CHAPTER 8

EMPLOYEE BENEFITS

(Written Report)

Work By:
Pabingwit, Clariza
Pabutawan, Gerha Marie Bugtay
Paluray, Alona Mandao
Patoy, Julie Niel Intong
Introduction
Attracting, retaining, and engaging competent and productive
employees are a critical challenge in today's highly competitive business
environment. It is acknowledged that employee benefits program is key to
successful talent management-regardless of the size of the organization.

In addition, employee benefits are fundamentally important as the

minimum and at times optimum requirement in enabling a productive
workforce. The benefits program offered by organizations is an important
attraction driver for employees as it gives them an overall idea of how the
organization values its employees, Well-designed employee benefits
program can translate to higher retention and engagement levels of
employees. Employee benefits are indirect and non-cash compensation
paid to an employee in addition to wages and salaries.

In developing employee benefits program, organizations are

influenced and guided by their vision, mission and values, statutory and
regulatory requirements, internal and external equity, current trends in
benefit plan and administration and collective bargaining agreements (for
unionized companies). This means that employee benefits should be
aligned with the organization's strategies, legally compliant, internally
equitable, competitive in the marketplace and collaboratively arrived at with
the union. When all of these elements are present, the benefits program for
employees is likely to become meaningful for them and desired by the
workforce.

This chapter delves into benefits as talent management strategy;

discusses steps in creating employee benefits program; and presents a
portfolio of employer benefit packages with specific focus in the Philippine
setting.
Definition of Employee Benefits
The 1940s and 1950s witnessed the wider use and acceptance of
employee benefits as supplemental to the compensation received by
employees.

Employee benefits are indirect financial and non-financial payments

and services employees receive for continuing their employment with the
company in addition to compensation (Dessler, 2007). In particular,
benefits include and are not limited to social security services, medical and
life insurance, retirement, leave entitlements, and wellness programs.

Basis of employee benefits

Organizations design employee benefits programs based on the following:
legally required benefits, company policy, internal and external equity, and
collective bargaining agreement and labor relations laws.

Employees are provided with legally required benefits that employers

are expected to participate in and contribute to. These benefits refer to the
labor paid to an standards set by the government and legislation affecting
employee benefits such as Social Security, Medicare, worker's
compensation, and retirement.

Benefit programs for employees are voluntarily created by company

policy. These benefits are integrated with the company's vision, mission,
objectives, and values.

As employers consider fair and equitable compensation in setting

salary and wages, there are also internal and external considerations in
designing employee benefits program. External equity refers to the
company's approach to benefits existing in the market. Where as, Internal
equity is used in assessing the relative value of the benefit in the
organization.

Organizations with labor unions plan and improve employee benefits

through collective bargaining agreement (CBA). A labor union is an
organization of workers organized for the purpose of advancing the
members' interests in respect to wages, benefits and working conditions.
Benefits programs for organizations with labor unions are based on
negotiations and agreement between management and labor union
through collective bargaining in accordance with labor relations law.

Theoretical Bases
Maslow's hierarchy of needs theory has been used to interpret the
whole range of human behavior. Maslow proposed that employee drive or
passion is a function of five basic needs-physiological, safety,
belongingness, esteem and self-actualization-which are arranged in the
predictable manner where a person's physiological needs must be met first
followed by safety needs, and so on in the hierarchical order (Kreitner &
Kinicki, 2007).

The basic idea of Maslow's hierarchy of needs is that employee

needs are incessantly changing. As one need is met, employees desire
other needs. Employee needs change with time. This means that
organizations should constantly review their benefit plan to keep it as a
significant driver for attracting, retaining, and engaging their talents. By the
same token, when designing total reward programs, employees' varied
needs must be well considered. Maslow's points will help the organization
reach its expectations.

However, Herzberg (1959, in Gawel, 1997) constructed a two-

dimensional paradigm of factors affecting people's attitudes about work.
He concluded that such factors as company policy, supervision,
interpersonal relations, working conditions, and salary and benefits are
hygiene factors rather than motivators. According to the theory, the
absence of hygiene factors can create job dissatisfaction, but their
presence does not motivate or create satisfaction. Thus, satisfaction and
dissatisfaction are not on a continuum with one increasing as the other
diminishes, but are independent phenomena. To increase satisfaction on
the job, employers should be concerned with the nature of the work itself-
the opportunities it presents for gaining status, assuming responsibility,
and for achieving self-realization. To reduce dissatisfaction, then it must
focus on the job environment-policies, procedures, supervision, and
working conditions.

In summary, satisfiers describe a person's relationship with what

he/she does, many related to the tasks being performed. Dissatisfiers, on
the other hand, have to do with a person's relationship to the context or
environment in which he/she performs the job. The satisfiers relate to what
a person does while the dissatisfiers relate to the situation in which the
person does what he/she does (Gawel, 1997).
Legally Required Benefits in the Philippines
The succeeding section presents the mandatory benefits and provisions
for employees in the Philippines under the Labor Code and special laws.
These are the minimum benefits with which employers must comply.

1. Membership in the Social Security System (SSS)

2. The Philippine Health Insurance (PhilHealth)

3. Home Development Mutual Fund (HDMF)

4. Paid Leaves

5. Service Incentive Leave (SlL)

6. Employees Compensation Benefits

7. The Solo Parents Welfare Act (Republic Act 8972)

8. Women Victims of Violence Paid Leave

9. Special Leave Benefit (SLB)

10. 13th Month Pay

11. Meal and Rest Period

12. Overtime Pay/Holiday

13. Night Shift Differential

14. Non-diminution of Benefit

Types of benefits
Benefits are any perks offered to employees in addition to salary. Majority
of benefits given to employees are classified as follows:

a. Supplemental pay

This refers to paid time-off earned by employees while they work.

The three common types of paid time-off are holidays, sick leave, and
vacation leave.

b. Insurance

This refers to indirect financial payment given to employees usually

to cover some basic needs of employees. The most common types of this
benefit items are medical insurance, disability and accident insurance, and
life insurance.

c. Retirement benefits

Are funds set aside to provide people with an income or pension

when they end their careers. Retirement plans fit into two general
categories:

d. Fringe benefits

They represent a variety of non-cash payments used to attract and

retain specially qualified employees.
Employee Benefits as a Talent Management Strategy
Benefits plans play a vital and significant role in talent management
as it forms an integral part of the employee value proposition and
employment brand espoused by organizations.

Talent management is concerned with attracting, retaining and

engaging competent employees as drivers for organizational performance.
Employee benefits should be seen within the bigger picture of talent
management. Beyond the concern on the cost management of employee
benefit plan is to see the real return on significant investment in talent. In
its recent 2012 Total Rewards Study, Aon Hewitt found what employees
consider as top attraction, retention, and engagement drivers, as shown in
Table 1

.
Employee Benefits as Rewards
An organization's total reward strategy brings together both intrinsic
and extrinsic rewards consisting of what an employee receives arising from
his/ her employment. Total rewards involves the integration of five key
elements that are designed to attract, retain, and engage talents required to
achieve the business objectives of the organization. These five elements
are compensation, benefits, work-life, performance and recognition, and
development and career opportunities (WorldatWork, 2007).

The phrase "compensation and benefits" has given way to "total

rewards"-which encompasses not only compensation and benefits but also
personal and professional growth opportunities and a motivating work
environment for example, recognition, valued job design, and work/life
balance (Heneman, 2000).

A total rewards strategy covers both intrinsic and extrinsic rewards.

Intrinsic rewards make employees feel better in the organization that
results in affective job satisfaction. On the other hand, extrinsic rewards
focus on the performance and activities of employees in order to produce
some outputs. This results in cognitive job satisfaction. However, the
difficulty in this situation is finding the right balance between employees'
performance (extrinsic) and happiness (intrinsic).
 Rewards serve many purposes in organizations. They are given as
part of a better and comprehensive employment deal. They serve to hold
on to good employees and to reduce turnover. And they are significant
attraction drivers. It is good to situate benefits as rewards fundamentally to
increase employees' willingness to work in and for the organization they
are connected with, and to enhance employees' productivity.

Portfolio of Employee Benefits Package

Other benefits programs in the Philippines are given by some
organizations in addition to legally required benefits. These benefits
enjoyed by Filipino employees are provided by some companies as part of
the total compensation package. Aside from the regular salary that
employees receive, companies offer a variety of benefits that are valuable
and favorable to employees and to some extent even to their dependents.

1. Health and Wellness

2 Life Insurance

3. Professional Development and Educational Assistance

4. Services Awards

5. Retirement Plan

6. Paid Time Off

7. Cost of Living Allowance

8. Bereavement Leave

9. Other types of Leave

- Wedding Leave

- Calamity Leave

10. Telecommuting

Designing Benefits Plans

Given the talent and rewards management principles, the design of
the benefits plan should take into account its alignment with the overall
vision, mission and values, business objectives, competitiveness in the
market industry, compliance with legal mandates and collective bargaining
agreements (if unionized) and the needs of employees.

The objectives of the benefits program are:

(a) help the organization recruit, retain, and engage qualified employees
who will significantly contribute to the strategic direction of the
organization,

(b) to enhance employee morale because the benefits they get are
competitive, equitable and compliant with statutory and regulatory
requirements and consistent with collective bargaining agreements, and

(c) to address the ever-changing needs of employees

Procedure in designing employee benefit plan

The following are steps that might be considered in developing employee
benefits plan:

1. Ensure that the vision, mission, and values of the organization articulate
the employer and employee brand. This means defining the kind of
employees (in terms of knowledge, skills and attitude they should possess)
the organization wants to attract, retain, and engage.

2. Start listing employee benefits by including the basic (i.e., benefits due to
employees by virtue of their membership to the organization) and
mandated benefits. These benefits include those that are legislated by the
government.

3. Develop contingent benefits. These elements in the benefit plan are

delivered based on some level of performance or behavior demonstrated
by employees. This contingent element in the benefit plan is positioned as
reward strategy which would likely become a factor for employees to stay
in the organization for a long time.

4. Include additional benefits to the employee benefits program that would

differentiate the organization from the rest. These programs will often
provide an additional edge in increasing employee morale, reducing
employee turnover rate, and enhancing employee engagement. A benefit
item that might be considered as differentiator is a profit-sharing plan.

5. Evaluate what benefits are most important to employees. A survey of

employees or potential employees to find out what benefit types hold the
most value for them would help.

6. Determine the cost of the benefits plan and the ability of the company to
maintain it for a sustained period of time.

Trends in Employee Benefit Programs

Now more than ever, organizations are pressed to think out of the
box in terms of managing their employee benefits plan. Certain factors
both within and outside the organization influence the way benefits are
administered and implemented.

Factors affecting employee benefit programs

• It is notable that when faced with new economic realities, many

employees place greater value on their benefits and express greater
interest in understanding the benefits offered by their employer. Financial
security, specifically retirement security, is of significant concern to
employees (Metlife, Inc., 2009).

• The ability to enjoy a long and healthy life is a critical component of the
development process. This trend may have impact on how benefits plan for
employees will be positioned. This means a higher value will be placed on
health care, post-employment or retirement benefits, disability, critical
illness, and long-term care. Benefit plan costs will continue to increase at
rates higher than general inflation.

• Despite a growing global population, the availability of skilled workers is

actually shrinking, and no longer just in advanced, aging countries such as
Japan and Italy.

The challenge for many organizations is how to continually respond

to the needs of employees considering the changing demographics. The
obvious divide is generational gap. Older and younger employees will be
working within the same organization. They are highly differentiated in
terms of their profile. Added to this will be increased cultural diversity as
migration increases. Given the diversity of the workforce at many levels, it
is important for organizations to respond as much as possible to the varied
needs of their workforce. A more flexible benefit plan might be in order to
better respond to the growing diversity in the workplace.
A flexible employee benefit program

Employers are shifting employee cost accountability and decision-

making to employees. A current approach in benefit plans is the
implementation of a flexible benefit program.

Flexible benefit plans represent a substantial departure from a

traditional, "one-size-fits-all" philosophy, where managers made decisions
about the type and level of benefits employees would receive and all
employees were covered by the same benefits. First introduced in the early
1970s, innovative practice did not start to gain popularity until the mid-
1980s (Hewitt Associates, 1995).

In general, any plan that allows employees to make choices about

the benefits that they receive is considered to be a flexible benefit, or
cafeteria, plan. Specifically, flexible benefit plans are defined as those that
offer employees a choice between qualified (non-taxable) benefits and
cash (Beam & McFadden, 1996).

There are four plan designs which are summarized in Table 3. As the table
shows, costs to the employer increase as the amount of flexibility
increases. Hence, costs and flexibility are lowest under the "salary-
reduction-only" design and highest under "mix and match" (Beam &
McFadden, 1996).
 Organizations have adopted flexible benefit plans mainly to improve
their employees' benefits satisfaction and for cost containment of rising
benefit costs. The underlying assumption for adopting flexible benefit
plans is that since the diversity of the workforce has increased, so too has
the diversity of employees' benefits needs. Allowing employees to select a
package that meets their individual needs has increasing appeal.

In addition, flexible benefit plans hold the promise of containing costs

by moving from a defined benefit (in which a certain package of benefits is
promised, regardless of cost) to a defined contribution (in which a certain
level of benefits expenditures is promised, regardless of what the funds
can purchase (Barringer, & Milkovich, 1997). Flexible benefits protect the
risk of any increasing cost of benefits for the company, because each
employee takes responsibility for their own choice of mixed benefits and
take into consideration any increase in price.
FLEXIBLE WORK SCHEDULES AT ACCENTURE

Flexible work arrangements are offered at Accenture to help

employees achieve work/life balance while meeting the demands of the
business. It's fly-back program, smart work initiative, and client-site flexible.
work arrangements help address the challenges that come with the
professional travel experienced by many of its consulting employees. It
also provides innovative communication and collaboration tools to help
increase productivity, efficiency, and flexibility.

Here are some of the various flexible work arrangements offered at

Accenture:

Flexible time schedule

This allows employees to vary their start and finish times around
predetermined core hours, or work their standard hours in fewer than five
days by varying the length of each workday.

Part-time arrangement

This enables employees their time work to work less than a standard
full-time schedule per week, by working fewer hours per day or fewer days
per week. Usually, the role is designed around a reduced workload so that
job responsibilities match the number of hours worked.

Job-sharing arrangement
 This involves dividing the workload of a full-time position between two
employees (usually each working a part-time schedule). This enables
employees to be on the career track while allowing them more time outside
of work.

Telecommuting/home working

This enables employees to work from a location other than an

Accenture office or project site. This set-up reduces the time, costs, and
stress of commuting for employees while helping Accenture control and
save on the cost of fixed office space.

Fly-backs

Help support work/life balance for employees with significant travel,

often the case for consulting professionals. Accenture offers employees fly
-backs to their home location, the option to fly them to their project site, or
the alternative to fly them to an alternate location in place of a trip home.

Client-site flexible work arrangements:

Accenture helps its consulting professionals, who spend much of their

time working at client sites away from their home location, balance work
and personal life. These flexible working options help meet their needs
while still meeting the needs of the clients:

Full weekend at home: Arrive at the project midday on Monday and stop
client work early Friday afternoon, thereby providing for a full weekend at
home. Work the same number of hours as a full work week, but compress
the completion into a shorter time frame.

Extended weekends in home location: Work a five-day work week: four days
at the project site and the fifth day in the home office or approved alternate
location, with either three or four nights at an out-of-town location.

Extended client/home location: Work an extended period of time at a client

site followed by an extended number of days at the home office or
approved alternate location, without altering the standard work week
requirement and just changing time of hours worked.

Other than responding to the diverse needs of employees, flexible

benefits schemes can significantly increase attractiveness of employers to
recruiting new people because it will build the image of the company and
become a powerful employer that stands out among its comparator group
which evidently helps to attract talents to join the organization, especially
when the labor market is tight. A flexible plan helps to ensure a competitive
edge in retaining important talen of the organization.

Overall, the increased satisfaction derived from well-designed flexible

benef plan will drive an improved performance from employees, and
directly contribute ultimately to organizational performance.
Preparing for Retirement: Pre-retirement Planning

Retirement is a reality for every working person. Most young people

today cannot think of retirement as reality as they believe in 'living at
present. Howeve it is important to plan for their retirement life if they wish
to retain their financial independence and maintain a comfortable standard
of living even when they are no longer earning.

Retirement planning acquires added importance because of the fact

that though longevity has increased, the number of working years have not,
employees end up spending the last phase of their life without earning. In
simple words, retirement should be the best period of the employees' life
when they can literally sit back and relax or enjoy their life by reaping the
benefits of what the earned from so many years of hard work. But it is
easier said than done. This is the reason why some organizations have
taken themselves to task in developing and implementing a systematic and
deliberate pre-retirement preparation program But preparing for retirement
goes beyond ensuring financial security. Preparations for retirement cover
the spiritual, physical, psychological, and social well-being of employees.