Session 6Discretionary BenefitsChapter 9Discussion QuestionChapter 9 , Question #1Many compensation professionals are faced with making choices about which discretionary benefits to drop because funds are limited and the costs of these benefits continually increase. Assume you make such choices. Rank order discretionary benefits, starting with the ones you would most likely drop to the ones you would least likely drop.Learning ObjectivesRole of discretionary benefits in strategic compensationTypes of protection programsTypes of paid time off plansTypes of employee servicesDiscretionary Benefits CostsAs of September 2010 $19,000 per employee 30.5% of total payroll costsExample, what HEALTHCARE plans cost?Costs are plan costs on a per person basis, including employee premium contributions.Discretionary Benefit TypesProtection programs - provide family benefits, promote health, and guard against income loss caused by such catastrophic factors as unemployment, disability, or serious illnessesPaid time-off - provides employees paid time off for such events as vacationServices - provide enhancements such as tuition reimbursement and day care assistance to employees and their familiesProtection ProgramsMedical PlansDental PlansVision PlansPrescription Drug CoverageMental Health & Substance AbuseDisability InsuranceLife InsuranceRetirement PlansTypes of Disability Insurance Sick Leave or Short Term Illness Generally up to one week or longer based on years of service Short Term Disability Up to 6 Months based on service Inability to perform any of occupations duties Long Term Disability 6 months to life Inability to perform work qualified for based on: training, education or experienceBoth short and long term disability insurance may duplicate public disability benefits mandated by the Social Security Act and state worker comp laws. Employer benefits typically supplement mandated benefits, not replace them. Sick leave policies cover minor illness and are funded as a payroll expense.Life InsuranceProtects family members by paying a specific amount to employee beneficiaries upon the death of the employee. Typically a multiple of the employees salary.Types of Life Insurance:1)Term life insurance Most common type offered by companiesLimited to period of employment2)Whole life insuranceCombine insurance protection with savings featureUncommon feature of employers plans3)Universal life insuranceHybrid of term life and whole lifeUncommon feature of employers plansRetirement PlansDefined Benefit Plan Not an individual account plan Pays participants a fixed periodic benefit or lump sum amount Calculated using specific formulas that Include items as: age earnings length of serviceDefined Contribution Plan An individual account plan Employer contributes to the plan Employee may contribute to the plan Employees may be given a choice of investment options Plan does not guarantee a benefit amount Participants bear the risk Paid Time Off Programs Holidays Vacation Sick Leave Personal Leave Time-off Banks Bereavement or Funeral Leave Jury Duty Witness Duty Leaves Military Leave Nonproduction Time On-Call Time Sabbatical Leave VolunteerismJury Duty Funeral LeaveMilitary LeaveClean-Up TimePreparation TimeTravel TimeRest PeriodsUnion Bargaining Topics10Wellness ProgramsServices ProgramsEmployee Assistance ProgramsCoverage for: -Alcohol or drug abuse-Domestic violence -Emotional impact of AIDS and other diseases -Clinical depression -Eating disordersAdvantages of EAPs for EmployersCan impact costs related to:-Turnover-Absenteeism-Medical costs-Unemployment insurance rates-Workers compensation rates-Accidents-Disability insurance Discretionary Benefits andStrategic Compensation Promotes competitive advantage Promotes employee behaviors with strategic value Attracts quality employees Meets the needs of a diverse workforceLearning ObjectivesRole of discretionary benefits in strategic compensationTypes of protection programsTypes of paid time off plansTypes of employee servicesSession 7Contextual Influences onCompensation Chapter (none but see Chapter 2)