CHAPTER IV:

BENEFIT PROGRAMS
AND
COMPENSATING SPECIAL
GROUPS
 OBJECTIVES:
After studying this chapter you should be able to:

 To be able to understand the different benefits in the

compensation package;
 Different legal consideration;
 Employee benefits are integral to
 the goals of your small business because they promote
loyalty and can save you money and time;
 Benefits offer helps you recruit, manage and retain
employees. Additionally, the employee benefits you
provide can help determine the quality of employees
Introduction:
Employee benefits play an
important role in the lives of
employees as well as their
families. For that reason, the
benefits you offer can be a
deciding factor for a potential
employee’s decision to work
at your business.
There are two types of employee benefits must provide by
law those the employer offer as an option to compensate
employees.

 Required benefits
 Optional benefits

The more progressive the organization is the

more flexible the structure is in December
response to today’s challenges le like having
four different generations of employees working
side by side. Employers who continue to provide
the more traditional and limited program, may
find it more difficult to find and keep different
types of employees.
The Advantages of Offering Benefits to Employers and
Employees;
For employers:
 By providing increased access and flexibility
in employee benefits, employers can not only
recruit but retain qualified employees.
 Providing benefits to employees is seen as
managing high-risk coverage at low costs and
easing the company’s financial burden.
 Employee benefits have been proven to
improve productivity Because employees are
more effective with they are assured of
Security for themselves and their families
 Premiums are tax deductible as corporation
expense, which means savings for the
For employees:
 Employees can experience peace of mind
which leads to increased productivity and
satisfaction by being assured that they are
their families are protected in any mishap.
 Employees with personal life and disability
insurance can enjoy additional protection
including income replacement in the event
of serious illness or disability.
 Employees can feel a sense of pride in their
employer if they are satisfied with the
coverage they receive (HR. COUNCIL.CA)
LEGAL CONSIDERATIONS

 While the presumption of compensability and theory of

aggravation under the Workmen’s Compensation Act may
have been abandoned under the new Labor Code, the
liberality of the law in general favor of the working man still
subsists. As an agency charged by the law to implement
social justice guaranteed and secured by the Constitution,
the Employees Compensation commission should adopt a
liberal attitude in favor of the employee in deciding claims
for compensability, especially where there is some basis in
the facts for inferring a work-connection to the accident
 This kind of interpretation gives meaning and substance to
the compassionate spirit of the law as embodied in Article 4
of the New labor code which state that “all doubts in the
implementation and interpretation of the provisions of the
Labor code including its implementing rules and regulations
shall be resolved in favor of labor.”
 The policy is to extend the applicability of the
decree (Presidential Decree No. 626) to as
many employees who can avail of the benefits
thereunder. This is in consonance with the
avowed policy of the State to give maximum
aid and protection to labor (Lazo vs.
employees’ Compensation commission, G.R.
No. 78617, June 18, 1990.)
Basic Employee Benefits
 Basic employee benefits are critical to ensuring
a conducive environment for employees to
provide value. Apart from compensation,
organizations offer employee perks to retain
talented employees and promote a secure and
balanced life.

 Vacation time: This is one of the basic employee

benefits that is found in all industries and
geographies. It is usually fixed. Though in the
recent past, some organizations have tied the
vacation time earned to the tenure in the
company. Typically, the vacation time earned is
between 14 and 21 days in a calendar year for
full-time employees.
 Sick Leave: This varies with full time and part time employees.
For full-time employees, sick leave is usually fixed as per the
number of months of full-time employment.
 Insurance: This is another one of the basic employee benefits
that varies substantially from organization to organization and
from industry to industry.
 Retirement (Pension) System: Some organizations offer
mandatory retirement plans. Usually, enrollment to this system
is automatic and there may be a clause.
 Health Plans: Automatic enrollment to medical or health
insurance This employee benefit is usually for full-time
employees.
 Recruitment (Joining) Bonus: This is one of the basic employee
benefits that gives instant return to both the organization and
the employee.
 Referral Bonus: Instead of hiring talent through expensive
consultants, many organizations have taken to offering a
referral bonus to its employees.
 Flexi-Timings and Work-From-Home Options: This is one of the
basic employee benefits that is relatively new and is commonly
Mandatory benefits and provisions for employees in
the Philippines under the Labor Code and special laws:

1. Minimum wage = P491.00 per day (in NCR) as of 02

June 2016.
2. 13th Month pay (after 1 month of service) = 1/12 of
the total basic salary earned by an employee within a
calendar year.
3. Overtime pay = 25% premium on hourly rate.
4. Night shift differential if work between 10:00 PM to
6:00 AM = 10% premium on hourly rate.
5. Special Non-Working day = 30% premium if worked
6. Regular holiday pay = 100% premium if worked, paid
if unworked.
7. Service incentive leave = 5 days paid leave for every
year of service
8. Maternity leave = daily maternity benefit equivalent
to one hundred percent (100%) of her average salary
credit for 60 days or 78 days.
9. Paternity leave = 7 days leave with pay (married
only).
10. Parental leave for solo parents = 7 days leave with
pay for every year of service.
11. Leave for victims of Republic Act 9262or Anti-
violence Against women law = 10 days leave with pay.
12. Special leave for women – 2 months leave with pay
for women wo under surgery due to gynecological
disorder.
13. Social security system contribution(based on
salary).
14. PAG-IBIG contribution(based on salary)
15. PhilHealth contribution (based on salary)
 Benefits Compliance

“Compliance” in the business sense refers to a

corporation following its legal commitments to
preserve other people’s health, safety, and well-
being. Some examples of compliance are
getting a business license, registering your
business with tax authorities, following
employee health and safety regulations. Every
company, regardless of its size, must
mandatorily be compliant if it wants to remain
in business.
 Benefits Objective
 Maintain company objective and productivity
 Encourage safety and prevention of injury
 Provide reasonable work opportunities when possible to
enable workers to return to a work level as close as
possible to their pre injury productivity and earnings
 Avoid re - injury through work assignment and effective
monitoring
 Employer should demonstrate concern for the injured
worker and fulfill obligation to the employee
 Assist the employee to return to their normal work
environment in an expedient manner
 Return the employee to a work level as close as possible
to pre-injury earnings and productivity
 Ensure that the employees return is an compliance with
all requirements of the American with disabilities Act,
Family Medical leave Act, and the Texas workers
 Planning Benefits strategically

 Strategic planning is critical to business success.

Different from classic business planning, the
strategic variety involves vision, mission, and
outside-of-the box thinking.
 Strategic planning defines the “ where” that your
company is heading (William Pirraglia, Demand
Media).
 Strategic planning is the process of taking inputs
(information), organizing and making sense of that
information and producing output (the plan) that
covers a long period of time, and maps out the
Employee Benefit Strategic Planning includes
all of the following:

• Management Interview
• Employee Surveys
• Communication and Education Long-term Planning
• Benchmarking Analysis
• Compliance Assessment/Audit
• Population Health Management Wellness Planning
• Key Metrics Baseline Analysis
 IMPLEMENTING FLEXIBLE
BENEFITS
 Flexible benefits plans allow employees to
choose the benefits they want or need from
package of proms offered by an employer. It
includes:
 Health insurance, retirement benefits such as
401(k) plans, and reimbursement account.
 In addition, the ability to pay for benefits with
pre-tax income lower an employee's taxable
income while raising the amount of their take-
home pay-an added "benefits".
 These companies, as well as larger ones, have
subsequently sought palatable means by
 Cafeteria Plans
 A type of flexible benefit plan known as a cafeteria plan enables
employees to choose between receiving some or all of an employer's
nontaxable benefits, or receiving cash or other taxable benefits such as
stock.
 Only certain benefits can be offered under a cafeteria plan, though
employers may offer any or all of these benefits. These include
 health and group life insurance as well as medical reimbursement plans
for non-insured expenses; disability, dental, and vision coverage: day
care or elder care, 401(k) plans; and vacation days.
 Tuition assistance and other fringe benefits are exempt from the plans,
even if they are not taxable. Funding for cafeteria plans may come from
the employer, employee or both.
 In addition, employers need to be sure that no more than 25 percent of
the tax-favored benefits go to "highly compensated" employees. These
employees could be officers earning above a certain salary range or
 FLEXIBLE SPENDING ACCOUNTS

 A flexible spending account (FSA) is a tax-deferred

savings account established by an employer to help
employees meet certain medical and dependent-care
expenses that are not covered under the employer's
insurance plan.
 Allow employees to contribute pre-tax dollars to an
account set up by their employer.
 They can later withdraw these funds tax-free to pay
for qualified health insurance premiums, out-of-
pocket medical costs, day care provider fees, or
private pre-school and kindergarten expenses.
 Three main types of FSAs

1. Premium-only plans - allow employees to set aside

funds to pay medical and life insurance premiums.

2. Unre - imbursed medical expense plans- which allow

which employees to set aside money for projected health
care expenses not covered by insurance.

3. Dependent care reimbursement plans - which allow

employees to set aside money for day care of dependent
children.
 THINGS TO REMEMBER
1. Employees must prove they have a legitimate
expense in order to be reimbursed from these
accounts. Invoices from health care
professionals or day care facilities would serve
this purpose.
2. Employees must also prove that the claim has
not been reimbursed by other coverage, such as
a spouse's insurance.
3. Funds placed in reimbursement accounts
generally must be used during the calendar
year in which they were contributed; otherwise,
the employee forfeits the funds.
For this reason, participating in a flexible
 SET-UP AND TAX IMPLICATIONS
 A small business can manage its own flexible benefit plan with the
proper software. Since these plans an under the watchful eye of
the IRS, it is important that record keeping and benefit payments
be accurate and timely.
 Many companies hire an outside Arms to manage their plan,
which reduces internal headaches but at a higher cost the
company.
 Employer contributions to cafeteria plans are tax deductible for
the employer and are not subject to income tax for the employee.
The contributions are taken before taxes, and therefore are not
subject social Security (FICA) or federal unemployment (FUTA)
taxes unless the monies a contributed to 401(k) plans.
 Obviously, flexible benefit plans are not without the drawbacks.
But for small businesses looking to attract and retain key
personnel with competitive benefit packages while keeping their
THANK YOU