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EMPLOYEE BENEFITS AND RETIREMENT

INTRODUCTION

One of the major factors that enhance an organization’s major workforce and

productivity is the benefits to which the organistion makes available to its

employees. These benefits range through retirement benefits, gratuity, pension,

health schemes, insurance schemes etc. Despite the benefits an employee gets from

the organisation, he or she is subjected to retiring in future. This comes with the

adage which says “no condition is permanent”. Employees, no matter the position

they occupy in the organisation, must one day “step aside in later life”. Retirement

evolves different feelings in different individuals. To some, it is a period of

uselessness, a period of frustration, People who are not enthusiastic about

retirement while to some it is a period they look forward to relaxation and

enjoyment.

EMPLOYEE BENEFITS:

Employee benefits are elements of remuneration given in addition to the

various forms of cash pay.

According to Gary (2009), “Benefits are indirect financial and non-financial

payments employees receive for continuing their employment with the company”.

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OBJECTIVES OF EMPLOYEE’S BENEFITS

There are some basic objectives that organisation employee benefits

schemes aim at:

1. To increase the commitment of employee to the organisation.

2. To provide for the actual or perceived personal needs of employees.

3. To demonstrate that the company care for the needs of its employees.

4. To ensure that an attractive and competitive total remuneration package is

provided which both attracts and retains high quality staff.

Armstrong and Murlis (2004) opine that organisations provide benefits in

some form to employees. This practice varies from one organisation to another.

Some of the reasons for these variations are:

1. Employee Status: Most organisations give more benefits to employee base on

his position in the hierarchy.

2. Local-National Sector practice: there is some mark differences in the benefit

programme between private sector and public sector, between capital intensive

organisation and the labour intensive organisation.

3. Private and Public Sector Status: In terms of non-financial benefits, private

sector enjoy more than the public sector.

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4. Employee views on the Negative or Positive effect of benefits: The extent to

which an organisation wish to attract or retain staff using benefit is dependent

on the management views the benefit programmes.

TYPES OF BENEFITS

(1) Pension Schemes: These are contributory Scheme typically financed during

the employee working lifetime to provide a guaranteed income for them or

their dependents on retirement or death.

(2) Personal Security: These are benefits which enhance the individual’s

personal and family security with regard to illness, health, accident,

redundancy or life assurance.

(3) Financial Assistance: this includes benefits such as Loans, mortgages,

relocation assistance discount etc.

(4) Personal Needs: These are entitlements which are given to employees in

other for the employee to meet his personal needs. E.g Holidays and other

forms of breaks, retirement, counseling, financial counseling etc.

(5) Company’s cars and petrol: this is benefits enjoyed by top and middle

level employees of the organisation.

(6) Other Benefits: There are numerous benefits that are not mention such as

subsidized meals, clothing, allowances, refunds of telephone cost and credit

card facilities, educational allowances for employee family.

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EMPLOYEE’S RETIREMENT

Retirement according to Uzoigwe (2001) is the “withdrawal from position or

service, going away, retreating, or removal from”. Dugguh (2007) opine that

retirement is regarded as a person’s life after he or she has given up full time career

employment. Abudu (1999) puts it that retirement comes when there is a

permanent change in how a person earns his or her income. Retirement affects a

person’s life in the following ways:

1. The normal income reduces

2. There is no realistic budget

3. There is a change in the nature of economic activities and

4. There is a change in the pace of performing similar activities.

Cole is of the opinion that retirement is the time when an employee reaches

the end of his working life. The issue of retirement seems to come suddenly to

employees particularly after they have clocked 45years and beyond (Dugguh,

2007). Some employees do not even think about it until they are getting close to

60years of age. Others who sleep walk throughout their lives get a shock when

their date of retirement arrives and they have to leave employment.

The issue of retirement should be of interest to everybody. Some people may

die too early and then avoid that period of retirement in life. Most of us however

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will spend some period toward the end of our lives when our bodies will be

relatively weaker and slower in performing various activities. Some people plan

consciously and realize enjoyable period of retirement.

Basically, every person in the labour force should retire at one time or the

other depending on the circumstances. Therefore any person, who works should as

soon as he gains employment and starts working, be aware that he will retire

someday. Plans for retirement should start that time. The categories of people who

should retire include the employees of labour (workers), the self-employed, and the

sick worker.

TYPES OF RETIREMENT

It is important for management to know the type of retirement that will be

less expensive to operate and favoured by both employees and the employers.

Some types of retirement according to Nzoigwe (1997) include:

a. Compulsory retirement

b. Flexible retirement

c. Early (Voluntary) retirement

Compulsory retirement is where there is upper ages limit at age 60 or 65.

This is a normal retirement. In some organisations an employee could retire

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compulsorily after putting 35 years in service irrespective of whether he or she

attains the upper limit age.

Flexible retirement involves no upper age limit, but some workers who have

not reached the period of normal compulsory retirement age are sometimes asked

to retire compulsorily because of some misconduct which could not lead to

termination of appointment or dismissal from service. This is applicable to workers

who have put in many years of service and this type of retirement compensates for

their years of service.

Early (voluntary) retirement is one type of flexible retirement. Some people

prefer to stop their regular work before normal retirement period. But an employee

is required to put in a minimum number of years of work before he or she is

eligible for early retirement. In most organisations in Nigeria, the minimum

number of years in this case is ten years in the public service especially as in the

case of Direct Short Service Commission or Short Service Combatant of the

Nigerian Army, Nigerian Air force and the Nigerian Navy. Five years is for

gratuity only without pension.

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FACTORS THAT INFLUENCES RETIREMENT OF EMPLOYEES

We have some factors that are more socially acceptable reasons for

retirement and unacceptable reasons. Below are some factors that influence the

retirement of an employee:

1. Health reasons

2. Migration out of home country

3. Informal norms at work situation

4. Attitude of friends

5. Family

6. Old age, etc.

Considering the above, it becomes the necessary responsibility of the human

resource manager to plan programmes to help the employees as they take

retirement decisions. In Nigeria, employees are also guided by the Pension Decree

of September 9, 1979 and the Pension Reform Act 2014.

PREPARATIONS FOR RETIREMENT

It is advisable that as soon as an individual starts work, he or she should

immediately draw up a personal plan for retirement in future. Realizing there

should be “life after death”, the employee is expected to (Dugguh, 2007):

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(a) Have a personal Monthly savings account: One way to plan for a

rewarding retirement is to have a constant fixed or flexible monthly amount of

money from salary or wages of the worker kept in his savings account in the bank.

The amount to be saved should possibly be flexible but constant. There are two

types of savings account:

1) Ordinary savings account: this is an account operated by a person in a

bank by depositing at least, a certain minimum amount required by the bank in an

account opened by the person for the purpose of savings. It is operated with a

passbook or some kind of document and an identity carried by the depositor. An

existing interest rate by the bank is paid to the depositor on the amount not

withdrawn from the deposit as required by the bank.

2) Fixed deposit account: these are deposit accounts operated by an individual

through his bank account for purpose of savings. Banks have 1 month, 2 months, 3

months, 6 months, and 12 months period deposit in each account, this means that a

person who decides according to his ability to operate a 3month fixed deposit

account gets a certain rate of interest on the amount deposited without withdrawing

from the deposit for a period of three months, otherwise the stated interest payment

does not apply. The higher the amount deposited and the longer the deposit period,

the higher the rate of interest the rate of interest paid. It is important to consult a

bank for further details.

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(b) Investment in education and training: investment in education and

training is one of the informal preparations for retirement made by any worker

through training his children or wards. This is normally a more viable investment

for retirement since it is an investment in human beings and therefore

developmental. Well-educated and trained people develop and prosper better and

help to develop others. Because of their training, exposure and position in society,

most of them are more humane and can care for their elderly ones who have

retired. A person who spends part of his savings from salaries or wages in training

his children or wards normally stands a better chance of living longer and enjoying

his retirement than one who did not. For one thing, the retiree will be peaceful

during retirement than one who did not. For one thing, the retiree will be peaceful

during retirement when he will need less money, his other needs will possibly be

minimal, and his children or wards will not depend again on him. He can now

manage whatever he has left, and hopefully, with assistance from his children, live

better than the retiree who ignored training his children. Investment in knowledge

after all, is now the in-thing in our changing world.

(c) Share (stocks) and bonds: investment in shares/stocks and bonds need very

careful handling or else the investment will not be profitable. A person who wants

to invest in shares/stocks or bonds needs the services of a financial management

expert or a stockbroker who should study the investment market and invest in

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proven profitable and quality companies. Before the investment is made a study of

chosen companies in the stock exchange should be done over a period of time of

operation to know their performance histories. The study is best done by the

consultants in the investment business (accountants, financial managers, business

managers, bankers, stockbrokers, etc.). Any careful investment in shares/stocks

and bonds usually yields good returns either by outright sale of the shares or by

dividends and interest payments. At retirement, other incomes are supplemented

with returns from investment in shares, stock and bonds.

(d) Insurance policy savings: Many insurance companies have policies

designed for both savings and or death benefits. The policy usually specifies the

number of years (10, 15, 20 years etc), the total amount to receive including the

interest on the premium paid at the expiration of the period as well as the monthly

premium to be paid. In the event of death before the maturity date of the policy, a

lump sum contained in the agreement is usually paid to the designated next of kin

of the insured or the person named in the will. It is advisable for a worker to invest

in such insurance policies at an early age so that at retirement he will have

accumulated large amounts of money to supplement his other retirement incomes.

Educational insurance policies are also available for children’s education or

training.

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(e) Ownership of property: In many countries property such as land,

buildings, etc. appreciate to compensate for the investments in them. Although

investments in land and buildings are large, a worker should, at an early stage,

invest in them according to his financially capability. If one buys an undeveloped

land and waits, for example, to sell it after ten (10) years, he could make a good

profit out of it, as a worker grows on the job and the income increases, he could

develop empty plots of land or buy houses for the future. At retirement the retiree

may sell some of these investments to supplement his income.

(f) Gratuity and pension: Gratuity is a lump sum of money paid to a worker

by his former employer after retirement. It is paid once and the amount depends on

the number of years worked and the level of salary and benefits due to the worker.

It can also be paid to the retiree’s surviving legal next of kin in case the retiree dies

before the gratuity is paid.

Pension is a fixed bi-monthly or monthly amount of money paid to a worker by

his former employer after retirement till the retiree dies. It is calculated according

to an organization’s regulations guiding pensions. The surviving legal next of kin

of a retiree can also be paid his pension for some years if the retiree dies before

payment is made.

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REFERENCES

Armstrong M. and Murlis H. (2004). Reward Management: A handbook of

Remuneration strategy and Practice. 5th

Edition. HayGroup.

Abudu, A.O.(1999) How to Prepare for a Comfortable Retirement. Dyno-Media

Ltd, Accra.

Dugguh S.I. (2007) Human Resource Management. First Edition. Oracle Business

Ltd. Makurdi, Benue state. Nigeria.

Garry D. (2009) Human Resources Management; Pearson Publising. Columba.

Uziogwe, C.N. (2001) Retirement Management without Tears: Creating more

Awareness, Esther Thompson Publishing Company, Owerri. Nigeria.