Employee Benefits—An
Overview
In order
to remain competitive, as well as attract and retain top employees, employers
are faced with the task of creating a winning compensation strategy that will
not only accomplish these objectives, but will also stay in line with corporate
budgeting constraints. It’s a fact that employee compensation is much more than
just a salary. It can encompass all the “perks,” such as vacation and sick
time, company vehicles, corporate memberships, and a variety of benefit options
designed to provide employees and their families with, at a minimum, health
insurance and retirement income. While employers are legally obligated to
provide certain state and federally sponsored benefits, the majority of
employers also offer, and often contribute to, additional employee benefits.
State
and Federally Mandated Benefits. Employers are required by law to participate in certain
programs, either through paying taxes or making contributions. These benefits
include workers compensation coverage, unemployment insurance taxes, Social
Security taxes, Medicare contributions, and state disability laws, where
applicable.
Group
Benefits. The
majority of employers voluntarily offer health-related benefits to employees.
In most instances, the employer and the employee share the cost for employee
health-related insurance. There is a wide range of group benefits available to
employers, which include the following:
o Group
Term Life Insurance—Group
term life insurance is generally offered as either a fixed amount, or based on
a multiple of salary. For example, an employer might offer employees a fixed
benefit of $50,000, or perhaps two times their annual salaries.
o
Medical Insurance—Medical
insurance is an important part of an employee’s overall compensation package.
Premiums for medical insurance have historically been very costly, and it is
almost prohibitively expensive for someone to purchase outside of an
employer-sponsored plan. Thus, an employer-sponsored health plan is an
excellent way to attract and retain employees.
There are a
number of different types of health insurance plans, including Fee-for-Service
Plans, Preferred Provider Organizations (PPOs), Point of Service
(POS) Plans, and Health Maintenance Organizations (HMOs). One main
difference in each of these plans is the number of participating doctors. In a
Fee-for-Service plan, an employee may go to any doctor for treatment, and he or
she will pay a deductible and coinsurance. In a PPO plan, employees may either
go to any doctor of their choosing (and pay a deductible and coinsurance) or
visit one of the participating doctors in the plan (and pay a lower
co-payment). POS plans offer some of the flexibility of a PPO plan, but the employee
must choose a primary care physician within the plan. HMOs allow the employee
to see doctors only within their plans, sometimes only at HMO facilities.
Whichever
plan you choose to offer your employees, you should know that there will be
those who insist on seeing their own doctors and are willing to pay extra
premiums and deductibles and coinsurance; for them, a Fee-for-Service or PPO
plan may be a good fit. Other employees may not have that need and will
appreciate a less expensive, more restrictive plan, such as a POS or HMO. In
order to satisfy the majority of their employees, many employers offer their
employees a choice of a Fee-for-Service or PPO plan, as well as an HMO plan.
o Dental
Insurance—Dental
insurance plans pay for a majority of services offered by dentists,
orthodontists, and endodontists. Services are classified as preventive (routine
exams and x-rays), restorative (fillings, endodontics, periodontics, crowns,
and prosthetics), and orthodontia (braces). Benefits are payable as a percentage,
based on the classification of the service. There is usually an annual maximum
benefit per insured and a lifetime limit on orthodontia. Riders are available
for services such as adult orthodontia.
o
Disability Income—Disability
income insurance replaces a percentage of an employee’s earnings, in the event
that he or she becomes unable to perform the regular duties of his or her job.
Typical benefits range from 50%-70%, up to a monthly maximum benefit. Some
disability income plans pay benefits for a specified number of years or until
age 65. Most plans offer additional provisions via policy riders designed to
improve coverage, as well as encourage the employee to return to work as soon
as he or she is able. Some of these policy riders include residual or partial
disability payments and cost-of-living adjustments.
o Vision
Insurance—Vision
plans generally provide a benefit for the purchase of eyewear or contact
lenses, and they may also pay for eye exams.
Offering a solid benefits plan now may help you attract and
retain employees that will assist you in maintaining your competitive edge.
Keeping employees—especially quality ones—satisfied is an issue that affects
all employers. An annual review of your benefits package might make benefits
planning a simpler task for all parties.
Source:
Liberty Publishing
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