The most common are 401(k) plans, Roth I plans. Section 401(k) plans are retirement plans named 401(k) plans, and deferred profit sharing after the section of the IRC that created G them. Following the previous description of defined contribution plans, 401(k) plans enable employees and employers to defer part of employee G compensation to an employee’s account. Only private sector employers are eligible to sponsor S 401(k) plans in 2006. These plans are similar to 401(k) 401(k) plans. The IRC established Roth plans, but there are two noticeable differences. First, employee contributions are taxed at the , individual’s income tax rate. Second, upon retirement, employee withdrawals are not taxed. Roth 401(k) plans are becoming an increasingly popular offering to help employees manage the uncertainty of possible changes in future A income tax rates. For example, it is difficult to predict what income tax rates will be when an individual retires. The rates could be equal to, lower than, N or greater than current income tax rates. Higher future income tax rates would require greater withdrawal amounts to meet retirees’G needs. Higher withdrawal rates would lower the value of a 401(k) plan more quickly, affecting E the number of years in which available funds will provide income. Similar to 401(k) plans are Section 403(b) plans and Section 457 plans. 403(b) plans L may be offered to employees of government and tax-exempt groups, such as schools, hospitals and churches. Section 457 plans applyAto state government employees. Companies set up profit sharing plans to distribute money to employees. Companies choose between offering a current profit sharing plan as an incentive or a deferred profit shar1 profit sharing plans award employees with a share of ing plan for retirement savings. Current the company’s profits, usually on an annual basis. Alternatively, deferred profit sharing plans 1 set aside money in employee accounts for use in retirement. For deferred plans, employees do 0 not pay taxes until they make withdrawals in retirement. In 2015, companies could take a tax 8 exceed 25 percent of each participant’s compensation or deduction for their contributions not to $53,000, whichever is the lesser amount. T 20 Table 9-3 summarizes selected differences between defined benefit and defined contribuS tion plans. Hybrid plans combine features of traditional defined benefit and defined contribution plans. The cash–balance plan is the most common hybrid plan. Cash–balance plans are structured as “defined benefit plans that define benefits for each employee by reference to the amount of the employee’s hypothetical account balance.”21 Cash–balance plans are a relatively new phenomenon compared to traditional defined benefit and defined contribution plans. Many companies have chosen to convert their defined benefit plans to cash balance plans for two key reasons. First, cash balance plans are less costly to employers than defined benefit plans. Second, these plans pay benefits in a lump sum instead of a series of payments. Companies are presumably in a better position to recruit more mobile workers. Under a traditional defined benefit plan, an employee who leaves employment prior to qualifying for a retirement annuity (a series of monthly payments for the rest of one’s life) will forfeit the annuity.  _ F N K 209 TABLE 9-3 Selected Differences between Defined Benefit and Defined Contribution Plans Characteristic F2& K&2 %& F2& &0'& %& Benefit formula Determines pension due at normal retirement age. Form of benefit expressed by formula An annuity—a series of payments beginning at the plan’s normal retirement age for the life of the participant. Annual funding is based on an actuarial formula subject to strict limits set by the IRC and is not equivalent to annual increases in pension benefits. Employee is guaranteed benefits regardless of investment returns on trust. Employer is responsible for ensuring sufficient funding H to pay promised benefit. Determines amount regularly contributed to individual account. A single lump sum distribution at any time. Funding Investment risk/profit Annual contributions and investment earnings are held in an individual account. Employee bears the investment risk, which can result in higher investment returns or the loss of previously accumulated pension benefits. I G G Paid Time Off The second type of discretionary benefit is paid time off.SThis category is relatively straightforward. As the name implies, paid time off policies compensate employees when they are not , Source: U.S. General Accounting Office (2000). Cash Balance Plans: Implications for Retirement Income, GAO/HEHS-00-207. Washington, "#$% & ' + performing their primary work duties as defined by the Portal-to-Portal Act (Chapter 2). The major types of paid time off benefits are: š š š š š š š š š š š š š Holidays Vacation Sick leave Personal leave Jury duty Funeral leave Military leave Clean-up, preparation, or travel time Rest period “break” Lunch period Integrated paid time off policies Sabbatical leave Volunteerism A N G E L A ISBN 1-323-59381-0 1 1 0 8 particularly paid holidays, vacations, Companies offer most paid time off as a matter of custom, and sick leave. In unionized settings, the particulars about paid Ttime off are in the collective bargaining agreement. The paid time off practices that are most typically found in unionized settings are jury S duty, funeral leave, military leave, clean-up, preparation, travel time, rest period, and lunch period. For employees and employers, paid time off benefits are significant. These benefits provide employees the opportunity to balance work and nonwork interests and demands. Companies stand to gain from sponsoring these benefits. Employees may legitimately take time off from scheduled work without incurring loss of pay and benefits, which should help reduce unapproved absenteeism from work. By keeping absenteeism in check, overall productivity and product or service quality should be higher. These benefits also contribute toward positive employee attitudes and commitment to the company, particularly for employees with longer lengths of service. The length of paid time off, such as vacation time, can increase to several weeks with years of service. A standout example of paid vacation policy can be found at the Internet company FullContact. Not only do employees receive their pay while on vacation, which is standard, but the founder of this company also provides each employee with $7,500 cash to spend on their Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 210   >N K vacation. The following Watch It! video describes this unique approach to paid vacations and the company’s rationale for offering this generous benefit. WATCH IT! If your professor has assigned this, go to the Assignments section of mymanagementlab.com     "  K" K""  %/" /"   & %%&# Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 As previously shown in Table 9-1, the majority of workers received paid time off benefits in 2014. There have been three developments in paid time off offerings: integrated paid time off policies, sabbatical leave, and volunteerism. We will discuss each of these practices in turn, highlighting the benefits of such paid time off practices to employers. Integrated paid time off policies or paid time off banks combine holiday, vacation, sick leave, and personal leave policies into a single paid time off policy. Such policies do not distinguish among reasons for absence as do specific policies. The idea is to provide individuals the H freedom to schedule time off without justifying the reasons. This freedom should presumably substantially reduce the incidence of Iunscheduled absences that can be disruptive to the workplace because these policies require advance notice unless sudden illness is the cause (e.g., you G went to sleep one evening feeling fine and then wake up the next morning on a scheduled work day with a stomach virus). IntegratedG paid time off policies have become an increasingly popular alternative to separate holiday, vacation, sick leave, and personal leave plans because they S are more effective in controlling unscheduled absenteeism than other types of absence control , policies.22 In 2014, approximately 41 percent of companies used a paid time off bank arrangement.23 Integrated policies also relieve the administrative burden of managing separate plans and the necessity to process medical certifications in the case of sick leave policies. A Paid time off banks do not incorporate all types of time off with pay. Bereavement and funeral N leave are stand-alone policies because the death of a friend or relative is typically an unanticipated G event beyond an employee’s control. Integrating funeral leave into paid time off banks would also likely create dissatisfaction among workers because it would signal that grieving for a deceased E friend or relative is equivalent to a casual day off. Jury duty and witness leave, military leave, and L and nonproduction time is negotiated as part of a collecnonproduction time are influenced by law, tive bargaining agreement. Sabbatical A leaves are also not included in paid time off banks because these are extended leaves provided as a reward to valued, long-service employees. Sabbatical leaves are paid time off for such professional activities as a research project 1 or curriculum development. These practices are common in college and university settings and apply most often to faculty members.1Most universities grant sabbatical leaves to faculty members who meet minimum service requirements (e.g., 3 years of full-time service) with partial or 0 full pay for up to an entire academic year. The service requirement is applied each time, which limits the number of leaves taken per 8 faculty member. Outside academia, sabbatical leaves Tare usually limited to professional and managerial employees who stand to benefit from intensive training opportunities outside the company’s sponsorship. S Sabbatical leaves are most suitable for such employees as computer engineers whose standards of knowledge or practice are rapidly evolving. Companies establish guidelines regarding qualification, length of leave, and level of pay. An important guideline pertains to minimum length of employment following completion of a sabbatical. For example, companies require employees to remain employed for a minimum of 1 year following the sabbatical or repay part or all of one’s salary received during the sabbatical. This provision is necessary to protect a company’s investment and to limit moves to competitors. For example, Capterra, which maintains a comprehensive catalog of business software, offers a 5-week, fully paid sabbatical every five years to each of its employees.24 According to Capterra’s CEO, the cost of a sabbatical equals a 10 percent reduction in productivity on an annual basis, but only 2 percent over a 5-year period. He maintains that the benefit to the company and the employee’s health and personal growth is a worthwhile expense.  _ F N K Volunteerism refers to giving of one’s time to support a meaningful cause. More and more companies are providing employees with paid time off to contribute to causes of their choice. In 2013, approximately 20 percent of companies offered paid time off for volunteer activities, trending up since 2007.25 In many instances, companies tout this benefit as a form of work–life balance and a mechanism for the betterment of the community. Brokerage company Charles Schwab provides employees with eight paid hours per year for this purpose. Managers have the discretion to provide additional paid time off for volunteer activities.26 From a company’s standpoint, a meaningful cause is associated with the work of not-for-profit organizations, such as the United Way, to help improve the well-being of people. There are a multitude of meaningful causes throughout the world including improving literacy, providing comfort to terminally ill patients, serving food at shelters for individuals who cannot afford to feed themselves, serving as a mentor to children who do not have one or more parents, and spending time with elderly or disabled residents of nursing homes who may no longer have living friends or family. Companies generally do not dictate the causes for which employees would receive paid time H off, except they exclude political campaign and political action groups for eligibility because of I management. possible conflicts of interest with company shareholders and Companies favor providing paid time off for volunteerGwork for three reasons. First, volunteer opportunities allow employees to balance work and life demands. Second, giving employees G the opportunity to contribute to charitable causes on company time represents positive corporate social responsibility, enhancing the company’s overallSimage in the public eye. Third, paid time off to volunteer is believed to help promote retention., Employees are likely to feel that the employer shares similar values, possibly boosting commitment to the company. The amount of time off ultimately varies considerably from company to company, ranging anywhere between 1 hour per week and, in limited cases for long-service employees, several weeks. A N G EMPLOYEE ASSISTANCE PROGRAMS Employee assistance programs (EAPs) help employees cope with such personal problems that may impair their job E performance as alcohol or drug abuse, L diseases, clinical depression, and domestic violence, the emotional impact of AIDS and other eating disorders. In 2014, approximately 54 percent of private-sector employees and 74 percent of A 27 Services government employees had access to an EAP. Companies offer EAPs because many employees are likely to experience difficulties that interfere with job performance. Although EAP costs are substantial, the benefits seem to out1 weigh the costs. For example, the annual cost per employee of an EAP is approximately $50 to 1 $60. Anecdotal evidence, however, indicates that employers’ gains outweigh their out-of-pocket 0 absenteeism, medical costs, unemexpenses for EAPs: savings from reduced employee turnover, ployment insurance rates, workers’ compensation rates, accident costs, and disability insurance 8 costs. Most important, the majority of employees who take advantage of EAP resources benefit; T unfortunately, large-scale evaluation studies are virtually nonexistent. Depending on the employer, EAPs provide a range of S services and are organized in various ways. In some companies, EAPs are informal programs developed and run on-site by in-house staff. Other employers contract with outside firms to administer their EAPs, or they rely on a combination of their own resources and help from an outside firm. ISBN 1-323-59381-0 FAMILY ASSISTANCE PROGRAMS Family assistance programs help employees provide elder care and child care. Elder care programs provide physical, emotional, or financial assistance for aging parents, spouses, or other relatives who are not fully self-sufficient because they are too frail or disabled. Child care programs focus on supervising preschool-age dependent children whose parents work outside the home. Many employees now rely on elder care programs because of their parents’ increasing longevity and the growing numbers of dual-income families. Child care needs arise from the growing number of single parents and dual-career households with children. Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 211 212   >N K A variety of employer programs and benefits can help employees cope with their family responsibilities. The programs range from making referrals to on-site child care or elder care centers to company-sponsored day care programs, and they vary in the amount of financial and human resources needed to administer them. The least expensive and least labor-intensive programs are generally referral services. Referral services are designed to help workers identify and take advantage of available community resources, conveyed through such media as educational workshops, videos, employee newsletters and magazines, and EAPs. Flexible scheduling and leave allows employees the leeway to take time off during work hours to care for relatives or react to emergencies. Flexible scheduling, which includes compressed work weeks (e.g., 10-hour days or 12-hour days), flextime, and job sharing, helps employees balance the demands of work and family. In addition to flexible work scheduling, some companies allow employees to extend their legally mandated leave sanctioned by the Family and Medical Leave Act (see Chapter 10). Under extended leave, employers typically continue to provide such employee benefits as insurance and promise to secure individuals comparable jobs upon their return. H Day care is another possible benefit. Some companies subsidize child or elder day care in community-based centers. Elder careIprograms usually provide self-help, meals, and entertainment activities for the participants. Child G care programs typically offer supervision, preschool preparation, and meals. Facilities must usually maintain state or local licenses. G S employees’ education. Under a tuition reimbursement program, an employer fully or partially reimburses an employee for expenses, incurred for education or training. There is substantial TUITION REIMBURSEMENT Companies offer tuition reimbursement programs to promote their variability in the percentage of tuition an employer reimburses. Some companies vary the percentage of tuition reimbursed according to the relevance of the course to the companies’ A goals or the grades employees earn. Tuition reimbursement programsNare not synonymous with pay-for-knowledge programs (Chapter 5). Instead, they fall under the G category of employee benefits. Under these programs, employees choose the courses they wish to take when they want to take them. In addition, employE ees may enroll in courses that are not directly related to their work. As we discussed in Chapter 5, L pay-for-knowledge is one kind of core compensation. Companies establish set curricula that employees take, and they generally award payA increases to employees who successfully complete courses within the curricula. Pay increases are not directly associated with tuition reimbursement programs. Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 TRANSPORTATION SERVICES Some employers sponsor transportation services, programs that 1 help bring employees to the workplace and back home again by using more energy-efficient forms of transportation. They may1sponsor public transportation or vanpools: employersponsored vans or buses that transport0employees between their homes and the workplace. Employers provide transit subsidies to employees working in metropolitan and suburban areas served by mass transportation 8 (e.g., buses, subways, and trains). Companies may offer T transit passes, tokens, or vouchers. Practices vary from partial subsidy to full subsidy. Many employers must offer transportation services to comply with the law. Local and state S governments increasingly request that companies reduce the number of single-passenger automobiles commuting to their workplace each day because of government mandates for cleaner air. The Clean Air Act Amendments of 1990 require employers in large metropolitan areas such as Los Angeles to comply with state and local commuter-trip reduction laws. Employers may also offer transportation services to recruit individuals who do not care to drive in rush-hour traffic. Furthermore, transportation services enable companies to offset deficits in parking space availability, particularly in congested metropolitan areas. Employees obviously stand to benefit from these transportation services. For example, using public transportation or joining a vanpool often saves money by eliminating such commuting costs as gas, insurance, car maintenance and repairs, and parking fees. Moreover, commuting time can be quite lengthy for some employees. By leaving the driving to others, employees can use the time more productively by reading, completing paperwork, or “unwinding.”  _ F N K OUTPLACEMENT ASSISTANCE Some companies provide technical and emotional support through outplacement assistance to employees who are being laid off or terminated. They do so with a variety of career and personal programs designed to develop employees’ job-hunting skills and strategies and to boost employees’ self-confidence. A variety of factors leads to employee termination. Those best suited to outplacement assistance programs include: š š š š š š Layoffs due to economic hardship Mergers and acquisitions Company reorganizations Changes in management Plant closings or relocation Elimination of specific positions, often the result of changes in technology Outplacement assistance provides such services as personal counseling, career assessments and evaluations, training in job search techniques, resume and cover letter preparation, interviewH ing techniques, and training in the use of such basic workplace technology as computers. Although I possible benefits for companies as beneficial to employees, outplacement assistance programs hold well. They can promote a positive image of the company among G those being terminated, as well as their families and friends, by helping these employees prepare for employment opportunities. ISBN 1-323-59381-0 G WELLNESS PROGRAMS In the 1980s, employers beganSsponsoring wellness programs to promote and maintain employees’ physical and psychological , health. Wellness programs vary in scope. They may emphasize weight loss only, or they may emphasize a range of activities such as weight loss, smoking cessation, and cardiovascular fitness. Programs may be offered on- or off-site. Although some companies invest in staffing professionals for wellness programs, others A contract with such external vendors as community health agencies or private health clubs. An N important goal besides promoting employee health is containing health care costs. The evidence 28 G appears to be mixed. Nowadays, nearly 90 percent of employers offer financial incentives or 29 prizes to employees who strive for better health. For example, E Johnson & Johnson employees pay $500 less for their annual health insurance premium if they complete a health profile, which L the company uses to recommend wellness activities. Some employers, on the other hand, impose A wellness activities (for example, penalties for employees who do not engage in at least three completing a health assessment). For instance, Houston, Texas, municipal employees take a $25 monthly pay reduction for failure to complete designated wellness activities. 1 not a condition of employment. Companies need to ensure that wellness programs are Recently, the U.S. Equal Employment Opportunity Commission 1 charged that Orion Energy violated the Americans with Disabilities Act by requiring an employee to submit to medical exams 0 and inquiries that were not job-related or of business necessity.30 This employee refused to participate in the wellness program. In response, the company8deducted the entire cost of the health insurance premium from this employee’s pay, and, ultimately, T terminated her employment. The disposition of the case was not reached by the time this edition of the book went to press. S Smoking cessation, stress reduction, nutrition and weight loss, exercise and fitness activities, and health-screening programs are the most common workplace wellness programs. Smoking cessation plans range from simple campaigns that stress the negative aspects of smoking to intensive programs directed at helping individuals to stop smoking. Many employers offer courses and treatment to help and encourage smokers to quit. Other options include offering nicotine replacement therapy (e.g., nicotine gum and patches) and self-help services. Many companies sponsor such antismoking events as the Great American Smoke-Out, during which companies distribute T-shirts, buttons, and literature that discredit smoking. Stress management programs can help employees cope with many factors inside and outside work that contribute to stress. For instance, job conditions, health and personal problems, and personal and professional relationships can make employees anxious and therefore less productive. Symptoms of stressful workplaces include low morale, chronic absenteeism, low productivity, and Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 213 214   >N K high turnover rates. Employers offer stress management programs to teach workers to cope with conditions and situations that cause stress. Seminars focus on recognizing signs of stress and burnout, as well as on how to handle family- and business-related stress. Stress reduction techniques can improve quality of life inside and outside the workplace. Employers benefit from increased employee productivity, reduced absenteeism, and lower health care costs. Weight control and nutrition programs are designed to educate employees about proper nutrition and weight loss, both of which are critical to good health. Information from the medical community has clearly indicated that excess weight and poor nutrition are significant risk factors in cardiovascular disease, diabetes, high blood pressure, and cholesterol levels. Over time, these programs should give employees better health, increased morale, and improved appearance. For employers, these programs should result in improved productivity and lower health care costs. Companies can contribute to employees’ weight control and proper nutrition by sponsoring memberships in such weight-loss programs as Weight Watchers. Sponsoring companies may also reinforce weight-loss programs’ positive results through support groups, intensive counselH ing, competitions, and other incentives. Companies sometimes actively attempt to influence I employee food choices by stocking vending machines with nutritional food. G G provide employees with the resources for managing offerings. Financial education programs personal budgets and long-term savings S (e.g., for retirement). Companies are increasingly including financial education as part, of the benefits program. These companies reason that FINANCIAL EDUCATION Some companies have added financial education to employee benefit financial education is a relatively low-cost benefit that helps employees plan current and future (retirement) budgets. 9-3. Summarize legislation that pertains to discretionary benefits. A N G LEGISLATION PERTINENT TO E DISCRETIONARY BENEFITS L Many laws guide the design and implementation of discretionary employee benefits practices. In Chapter 2, we reviewed the relationship between core compensation and the National Labor A Relations Act, the Fair Labor Standards Act, and key antidiscrimination laws such as Title VII of the Civil Rights Act of 1964. These laws also have bearing on discretionary benefits practice in a more general way. Here we review 1 additional key laws that influence discretionary employee benefits practice: the Internal Revenue Code (IRC), the Employee Retirement Income Security 1 Act of 1974 (ERISA), and the Pension Protection Act of 2006. 0 Internal Revenue Code 8 As noted previously, the IRC is the set Tof regulations pertaining to taxation in the United States (e.g., sales tax, company [employer] income tax, individual [employee] income tax, and propS erty tax). Taxes represent an essential source of revenue to fund federal, state, and local govern- Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 ment programs. The Internal Revenue Service (IRS) is the government agency that develops and implements the IRC and levies penalties against companies and individuals who violate the IRC. Since the early 1900s, the federal government has encouraged employers to provide retirement benefits to employees with tax breaks or deductions. In other words, the government allowed employers to exclude retirement plan payments from their income subject to taxation. This “break” reduced the amount of a company’s required tax payments. In general, the larger the contributions to retirement plans, the greater the reduction in the amount of taxes owed to the government. The IRC also permits employees to make contributions to benefits such as health care and retirement plans on a pretax basis. Earlier in the chapter we discussed 401(k) plans. The tax deductibility of benefits costs also requires that employers meet particular requirements set forth by the Employee Retirement Income Security Act (ERISA), which we discuss next.  _ F N K Employee Retirement Income Security Act of 1974 (ERISA) The Employee Retirement Income Security Act of 1974 (ERISA) was established to regulate the implementation of various employee benefits programs, including medical, life, and disability programs, as well as pension programs. The essence of ERISA is protection of employee benefits rights. ERISA addresses matters of employers’ reporting and disclosure duties, funding of benefits, the fiduciary responsibilities for these plans, and vesting rights. Companies must provide their employees with straightforward descriptions of their employee benefit plans, updates when substantive changes to the plan are implemented, annual synopses on the financing and operation of the plans, and advance notification if the company intends to terminate the benefits plan. The funding requirement mandates that companies meet strict guidelines to ensure having sufficient funds when employees reach retirement. Similarly, the fiduciary responsibilities require that companies not engage in transactions with parties having interests adverse to those of the recipients of the plan and not deal with the income or assets of the employee benefits plan in the company’s own interests. As noted, tax incentives encourage companies to offer H retirement programs. Some of the ERISA Title I and Title II provisions set the minimum standards required to qualify pension I plans for favorable tax treatment. Qualified plans entitle employers and employees to substanG not pay tax on their contributions tial tax benefits. Employers and employees specifically do within dollar limits that differ for defined benefit and defined G contribution plans. In addition, the investment earnings of the trust in which plan assets are held are generally exempt from tax. Finally, participants or beneficiaries generally do not pay S taxes on the value of retirement benefits until they receive distributions. A company’s failure to , meet any of the minimum standard provisions “disqualifies” pension plans from receiving favorable tax treatment. Nonqualified plans refer to pension plans that fail to meet at least one of the minimum standard provisions. A 9-4 lists these characteristics. We Qualified plans possess 13 fundamental characteristics. Table will briefly discuss four of the more fundamental standards N next – participation requirements, coverage requirements, vesting rules, and nondiscrimination rules. G Participation requirements apply to pension plans. Employees must specifically be allowed to 31E participate in pension plans after they have reached age 21 and have completed 1 year of service (based on 1,000 work hours).32 These hours include all paid time L for performing work and paid time off (e.g., vacation, sick leave, and holidays). Coverage requirements limit the freedom of employers A favor highly compensated employto exclude employees. Qualified plans do not disproportionately 33 ees. The IRS specifies the criteria for highly compensated employee status. We will review these criteria in Chapter 11 on executive compensation. Vesting refers to an employee’s nonforfeitable 1 rights to retirement plan benefits.34 There are two aspects of vesting. First, employees are always ISBN 1-323-59381-0 1 0 TABLE 9-4 Characteristics of Qualified Retirement Plans 8 š Participation requirements T š Coverage requirements S š Vesting rules š š š š š š š š š š Accrual rules Nondiscrimination rules Key employee and top-heavy provisions Minimum funding standards Social Security integration Contribution and benefit limits Plan distribution rules Qualified survivor annuities Qualified domestic relations orders Plan termination rules and procedures Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 215 216   >N K vested in their contributions to pension plans. Second, companies must grant full vesting rights to employer contributions on one of the following two schedules: cliff vesting or 6-year graduated schedule. Cliff vesting schedules must grant employees 100 percent vesting after no more than 3 years of service. That is, after 3 years of participation in the pension plan, an employee has the right to receive all of the contributions plus interest on the contributions made by the employer. This schedule is known as cliff vesting because leaving one’s job prior to becoming vested under this schedule is tantamount to falling off a cliff—an employee loses all of the accrued employer contributions. On the other hand, companies may use a gradual vesting schedule. The 6-year graduated schedule allows workers to become 20 percent vested after 2 years and to vest at a rate of 20 percent each year thereafter until they are 100 percent vested after 6 years of service. Nondiscrimination rules prohibit employers from discriminating in favor of highly compensated employees in contributions or benefits, availability of benefits, rights, or plan features.35 In addition, employers may not amend pension plans so that highly compensated employees are favored. H Pension Protection Act of 2006 I The Pension Protection Act (PPA) was designed to strengthen employee rights and is an amendG ment to ERISA. The PPA focuses on bettering employee rights in at least two ways. The first conG and the second applies to defined contribution plans. sideration applies to defined benefit plans S , (PBGC), DEFINED BENEFIT PLANS First, this law should strengthen the financial condition of the Pension Benefit Guaranty Corporation which is a self-financed corporation established by ERISA to insure private-sector defined benefit plans. Companies that offer defined benefit plans are required to pay an insurance premium to protect retirement income promised by Aunderfund these plans pay substantially higher costs for these retirement plans. Companies that insurance protection because they areNat greater risk for not having the funds to pay promised retirement benefits. The PPA aims to strengthen the PBGC financial condition by making it G more difficult for companies to skip making premium payments. Finally, the PPA raises the E to pension funding with tax advantages, creating an amount that employers can contribute additional incentive to adequately fund Lpension plans. A makes it easier for employees to participate in defined DEFINED CONTRIBUTION PLANS The PPA contribution plans. Millions of workers who are eligible to participate in their employers’ defined contribution plans do not contribute to them. In 2014, only 70 percent with access to a 1 36 There are a variety of reasons why employees defined contribution plan chose to participate. choose not to participate; however, a 1 prominent reason is that most individuals feel they do not have sufficient knowledge about how0 to choose investment options that will help them earn sufficient money for retirement. In addition, once employees make the decision to participate in these plans and have been making8 regular contributions, they are not likely to stop. With these issues in mind, the PPA enables T companies to enroll their employees automatically in defined contribution plans and provides greater access to professional advice about investing for S retirement. In addition, this Act requires companies to offer multiple investment options to allow employees to select how much risk they are willing to bear. DESIGNING AND PLANNING THE BENEFITS PROGRAM As noted earlier, discretionary benefits can work strategically by offering protection programs, paid time off, and services. As they plan and manage employee benefits programs, HR professionals should keep these functions in mind. There is probably no single company that expects its employee benefits program to meet all these objectives. Company management, along with Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 9-4. Discuss the fundamentals of designing and planning the benefits program.  _ F N K union representatives as appropriate, must therefore determine which objectives are the most important for a particular workforce. Many experts argue that employee input is essential to developing a successful program. Such input helps companies target the limited resources they have available for employee benefits to those areas that best meet employees’ needs. For example, if a company’s workforce includes mostly married couples who are raising young children, family assistance programs would probably be a priority. By involving employees in program development, they are most likely to accept and appreciate the benefits they receive. Companies can involve employees in the benefits determination process in such ways as surveys, interviews, and focus groups. Fundamental design issues include: š š š š š Who receives coverage Financing of benefits Employee choice Cost containment Communication H I Employers can ascertain key information from employees G that can be useful in designing these programs. The areas of input emphasize employees’ beliefs about other employers’ benefits offerings and employees’ thoughts about the valueG of the benefits they receive. S Determining Who Receives Coverage , Companies decide whether to extend benefits coverage to full-time and part-time employees or to full-time employees only. As shown in Table 9-1, part-time workers have much less access to benefits than full-time employees. A Another scope issue companies must address is employees’ status. In many companies, N employees’ initial term of employment (usually shorter than 6 months) is deemed a probationary period, and companies view such periods as an opportunityGto ensure that they have made sound hiring decisions. Many companies choose to withhold discretionary employee benefits for all E probationary employees. Companies benefit directly through lower administration-of-benefits costs for these employees during the probationary period. L A Financing Human resource managers must consider how to finance benefits. In fact, the available resources and financial goals may influence, to some 1 extent, who will receive coverage. Managers may decide among noncontributory, contributory, and employee-financed pro1 grams or some combination thereof. Noncontributory financing implies that the company 0 assumes total costs for each discretionary benefit. Under contributory financing, the com8 pany and its employees share the costs. Under employee-financed benefits, employers do not contribute to the financing of discretionary benefits. T The majority of benefit plans today are contributory, largely because the costs of benefits have risen so dramatically. In 2014, the S percentage of employees who were required to contribute to funding the following benefits is as follows: Life insurance (6 percent), long-term disability (8 percent), short-term disability (17 percent), and health insurance (100%).37 On average, the employee share of the contributions for health insurance was 31 percent. ISBN 1-323-59381-0 Employee Choice Human resource professionals must decide on the degree of choice employees should have in determining the set of benefits they will receive. If employees within a company can choose from among a set of benefits, as opposed to all employees receiving the same set of benefits, the company is using a flexible benefits plan or cafeteria plan. Companies implement cafeteria plans to meet the challenges of diversity, as discussed earlier. Although there is limited evidence regarding employees’ reactions to flexible benefits, the existing information indicates benefit Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 217 218   >N K TABLE 9-5 Core Plus Option Plan The core plus option plan contains two sets of benefits: core benefits and optional benefits. All employees receive a minimum level of core benefits: š Term life insurance equal to one times annual salary š Health protection coverage (e.g., indemnity plan, self-funded, HMO, PPO) for the employee and dependents š Disability insurance All employees receive credits equal to 4 to 7 percent of salary, which can be used to purchase optional benefits: š Dental insurance for employee and dependents š Vision insurance for employee and dependents š Additional life insurance coverage š Paid vacation time up to 10 days per year H If an employee has insufficient credits to purchase the desired optional benefits, he or she can purchase these credits through payroll deduction. I G satisfaction, overall job satisfaction, G pay satisfaction, and understanding of benefits increased 38 after the implementation of a flexible S benefits plan. Many of these outcomes are desirable because they are known to lead to reduced absenteeism and turnover. Cafeteria plans vary,39 so only the, two most common will be discussed here. Flexible spending accounts (FSAs) permit employees to pay for certain benefits expenses (e.g., health care or child care) with pretax dollars. Each A year, employees elect the amount of salary-reduction dollars they wish to allocate to this kind of plan. Employers then use this money to reimburse N the plan year that qualify for repayment. IRS regulaemployees for expenses incurred during tions limit the amount an employee may G set aside each year in their FSA. In 2015, an employee was eligible to contribute up to $2,550 for his or her own medical expenses. For dependent care E FSA accounts, the limit was $5,000. Core plus option plans extend aLpreestablished set of such benefits as medical insurance as a program core, which is usually mandatory for all employees. Beyond the core, employees A may choose from an array of benefits options that suit their personal needs. Companies establish upper limits of benefits values available to each employee. If employees do not choose the 1 may offer an option of trading extra benefits credits for maximum amount of benefits, employers cash. Table 9-5 illustrates the choices 1 of a typical core plus plan. 0 8 costs. As indicated earlier, the rise in health care costs Overall, HR managers today try to contain is phenomenal, so employee benefits now T account for a substantial percentage of total compensation costs incurred by companies. In 2014, total employee benefits accounted for 31.2 percent.40 Discretionary benefits costs accountedSfor nearly 25 percent. The current amount has risen draCost Containment matically over the past few decades. This increase would not necessarily raise concerns if total compensation budgets were increasing commensurably. As we discussed in Chapter 8, the growth in funds available to support all compensation programs has stagnated. As a consequence, employers face difficult trade-offs between employee benefits offerings and increases in core compensation. Communication Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 Earlier, we noted that employees often regard employee benefits as an entitlement. Thus, it is reasonable to infer that employees are not aware of their value. In fact, employees are either not aware of or undervalue the employee benefits they receive. Given the significant costs associated with offering employee benefits, companies should try to convey to employees the value they are likely to derive from having such benefits. For example, a personal benefits summary, displayed  _ F N K 219 in Table 9-6, is a useful approach. A benefits communication plan is therefore essential. An effective communication program should have three primary objectives:41 š To create an awareness of and appreciation for the way current benefits improve the financial security and the physical and mental well-being of employees š To provide a high level of understanding about available benefits š To encourage the wise use of benefits Companies have traditionally used printed brochures to summarize the key features of the benefits program and to help potential employees compare benefits offerings with those of other companies they may be considering. When new employees join the company, initial group meetings with benefits administrators or audiovisual presentations can detail the elements of the company’s benefits program. Shortly after group meetings or audiovisual presentations (usually TABLE 9-6 Sample Personal Statement of Benefits H A PERSONAL BENEFITS STATEMENT FOR: John Doe REVIEW OF YOUR CURRENT BENEFIT CHOICES As of March 2013, our records indicate you have chosen the following benefits (rates may change July 1, 2013): MEDICAL For you: PERSONAL CARE HMO For your dependent(s): NONE Employer’s monthly contribution: For you: $285.00 For your dependent(s): None Your monthly contribution: $37.50 DENTAL QUALITY CARE DENTAL PLAN Your monthly contribution: $9.50 Employer’s annual contribution: For you: $110.00 For your dependent(s): None I G G S , A N G E L A SSN: xxx-xx-xxxx Marital Status: Single Date of Birth: 04/10/61 LIFE INSURANCE As a full-time employee, you receive employer-paid life insurance equal to your annual salary. If you work part-time, your employer-paid amount is less. When you retire at age 60 or older, you still receive $5,000 worth of employer-paid life insurance. Employer’s monthly contribution for your employer-paid life insurance: Basic life ($90,000): $32.50 Your monthly contribution for the following optional coverage: For you (None): None Spouse life (None): None Child life (None): None Accidental Death and Dismemberment: (None): None 1 FLEXIBLE SPENDING ACCOUNTS 1 You are enrolled in the following plan(s): Dependent Care Assistance Plan 0 Annual deduction Not Enrolled 8 Medical Care Assistance Plan DEPENDENTS Not Enrolled T Annual deduction You have chosen to cover the following dependent(s) under your Health Plan: S ISBN 1-323-59381-0 No Dependents DOLLAR VALUE OF YOUR BENEFITS Your total annual compensation is your salary or retirement payment plus the value of employer-paid medical, dental, and life insurance coverage. $3,420.00 Employer-paid medical insurance coverage for you: None Employer contribution for medical insurance coverage for your dependent(s): $110.00 Employer-paid dental insurance coverage for you and your dependent(s): Employer-paid life insurance coverage for you: $390.00 Total Value of Your State-Paid Benefits: $3,920.00 Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 220   >N K TABLE 9-7 Menu of Employee Benefit Options This section is designed to provide detailed information regarding your benefits as a University of Illinois employee. It will give you a comprehensive explanation of each benefit and the resources you will need to initiate enrollment, make changes, or find answers to questions regarding your benefits. Please select from the following categories: š Announcements—Provides announcements of upcoming sign-up periods or events and updated information relating to your benefits. š Benefits Directory—Provides a listing of staff members, including addresses, phone numbers, and e-mail addresses for the Benefits Service Center and each campus. š Benefit Choice—Benefit Choice is an annual open enrollment period that allows employees to make changes to their state of Illinois health, dental, and life insurance coverages, and enroll or re-enroll in flexible spending accounts. š Benefit Forms—Provides links to printable and online benefit forms. š Benefits Statement—Provides a statement outlining your current benefit enrollments and instructions for accessing that information. H š Benefits Summary—Provides a detailed, comprehensive description of each benefit plan and its provisions. I š Frequently Asked Questions—Provides a list of commonly asked questions relating to your benefits. š Leave Information—Provides time off related information for suchG benefits as family medical leave, sick leave, and vacation leave. š Retirement Planning Seminars—Provides dates and sign-up information. G S , meet individually with benefits administrators, sometimes within a month), new employees should known as “counselors,” to select benefits options. After employees select benefits, the company should provide them with personal benefits statements that detail the scope of coverage and value A of each component. Beyond these particulars, companies may update employees on changes in benefits (i.e., reductions in or additionsNto benefits choices or coverage) with periodic newsletters. Contemporary information sourcesGinclude a company’s intranet. An intranet is a useful way to communicate benefits information to employees on an ongoing basis beyond the legally required E office, employees are less likely to have written materiwritten documents. In an era of the paperless als readily available. Employees can review L general information about the benefits program whenever they want. For example, Table 9-7 lists A general information about the kinds of benefits options available at the University of Illinois. In the online version of such a list, each item (e.g., announcements, benefits directory) would contain a hyperlink that leads to more detailed information. 9-5. Explain the benefits and costs of discretionary benefits. 1 1 THE BENEFITS AND COSTS OF 0 DISCRETIONARY BENEFITS 8 Discretionary benefits, like core compensation, can contribute to a company’s competitive T advantage for the reasons discussed earlier (e.g., tax advantages and recruiting the best-qualified S candidates). Discretionary benefits can also undermine the imperatives of strategic compensa- Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 tion. Companies that provide discretionary benefits to employees as entitlements are ultimately less likely to promote competitive advantage than companies that design discretionary employee benefits programs to fit the situation. Management can use discretionary benefit offerings to promote particular employee behaviors that have strategic value. For instance, when employees take advantage of tuition reimbursement programs, they are more likely to contribute to the strategic imperatives of product or service differentiation or cost reduction. Knowledge acquired from job-relevant education may enhance the creative potential of employees, as well as their ability to suggest more cost-effective modes of work. On the other hand, deferred profit sharing plans may contribute to companies’ strategic imperatives by instilling a sense of ownership in employees and a drive to help position the company to earn significant profits over the long run.  _ F N K 221 A company can use discretionary benefits to distinguish itself from the competition. In effect, competitive benefits programs potentially convey the message that the company is a good place to work because it invests in the well-being of its employees. Lucrative benefits programs will presumably attract a large pool of applicants that include high-quality candidates, positioning a company to hire the best possible employees. Finally, the tax advantage afforded companies from offering particular discretionary benefits has strategic value. In effect, the tax advantage translates into cost savings to companies. These savings can be applied to promote competitive advantage. For example, companies pursuing differentiation strategies may invest these savings into research and development programs or employee development. Companies pursuing lowest-cost strategies may be in a better position to compete because these savings may enable companies to lower the prices of their products and services without cutting into profits. H I Many employees feel entitled to certain benefits that they con-G       @       K   G  !        to the organization to decide on other benefits that are offeredS and administered. As a line manager or HR professional, you , might be in charge of creating a benefits program, but you will COMPENSATION IN ACTION  Create workshops to help employees understand the          Ktion—highlight confusing aspects and aspects that are not well known.  While many companies now have call centers that answer      Y                  more complex benefits issues arise (e.g., long-term disabil    @ Z    can be dealt with in a sensitive and timely manner. certainly be called on to interpret policy in order to meet the   !     A ation or interpretation of benefits, you will want to have access to accurate information so your organization’s offerings serveN as true benefits for employees and not a source of frustration G Line managers take the lead and ambiguity. ways to keep the “explaining your benefits” E  Suggest portion of new employee orientation engaging and L interesting. The session should be conducted by HR Action checklist for line managers and HR—       Z helping employees understand and fully utilize A  [ Y          benefits arise. Seek to be educated by HR on the specifics of HR takes the lead        @  Y  1  Ensure that the employee benefits handbook is up to and accurately. date and accurate. Depending on the employee popu- 1  When changes to benefits are made, call employees lation, both an online version and a hard copy of the together to discuss rationale and what can be done 0 manual should be accessible. Y \     Ensure employee handbook is up to date and accessible 8 T New employees receive orientation to S understand benefit options ISBN 1-323-59381-0 Changes to benefits are given importance and communicated accordingly Education of line managers so they can respond swiftly and accurately Workshops to help employees become acquainted with specifics of program offerings Benefits call centers should not be used as a crutch—these issues are important to employees and should be treated as such Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 222   >N K END OF CHAPTER REVIEW MyManagementLab Go to mymanagementlab.com to complete the problems marked with this icon . Summary Learning Objective 1: A variety of social and economic factors contributed to companies’ adoption of discretionary employee benefit practices. For example, the federal government provided tax incentives to companies that offered benefits. Wage freezes during World War II prompted companies to offset those freezes with new or enhanced benefits. Learning Objective 2: The three categories of discretionary benefits include protection programs, paid time off, and services. An example of a protection program is life insurance. Vacation is one among many paid time off benefits. Wellness programs provide important services to employees’ health and welfare. Learning Objective 3: A host of laws influence the design and implementation of discretionary benefit Key Terms Learning Objective 4: Benefit program design enH tails consideration of many factors including who is I eligible to participate, financing of benefits, employee choice G in determining benefits, cost containment methods, and communication plans. G Learning Objective 5: Discretionary benefits are an S essential component of the total compensation system. , When designed properly, discretionary benefit practices can help promote particular behaviors through promoting wellness, financial security, work-life balance, and A so forth. N G E L A Section 401(k) plans 208 1 Roth 401(k) plans 208 Section 403(b) plans 1 208 Section 457 plans 208 0 profit sharing plans 208 8 plans 208 deferred profit sharing hybrid plans 208 T cash-balance plans 208 S integrated paid time off policies 210 paid time off banks 210 sabbatical leaves 210 volunteerism 211 employee assistance programs (EAPs) 211 family assistance programs 211 flexible scheduling and leave 212 day care 212 tuition reimbursement programs 212 transportation services 212 outplacement assistance 213 wellness programs 213 smoking cessation 213 stress management 213 weight control and nutrition programs 215 Employee Retirement Income Security Act of 1974 (ERISA) 214 qualified plans 215 nonqualified plans 215 participation requirements 215 coverage requirements 215 vesting 215 cliff vesting 215 6-year graduated schedule 216 Nondiscrimination rules 216 Pension Benefit Guaranty Corporation (PBGC) 216 probationary period 217 Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 welfare practices 203 short-term disability insurance 204 long-term disability insurance 204 short-term disability 205 preexisting condition 205 preeligibility period 205 elimination period 205 exclusion provisions 205 long-term disability 205 life insurance 206 term life insurance 206 whole life insurance 206 universal life insurance 206 retirement programs 206 pension plan 206 defined benefit plans 206 defined contribution plans 207 company match 207 Internal Revenue Code (IRC) 208 annual addition 208 practices, including the Internal Revenue Code, the Employee Retirement Income Security Act, and the Pension Protection Act.  _ noncontributory financing 217 contributory financing 217 employee-financed benefits 217 flexible benefits plan cafeteria plan 217 core plus option plans F N K 223 218 217 MyManagementLab CHAPTER QUIZ! If your professor has assigned this, go to the Assignments section of mymanagementlab.com to complete the Chapter Quiz! and see what you’ve learned. Discussion Questions H 9-1. Many compensation professionals are faced I with making choices about which discretionary G benefits to drop because funds are limited and the costs of these benefits continually increase. G Assume you must make such choices. Rank-orderS discretionary benefits from the ones you would most likely eliminate to the ones you would least , likely eliminate. Explain your rationale. Do such factors as the demographic composition of the A workforce of the company matter? Explain. 9-2. Discuss your views about whether discretionary N employee benefits should be an entitlement or G something earned based on job performance. E 9-3. Assume that you are an HRM professional whose responsibility is to develop a brochure for L the purpose of conveying the value of your company’s benefits program to potential employees. Your company has asked you to showcase the benefits program in a manner that will encourage recruits to join the company. Develop a brochure (of no more than one page) that lists the benefits and the objectives. 9-4. Conduct some research in order to identify examples of innovative benefit practices. A useful starting point is an Internet search using phrases such as “best companies to work for.” 9-5. Are employees more likely to favor defined contribution plans over defined benefit plans? How about employers? Explain your answers. A CASE 1  22  ' 2~% " 1 ISBN 1-323-59381-0 Case can be found on MyManagementLab. 0 As she hangs up the telephone, Joan Jackson realizes that she needs to consider changing her company’s 8 time off policies. She just received a call from an employee reporting off work because he is sick. This is the second employee on the same project team to call off thisT week, and the unscheduled absence will likely cause a delay in meeting the project deadline. S Joan, the president of Superior Software Services, is proud that her company has earned a reputation for providing high-quality software solutions. Superior recruits and retains top software engineers and also boasts an impressive administrative staff. However, even with a talented staff, Joan is concerned about the company’s ongoing ability to meet project deadlines. Over the past few months, unscheduled absences have caused Superior to delay the delivery of software products to a few clients. When a staff member calls in to take a sick day without prior notice, shifting employees to cover the work in order to meet a deadline is difficult. Joan believes Superior’s time off policies may be causing some of the problems. Superior offers employees 7 vacation days and 5 sick days each year. The company has a policy that employees may use sick days only for illness or emergencies. Employees may not schedule sick days in advance. Vacation days are scheduled at the beginning of the year. Employees receive approval of their requested vacation days on a seniority basis, so most employees designate the days they will take their vacation within the first few weeks of a new year so they are able to effectively plan vacation travel. Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 224   >N K Joan believes Superior’s current time off policy creates an incentive for employees to call off at the last minute. She has learned from supervisors that many employees use their sick days to take care of personal business such as attending parent–teacher conferences or running personal errands. These are often events that could be prescheduled time off, but employees do not feel they have a time off option to address such needs. Sick days can’t be prescheduled, and vacation days are often already committed at the beginning of the year. Joan believes that changing the time off policies could reduce the number of unscheduled absences, but she is not sure if her idea will address her concerns. She is considering replacing the current vacation/ sick day allowance with a paid time off (PTO) bank. Employees would receive 12 PTO days each year. They would be permitted to schedule preferred days off at the beginning of the year so that they can make vacation travel plans, and the remaining days could be saved for days when the employee is ill or could be scheduled ahead of time to take care of personal business. Joan believes this change will encourage employees to schedule their time off in advance when possible. With advance notice of absences, supervisors will be better able to plan projects and meet deadlines. H Questions: 9-6. Do you think changing Superior’s I time off policies will decrease unscheduled time off? 9-7. Beyond reducing occurrences of unscheduled time off, are there any other benefits to offering PTO? 9-8. Are there any disadvantages to G offering PTO? G S , Crunch the Numbers! Z` S@X %& &0'&"$ ~%0 '&" %& A / % N G You have just begun work at XYZ Manufacturing Company. Among its benefits offerings is a generous E In 2015, your annual salary is $45,000 and you are age 55. qualified 401(k) plan with an employer match. You’ve decided to contribute 10 percent ofLyour annual salary to your 401(k) plan even though the Internal Revenue Service allows you to contribute up to $24,000 in 2015 ($18,000 plus a $6,000 catch up contribuA addition is $53,000. tion for employees age 50 or more). The annual & %&% '&  '0"1 " %& 0 2'& & mymanagementlab.com. Questions: 1 need to contribute to meet the allowable maximum 9-9. How much more money would you 1 0 How much is the company match based on your 10 percent and 6 percent of your annual salary. contribution? 8 Based on the sum of your answers to questions 9-9 and 9-10, what is the difference between the IRS maximum annual addition forT2015 and the total contribution to your 401(k) plan? S contribution? 9-10. In 2015, the company offers a $0.75 match for each dollar that you contribute between 3 percent 9-11. MyManagementLab Go to mymanagementlab.com for Auto-graded writing questions as well as the following Assisted-graded writing questions: 9-12. If a company’s budget were extremely limited and could only afford to offer one benefit, control over absenteeism. 9-14. MyManagementLab Only – comprehensive writing assignment for this chapter. Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. ISBN 1-323-59381-0 which would you select? Provide your rationale. 9-13. Name at least one discretionary benefit practice that would help companies to have better  _ F N K ISBN 1-323-59381-0 Endnotes 1. U.S. Department of Labor. (2015, March 11). Employer costs for employee compensation, December 2014 (USDL: 15-0386). Available: www.bls.gov, accessed March 14, 2015. 2. Employee Benefits Research Institute. (1997). Pension Plans (Chapter 4.). Fundamentals of Employee Benefits Programs. Washington, D.C. Employee Benefits Research Institute. 3. U.S. Bureau of Labor Statistics. (1919). Welfare Work for Employees in Industrial Establishments in the United States. Bulletin # 250, pp. 119–123. 4. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 5. Solnick, L. (1985). The effect of the blue collar unions on white collar wages and benefits. Industrial and Labor Relations Review, 38, pp. 23–35. 6. Toossi, M. (2009). Labor Force Projections to 2018: Older workers staying more active. Monthly Labor Review, pp. 30–51. 7. Martocchio, J. J. (2014). Employee Benefits: A Primer for the HHuman Resource Professional (5th ed.). Burr Ridge, IL: Irwin/McGraw-Hill. I Survey: Employee Benefits in the 8. U.S. Bureau of Labor Statistics. (2014). National Compensation United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. G 9. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the G United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 10. U.S. Bureau of Labor Statistics. (2014). National Compensation S Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. , Survey: Employee Benefits in the 11. U.S. Bureau of Labor Statistics. (2014). National Compensation United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 12. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the A United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 13. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the N United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 14. Costo, S. L. (2006). Trends in retirement plan coverage overG the last decade. Monthly Labor Review, February, pp. 58–64. E 15. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the L United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 16. Costo, “Trends in retirement.” A 17. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 18. Rapoport, M. (2015). Longer lives hit companies with pension 1 plans hard. The Wall Street Journal (February 23). Available: www.wsj.com, accessed February 25, 2015. 1 19. I.R.C. §415(c). 20. I.R.C. §404(a)(3). 0 21. 26 Code of Federal Regulations §§1.401(a)(4)-8(c)(3)(I). 8 WorldatWork Press. 22. Markowich, M. M. (2007). Paid Time-Off Banks. Phoenix, AZ: 23. WorldatWork (2014). Paid Time Off Programs and PracticesT(September). Available: www. worldatwork.org, accessed March 10, 2015. S 24. Harrison, K. (2014). The most popular employee perks of 2014. Fortune (February 19). Available: http://www.fortune.com, accessed March 12, 2015. 25. Society for Human Resource Management (2013). 2013 Employee Benefits: An Overview of Employee Benefits Offerings in the U.S. Available: http://www.shrm, accessed February 5, 2015. 26. Halzack, S. (2013). Paid time off for volunteering gains traction as a way to retain employees. The Washington Post (August 11). Available: http:/www.washingtonpost.com, accessed February 26, 2015. 27. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 28. Thomas, K. (2013). Companies get strict on health of workers. The New York Times (March 25). Available: www.NYTimes.com, accessed February 7, 2015. 29. Wieczner, J. (2013). Your company wants to make you healthy. The Wall Street Journal (April 8). Available: www.wsj.com, accessed January 15, 2015. Strategic Compensation: A Human Resource Management Approach, Ninth Edition, by Joseph J. Martocchio. Published by Pearson. Copyright © 2017 by Pearson Education, Inc. 225 226   >N K 30. U.S. Equal Employment Opportunity Commission (2014). EEOC Lawsuit Challenges Orion Energy Wellness Program and Related Firing of Employee (Press release, August 20). Available: www.1.eeoc.gov, accessed March 12, 2015. 31. I.R.C. §§410(a)(1), 410(a)(4); Treas. Reg. §1.410(a)-3T(b); ERISA §202(a). 32. I.R.C. §410(a)(3), Treas. Reg. §1.410(a)-5, 29 C.F.R. §2530.200b-2(a), ERISA §202(a)(3). 33. I.R.C. §414(q). 34. I.R.C. §§411(a)(2), 411(a)(5); Treas. Reg. §1.411(a)-3T; ERISA §203(a). 35. I.R.C. §401(a)(4). 36. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 37. U.S. Bureau of Labor Statistics. (2014). National Compensation Survey: Employee Benefits in the United States, March 2014 (Bulletin 2779). Available: www.bls.gov, accessed March 11, 2015. 38. Barber, A. E., Dunham, R. B., & Formisano, R. (1990). The Impact of Flexible Benefit Plans on Employee Satisfaction. Paper presented at the Fiftieth annual meeting of the Academy of Management, San Francisco, CA. H 39. Martocchio, Employee Benefits (5th ed.). 40. U.S. Department of Labor (DecemberI 10, 2014). Employer costs for employee compensation, September 2014 (USDL: 14-22...
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