All the financial returns that are not paid directly to the employee are referred to as employee benefits. The decisions of employers about the social costs of retirements & health care are considered employee benefits in all over the world.
The decision of employee benefits is also taken by the Department of Human Resource Management. Below are some different ways of employee benefits that are commonly practicing all over the world for this purpose.
Ways to Give Employee Benefits
Benefits as Indirect Financial Compensation
Most organizations prefer to provide certain financial related benefits to their employees like insurance & other welfare programs including safety, health, and security, etc. In fact, all these employee benefits contain the financial returns that are not paid to employees directly.
Mandated Benefits
Some employee benefits are given to employees through the decisions of top management while some of them are obliged to pay in the light of certain laws. The following are some possible ways of the employee benefits, which are supported by different laws.
- Social Security
These benefits are related to the retirement of an employee such as survivor’s benefits, Medicare & disability Insurance, etc.
- Unemployment Compensation
If an employee is laid off by an organization then he has the legal right to receive unemployment compensation for the next 26 weeks. There are certain guidelines that direct the system of unemployment compensation but it is the responsibility of the state to provide such compensations which may be different from one state to another.
- Worker Compensation
The expenses that arise from the job-related illness or accidents are covered financially by the worker compensation program of employee benefits.
Family & Medical Leave Act (FMLA)
The family & medical leave act is imposed on all the government employers as whatever number of employees they retain & also to the private employer who keeps the number of employees 50 or above. This act imposes unpaid leave of about 12 work weeks per year, because of the health-related conditions of the employee, his newborn child, any other ill child, spouse, or his parents.
Discretionary Benefits
Certain organizations provide specific employee benefits voluntarily. The following is the detail of these benefits.
Payment for Time not worked
The organization identifies that there are certain benefits that employees need like
- Payment of holidays not worked
- Paid sick leave
- Paid vacations
- Military rescue duty like the national guard
- Bereavement time or voting time etc
Health Benefits
Employee’s indirect financial compensation includes health-related benefits like health vision care, dental, etc. The following is the detail of some of the important areas.
- Health Care
The indirect financial compensation includes the most expensive & fast-growing cost which is the health care of employees. There are many factors that lead to these conditions like
- Aging population
- Increasing demand for medical care
- Expensive medical technology
- Lack of price controls
- Inefficient administrative processes
There are many other options that employers use in the area of health care of their employees. For this purpose, one option is in the form of Health Maintenance Organizations (HMOs) that offers all the services for a fixed fee.
Point-of-Service (POS) is another option that allows the members to choose a provider from within the specified network or in case of benefits of lower level; the members may also look outside the network. Another option consists of a more flexibly managed care system called Preferred Provider Organizations (PPOs).
Usually, members are given the incentives to use the services within the network, because the outside network providers result in a higher cost.
- Capitation
It is like a reimbursement method in which physicians of primary care negotiate with the employers for a rate for the entire working life of employees. In fact, in this method, the doctors are hired for the cost per patient rather than per service.
- Defined Contribution Health Care System
The employees are provided with a certain amount of money on an annual basis which should be used in purchasing certain health care coverage.
- Utilization Review
It is the process that scrutinizes hospitalization, surgery, medical diagnosis and other medical care & treatment specified by doctors.
The Health Insurance Portability & Accountability Act
This act was passed in the year 1996 in America in which people who move from one job to another or who are self-employed etc, are provided protection in the area of health care.
- Dental & Vision Care
Dental & vision care is also provided by employers to their employees.
Security Benefits
Security Benefits include the following benefits.
- Retirement Plans
Private Retirement Plans are specified for the provision of income to employees who have served the organization for a specified time period or who have reached a certain age limit. In the case of Defined Benefit Plans, the employers of the organization agree to give specified income to employees which are either a percentage of earnings or fixed dollar amount.
There is also a Defined Contribution Plan in which the employer contributes a certain amount to the employee savings or retirement funds. Besides these plans, there are also some other specific retirement plans like 401 (k) Plan, Employee Stock Ownership Plan, etc.
- Disability Protection
Usually, the compensation given to employees protects them from job-related illnesses or accidents but there are certain organizations that provided additional protection to their employees which are more comprehensive in nature.
- Life Insurance
In the event of the death of an employee, life insurance is a benefit that is given to the family members of the dead employees but there is fix premium that should be paid on an annual basis.
- Employees Services
There are certain benefits named employee services that are offered by the organization. These benefits are as follows.
- Relocation Benefits
- Child Care
- Educational Assistance
- Financial Services
- Unique Benefits etc.
Employees Retirement Income Security Act (ERISA), Older Workers Benefit Protection Act (OWBPA) also from one of the benefits of employee benefits that required legalization.
Hello everyone! This is Richard Daniels, a full-time passionate researcher & blogger. He holds a Ph.D. degree in Economics. He loves to write about economics, e-commerce, and business-related topics for students to assist them in their studies. That's the sole purpose of Business Study Notes.
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