Three elements of concern regarding employee benefits are:
Legislatively mandated benefits
Health-care cost containment
Family issues
What are "fringe" benefits?
Direct compensation
Total compensation
Indirect compensation
Answer: Indirect compensation
The term "fringe benefits" and "benefits-pay" are used by many corporations to denote indirect compensation.
True or False: Indirect compensation costs are growing in proportion to total compensation costs.
Answer: True
Most employees today are extremely concerned about indirect compensation. As the cost of indirect compensation grows in proportion to total compensation costs, employers become more interested in choosing benefits that are most cost-effective (and choosing benefits that employees really value).
Which of the following is one of the fastest growing costs facing employers?
Wages
Employee benefits
Recruitment costs
Building costs
Answer: Employee benefits
The aggregate cost of benefits suggests that benefits are no longer "fringe" amounts, but instead, employee benefits are one of the fastest growing costs facing employers.
True or False: Employee preferences are not very diverse when it comes to the different types of indirect compensation
Answer: False
Because rewards are so diverse and employee preferences are so varied, indirect compensation is not always valued or seen as a reward by all employees.
Which of the following types of compensation includes wages, benefits, and training?
Indirect compensation
Total compensation
Direct compensation
Answer: Total compensation
Total compensation is the entire value of all direct and indirect payments to the employee. Direct compensation includes basic wages and performance-based pay. Indirect compensation, including employee services, benefits, training, etc., consists of rewards provided by the organization to employees for their membership and/or participation in the organization.
True or False: Most benefits are not taxed.
Answer: True
One of the driving forces in benefits' growth and popularity was that they were not taxed as income. Today, some benefits are taxed, but most are still provided without tax.
What should a company do if the productivity level doesn't justify the current costs of benefits?
Increase benefits so the employees will increase their productivity
Drop all benefits to employees
Keep the benefits at the same level so as not to hurt morale
Complete an evaluation of the total benefits package
Answer: Complete an evaluation of the total benefits package
One major concern in designing and implementing benefits is cost control. If the productivity level does not justify the current costs of the benefits, then an evaluation of the total benefits package is necessary.
True or False: Benefits can influence people to believe that a specific organization is a good company to work for.
Answer: True
To attract qualified people, benefits should be appealing. Benefits have to power to promote a desire to want to produce, and they can influence people to believe that this is a good company to work for.
All of the following are ways that benefits help retain current employees, except...
They help employees be dedicated to the company
They provide an incentive to produce
They help employees be satisfied with the company
They help employees be dedicated to other companies
Answer: They help employees be dedicated to other companies
People who are satisfied with the company will be less likely to consider leaving. Benefits should provide a means to retain talented employees. Certain types of benefits can provide an incentive to produce and be dedicated to the company.
True or False: Any benefits will motivate employees.
Answer: False
Organizations can use benefits to motivate employees if the rewards correspond with employee needs. For example, if the workforce of the organization has many students, the organization could promote education by subsidizing education costs. This type of benefit would have no meaning to a company with few students in their organization.
What does workers' compensation apply to?
Managers and executives who are injured
Any injury that happens to an employee while he/she is employed
Injuries that occur on the job
Fraudulent claims of injury
Answer: Injuries that occur on the job
Workers' compensation provides insurance and replaces wage and medical benefits if employees are injured on the job.
Who funds Social Security?
The federal government
The state
The employee and employer
Non-profit organizations
Answer: The employee and employer
Social security is funded through payroll taxes. Social security taxes are half paid by employees and half by employers. People who are self employed are required to pay both parts.
True or False: Employees have no way to fraudulently make injury claims.
Answer: False
False: Unfortunately, there are a number of instances where employees fraudulently claimed they were injured when, in reality, they were not. As a result, employers need to be vigilant about making sure that claims are legitimate.
Who is Unemployment Insurance designed to benefit?
Anyone who is insured
Any employer whose company is in full compliance with OSHA standards
People who are unemployed through no fault of their own
Anyone who is unemployed
Answer: People who are unemployed through no fault of their own
Unemployment Insurance is both a state and federal program that gives cash benefits to workers who qualify. All states are required to follow the guidelines based by the federal law, however each state administers a separate unemployment insurance program. These insurance benefits are designed to give financial assistance to unemployed workers who are unemployed through no fault of their own. Each state established its very own criteria for eligibility of the benefit program.
True or False: Workers' compensation only benefits the employee, not the employer.
Answer: False
Workers' compensation provides insurance and replaces wage and medical benefits if employees are injured on the job. In exchange for this benefit, employees waive their right to sue their employer for the tort of negligence leading to the injury.
defined benefit plan
is a retirement plan in which the employer commits (and pays) a specific monthly benefit (or amount) to the employee when the employee retires.
defined contribution plan
the employer pays a specific amount, or contribution, to an employee's retirement during each pay period that the employee is with the firm.
Which of the following plans is taxed in the year it is contributed?
403(b)
Roth 401(k)
401(k)
Answer: Roth 401(k)
Under a Roth 401(k) plan, participants of traditional 401(k) plans can allocate some or all of their contributions to a separately-designed Roth account. These Roth contributions are collected and treated as after-tax dollars, that is, income tax is paid or withheld in the year contributed. Qualified distributions from a designed Roth 401(k) account are tax-free. A traditional 401(k) account is funded with pretax dollars and, in general, taxes must be paid when the original contribution and earnings are withdrawn.
401(k) plans are mainly sponsored by whom?
Employers
The federal government
The state
Individuals
Answer: Employers
All 401(k) plans are offered by employers to help employees save for retirement. Firms that offer traditional and Roth 401(k) plans provide added compensation and motivation to their employees. A recent study by the AON Hewitt consultancy group suggests that roughly half of all organizations do not currently offer a Roth retirement option. However, the study also found that nearly 30 percent of those without the Roth option will likely implement such a plan in the next 12 months.
True or False: Employers are increasingly shifting toward the defined benefit plans for their employees.
Answer: False
Employers are increasingly shifting away from defined benefit plans. This is due, in part, to the cost incurred by the employer. Most employers see pension contributions as an unsustainable expense to the firm. Organizations can avoid the long-term commitment of defined benefit plans by offering defined contribution plans instead.
Nadine works for an online data analytics company. Her employer will give her $1500 a month when she retires. What type of retirement plan is this?
401(k)
Roth 401(k)
Defined benefit plan
Defined contribution plan
Answer: Defined benefit plan
A defined benefit plan is a retirement plan in which the employer commits (and pays) a specific monthly benefit (or amount) to the employee when the employee retires. In today's global, competitive environment, the number of defined benefit plans sponsored by employers has steadily declined. In fact, most employers see pension contributions as an unsustainable expense to the firm. Organizations can avoid the long-term commitment of defined benefit plans by offering defined contribution plans instead.
What type of retirement plan provides participants with individual accounts that fluctuate depending on what they contribute and investment returns?
Defined contribution plan
Defined benefit plan
Answer: Defined contribution plan
A defined benefit plan is a retirement plan in which the employer commits (and pays) a specific monthly benefit (or amount) to the employee when the employee retires.
In a defined contribution plan, the employer pays a specific amount, or contribution, to an employee's retirement during each pay period that the employee is with the firm.
How many employees must an organization have before it is mandated to provide health insurance to their full-time employees or pay a tax penalty?
50
15
25
100
Answer: 50
Under the Affordable Care Act, businesses with more than 50 employees must provide health insurance to their full-time employees, or the business will be required to pay a tax penalty.
All of the following are reasons that health care costs are rising except...
Overall, Americans are living longer lives
There is no accountability on the patient's part for health care costs
The overall health of society is deteriorating
Advanced technologies decrease the desire for expensive equipment and procedures
Answer: Advanced technologies decrease the desire for expensive equipment and procedures
There are numerous explanations for the rise in health care, some of which are:
-Deteriorating overall health in society
-No accountability on patient's part for health care costs
-Aging population
-Advanced technologies that increase the desire for expensive equipment and procedures
-An increased focus on saving the lives of premature babies and morbidly ill patients (e.g., cancer patients)
What type of disability insurance do more organizations offer?
Long-term disability insurance
Short-term disability insurance
Answer: Short-term disability insurance
Short-term absences due to disability are covered by short-term disability, while longer-term absences are covered by long-term sickness and disability insurance. Short-term disability insurance protection is generally offered by more organizations than long-term disability protection.
True or False: Most employers decide not to provide life insurance programs for employees because of the cost to employees.
Answer: False
A number of organizations provide noncontributory life insurance coverage for their employees so that the employee does not pay premiums. Despite the cost of providing life insurance benefits to employees, many organizations make the strategic decision to provide them in order to keep up with other organizations and attract the best talent available.
Which of the following health care plans generally has less paperwork and less out of pocket costs to the employee?
HMO
POS
PPO
Fee for Service Plan
Answer: HMO
In an HMO (health maintenance organization), the employee must choose a primary care physician in the network, but all health care provided must be provided by in-network physicians that are chosen by the Primary care physician. Some advantages of this program are less paperwork and lower out-of-pocket costs for the employee.
Which flexible compensation package allows employees to select a preferred package from various benefit plans?
Flexible Spending Account
Modular Plan
Flexible Insurance
Core Plus Option
Answer: Modular Plan
The modular plan allows employees to select a preferred package from various existing modules (or benefit plans). These modules are then structured to satisfy common situations within the workforce.
True or False: Flexible spending accounts can be used for any type of benefits that the employer offers including medical expenses, time off, stock options, etc.
Answer: False
Flexible spending plans have tax advantages, so funds can only pay medical expenses, dependent care, or other approved expenses.
What is the core-plus-option flexible benefit plan?
When all employees are offered a general benefits program and then can either increase or expand coverage or receive cash instead of the benefits
When the employee is allowed to set aside a portion of their earnings for use in any expenses
When employees can select a preferred package from various benefits plans
When the employee is allowed to set aside a portion of their earnings for use in qualified expenses
Answer: When all employees are offered a general benefits program and then can either increase or expand coverage or receive cash instead of the benefits
The core-plus-option plan is a common approach to developing a flexible compensation package. The general core benefits program that is offered to all eligible employees, and an option is granted to either increase or expand coverage. In some instances, employees may elect to receive cash amounts rather than benefits.
True or False: Flexible compensation packages have evolved because employees have different needs.
Answer: True
Because employees often have different needs, many organizations offer benefit flexibility. When designed effectively, a flexible benefits approach should increase the variety of plans offered to employees without increasing the cost to employers.
A utilization review _______________________.
Assesses the cost of each benefit to determine which are being used and which can be changed
Assesses the cost of each employee to find their overall worth in the company
Assesses the cost of wages for each department to determine which are being most productive
Assesses the organization's total costs to see where the organization can lower or eliminate costs
Answer: Assesses the cost of each benefit to determine which are being used and which can be changed
To lower costs, organizations periodically conduct utilization reviews. A utilization review assesses the cost of each benefit and provides data that shows which benefits are being used most often and which benefits could be reconfigured, redirected, or eliminated.
True or False: HR professionals should design compensation packages to achieve the organization's strategic goals and objectives.
Answer: True
As HR professionals design the compensation function, they should ensure that compensation is designed to help the organization achieve its strategic goals and objectives.
True or False: Indirect compensation is lessening in its importance to employees.
Answer: False
Over the last few decades the importance of indirect compensation has grown significantly. While money, job challenge, and opportunities for advancement are important elements of compensation, many employees also place significant value on pension benefits, disability provisions, health insurance, and other forms of indirect compensation.
To increase the chances that employers will see increased gains from indirect compensation, they should do all of the following except...
Have less employee participation in the design of benefit packages
Have employees participate in the selection of benefit packages
Have more employee participation in the design of benefit packages
Increase communication about the benefits they provide to employees
Answer: Have less employee participation in the design of benefit packages
Increased communication and more employee participation in the design and selection of benefit packages may increase the likelihood that organizations will receive increased gains from providing indirect compensation. With regular input from employees, benefit packages will better fit the needs of the employees and keep them happy.
True or False: Because direct compensation focuses on wages and indirect compensation focuses on benefits, they mostly focus on different purposes for the company.
Answer: False
Because direct and indirect compensation are both a part of the total compensation package, they share many of the same purposes. Such as, recruiting, retaining, and keeping employees for the long-term.
When conducting assessments of the organization's indirect compensation, the assessment should look at all of the following except...
What employees prefer to see the organization doing
What other organizations are doing
What benefits are the least expensive, and implement those
What the organization is doing
Answer: What benefits are the least expensive, and implement those
To ensure that the organization is getting the most from its indirect compensation, assessments must be made of what the organization is doing, what other organizations are doing, and what employees prefer to see the organization doing. Checking benefits to find cheaper ones is a good idea, but if those benefits are not what the employees want, then there is no reason to implement them.
