CHAPTER 9:

THE MANAGEMENT OF
EMPLOYEE BENEFITS
AND SERVICES
HUMAN RESOURCE MANAGEMENT

Prepared by:
Samonte, Sharina Mhyca A.
Lianza, Aron Jhake
Agullo, Alfer John
THE BEGINNING OF THE FRINGE BENEFITS CONCEPT

The human concept of the labor has been recognized widely in the industrial world. The
employer, though not bound, provide several benefits and services to the employees,
working in the organization to maintain and promote the employees’ favorable attitude
towards work and work environment, because maintenance of the favorable attitude is
essential part of motivation and high moral. Such benefits and services, being a part of
wage and salary administration.

Wage - payment usually of money for labor or services usually according to contract and
on an hourly, daily, or piecework basis.

Salary - a fixed regular payment, typically paid on a monthly or by weekly basis but often
expressed as an annual sum.

Fringe Benefits

⚫ Benefits which supplements the employees’ ordinary wages and which is of value to
them and their families in so far as it materially increases their retirement benefits.

⚫ are the additional benefits offered to an employee, above the stated salary for the
performance of a specific service? Some fringe benefits such as social security and
health insurance are required by law, while others are voluntarily provided by the
employer.

Features of Fringe Benefits

1.Fringe benefits are supplementary to regular wages or salaries.
2.These benefits are paid to all the employees based on this membership in the
organization.
3.These benefits are indirect compensation because these are usually extended as a
condition of employment and are not directly related to performance.
4.Fringe benefits involve a labor cost for the employer and are not meant directly to
improve efficiency.
5.Fringe benefits raise the living standard of the employees.
6.Fringe benefits refer to items for which a direct monetary value to the employee can be
ascertained (Provident funds, pension, etc. On the other hand, services refer to the items
like medical facilities, recreation, etc.)
7.These benefits may be statutory or voluntary.

Objectives of Fringe Benefits

Fringe benefits are given to achieve the following objectives.
1. To recruit and retain the best employees.
2. To protect employees against certain hazards e.g. life insurance, old age pension, etc.
3. To improve motivation and morale of the employees by satisfying some unsatisfied
needs.
4. To improve work environment and industrial relations.
5. To ensure health, safety and welfare of employees.
6. To develop a sense of belongingness and loyalty among workers.
7. To meet statutory requirements.
8. To satisfy the demands of trade unions.
9. To improve the public image of the organization.

Kinds of Fringe Benefits

The benefits and services to be included under the title ‘fringe benefits’ are numerous. A
few of them are — Bonus for quality and attendance, contribution to group insurance
plan, lay off and termination pay, travel expenses, suggestion awards, medical leave with
pay, overtime, university and trade courses, etc.
The Chamber of Commerce, USA has included 5 types of benefits under fringe benefits.
1. Statutory payments such as old age pension unemployment insurance, group
insurance, etc.
2. Payment for pension and labor welfare
3. Rest or leave with pay
4. Payment for time not worked
On 19 December 2017, Philippine President Rodrigo Duterte signed into law the first
package of the comprehensive tax reform program called “Tax Reform for Acceleration
and Inclusion (TRAIN),” now Republic Act No. 10963. Included in TRAIN are major
amendments to personal income tax provisions in the National Internal Revenue Code of
1997.
Republic Act No. 10963 provides for new tax deadlines, new tax rate tables, removal of
individual exemptions and limitations on qualifications for preferential tax rates. The
changes in the income tax rates will negatively impact high income earners while low- to
middle-income earners will see an increase in net pay. The new law may lead to
significant changes in

FRINGE BENEFITS TAX (FBT) The FBT rate has increased from 32% and the
gross-up factor in computing the grossed
monetary value of fringe benefits is 65%

THE CONCEPT OF BENEFITS

Benefits are anything that is not covered by regular salaries and wages. It is
anything that contributes to the improvement of the conditions of work, and that
motivates the employees to do good work. Benefits are additional compensations that
the employees receive regularly at an interval stipulated in the company policies and
guidelines.

Benefits are granted to employees to assist them and facilities are provided so
that they will enjoy their stay in the company. The main purpose is to develop greater
commitment and loyalty and to keep good employees in the company roster.

Management social conscience has shifted to recognize that employees are

partners in their development and progress. They realize that the employees are
exposed to hazard of work and economic problems brought about by the rising cost of
living, the cost of hospitalization and other social life problems. Management is now
more concerned with their employees’ welfare and share in the social responsibility and
community activities. The government on one hand, had recognized that the employee
as contributor to the economic development of the country has to be taken care of by-
passing legislation that offers more benefits to the employees. The objectives of the
company in granting fringe benefits are:

1. To provide additional protection and comfort to their employees and their families as
they consider them as member of the team.
2. To maintain and develop employees as an effective work force duty committed to
their corporate mission and vision.

3. To develop productive and happy employees and develop greater loyalty and
commitment to motivate them to remain in the employment of the company.

4. To develop greater partnership in the development of quality products and services to

their customers and clients.

5. To develop satisfied employees and more concerned workers to avoid activities in the
workplace that will interfere with company production.

6. To develop partnership with labor unions and employees’ associations.

THE GOVERNING PHILOSOPHY IN GRANTING FRINGE BENEFITS

Company benefits are additional costs in the company operations. They should be
administered appropriately and be based on a sound company philosophy in granting
additional benefits. Such philosophy must consider the company’s ability to pay and
contributions to the profitability of the organization. It must also be mutual benefit to the
giver and the receiver of benefits. Along these lines, the company benefits should focus
along the following principles:

1. Company benefits should be based on the financial

conditions and the capability of management to pay Benefits - humanitarian
grants of management
additional cost of operations, as benefits granted cannot and the capability to
withdrawn when already granted. Additional cost may be pay must be carefully
mean additional financial loses to the company that may studied.

lead to company bankruptcy. Employees should not expect

much at a time of financial crisis.
2. Benefits granted should not interfere with company operation and management
has the prerogative to control the same.

As an example, additional leave credits cannot be availed of without proper

management approval, especially if it will interfere with production schedules. Shifting
schedules are controlled by management to take care of continuous company
operation.

3. Benefits should be fair to all employees of equal rank and position, and should be
capable of uniform implementation.

Example, if rank and file employees are entitled to a rice allowance of one sack per
month, then all must be given the same. If all senior managers are given car
allowances then all the others must enjoy the same benefits. Equal treatment will
avoid jealousy among managers thereby greater cooperation is maintained. Equal
ranks must get the same benefits.

4. The benefits must have mutual value to both employers and the employees
concerned.

Example: Car plans are given by companies to managerial employees to gain

representation for the company and for them to go to the office in convenience but it
should not be abused by the employees concerned for coming late or going home
early. Managers usually enjoy flexible time schedules but they are not paid overtime
work.

5. The employees must understand the cost benefit implementation and they should
work hard so that the company will maintain its ability to pay the added fringes. In
time of financial crisis and the company is in the point of reversals, the employee
should not expect the company to be benevolent to implement some of those that
are not usually given like company outing and Christmas bonanzas.

6. Benefits must be measured in terms of employees’ services to the company. While

benefits should be uniformly implemented, there must be a measurement in the policy
guidelines on those who should receive the benefits in terms of the following criteria:
 a. Length of service – The following company guidelines may be of help in the
granting of leave credits:

•Employees who have one year of service are entitled to the mandatory
leave of fove days per year.
o

•The employees enjoy an additional two-day leave for every year of

service but not to exceed 15 days thereafter.
o
•The employee may initially enjoy five days sick leave after one year of
service, and then additional leave of one day per year of service until
o he enjoys the fullfifteen days leave.

•Additional leave may be granted depending on the company's

capability to pay.
o

b. Retirement Benefits

•Some companies pay retirement benefits outside of those given by the

Social Security Syste. Some companies pay an additional retirement benefit
o of one day after five years of additional service.

•Other companies pay as much as two months in retirement benefits for

every year od service. Other pay more depending on their collective
o bargaining agreements.

•The employee may initially enjoy five days sick leave after one year of
service, and then additional leave of one day per year of service until he
o enjoys the fullfifteen days leave.

c. Other benefit Programs

•Company insurance plans covering the employees and their

dependents may be given depending on the services of the
o employees
The granting of measurable benefits is a come-on perk for employees to stay longer with
the company and provide loyal and efficient services to satisfy customer demands and
develop employee morale. Anticipation of greater company benefits based on the
number of years of service prevents employees from resigning and looking for other jobs
thereby lessening employees’ turnover rate.

7. Benefit programs should be a cooperative effort of top management and employees.

Recreational programs and athletic activities are fringe benefits of the company. Such
programs should be coordinated and participated in by all employees concerned and
participation should be to the maximum.

The athletic and recreational programs are company benefits. They aim to develop esprit
de corps and boost employees’ morale. When handles properly, this incentives and
benefit program can boost efficiency and increase production.

THE CLASSIFICATION OF BENEFITS

1. Statutory Benefits-- are the benefits mandated by the law such as:

A. 13th month pay given half in June and half in December

Under Presidential Decree No. 851, employers from the private sector in the Philippines
are required to pay their rank-and-file employees a Thirteenth 13th Month Pay not later
than December 24 every year. a mandatory benefit and should not be confused with the
“Christmas bonus” commonly practiced in the local business setting.

B. Five days incentives leave

Under Presidential Decree No. 442 of 1974 also known as the Labor code of the
Philippines under Article 95 mandates employers to give their employees a yearly service
incentive leave of five days with pay. The Service Incentives Leave shall be granted to a
worker who has been in service within 12 months, whether continuous or broken,
reckoned from the date the employee started working, including authorized absences
and paid regular holidays.
C. Birthday Leave

Under CSC Resolution No. 99-0595 series of 1999 amendment of Section 21 of CSC
Memorandum Circular No. 41, s. 1998 in order to affect the equitable avail of special leave
privileges to all qualified sectors of the bureaucracy, regardless of civil status and personal
circumstances.

WHEREAS, ten (10) occasion are enumerated in that section that would entitle an
employee to the special leave privileges i.e.,

Funerals/Mourning Leave Calamity Leave

Hospitalization Leave Graduation Leave
Accident Leave Enrollment Leave
Relocation Leave Wedding Anniversary Leave
Government Transaction Leave Birthday Leave

D. Maternity leave with pay for married women.

Under R.A No. 11210. An act increasing the maternity leave period to one hundred five
(105) days for female workers with an option to extend for additional thirty (30) days
without pay and granting an additional fifteen (15) days for solo mothers and for other
purposes

E. Paternity leave with pay when husband’s wife gives birth.

Under R.A No. 8187. An act granting paternity leave of seven (7) days with full pay to all
married male employees in the private and public sectors for the first four (4) deliveries of
the legitimate spouse with whom he is cohabiting and other purposes.

F. Pag-ibig Fund--Housing Loans Through employer-employee contribution

Under R.A. No. 9679 “Home Development Mutual Fund Law of 2009, otherwise known
as Pag-IBIG.

G. Medicare Fund--for medical expenses of the employees and dependents

Universal Health Care (UHC) law (Republic Act No. 11223) that automatically enrolls all
Filipino citizens in the National Health Insurance Program and prescribes complementary
reforms in the health system. This gives citizens access to the full continuum of health
services they need, while protecting them from enduring financial hardship as a result.
H. Social Security Benefits

Republic Act No. 11199, otherwise known as the Social Security Act of 2018, revised
Republic Act No. 1161 (the old Social Security Law) and Republic Act No. 8282 (amending
the old previous Social Security Law). Which Philippines which promote social justice and
provide meaningful protection to members and their beneficiaries against the hazards of
disability, sickness, maternity, old age, death, and other contingencies resulting in loss of
income or financial burden. Towards this end, the State shall endeavor to extend social
security protection to workers and their beneficiaries.

2. Company Benefits - These are benefits granted by the company outside of those
mandated by law. These Benefits could be through a collective bargaining agreement
and those that are given unilaterally by management.

A. Vacation Leave with Pay-- this varies from the company

B. Sick Leave with Pay

C. Bereavement Leave

D. Hospitalization Leave

E. Sickness and accident insurance plan.

F. Life insurance and pension plan

G. Christmas and mid-year bonus

H. Housing Equity Assistance

I. Educational Plan

J. Recreational and Fitness Facilities

K. Legal Aid

L. Car Plan

M. Company Service and Transportation

N. Stock Option Plan

O. Management Bonus

P. Emergency Leave

Q. Personal Leave

R. Union Leave

S. Production Sharing Plan

T. Profit-sharing.

PROFIT-SHARING PLANS

Profit-Sharing is an incentive plan under which an employer agrees to share with

his personnel a specified portion of the net profits of his business at the end of each fiscal
period or over a given period. It is not a pension or a bonus. It provides payment of current
or deferred sums based on the profitability of the enterprise as a whole.

Purpose of Profit-Sharing

1.It is believed that employees would feel they have stake in the company if they get a
direct share in the profits of the enterprise in which they work.

2.It aims to modify employees’ attitudes to achieve greater employee efficiency,

productivity and loyalty to the firm and keener interest in its welfare.

3.Employers who subscribe to the concept of profit-sharing look upon their workers as
partners or co-workers of the enterprise.

TYPES OF PLANS

1.The Cash Plan – also known as the Current Distribution Plan. This provides for payment
of the employee’s share in the profit in cash based on his salary or wage. Shares under
this agreement are generally paid quarterly, semi-annually or annually.

2.The Deferred Distribution Plan – the program establishes a trust fund to provide
employees with future payment. The distribution of profits is withheld until the
employees’ retirement, death or disability.
3.The Purchase Plan – Under this plan, participating employees are permitted to purchase
often through payroll deductions, shares of company stock, either or less than the
prevailing market price or at par value.

The scope and nature of benefits are so varied as enumerated above but such benefits
can be further classified into four major categories:

1.Economical and Financial Benefits

2.Recreational, Social and Athletic Services

3.Health and Medical Services

4.Professional Services

The benefits derived from these company services are immeasurable, since they are
intangible. Nevertheless. Their value cannot be underestimated as they contribute greatly
in making the company a good place to spend the best years of the employees’
productive life.

MANAGING BENEFITS: PLANNING AND ADMINISTRATION

What is Employee Benefits Administration?

Employee benefits administration means determining and managing of benefits offered

to the employees by company agreement at policies with governmental approaches.
Effective benefits administration can serve as a competitive advantage for many
organizations in attracting, hiring, and retaining top talent, as well as cutting operational
costs.

What is the Employee Benefits Security Administration?

The Employee Benefits Security Administration (EBSA) has a government agency

connection that protects, provides information about, and promotes employer-sponsored
benefits packages in the private sector. These protected benefits include retirement,
pension, and health plans. The EBSA runs under the United States Department of Labor
What does the Employee Benefits Security Administration do?

The main purpose of the Employee Benefits Security Administration (EBSA) is to help
employees understand their rights and work benefits. It is essentially a watchdog agency
that protects the rights of employees to fair retirement and health benefits and monitors
inappropriate activities of pension and bene fits plan managers.

Steps in Benefits Administration

• The benefits administration process flow begins with HR managers and relevant
executives determining what kinds of benefits will be offered to employees.
• Those involved in the benefits administration process flow should ensure that
benefits plans conform to current federal regulations. This may involve regularly
reviewing the policies and checking them against government regulations, which
may change over time.
• One of the most important steps in benefits administration is training employees
in what benefits are available and how to enroll in the company programs.
Employees need to know about enrollment deadlines and when and how to add
a dependent.
• Using a software-based program will make enrollment simpler and allow
employees to track and read about their benefits.
•

What is the Role of a Benefits Administrator?

The benefits administrator is typically a human resource professional within the

organization charged with managing the benefits administration process. The benefits
administrator should be knowledgeable about federal guidelines governing health,
retirement, and other benefits. Additionally, he or she should be aware of the business’s
resources and employee needs. The benefits administrator will be in charge of developing
and managing the benefits program, and selecting the right HR software and insurance
policies for the organization, among other duties.
STRATEGIC BENEFIT IMPLEMENTATION

Management has to analyze the benefit payoff of any benefits management program.
Employees expect management to provide them benefits but, on the other hand, job
performance remains the same. Benevolent management on the other hand expects
employees to contribute to the company’s productivity and profitability and end game
should be of mutual benefits to both the employer and the employees. Since benefits are
expenses and the results are not usually immediately appreciated, a strategic
management in its implementation must be considered.

1. Benefits Survey and Benchmarking

Benefits should be within the level of the industry in the community and those of the
competitors in business as any added cost should affect product-pricing strategy. Cost
information is necessary as product competition affects company sales strategy and
programs.

2. Cost Control Strategy

In thinking about cost control strategy, several factors can be successful. It is assumed that
the larger the cost of benefits category, the greater the opportunity for savings. We must
also consider the growth trajectory of the benefit category as its cost impact may run out
of control in the future. Cost containment effort can only work to the extent that the
employer has significant discretion and control in choosing how much they spend in the
benefit category. Statutory cost varies as government policies change over time and this
is beyond control by management, and therefore a tie-up study must be taken into
course.

3. Staffing Cost Strategy

Employers may change staffing practices to control benefit costs. Benefit costs are fixed
and spent per employee. The company may require the employees to work more hours
and pay overtime premiums. The overtime premium should be computed against
expenses for employees’ benefits. If the resultant factors are more than savings without
sacrificing production performance, then such plan could be implemented. This condition
will also be favorable to the employees as it will increase their home pay, which is more
important especially for heads of the family.

4. The Demographic Composition Cost Strategy

The employer must also consider the demographic factors such as age, sex and status of
their work force. The benefits must be designed along the demographic need of human
resources to be more relevant and appreciated. Planning such a benefit program could
be ticklish issues as human resource compositions are varied in any company
organization. Careful study must be conducted.

5. Organization of Employees cooperatives

Organizations of employee association’s Credit Unions – are developed as

cooperatives will greatly help unburden self-help organizations to help
solve some of their personal
management of employees’ loans and cash financial problems through loans
advances. This will also help employees save part of at very minimal interest plus
incentive refunds.
their income and generate dividends as added
incentives.

6. Communicating Benefits to Employees

Any strategic implementation of any program cannot take root on employees’ morale
without their understanding fully the concepts and program of management in the
granting of such benevolent gestures for their welfare. Benefits are investments in the
greater job satisfaction and increased commitment for better performance on the job.
CORPORATE POLICY GUIDELINES ON BENEFITS

The company must develop corporate policy guidelines in the implementation of any
benefit program. Such policy and procedure must be developed in cooperation with all
operating and staff departments and submitted to the Board of Directors for proper
approval. It must set the policy and procedure in implementing the program and
communicating these to all employees concerned so that they are fully understood.

Corporate policy must follow the following guidelines:

1.It must specify are covered by the policy

2.It must relate to the family and individual assistance to levels of need.

3.It must make the cost of work-related benefits as part of cost production.

4.It must provide security in such forms as compensation during work-related

illness and retirement benefits.

5.It must promote healthy and safe work environment.

6.It must provide morale-building programs and develop employees’ esprit de

corps.

7.It must be of mutual benefit to both the employees and the employer.

BENEFITS PROGRAM EVALUATION

Effective program management of employee benefits is an important means by which

organizations successfully compete. Benefit costs are substantial and continue to grow
rapidly in some areas, especially on employees’ health care benefits. Effective evaluation
of all benefits costs is necessary to be able to compete in products and services especially
in the global market. Evaluation must also focus its attention not only on product cost but
also on the growing competition in acquiring a totally committed work force that will
profile the company towards its growth and economic stability. Beyond investing more
money and other resources on benefits implementation, the attraction and retention of
quality employees can be helped by proper evaluation and communication of benefit
packages to all company stockholders. The employers carry a very significant social
responsibility to its employees must fully understand that they themselves carry the
responsibility of safeguarding their own economic and social well-being by “protecting
their employees through productive efforts to sustain financial stability.

A continuing research program should be done by the Human Resource Department to

evaluate not only the cost impact of benefit program but also its effects on employees’
performance and morale. Cost benefit researches and evaluation are tools that will guide
management in decisions on any further benefit implementations.