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CHAPTER 12 Designing and Administering Benefits

CHALLENGES

After reading this chapter, you should be able to deal more effectively with the following challenges:

1 Grasp an overview of benefits.
2 Develop the benefits strategy.
3 Know the legally required benefits.
4 Have familiarity with the voluntary benefits.
5 Learn practices for administering benefits.

Employee benefits in the twenty-first century have increased in complexity from the standard benefits of health insurance, retirement plans, and vacation time that all companies offer to employees. Google, the world’s largest search-engine company, uses a vast array of benefits to differentiate itself from competitors that want to hire people with the same talents, according to Steven E. Gross, a consultant practice leader at Mercer Human Resource Consulting.1

One of the benefits that is noticed right away at Google is the food. Google provides 11 free gourmet cafeterias at its campus in Mountain View, California, that provide a variety of international foods, including a Spanish-style tapas bar and Indian, Chinese, Italian, Thai, and Mexican restaurants.2 It also offers a 24-hour on-site fitness center, as well as personal trainers. There is an in-house doctor, nutritionist, a dry cleaner, and a massage service. A biodiesel bus equipped with Wi-Fi shuttles commuters to the office. For employees who wish to drive their cars to work, Google supplies onsite car washes and oil changes. In addition, Google offers employees a $5,000 subsidy to buy a hybrid car.3

Source:© ZUMA Press, Inc./Alamy.

Is Google’s generosity purely altruistic? Of course not! Google uses the benefits to achieve several goals: Attract the best knowledge-workers it can in the intensely competitive environment for high achievers; help them work long hours by feeding them gourmet meals onsite and handling other time-consuming personal chores; show them that they are valued; and have them remain “Googlers,” as employees are known, for many years. The benefits that Google offers send this message to employees: “Come to work for us, work very hard, and we’ll try to help you with your daily activities.” Transportation is one. And having services available on the Google campus is another.4

Being a leader in employee benefits has given Google recognition as an outstanding place to work. Google was ranked number one in Fortune’s “100 Best Companies to Work For” list in 2012 and 2013.5

Of course, not all companies have the resources to offer the benefits that Google does for its employees. The challenge is for managers and HR professionals to work together to (1) give employees meaningful benefit choices that match their needs, (2) keep the costs of these benefits under control, and (3) ensure that employees are fully informed of their benefit options.

The Managerial Perspective

In the United States, unlike most other developed countries, the employer provides most of an employee’s benefits. The benefits, which are part of a group benefit plan, are designed to safeguard employees and their families against problems due to sickness, accidents, or retirement. More than almost any other issue addressed in this text, an organization’s HR staff controls benefits programs. Still, managers must be familiar with benefits for several reasons:

▪ Benefits issues are important to employees Managers must help employees understand and make the best use of their benefits. For instance, if an employee has a child who needs urgent medical attention, the employee’s manager should be able to explain the company’s medical benefits to ensure that the employee obtains all available coverage.
▪ Benefits are a powerful recruiting tool Managers at firms that offer enticing benefits can use this advantage to recruit high-quality applicants.
▪ Benefits help retain talented employees Firms that offer an attractive benefits package to employees give managers an advantage because the package often helps reduce turnover.
▪ Certain benefits play a part in managerial decisions Some benefits—such as vacations, family and medical leave, and sick days—give employees scheduling flexibility. Managers need to be aware of these benefits to effectively manage work schedules.
▪ Benefits are important to managers Managers need to be aware of their own benefit options. Some decisions, particularly those concerning retirement plans, have long-term consequences. Good decisions in this area made early in a career can affect quality of life at the end of and after a career.

However, understanding benefit plan designs is not an easy task. As we see in the chapter, cost-control measures, the need to offer benefits that attract and retain employees, and new laws and regulations have led to many changes in the design of benefit programs.

In this chapter, we explain benefits in detail. We begin with an overview of employee benefits and the relationship of benefits to the rest of the compensation package. We then examine strategies for designing benefits programs. Next, we describe the scope and significance of two categories of employee benefits programs: legally required benefits and voluntary benefits. Finally, we discuss some important issues in benefits administration.

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Table of Contents for CHAPTER 12 Designing and Administering Benefits

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Table of Contents for
CHAPTER 12 Designing and Administering Benefits