Designing and Planning Benefit Program

Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)

Professor

Process of Benefit PlanningDetermining the goals and objectives Assessing and/or selecting benefits Designing the benefits Package Monitoring the plan

Determining Goals & Objectives of Benefit Plan

Selecting BenefitsAssess current benefits to see where improvements

needed or new ones need to be added Selecting & evaluating benefits is the 1st step in

translating goals and objectives of a benefit program

Organizations have some choices in benefits they offer

There are benefits as required by legislationThere are customary benefits common to almost all

organization and There are benefits those can make benefit package

unique

Selecting Benefits -Legislation

Social legislation requires that employer make expenditures for health & safety of employees

Insurance to be made to indemnify employee’s loss of income from illness, injury, unemployment & old age

Law also requires how organization will develop & operate specific benefits, like retirement plans

These expenditures are to be incurred, whether employer wants to incur it or not and whether employee desires the benefit or not

Legally required benefits currently cost employers in excess of 10% of payroll cost

Selecting BenefitsAssessing Competition• knowing what benefits other employers are

offeringOrganizational Benefit Plan Analysis • comparison of benefits offered currently with

needs & preferences of employeesOrganizational Financial Analysis • comparison between direct wages & benefits

including its cost and employee need and• employer's ability to pay

Selecting BenefitsCollective Bargaining and Benefits• through collective bargaining employees receive the

benefits they want and• unions are motivated to convince employees about

the value of benefits bargained forWho Should Receive Benefits • part time employees/dependents of

employees/retired employees/survivors of deceased employees

Employee Choice in Benefits • each person to decide what benefits to include &

how much to allocate for each, as per flexible benefit plans

Flexible Benefit PlansMix and Match Plans • employee is offered an amount based on salary,

seniority & age and he can choose from various benefit options

Modular Plans • Organization offers various optional benefit

programs and employee can choose those which best fits his needs

Core-Plus-Option Plans have two parts • core part provides health and retirement benefits to

all employees & • Optional part provides various benefits - employee

can choose from

Flexible Benefit PlansPre-tax Salary Reduction Plans Permits employees to set aside a portion of wages

each year on a pre-tax basis to pay for qualified expenses

There are two major types of plans:• Flexible spending Accounts - allows employee to pay for expenses, such as,

medical expenses, reducing employee's gross income

• Premium-Only Plans

- allows employee to pay for insurance premiums

Reducing Costs of Benefits

Health Plans • Changing an insurance plan to a Preferred

Provider can reduce costsTime Off • holidays can be adjusted if organization grants

holidays those are not required by lawRetirement • changing defined benefit plans to defined

contribution plans

Cost SharingHealth Plans • employees to pay a part of their monthly

health insurance premiumsTime Off• pay only a portion of salary for certain types of

time off or share costs with an insurance plan, as in disability

Retirement • all types of retirement plans can be made

contributory on the part of the employee

Reducing Administrative CostHealth plans can contain 3 features that help in

controlling costs• Wellness Programs - programs are intended to reduce future medical claims

by keeping employees healthy• Utilization Reviews - reviews evaluate frequency of employee usage and

quality of service received• Case Management • Overseeing the expenses of illnesses which add up

very rapidly and balancing care and cost Outsourcing the Benefits Function to reduce and

control operating costs

Monitoring Benefits

Organization keeps careful track of what is happening both externally & internally

Needs & preferences of employees likely to change due to change in organization's work force

Surveying employee needs and preferences should be a continuing exercise and not a one-time project

Organization can not monitor change in costs of benefits provided by outside Insurance Companies

Hence, organizations are developing alternative ways of providing the benefits to employees at lower/stable cost