Week 6 Essay

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Maintaining the costs of benefits for current employees by reducing the benefits given to retirees has its advantages as well as disadvantages. The main advantage is that employees will feel more satisfied when they do not have to pay much in order to get the benefit. For retirees, this means that they are able to get more comprehensive health cover benefits.

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Legal provisions have in the past made it possible for employers to do away with health benefits for employees who are over the age 65. Once they attain this age, the retirees become eligible for Medicare. However, for retirees who are younger than 65, the benefits remain. Creation of two categories of retirees is sometimes necessary although it creates logistical challenges for employers. Maintaining a balance on the needs of the two groups without seeming to be creating double standards can also be very challenging.

Retiree health benefits provided by employers are not generous enough and these days, they are increasingly becoming less available. For reason, employees would not feel as if they are losing out too much by having them replaced with the Medicare plan. For employers, this means a great deal of convenience since they can be able to ease the burden of cost of benefits on younger employee.

The coverage that people over 65 are often looking for from former employers is only meant to supplement the kind of help that they get from Medicare plans. The sense of deprivation is impossible for these senior citizens to ignore although it does not count for much as far as their health is concerned. The only reason why they could complain is if the sense of security that they are taking refuge in is eroded by the plan. However, since the law makes it possible for former employers to voluntarily continue offering health benefits to the retirees who are over age 65, all is not lost.

Reduction of contribution to pensions also has its share of benefits. For one, it provides younger employees with an opportunity to earn higher pay in order to cater for inflation costs. This way, the employees are able to see some changes on annual salary increment. However, it might be to the detriment of employees to avoid contributing to pension schemes since they might not have any source of income once they retire. The action could only be viable if the savings resulting from cessation of cost of benefit payment are enough to invest in one way or the other.

The best way out for both employers and employees is to make the plans flexible such that when economic times are difficult, employees can temporarily be relieved of the burden of contributing to pensions. This measure would result in a win-win situation as long as employers do not introduce discriminatory policies when implementing such a program.

            Rather than eliminate contribution to pension schemes completely, a cost-sharing agreement would be desirable. This is because benefits are an integral component of every employment arrangement entered into between an employer and an employee. If co-pays are increased, there should be checks and balances in order to ensure that health coverage is not dropped altogether even in times of economic recession. The plan would be friendly for both retirees and people who are still actively engagement in employment.

            Reduction in pension contributions should be done relative to any retirement age adjustments that are made at the state level. Synchrony in these two variables would ensure that employees are able to look at the effects of halting contributions to pensions in a whole new way. As long as the costs of benefits are maintained in a solvent manner, employees need not worry about contributions to pensions. This because member of the pension program can come together and implement cost-saving measures that would maintain the solvency of the program as long as members are determined to work towards keeping it that way.

For employees who are lucky to have gotten jobs that guarantee them pension benefits, such as teachers, cost-sharing is a new phenomenon which they would be happy to oppose. In the US, this policy was halted 20 years ago and is today slowly being reintroduced. The main reason for this is that health care costs have been rising since the 1980s. This presents employees as well as employers with a challenge, considering that health care is a priority area for employees as well as retirees.

Charging employees more money in order to cater for their health benefits is better than reducing the amount of money that they contribute toward pension schemes on one condition: that the employer wants to offer long-term satisfaction to employees. The best thing for employees is striking a balance between what they can afford to pay and what the state is willing to pay towards settling claims. Since cost of paying claims has skyrocketed, the most prudent thing for employers to do is to reducing, rather than completely eliminating contributions to pensions

In case contributions to pensions are not reduced and employees are forced to meet the additional costs of paying for them, this would lead to an unprecedented increase in pension coverage and insurance coverage, which according to Tremblay, 2000 would record an 18.5 percent increase in the fiscal year 2011 when this year’s estimates alone are put into consideration.

Reducing contributions to pensions can only work for the benefit of employees in the cases where a later retirement age is put in place. In all fairness, the retirement age changes would only affect new employees. For existing employees who are approaching retirement, slightly increasing the percentage of the salary that goes to pension would be to their own benefits. Currently, most people pay 5 percent of their salaries towards pension programs. This could be increased to 6 percent.

Cost-reduction is a sensitive issue when benefits are the main issue under discussion. Critical decisions should be made wisely through dialogue with employees on whether or not they perceive increased spending on costs of benefits to be beneficial to them. In case, they perceive it that way, it is upon the employer to use implement cost of benefits reduction measures. At the same time, he should enlighten the employees on other available alternatives that are viable and when it would be ideal to use them.

            Today, employees understand that we are in a time of recession. At some point, when they perceive the recession to be over, they will expect the employer to rescind on measures that had been put in place previously, and which were curbing their benefits and compensation.

            Whatever measures the employer takes, the most important thing is their ability to ensure that employees are satisfied without unnecessarily spending more money on costs on costs of benefits (Williams, 1995).The best way to do this is through maintaining a balance between the cost benefits and the net income of employees. For employees with dependants, the challenge of bringing about satisfaction unless long-term benefit plans are put in place by the employer.

The growth in the cost of health benefits over the five years has put employers in a very precarious position. If they do away with these benefits, they risk facing a high employee turnover. Continuation of these costs of benefits is counterproductive for employers. Countering the costs without affecting employee morale is a great challenge. In this case, the best this for employers to do is ensure that wage increase is proportionate to increase in amount of premiums that employees pay towards health insurance schemes.

Recent development in the legal system may also warrant an evaluation of the existing costs of benefits scheme. In this case, the historical practices that relate to how the employer has been handling health insurance plans might be affected, in most cases to the benefit of both employers and employees. (Tremblay, 1998)

Conclusion

Compensation satisfaction covers many dimensions according to Dreher et al, 2006. Satisfaction data gathered by Dreher et al, 2006 reveals that increase in satisfaction in line with introduction of new benefits can be interfered with whenever employee costs are increased. Variation in the amount of money paid towards health insurance schemes by employees, according to Dreher,et al, is the greatest cause of dissatisfaction.

Adherence to compensatory allocation rules by employers is very important if they are to maintain employee satisfaction in a situation where health insurance costs keep fluctuating every now and then.

References

Dreher, G. 2006. Benefit Coverage and Employee Cost: Critical Factors In Explaining Compensation Satisfaction, Personnel Psychology 41(2) p. 237-254.

Tremblay, M. 1998. A Study of the Determinants and of the Impact of Flexibility on Employee Benefit Satisfaction, Human Relations 51(5)p. 667-688.

Tremblay, M.  2000. The Role of Organizational Justice in Pay and Employee Benefit Satisfaction, and its Effects on Work Attitudes, Group & Organization Management. 25, (3) p. 269-290.

Williams, M.1995.Antecedents of Employee Benefit Level Satisfaction: A Test of a Model, Journal of Management 21(6) p. 1097-1128.