Legally_Required_Benefits_and_Discretionary_Benefits

Legally Required Benefits and Discretionary Benefits Legally required benefits are mandated by the following laws: the Social Security Act of 1935, various state workers’ compensation laws, and the Family and Medical Leave Act of 1993. All provide protection programs to employees and their dependents. The Social Security Act of 1935 The economic devastation of the Great Depression era prompted the federal government into action, because most people used up their life savings to survive and opportunities for gainful employment were scarce. The Social Security Act of 1935 set up two programs: a federal system of income benefits for retired workers and a system of unemployment insurance administered by the federal and state governments. Amendments to the Social Security Act in 1965 established the disability insurance and Medicare programs which serves nearly all U.S. citizens aged at least 65, as well as disabled Social Security beneficiaries, by providing insurance coverage for hospitalization, convalescent care, major doctor bills, and prescription drug coverage. Today, Medicare serves nearly all U.S. citizens aged 65 or older by providing insurance coverage for hospitalization, convalescent care, and major doctor bills (Martocchio, 2010). Workers’ Compensation Workers’ compensation refers to state-run insurance programs that are designed to cover medical, rehabilitation, and disability income expenses resulting from employees’ work-related accidents. (Martocchio, 2010). Workers’ compensation insurance came into existence during the early decades of the 20th century, when industrial accidents were very common and workers suffered from occupational illnesses at alarming rates. During the early years of industrialization of the U.S. economy, no laws required employers to ensure the health and safety of employees. Seriously injured and ill workers were left with virtually no recourse because social insurance programs to protect such workers were nonexistent. The Family and Medical Leave Act of 1993 The Family and Medical Leave Act (FMLA) provide job protection to employees in cases of a family or medical emergency. FMLA permits eligible employees to take up to 12 workweeks of unpaid leave during any 12-month period. These employees retain the right to return to the position they left when the leave began or to an equivalent position with the same terms of employment, including pay and benefits. The passage of the FMLA reflects growing recognition that the parents of many employees are becoming elderly, rendering them susceptible to a serious illness or medical condition. The passage of the FMLA also recognizes the increasing prevalence of two-income families and the changing role of men regarding child care (Martocchio, 2010). Discretionary Benefits Discretionary benefits, on the other hand, are voluntary benefits and hence, are not mandated. This kind of benefit encompasses health care, life insurance, retirement plans, Employee Stock Option Plans, Supplemental Unemployment Benefits, premium pay, part-time employee benefits, distinctive benefits, etc. Companies can choose to offer a wide variety of benefits to employees. Discretionary benefits fulfill several roles. The first, protection programs, most closely parallels legally required benefits by offering protections to employees and family members due to income loss or ill health. The second, paid time-off, affords employees time off with pay for many purposes, including illness or to celebrate designated holidays. Income Protection Programs Disability insurance replaces income for employees who become unable to work on a regular basis because of an illness or injury. Employer-sponsored disability insurance is more encompassing than workers’ compensation because these benefits generally apply to work- and nonwork related illness or injury. Life Insurance Employer-sponsored life insurance protects family members by paying a specified amount to an employee’s beneficiaries upon the employee’s death. Most policies pay some multiple of the employee’s salary for instance, benefits paid at twice the employee’s annual salary. Employees usually have the option of purchasing additional coverage. Frequently, employer-sponsored life insurance plans also include accidental death and dismemberment claims, which pay additional benefits if death was the result of an accident or if the insured incurs accidental loss of a limb. Retirement Plans Sometimes referred to as pension plans; provide income to individuals and beneficiaries throughout their retirement. Individuals may participate in more than one pension plan simultaneously. Companies may establish their retirement plans as defined contribution plans, defined benefit plans, or hybrid plans that combine features of defined contribution and defined benefit plans. Under a defined contribution plan, employers and employees make annual contributions to separate accounts established for each participating employee, based on a formula contained in the plan document. The amount each participant receives in retirement depends on the performance of the selected investment vehicle for example, company stock, government bonds. Typically, formulas call for employers to contribute a given percentage of each participant’s annual pay each year. Employers invest these funds on behalf of the employee in any of a number of ways, such as company stocks, diversified stock market funds, or federal government bond funds. Health Protection Programs Health protection programs refer to a host of practices geared toward promoting sound health. Health protection programs subsume health insurance, as well as a variety of additional programs designed to promote physical and mental health. Employers refer to these programs, often set up to promote healthier lifestyles, as wellness programs. Examples of wellness programs include stress management programs. Benefits professionals usually designate wellness programs as an accommodation and enhancement benefit (Martocchio, 2010). Health Insurance Health insurance covers the costs of a variety of services that promote sound physical and mental health, including physical examinations, diagnostic testing (X-rays), surgery, and hospitalization. Companies can choose from four broad classes of health insurance programs, including fee-for-service plans, managed care plans, point-of-service plans, and consumer-driven health care. Companies may offer additional specialized insurance: Dental insurance benefits may cover routine preventative procedures, like cleanings once every six months and necessary procedures to promote the health of teeth and gums. Vision insurance plans usually cover eye examinations, lenses, frames, and fitting of glasses. Prescription drug plans cover the costs of drugs. These plans apply exclusively to drugs that state or federal laws require be dispensed by licensed pharmacists. Paid Time-Off The second type of discretionary benefits is paid time-off. Paid time-off policies compensate employees when they are not performing their primary work duties. Companies offer most paid time-off as a matter of custom, particularly paid holidays, vacations, and sick leave. In unionized settings, paid time-off provisions are specified within the collective bargaining agreement. The paid time-off practices that are most typically found in unionized settings are jury duty, funeral leave, military leave, and clean-up time, preparation, travel time, rest period, and lunch period. Even though the Government has mandated several types of benefits listed above, clearly the employer provides a great deal of discretionary benefits in order recruit and retain employees as well. References Martocchio, J. J. (2010). Strategic compensation, a human resource management approach. (Sixth Edition ed.). Pearson College Div.