Benefits Required by Law

Several forces have made benefits a signficant part of employeecompensation packages. For example, both federal and state lawsrequire employers to pay certain benefits to employees, such ascontributions to Social Security and unemployment insurance. changeConcept Review paragraph to read as follows: State and federal lawsrequire that employers offer specific benefits to their employees,and the costs of these benefits are high. Out of every dollar spenton compensation by U.S. companies, more than 30 cents go tobenefits, and this share has grown over the past few decades.Employers who want to contain their labor costs must look closelyat the cost of their employee benefits. The following case is aboutone such employer, who worries about the high cost of benefits andtries to analyze ways he might be able to lower these costs.

State and federal laws require that employers offer specificbenefits to their employees, and the costs of these benefits arehigh. Out of every dollar spent on compensation by U.S. companies,more than 30 cents go to benefits, and this share has grown overthe past few decades. Employers who want to contain their laborcosts must look closely at the cost of their employee benefits. Thefollowing case is about one such employer, who worries about thehigh cost of benefits and tries to analyze ways he might be able tolower these costs.

Read the case below and answer the questions thatfollow.

Hospital CEO Richard Weber was facing a difficult decisionregarding employee benefits for the 1,200 doctors, nurses, andadministrative staff working in his large healthcare center. Thecosts of employee benefits had continued to grow and now accountedfor a large percentage of the total compensation package at thehospital. Weber tried to review his options.

Benefits were often used to attract potential employees to thehospital. In addition, Weber believed that the tax treatment ofbenefits was more valuable to employees than if he were to offerhigher salaries, and he knew the hospital insurance rates were muchlower than those the employees would be able to find on their own.Finally, state and federal laws required many of the benefits.

He worried that if he changed the benefits package, he wouldhave dissatisfied workers and increase the risk of losing talentedemployees. Weber knew that he could potentially reduce specializedprograms such as the 16 paid hours per month he provided employeesto do volunteer work, but he felt that those programs were valuableand enriched outreach to the surrounding community. The cost ofbenefits just kept growing, and Weber was stymied as to how to keepemployee benefit costs at a manageable level.

1.Which of the following is NOT a legally requiredbenefit that Weber would have to continue to fund?

Unemployment insurance

Worker's compensation

Domestic partner benefits

Social Security

Benefits under the Family and Medical Leave Act (FMLA)

2. By offering 16 paid hours per month forvolunteer work, Weber is providing a way for his hospitalto:

reduce taxes for employees.

reach out to the community.

offset increasing healthcare benefit provisions.

meet FMLA requirements.

extend unemployment privileges.

3.Because the hospital employs primarily a younger,female workforce, offers a safe work environment, and has a verylow turnover, the largest financial challenge for Weber among thelegally required benefits is most likely:

Social Security costs.

domestic partner benefits.

family and medical leave costs.

unemployment insurance benefits.

worker's compensation expenses.

4.Weber could alter, modify, or reduce all of thefollowing optional benefits except:

child care.

benefits for part-time staff.

retirement plans.

holiday pay.

health insurance coverage for dependent children through age26.

5. Looking beyond 2015, when he expected to haveeven greater employee benefit expenses, Weber could take steps toget the full value of the cost of benefits and motivate employeesby:

imposing lifetime limits on coverage when people get sick.

effectively communicating the value of employee benefits to allhospital staff.

ending coverage for older employees with greater healthcareexpenses.

ceasing automatic enrollment and let employees decide whetherthey want health coverage.

limiting coverage of children with preexisting healthconditions.