chair 9 T ; HE MANAGEMENT OF EMPLOYEE BENEFITS AND SERVICES OBJECTIVES: After this lesson, you should be able to: Define what employee's fringe benefit are; Discuss the principles governing fringe benefits Know the reasons why benefits and services are granted to ‘ernployees in addition to employee's salaries, Identify the types of benefits given to the employees, and Distinguish employees’ benefits and services trom companyov 7M ‘ The Beginning of the Fringe Benefit Concept soa The patemalistic concept ofthe fringe benefit started oes gained the employe among their employees and their families. The early PI inspired them to work m loyalty to the company, cooperation and goodwill and INSP bers of one bi efficiently. These concepts regarded the employee a5 ois was when the compan, family and the company kept them satisfied in their jobs. ember of the family. Som, as a small group that considered the employee 2 9,71 vith family quarter Companies then gave free meals to their workers, POVIGE! “provided housin, Dear their work area and other services. Some big corporati employees’ facilities, hospitals, recreational facilities and other amenities for the employees’ use For some time, this patemalistic concept worked well, Gorges a qamPany was small and the employees were few. The manageTNN, Yh Mire the owners themselves knew sll their employees and their dependents, They were considered as the “Big Brother”, one who provided for family emergency nesds ang was highly respected by all. As the firm expanded from the small family owned business to a larger corporation, and the company workforce increased tremendously due to the expansion of the business operation, the granting of fringe benefits became less and less as corporate organization became aware of the expenditures for the granting of the usual benefits, On the other hand, some employees who had not developed their loyalty to the organization considered these benefits as dole-outs, as special concessions to low wages paid by the company. Those employees who continued to give their loyal service to the company received their regular benefits. Those who were to the company were not given any. They considered the granting of benefits as inequalities of treatment. There were then no clear-cut policies and guidelines in the granting of company benefits and services. The formation of the company unions resulted in the active quest for the fair treatment of all employees in the granting of benefits and services. Due to this active movement of the unions, management became more prudent in the treatment of benefits. The granting of benefits is now covered by specific company guidelines and procedures as management realizes that employee services and benefits should be based on sound management principles of coexistence with the employees organization. : The Concept of Benefits Benefits are anything that is not covered by regular salari i anything that contributes to the improvement of the condita 32 Aaa tht motivates the employees to do good work. Benefits are additional cog nor ona the employees receive regularly at an interval stipulated in the comer) olicies and guidelines. pany peBenefits are granted to @ that they will enjoy their st commitment and loyalty mployees to assist them and facilities are provided so ‘ay in the company. The main purpose is to develop greater and to keep good employees in the company roster Management social 8 Social conscience has shifted to rect ygnize that employees are partners in a development and progress. They realize that the employees are exposed to hazards of work and economic problems brought about by the rising cost of living, the cost of hospitalization and other social life problems. Management is now more concerned with their employees’ welfare and share in the social responsibility and community activities. The government on one hand, has recognized that the employee as contributor to the economic development of the country has to be taken care of by passing legislation that offers more benefits to the employees. The objectives of the company 1n granting fringe benefits are: 1. To provide additional Protection and comfort to their employees and their families as they consider them as members of the team. To maintain and develop employees as an effective work force duly committed to their corporate mission and vision. 3. To develop productive and happy employees and develop greater loyalty and commitment to motivate them to remain in the employment of the company. 4. To develop greater partnership'in the development of quality products and services to their customers and clients. 5. To develop satisfied employees and more concerned workers to avoid activism in the workplace that will interfere with company production 6. To develop partnership with labor unions and employees’ associations The Governing Philosophy in Granting Fringe Benefits Company benefits are additional costs in the company operations. They should be administered appropriately and be based on a sound company philosophy in granting additional benefits. Such philosophy must consider the company’s ability to pay and contributions to the profitability of the organization. It must also be mutual benefit to the giver and the receiver of benefits. Along these lines, the company benefits should focus along the following principles: 1. Company benefits should be based on the financial conditions and the capability of management to pay additional cost of operations, as benefits granted cannot withdrawn whenalready granted. Benefitsare humanitarian grants of management and the capability to pay must be carefully studied. Additional cost may mean saditional financial loses to the company that may lead to company bankruptcy Employees should not expect much at a time of financial crisis. 2. Benefits granted should notin rfere with company operato and management 7 the prerogative to control the same. Asan example additional leave credits can be availed of without proper management approval, especially if it will interfere with production schedules. Shifting se hedules are controlled by managemeAan oN 3. Toe 7 » shipped to custo, i ist be shipp Ne ion. Goods mu I leave credits 1, 1S Company operati ns, Additional it May lays may a juled maintenance break, or on ed take care of continue on time as det cause company proble Pany shutdown or on sche d position, and shy fair to all employees of equal ee is empleye ©f uniform implementation. Example, i 4 rice allow; senior mana, bene: Sreater coope: uly ar en all must be given, ance of one sack per month, then a the nces then all the others must ENjo Bers are given car allowa among, managers thera)’ fits. Equal treatment will avoid erie ike ene bent ration is maintained, Equal ranks must ge! The benefits must have Soncerned. Example:¢ Bain represent, butit should home early, same. If a} the same : he employe, Mutual value to both employers sealer : thera ategiven by companiesto manag i satiety Sto, ‘ation for the company and for them to goto oe eee Not be abused by the employees concerned for OF Boing Managers Usually enjoy flexible time schedules but they are not Paid overtime work, On the other hand, : additional leaves are provided by management to give i, employees a break from work and let them enjoy time off with their families, by, they are expected to be more refreshed; and when they go back to their work they are expected to be more productive and could work efficiently. Employees must ir additional leaves without employ n investment in their personal w ‘ved of worry in i daily earnings and the tare not covered are free from these Sreater efficiency is of paying medical bills tha ployees hence Personal stresses they feel in their jobs expected. The employee must un derstand the costs bene: work hard so that the ‘ation and they should company will maintain to pay the In time of financial crisis and the company is in of revers, should not expect the company to be beney, i are not usually given like company outin fit implement, its ability added fringes ‘als, the employee of those that In Japan, when the company is in its re opt to forego some benefits granted by work harder for the company to ady them to enjoy later the suspended be Anagement relations hence furth Mar Petiod, the employe management That 1S the time that the ‘ance further its ro nefits. This p company re "es themselves 88 about healthic tedcannot give what one does not have enough to 5P# ones’ capacity to give, Benefits must be measured in terms of employ’ penefits should be uniformly implemented, policy guidelines on those who should receive criteria a hat one rstand t 4 by ons must unde is hampered Our company unions and various organizati re, Benevolence company. While ement in the following eos’ services to the be a measure here must s in terms of the the benefit Length of service - the following company guidelines ™2Y be of help in the granting of leave credits * Employees who have one year of leave of five days per year. service are entitled to the mandatory var of service serve the m 15 days «Theemployees enjoy an additional two-day leave for eX ye but not to exceed 15 days thereafter. That is, if the employees company for another five years then they can enjoy the maximu} leave credit per year. «The employee may initially enjoy five days sick leave after one year of service, and then an additional leave of one day per year of service until he enjoys the full fifteen days leave. «Additional leave may be granted depending on the company’s cap to pay. Retirement Benefits: ability Some companies pay retirement benefits outside of those given by the Bocial Security System. Usually employees are paid 15 days for every year of service. Some companies pay an additional retirement benefit of one day after five years of additional service. That is, when the employee has Served for another ten years or total of 15 years, he gets the full one month in separation pay- Other companies pay of service. bargaining agreements. © Other cémpanies provide pension plans, either participatory or non- participatory. That is meant to relieve the company of paying a huge ‘amount of money when employees retire from employment. Other Benefit Programs — compal and their dependents may be given urable benefits is a come-on perk for employees to any and provide loyal and efficient services to satisty fs and develop employee morale. Anticipation of greater based on the number of year of service prevents employees looking for other jobs thereby lessening employees retirement benefits for as much as two months in collective ‘Others pay more depending on their ny insurance plans covering the employees depending on the services of the employees. The granting of meas stay longer with the comp’ customer demand! company benefits from resigning and turnover rate.a a mn ——— cut yt of £0P MANABEMEN ang ative efor ties are fringe benefits. tivil sd sti ac participated in by , ‘ational programs and athle finated and particlp Benefit Programs should be a cooper employees, Rec coord mum. Planning th, « comPany. Such programs should be ¢¢ Id be to the max! ee ae ; employees concerned and participation should pe oe itee me be Program and assignment of the chairman and uitations with the differen, Consulta ; stivities should be handled by the Human Resources Department. Th these activities should be jy 1 be char, heads and those with the talent and expertise i ent uniforms should be charg " Priority for the success of the program. Departmttee should decide the color gy qBainst department budget allocations. The com! to avoid disgruntlement ‘MSs, with less. management intervention, enefits. They aim tc any benefi The athletic and recreational programs are compan) en handled properly, thi, develop esprit de corps and boost employees’ morale. Upediant production incentives and benefit program can boost efficiency an The Classification of Benefits Benefits could be classified under the following: 1. Statutory Benefits — are benefits mandated by law such as: 2. 13" month pay given half in June and half in December b. Five-day incentive leave ©. Birthday leave 4. Maternity leave with pay for married women ©. Patemity leave with pay when husband's wife gives birth £Pag-ibig Fund — housing loans through employer-employee contributions 8 Medicare Fund - for medical expenses of employees and dependents h. Social Security Benefits — retirement, Pension, de. sickness, medical rehabilitation, employee compens. in the performance of work ‘ath, burial, disability ation in case of accident i. Cost of living allowance 2. Xompany Benefits ~ These are bene! those mandated by law. These benefit: agreement and those that are fits granted by S could be siven unilaterally the cor through by man MPany outside of A collective bargaining agement a. Vacation leave with pay - this y, ‘aries from company to company b. Sick Leave with pay c. Bereavement leave d. Hospitalization plan €. Sickness and accident insur ance plan{Life insurance and pension plans g. Christmas and mid-year bonus h. Housing equity assistance i. Educational plan j. Recreational and fitness facilities k. Legal aid 1 Car plan m. Company Service and transportation n. Stock option plan ©. Management Bonus Emergency leave Personal leave r. Union leave s. Production sharing plan t. Profit sharing Profit-Sharing Plans sharing is an incentive plan under which an employer agrees (0 share with his personnel a specified portion of the net profits of his business at the end of each fecal period or over a given period. tis nota pension or a bonus It provides payment of carent or deferred sums based on the profitability of the enterprise as a whole. Purpose of Profit-Sharing ed that employees would feel they have stake in the company if they 1. It is believe rofits of the enterprise in which they work. get a direct share in the p 2. It aims to modify employees’ productivity and loyalty to the who subscribe to the concept of profit-sharing look upon their workers of the enterprise attitudes to achieve greater employee efficiency firm and keener interest in its welfare 3. Employers workers as partners oF CO“ Types of Plans 1. TheCash Plan ~ alse ‘of the employee's sha ares under this agres known as the Current Distribution Plan. This provides tor re in the profit in cash based on hi »rally paid quarterly, semi-ann payment wage. Shi or annuallyht Vaan ‘ [Nn i trust fung establishes a A to 2. The Deferred Distribution Plan - this progr ibation of profitsis withhelg Provide employees with future payment disability: Until the employees’ retirement, death or scipating employees are Permittey 3. The Purchase Plan - Under this plan, participt res of company StOck,eithy ‘0 Purchase often through payroll deductions * orless than the prevailing market price oF at P above but s, : snumerated uch, Scope and nature of benefits are so varied 2s © : ies: benefits can be further classified into four major categor 1. Economical and financial benefits 2. Recreational, social and athletic services 3. Health and medical services 4. Professional services The benefits derived from these company services are immeasurable, since they are intangible. Nevertheless, their value cannot be underestimated as they contribute Breatly in making the company a good place to spend the best years of the employees productive life. Managing Benefits: Planning and Administration Managing a fringe benefits program is an administrative and a financial problem to the employer. This needs to be handled very carefully as this may mean sour relations between management and the employees. Careful planning of the benefit programs could develop healthy administrative relations between the workers and management. It should be both beneficial to the employer and the employee as well. It should be wisely managed by a competent staff that knows the feeling of the employees and understand management benefits Program philosophy. Before any benefit pro the working conditions, hours of work, salaries and wages. The basic necessities of the labor force must be met first before any benefit program is to be implentented. Employees will only appreciate benefits if the basic Tequirements of wages and working conditions are met by the management. Benefits must be operated with: minimum financial expenditures as workers may see it as a ploy of management in place of higher wages. Wages are still the basic intrinsic factors that drive the employees to be productive and efficient in the performance of their task, Benefits are additional perks of management and their effects are onl: 7 'Y appreciated at the ti joy the Program, therefore they are considered as extrinsic motivators, © REY eNI°Y Strategic Benefit Implementation Management has to analyze the benefit payoff of an : 'y benefit ent program. Employees expect management to provide them benefits bu rt “on the ol \d, job pertc same, Benevolent Management on, the other handexpects employees ¢, the end game should gee to the companys’ productivity and profitability and Since benefits are expences ritual benefits to both the employer and the employees strategic management jad the results are not usually immediately appreciated, a in its implementation must be considered 1. Benefit Surve industry in je Benchmarking - Benefits should be within the level of the cost should ae and those of the competitors in business as any added product compet Product-pricing strategy. Cost information is necessary as tition affects company sales strategy and programs. pr Ue ihard ie related to employees’ turnover rate. When benefits are not employee tumover, ed with the same or similar firms, then the percentage of the Bureau of se en2) affect production. Some information may be available from Department of nist¢s Office under the Department of Trade and Industry and the needs tora] e Labor and Employment. With information at hand, management needs to font ftst the probable payott of any benefit program. This evaluation from the emia Tecognize that the employees have come to expect certain things their well overs. The employees must feel that the employer is committed to ‘cit welfare, so that they will also be committed to the objectives of the company. There is much room in evaluating benefits decisions. Benefits are tax-exempt tax deductible from their operating profits. The company must find the right formula on what financial and non-financial incentives to give the employees before any added benefits is to be implemented. Anything given by the right hand cannot be taken back by the left hand. 2. Cost Control Strategy —In thinking about cost control strategy, several factors can be successful. It is assumed that the larger the cost of benefits category, the greater the opportunity for savings. We must also consider the growth trajectory of the benefit category as its cost impact may run out of control in the future. Cost containment effort can only work to the extent that the employer has significant discretion and control in choosing how much they spend in the benefit category. Statutory cost varies as government policies change over time and this is beyond control by management, and therefore a tie-up study must be taken into course. 3. Staffing Cost Strategy - employers may change staffing practices to control benefit costs. Benefit costs are fixed and spent per employee. The company may require the employees to work more hours and pay overtime premiums. The overtime premium should be computed against expenses for employees’ benefits. If the resultant factors are more than savings without sacrificing production performance, then such plan could be implemented. This condition will also be favorable to the employees as it will increase their home pay, which is more important especially for heads of the family. The hiring of contractual or temporary employees will greatly reduce cost on benefits. Usually the regular employees enjoy company benefits. The personnel roster should be studied very carefully; the workload must be properly distributed and should maintain only the regular work force performing regular functions. This is the primary reason why most companies resort to such personnel arrangements,a — ied ivities that could be dy Job contractors may be employed on production activities a ope Outside the plant operations, Outside of benefit cost sir operations, the compan, could be avoided, While jobbers may gain profits fOr ne ent of addition, on the other hand will be absorbed in the administration aN Ped along benefits. Nevertheless, cost benefit analysis should also ™ line in terms of company productivity and quality index. + The Demographic Composition Cost Strategy factors such as age, Sex ang reo mPlaver must also consider the demograP NY tong thee demograph Status of their work force. The benefits must be design i need of the human resins be more relevant and ae gmat ee workers would prefer higher wages and more overtime work 10 AUBIN their take home pay to pay their needs and other comforts. Married wo! will. des more disability benefits and childcare protection than single WOmED Wit; Older Work force will need more retirement programs and pension plans: Planting such a benefit program could be ticklish issues as human resource composi IONs are varied in any company organization. Careful study must be conducted a fe ine line through a research program to assess employees’ preferences; in the same way the consumers demand for products and services are analyzed. Care must be taken not to raise employees’ expectations regarding future changes benefits. 5. Organization of Employees Cooperatives Organizations of employee associations’ cooperatives will greatly help unburden management of employees’ loans and cash advances. This will also help employees save part of their income and generate dividends as added incentives, Credit unions are developed as self-help organizations to help solve some of their personal financial problems through loans at very minimal interest plus incentive refunds. Credit cooperatives can also have consumer merchandise and groceries for the employees’ household needs at prices below regular market cost and may be paid through payroll deductions. The organization of these associations should be encouraged and supported by management. Some companies provide seed fund to start the program and make monthly deductions based on the employees’ approval on how much capital investment they will put into the association. Capital investment plus interest can be withdrawn when the employee retires of is separated from the company. 6. Communicating Benefits to Employees Any strategic implementation of any program cannot take morale without their understanding fully the concepts and program of management in the granting of such benevolent gestures for their welfare Benefits are investments in the greater job satisfaction and increased commitment for bette! performance on the job. root on employees’ Research findings have shown that employees’ job satisfacti show very little correction between company benefits Prograt think that it i for a compan 150 ion and performance ms. Many employees those 15 days sick leave and15 day» vacation |e a company to impiane withoue their realizing that those are aot mandatory for absence with pay to the nt Many employees do not feel the cost impact of such is aimed giving the om snPanys’ financial conditions but his time off from work more efficient Ployees the time to relax and refresh and for them to be when they go back to work. The benefit pr Program must be the orientation program, and in must be ment i ioned in all information, The e H Program as a me properly communicated to the employees during iduction of new employees. The cost implications tivities through bulletins and company news ™ployees must feel that they are part of the employers’ welfare mber of one big family. Job applicants m ust i r to be attracted not ist be aware of the benefit programs of the company for them nbc only on the pay but also on how the company cares for their With, A caring employer is what most productive applicants want to work Corporate Policy Guidelines on Benefits The company must develop corporate policy guidelines in the implementation of any benefit program. Such policy and procedure must be developed in cooperation with all operating and staff departments and submitted to the Board of Directors for proper approval. It must set the policy and procedure in implementing the program and communicating these to all employees concemed so that they are fully understood. Corporate policy must follow the following guidelines: 1. It must specify are covered by the policy. It must relate to the family and individual assistance to levels of need. It must make the cost of work-related benefits as part of cost production. sen It must provide security in such forms as compensation during work-related illness and retirement benefits. 2» Jt must promote healthy and safe work environment. 6. It must provide morale-building programs and develop employees’ esprit de corps. 7. It must be of mutual benefit to both the employees and the employer. Benefits Program Evaluation t of employee benefits is an important means by Effective program marae compete Benefit ats ave subtgniil ard contin which organizations reer reas, especially on employees’ health care benefits. Effective to grow rapidly in some Bt sis necessary tobe able to compete in products and services evaluation of al bene i en cet, Evaluation must also focus its attention not only on especially = pork cone the growing competition in acquiring a totally committed product cos! . ;fn - : h work force that will profile the company toward its BfO* 0 found investing more money and ee resources On ped by and ction and retention of quality employees 4" be stock scintillator ot ry ignificant soci ibility to 1 -being deions neon a Hearpaesmustfully understand Daal es carry the responsibilty of safeguarding their own economic 22°08 oe by Protecting their employers through productive efforts to sustain Careers be done by the Human Resource, A continuing research rogram should 2 Department to evaluate not only the cost impact of benefit programs but also its effect; tool yelovees’ performance and morale. Cost benefit researches and evaluation are ‘ols that will guide management in decisions on any further benefit implementationCASE STUDY q The Tennis Match Noelisa computer that part of the com to be held at the corporate tw used to play with Nog! in mai tournament. They fe ; Programmer atJonadel oration le was delighted to know Panye athe 2UJonadel Corporation, He was delighted to ka etic program is a mixed doubles tennis tournament Mnis court, Grace, who works in the same department el that hee ecasions and the two would like to compete in the . 'e 1S a great chance to win the annual tennis competition There is a g eso ie ree interest among, employees who are tennis players in the are all tennis enthus Ps more productivity at work. The management themsely annagenient dévined a The tournament is scheduled on friday afternoon and pia aera ¢ this as a “tennis holiday”. It is a day of fun and workers can spective teams. Management supported the program with free snacks and fun fairs ; 2 $ to make the occasion memorable. It was a four-consecutive-Fridays tournament. : Noel and Grace advanced to the final round. They were leading in the third set which was the deciding point. On a smash, Noel twisted his ankle badly. Despite the injury Noel and Grace continued the game until they won the set and were declared tennis champion. Noel's injury became worse and he had to be confined in the hospital for 2 days as the X ray results showed hairline fractures. Noe] missed two days of his work activities. He has no more sick leave or vacation leave because company policy and ECC policy do not cover non-related work accidents. Workers’ compensation provides payment if the worker is “functioning within the scope of employment”. Note: Use Case Format