Quản trị kinh doanh - Chapter 13: Benefits

Chapter 13: Benefits4/8/2013Chapter 13: BenefitsWages versus BenefitsWhy Offer Benefits?Cost AdvantageEconomies of ScaleTax Arbitrage or SubsidyValue AdvantageEmployee SortingEmployee ProductivityGovernment MandateImplementation of BenefitsImproving Employee SortingCafeteria PlansPensionsPlan TypesPensions and TurnoverVestingPortability Employee Stock OwnershipPaid Time Off Summary4/8/2013Chapter 13 – BenefitsAfter today’s lecture, you will be able to address the following:When is it advantageous for firms to use benefits in lieu of cash compensation?What categories of benefits are there?What benefits can a firm provide more cheaply than the employee can buy?How can benefits be used to enhance employee productivity?Is there a danger of diminishing productivity through benefits?4/8/2013 Benefits DiscussionHourly cost of employees with benefits and “overhead” is often referred to as the burdened rateQuestion: On average, how much of every $ in wages goes to benefits?Uniformly provided benefits may cost the firm more than the value to the workerQuestion: What can a firm do in such a case?4/8/2013 Reasons Firms Offer BenefitsEconomies of scaleQuestion: Is this the same as pooled risk?Most important is health insuranceNote also cross-subsidization effectLegislationTax advantagesHealth carePension plansMandatesEmployee sorting and/or productivity enhancement4/8/2013Employee Sorting & Self-SelectionAs noted, some benefits may represent less value to certain workers – this implicitly drives sorting Question: How can your firm use this to advantage?Benefits can also be used to develop specific human capitalQuestion: Can you provide an example?Cafeteria Plan: Provide multiple choices and a fixed value of benefitsWhat is the advantage to the employee?Is there a disadvantage to the firm?4/8/2013Employee Pension Plans Very significant component of employee costTwo major types of plansDefined benefitDefined contributionVesting: Delay in benefit eligibilityPortability: Continuation of benefit pathPaid Time Off (PTO) – usually misappliedQuestion: When can it be appropriate?4/8/2013Defined Benefit Pension PlanEXAMPLEworker’s age = 58service = 30 yrs so farretire @ 65 (7 more years)current salary = $80,000What is the worker’s defined benefit? X% per year x final salary (X = years of service @ retirement) E.g., : 2% x 37 x $80,000 = $59,2004/8/2013Chapter 13 – RecapShould offer benefits when the firm can provide more value than if the employee spent the same amountOwing to advantages in scale and/or risk toleranceSorting effects can also have an impactTypical categories includeHealthcare or other insurancesPension plansCompany-generated goodsFirms can enhance productivity with perks that make it easier to work more – meals, facilities, services Benefits may lead to non-optimal sorting and utilization – unless firm is able to target prices 4/8/2013