HRM CH 13

Human Resources Management in
Canada
Fourteenth Canadian Edition
Chapter 13
Employee Benefits
and Services
Copyright © 2020 Pearson Canada Inc. 13 - 1

Learning Outcomes (1 of 2)
13.1 Explain the strategic role of employee
benefits.
13.2 Describe five government-mandated benefits.
13.3 Discuss five types of voluntary healthcare-
related employee services or benefits offered
to employees.
13.4 Describe the two categories of pension plans
and the shift that is occurring in their relative
popularity.

Learning Outcomes (2 of 2)
13.5 Discuss five types of employee-specific
benefits and identify the impact of these
benefits on the employee–employer
relationship.
13.6 Explain how to set up a flexible benefits
program.
13.7 Explain why the cost of health insurance
benefits is increasing and how employers can
reduce these costs.

The Strategic Role of Employee
Benefits (1 of 3)
Employee Benefits:
• Indirect financial payments that an employee receives
during employment.
• Employee services are growing in importance as part of
the total compensation.
• Benefits matter to employees.
• Benefits aligned with business strategy help attract and
retain the right people to achieve business objectives.
• Benefits administration is an increasingly specialized task.
• Benefits must comply with a wide variety of laws in
Canada.

Benefits (2 of 3)
Table 13.1 Objectives of a Benefits Strategy (2015)
Objectives of Benefits Strategy Percent of Organizations That Rated the
Objective as “Very Important”
Complying with accounting, 53
regulatory, and company standards
Containing benefits costs 45
Attracting talent/maintaining 39
competitive position
Retaining talent/reducing turnover 37
Increasing job satisfaction/employee 33
engagement
Enhancing employee health 30
SOURCE: The Conference Board of Canada. “Benefits Benchmarking 2015,” October, 2015, p. 6.
Reprinted by permission.

Benefits (3 of 3)

Government-Mandated Benefits (1 of 6)
Employment Insurance (EI):
• Federal program intended to provide temporary financial
assistance to eligible persons who experience interruption
in their work.
• Funded by contributions from employees and employers.
Canada/Quebec Pension Plan (C/QPP):
• Provides working Canadians with a basic level of financial
security on retirement.
• Types of benefits:
– Retirement pensions.
– Disability benefits.
– Survivor benefits.

Workers’ Compensation:
• Provides sure and prompt income and medical benefits to
victims of work-related accidents or illnesses or their
dependants, regardless of fault.
• Employers pay the full cost of workers compensation
system.
• Benefits are non-taxable.
• Controlling costs:
– Focus on accident prevention, safety and health programs
and comply with government safety standards.
– Rehabilitation and modified return to work programs(E.g
physical therapy, career counselling).
– Workers are required to co-operate with initiatives such as
modified work.
Paid Time Off:
• Maternity/paternity leave:
– Guarantee of old or similar job on return to work.
• Vacations:
– Labour/employment standards legislation sets out minimum
amount of paid vacation that must be provided to
employees.
• Legislated holidays:
– Number of paid holidays varies from one jurisdiction to
another. Most common: New Year’s Day, Good Friday,
Canada Day, Labour Day, Christmas and Boxing Day.

Paid Time Off:
• Paid breaks:
– Mandated paid and unpaid time off.
– Some jobs (shift work) required an uninterrupted break after
set number of hours.
– If employee is under direct control of employer and expected
to be available for work during this time, the break must be
paid.
– Otherwise it is unpaid (coffee and eating breaks).

Pay on Termination of Employment:
• Employment/labour standards legislation requires that
when employment is being terminated by the employer,
the employee must be provided by termination pay.
• Reasonable advance notice:
– Provide employee in advance with a written notice.
– Advance (reasonable) notice applies only to employees
whose employment is terminated through no cause of their
own.
– Alternative is pay in lieu of reasonable notice and employee
ceases to work immediately.

Pay on Termination of Employment:
• Advance notice for mass layoffs:
– Some provinces require additional pay when layoff of more
than 50 employees occurs.
• Severance pay:
– An additional payout on top of the minimum notice period
requirements.
– Only applies in certain specific conditions in the applicable
jurisdiction.

Voluntary Employer-Sponsored Benefits
(1 of 4)
Life Insurance:
• Almost all employees provide group life insurance plans.
• Accidental death and dismemberment coverage:
– Provides a fixed lump-sum.
• Critical illness insurance:
– Lump-sum payment for a life-threatening illness.
Supplementary Healthcare/Medical Insurance:
• Most employers provide plans that cover medical
expenses not covered by government health plans.

(2 of 4)
Short-Term Disability Plans and Sick Leave Plans:

• Short-term disability plans:
– Continue all or part of salary for illness or injury related
absence from work.
• Sick leave plans:
– Full pay for specific number of permissible sick days.
• Many employers use “pooled” paid leave plans which
combine sick leave, vacation, and personal days.
Employees use accrued days as they see fit.

(3 of 4)
Long-Term Disability Plans:

• Insurance that provides income protection or
compensation for long-term illness or injury that is not
work related.
• These start when sick leave and/or short-term disability is
used up.
• Disability management program:
– Process that coordinates the activities of the employer, the
insurance company and healthcare providers to help
workers to successfully return to work and perform the job.
– Prevention, early assessment and intervention, early and
safe return-to-work policies etc.
(4 of 4)
Mental Health Benefits:

• Leading cause of short- and long-term disability claims.
SOURCE: “What Are the Top Challenges You Face in Improving How Mental Health Issues Are Addressed in Your
Workplace?” 2008 Mental Health in the Workplace National Survey (Toronto, ON: Mercer and Canadian Alliance on
Mental Illness and Mental Health, 2008), p. 22. Reprinted with permission of Mercer.
Retirement Benefits (1 of 4)
Retirement Benefits:
• Pre-funded employer-sponsored pension plans are
intended to supplement an employee’s government-
sponsored retirement benefits.
• Income is provided when an employee reaches a pre-
determined retirement age.

Categories of Pension Plans:
• Defined benefit plan – actual benefits are defined ahead
of time.
• Defined contribution plan – benefits depend on the
amounts employees (and employers) contribute to the
plan; and the fund’s investment earning.
• Group registered retirement savings plan (RRSP) –
employees contribute directly from pay which is matched
by the employer.
• Deferred profit-sharing plan (DPSP) – certain amount of
company profits are credits to employee’s account.

Designing Pension Plans:
• Legal and policy issues in pension plan design:
– Membership requirements – minimum number of years of
service.
– Benefit formula – final or average earning.
– Retirement age – mandatory retirement age is prohibited
under human rights legislation.
– Funding – contributions by employer, employee, or both.
– Vesting – provision that employer money put into pension
fund cannot be forfeited for any reason.
– Portability – if employee leaves the pension can be
transferred.
Designing Pension Plans:
• Phased retirement:
– Employee gradually eases into retirement using reduced
workdays or shortened work weeks.
• Supplemental employee retirement plans (SERPs)
– Additional pension benefits for employees whose full
pension exceeds maximum allowable under the Income
Tax Act.

Employee-Specific Services (1 of 5)
Family-Friendly Benefits:
• Subsidized childcare:
– Company sponsored facilities; or local community childcare
facilities.
– Help attract young parents to the payroll, reduce
absenteeism and turnover; increases job satisfaction and
productivity.
• Eldercare:
– Increasingly important workplace issue.
– Employers are establishing support initiatives:
▪ Flextime, compassionate care leave, education.

Flexible Work Schedules:
• Flextime – workdays are built around a core of midday
hours, employees determine what other hours they work.
• Telecommuting – work away from the office using
technology.
• Compressed work week – work fewer days each week,
but longer hours each day.
• Job sharing – two people share a single full-time job.
• Work sharing – temporary reduction in work hours during
economic downturns to prevent layoffs.
• Flexible work schedules have positive effects on
productivity.
Voluntary Job-Related Services:
• Educational subsidies – upgrade educational
qualifications, job related or not.
• Paid time off for volunteering – help brand the company.
• Transportation – carpooling, public transit subsidies.
• Food services – full service cafeterias on-site, or
subsidies.
• Sabbaticals – leaves of absence to pursue personal
goals. Usually unpaid.

Personal Services:
• Credit unions – separate business established with
assistance of employer.
• Counselling services – financial, family, career, job
placement, preretirement, and legal.
• Employee assistance plans (EAPs) – company sponsored
to help employees cope with personal problems.
– Confidential; in-house or with an external provider.
• Other personal services – various social and recreational
opportunities; on-site gyms.

Executive Perquisites:
• Can range from substantial to the almost insignificant.
• May include:
– Salary guarantees.
– Relocation benefits.
– Outplace assistance.
– Company cars/planes.
– Executive dining rooms.
– Legal services.
– Liberal expense accounts.
– Club memberships.
– Education for dependents.
Emergent Issues in Employee Benefits
(1 of 4)
Flexible Benefits Programs:

• Individualized plans to accommodate employee
preferences.
• Benefits to employers:
– Cost containment – place limits on costs.
– Ability to meet needs of a diverse workforce.
• Benefits to employees:
– Put together own benefits package.
– Main advantage is flexibility.
• Biggest challenge is communicating options available.

(2 of 4)
Benefits Administration:
• Challenge for all firms.
– Keep track of benefits status of each employee is time-
consuming.
Keeping Employees Informed:
• Provide correct information in a timely, clear manner.
• Technology aids.
Benefits Fraud:
• Audit online benefit claims forms; monitor all claims.
• Sick days are often abused.
(3 of 4)
Reducing Health-Benefit Costs:

• Increased costs are the biggest issue facing firms:
– Aging population.
– Increased use of expensive new drugs.
• Reducing costs:
– Increase coinsurance paid by employees.
– Publish list of drugs restricted under the plan.
– Increase health promotion in-house.
– Implement risk-assessment programs
– Establish healthcare spending accounts.

(4 of 4)
Retiree Health Benefits:

• Costs are exceeding the costs for active employees.
– Cut costs by increasing retiree contributions.
– Increase deductibles.
– Tighten eligibility requirements.
– Reduce maximum payouts.
• Trend is away from employer-provided retiree health
benefits.

Technology Plus’s Benefit Dilemma
Questions?
1.In your opinion, what voluntary employer sponsored
benefits should this company maintain, and which ones
should they not maintain? Why?
2.Would a flexible benefit program save this organization
money if administered properly?

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Human Resources Management in

Copyright © 2020 Pearson Canada Inc. 13 - 1

Copyright © 2020 Pearson Canada Inc. 13 - 2

Copyright © 2020 Pearson Canada Inc. 13 - 3

Copyright © 2020 Pearson Canada Inc. 13 - 4

Copyright © 2020 Pearson Canada Inc. 13 - 5

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Copyright © 2020 Pearson Canada Inc. 13 - 7

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Short-Term Disability Plans and Sick Leave Plans:

Copyright © 2020 Pearson Canada Inc. 13 - 14

Long-Term Disability Plans:

Mental Health Benefits:

Copyright © 2020 Pearson Canada Inc. 13 - 17

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Flexible Benefits Programs:

Copyright © 2020 Pearson Canada Inc. 13 - 26

Reducing Health-Benefit Costs:

Copyright © 2020 Pearson Canada Inc. 13 - 28

Retiree Health Benefits:

Copyright © 2020 Pearson Canada Inc. 13 - 29

Copyright © 2020 Pearson Canada Inc. 13 - 30

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