Finance is a very important segment in accounting. There are different aspects of accounting and you can study any one segment you like. It is rather very interesting subject since it deals with cash flow, fund flow, investments, return on investments, profits, and losses, and many other important topics.
Finance is very important since the world itself moves on financial aspects. The people running a business has to have an acute knowledge of each and every financial program so as to get the best results at the year endings.
Amongst all this, Employee benefit is one such financial aspect that is important in every business these days. There is a huge number of talented employees working in businesses and thus, looking after their benefits is the job of a company. You might be given an assignment on this since employee benefits are a vital part of any organization. For you to prepare notes on your interesting assignment, here the topic is discussed vividly.
What is employee benefit?
Employee benefits are actually benefits that are being offered to employees apart from the salary that they get. Most common benefits enjoyed by any employee are-medical insurance, life insurance, disability, retirement programs, paid time off benefits and benefits on the fringe.
These benefits are very much valuable as medical insurance costs almost hundreds a month. That is the reason these benefits are to be considered as an important part of the total compensation that you gain. It is for you to ensure that you receive each and every benefit that you deserve.
Types of benefits
In exchange for the service of employees, employee benefits are provided to each and every person working in an organization. You get to know about these benefits as soon as you join a particular organization. Your call letter will mention all important points related to the same. In case there is any problem that you suspect, never step back to clarify it from the HR department.
- Short term employee benefits:
Short-term benefits are described as salaries, wages, and contribution towards social securities, which means an employer’s contribution to an insurance company to pay off medical care of employees working in his company.
Apart from this, there are other short-term benefits like annual leaves that are paid and sharing of profits and bonuses. Non-monetary benefits include medical cares, housing services, car services and certain subsidized or free products. Only current employees who have worked for a year get to enjoy these facilities.
- Post-employment benefits:
You might often hear the word pension if you have your old grandfather at home or your father has retired recently. This is actually a benefit he/she receives even if he is not at work anymore. The other post-employment facilities are gratuity, retirement benefits, life insurance post-employment and medical care post-employment.
- Long-term employee benefits:
If you are an employee in a company for a longer time, you are bound to have long-service leave or sabbatical leave. There are other long-service facilities that one enjoys which can be termed as a jubilee, long-term disability facilities, profit sharing plan, and bonuses and many others.
- Termination facilities:
There are certain situations when these facilities are being provided to either employee or to their wives or children or any other dependants. These are generally settled via payments or via the provision of certain goods and services as well.
Some can be directly provided to employees or to their wives and children or dependents or any other nominees and legal heirs. Whereas others can be provided via trusts and via insurance sectors.
Thus, in short, here we shall explain all benefits. Short term employee benefits are certain facilities apart from termination facilities that fall under twelve months after any ending of the period where any employee renders certain service.
Post-employment benefits are termed as certain facilities that an employee receives while he has stopped working for that company after a certain age.
There are other long-term facilities apart from post-employment and termination which never fall within twelve months as during ending of certain tenure in which an employee gives the certain service.
What are the termination facilities?
These employee benefits have certain facilities that are paid to employees when:
- An organization decides to terminate an employee and his tenure of service before his normal retirement date.
- An employee decides to accept voluntary retirement in exchange for certain benefits, there are termination benefits valued upon him.
Detail discussion of certain facilities
- Medical Insurance:
This type of benefit is made so that it covers almost all costs of a physician or a surgeon’s fees, rooms in hospital and drugs that are prescribed while a certain employee or his family is admitted to the hospital.
As a part of overall package benefits sometimes, dental as well as optical care is also added. This can be used as separated benefits or cannot be covered under medical benefits at all. An employee can cover his/her family under these health benefits.
The employers usually do the payment partly or full depending on terms and conditions in the medical insurance. There are rules where employees too often pay off a certain percentage of the total billing cost. For financial students, it is necessary to understand as to how much is covered under an employee and an employer.
More than fifty per cent of organizations offer medical and health benefits to their full-time employees. Ten percent of organizations offer these benefits to part-time employees. For part-time service employees, dental or optical insurance is not so common. Industries such as manufacturing, educational, health and certain financial organizations offer these benefits. No insurance is provided by hospitality sectors and leisure industries.
Smaller firms tend to have lower benefits than larger firms who promise to give best benefits to large number of employees they have.
- Disability Insurance:
This insurance is used to replace almost all or a certain part of the salary that gets lost when any employee or worker is not being able to perform their said job due to reasons of illness or any accident or injury. There are two types of disability insurances and this insurance follows strict guidelines:
- Short-term disability insurance:
This insurance starts immediately within twenty-four hours or a few weeks as soon as there is an accident or illness or any emergency disability. For example, an employee who accidentally gets hurt while working and is hospitalized due to it will get the full coverage of the policy within a few weeks or within a few hours.
- Long-term disability insurance:
This policy is provided to those employees when there is any long-term injury or permanent accidental damage caused to the individual for whom he/she is unable to perform any task or job. For example, if, there is an employee with injury in spinal system needs to be entitled to longer disability policy and hence, he/she should attain long term benefits until the age of his/her retirement.
In this world, only twenty percent of organizations offer short-term policies and only nineteen percent of them offer long-term policies to workers working full time in their organizations.
Life-insurance- Death is inevitable and our life is in the hands of fate. Thus, to avoid your family from sufferings in terms of finance, life insurance policy is provided to your family or the immediate survivors or your nominees when you are no more. The beneficiaries of this certain policy are given all the amount at once. Generally, an employee who dies uncertainly, his wife and children are given this life-insurance amount.
If your employer sponsors a group term plan, you are liable to get the life insurance coverage. Generally, company-sponsored insurance plans are very standard and all full-time employees in any medium or bigger organizations in this country enjoy this facility. If you plan to buy life insurance plan privately, it becomes a bit expensive. A company decides to plan life insurance policy depending on the number of people who are employed under the organization.
Only twenty per cent of companies have lesser than twenty employees offer this policy benefits. Companies having more than three hundred employees offer this policy universally.
- Retirement policies:
After you retire or stop working after age, you still get to have the benefits, and those funds that are provided to help retired persons with a steady income flow. This is termed in finance as pension, which an employee gets after his/her retirement. There are two categories of retirement plans:
- Defined benefit policy:
This is called pension plan and the amount of benefit is pre-planned depending upon the salary and your years of full-time service in a company. The risk of investment here is borne by the employer himself.
- Defined contribution policies:
These types of policies have full employer as well as their contributions that are often specified in details. Here, benefit amount is added to the returns of investments. Only twenty percent of firms offer this policy.
- Domestic partner policy:
There are certain firms that offer facilities to unmarried domestic partners. One needs to show as proof that he/or she is under domestic partnership policy or has financial interdependence.
You get to attain health insurance, which is for family. There are also certain tax benefits that one usually gets from here.
- Paid time off benefits:
Also termed as PTO, this type of benefit is earned by an employee when they are working full time in any firm. They are:
These are completely separate benefits earned by the employees and almost ninety percent of organizations having full-time employees offer this type of benefits. Certain organizations combine sick leave and vacation into one single mode of account so that an employee can use it as per his/her requirements.
This happens when an employee has never taken any sick leave and wants to go on a vacation with his/her family. The HR department, upon approval from the employer, then combines his/her sick leaves and add it to vacation leaves for the employee to use it.
The most common benefit here enjoyed by the employees is the aid vacation. Almost 70 percent of the firms all over the world offer this type of benefit to their employees who are full-time workers. Almost forty percent of the organizations offer paid sick leaves for the employees working full time.
These are a number of non-cash payment procedures, which are generally planned by the organizations in order to attract and retain the most talented employees working there. These include assistance on tuition, various flexible health and childcare policies which are actually pre-tax accounts, various childcare facilities, and many non-production benefits and bonuses. These bonuses are not added with performances.
Thus, with so much to read and write in employee benefits, it will now become easier for you to complete your assignment. This is actually a very interesting topic where you get to write about certain policies in detail. Not only that, you yourself get to learn about it too and explain it to your peers or family members in detail about certain plans and policies since you will also be an employee in future!
Here are some links to important financial topics and assignments that will help you write projects:
Nancie L Beckett is a Master of Finance degree holder of University of Pennsylvania with an experience of more than six years in the field of finance. She is a wonderful person who is actually less of a mentor and more of a friend to her students. She not only helps them in completing their assignments and projects on time but also helps her students to prepare certain questions and answers from their texts to study during exams. Nancie’s experience in this field has led her to achieve success and prestige in her genre. She is a wonderful persona and a tutor as well.