employment benefits inherent logic

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Can someone explain, in simple terms anyone can understand, what the inherent logic is behind employment benefits?

For example, why should I have to go though all the paperwork hoopla to get glasses, instead of simply having increased wages so that I can buy what I want with the added income, whether that be glasses of otherwise?

In Canada, benefits are taxed at one's full marginal rate (as if it were income) so there is no tax savings to be had when a company provides glasses as a benefit, as opposed to paying that amount out as income.

In fact, the total infrastructure costs of providing such benefits goes far beyond a paperwork hoopla on the beneficiary's part plus the given payout, because there are insurance companies, HR personal; a whole raft of intermediaries bringing costs to bear directly and indirectly.

Why not just estimate what the whole shebang really costs, get rid of the entire benefits infrastructure, and pay out to the employees the given amounts to do with as they see fit?

Why should I be forced to pay for benefits that a) are a pain in the ass to get because of the paperwork hoopla and/or b) require a large expensive management infrastructure and/or c) I will not need an any case because I take care of my health and do not want kids.

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I can't speak for what goes on in Canada but here in the U.S. most of those benefits aren't considered taxable. We avoid a lot of personal income taxes by getting things as employment benefits and the company benfits on the tax side as well.

There is the question of whether or not you could actually purchase the items at the same cost if the cash were given to you intead of being paid for through insurance though.

Of course, benefits used to be just that - a benefit for working for a given employer. Now many of them are mandated.

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A lot of employers have gone with the cafeteria approach to benefits - you select the benefits you want/need. It became the standard approach in Ontario about 15 - 20 years ago. It's most beneficial where both partners in a marriage work - they can pick the best options from two employers for the family.

I generally suggest people go for plans where they pay their own premiums - the resulting benefit is not taxable (most important on STD/LTD plans where you'll need every dime if it's ever payable).

We've got a modified cafeteria plan where I work now. A basic level is required for a couple of categories, the rest is up to the employee to select.

At the last place I worked, it was not only a cafeteria plan - but the total amount the employer would pay toward benefit premiums was fixed - with the balance you didn't use for premiums added to your income.

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fishin wrote:

I can't speak for what goes on in Canada but here in the U.S. most of those benefits aren't considered taxable. We avoid a lot of personal income taxes by getting things as employment benefits and the company benefits on the tax side as well.

Not in Canada alas, they tax everything to death, and we get almost no tax advantages on anything.....evah.

fishin wrote:

There is the question of whether or not you could actually purchase the items at the same cost if the cash were given to you instead of being paid for through insurance though.

I cannot see why one cannot buy these types of insurances privately; but in any case so what? Why should my employer force me to buy something with what is essentially my own money, and of which I can do without or buy as and if I want?

fishin wrote:

Of course, benefits used to be just that - a benefit for working for a given employer. Now many of them are mandated.

Right, but for what express logic? If they are not at best, any better than getting the wages in hand and most typically have hidden very costly infrastructure expenses? To say that benefits are part of a tradition does not answer the germane query that being: what's the inherent logic behind employment benefits?

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ehBeth wrote:

A lot of employers have gone with the cafeteria approach to benefits - you select the benefits you want/need. It became the standard approach in Ontario about 15 - 20 years ago.

Of the three unions I am involved with, neither the International Brotherhood of Electrical Workers (IBEW), the Hospitals Employee's Union (HEU), or the International Association of Machinists and Aerospace Workers (IAMAW) have this option.

I am not aware of any major union in British Columbia that has the options you speak of, I would expect the same in Ontario but perhaps you can update me if Ontario's major unions deal with things differently.

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Chumly wrote:

fishin wrote:
There is the question of whether or not you could actually purchase the items at the same cost if the cash were given to you instead of being paid for through insurance though.
I cannot see why one cannot buy these types of insurances privately; but in any case so what? Why should my employer force me to buy something with what is essentially my own money, and of which I can do without or buy as and if I want?

The "so what?" is the cost. As an example, (again, speaking of the U.S. since I'm not famaliar enough with Canada's systems) when an employer buys insurance for it's employees the rate is set by the number of employees being covered. An employer with 10 employees will pay (significantly) more for the same policy than an employer with 10,000 employees. What you pay for it individually is crazy.

Whether it would be to your benefit to have the cash instead of the benefit would depend on who your employer is at any given time. If my employer can provide me with insurance at a cost of $500/month and they gave me that as cash it wouldn't do me much good if I can't buy a policy for myself for less than $1,000/month. I'd lose in the long run. The cost/person is based on the total size of the group being covered. The fewer the number the higher the cost.

With my last employer I refused the eye care coverage. The HR people basically begged me to take it but I didn't need it so I refused it. Then the company president called me and explained that if I didn't take it the cost of the policy was $15/month for every other employee. If I did take it it would push them over a certain number of employees in the plan and the cost would drop to $3/month per employee. He offered to pay my cost for it if I'd just sign the papers to accept the plan because of the savings to everyone else.

But, again here in the U.S., you aren't forced to pay for anything. If you don't want it you walk into the HR office and sign the form declining the benefit. Easy enough. Your assumption that the money that the company pays out for it is somehow "essentially" your's is misguided. It isn't your's. It is a benefit of your employment - hence the use of the word.

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Chumly wrote:

To say that benefits are part of a tradition does not answer the germane query that being: what's the inherent logic behind employment benefits?

Do you really need that spelled out for you?

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My experience administering benefits for unionized employees ... oh boy ... that could lead to a lengthy anti-union rant. Which is problematic given my extended family and their union activity.

Let's just say that I don't think much of union leaderships' interest in getting the best options for union members when it comes to negotiation of benefit plans/packages.

Unions are basically big ****-ups when it comes to employee benefit planning.

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ehBeth wrote:

My experience administering benefits for unionized employees ... oh boy ... that could lead to a lengthy anti-union rant. Which is problematic given my extended family and their union activity.

Let's just say that I don't think much of union leaderships' interest in getting the best options for union members when it comes to negotiation of benefit plans/packages.

Unions are basically big ****-ups when it comes to employee benefit planning.

This is my biggest bitch with Unions. They'll happily stand on principle while their own members get screwed over.

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fishin wrote:

Chumly wrote:
fishin wrote:
There is the question of whether or not you could actually purchase the items at the same cost if the cash were given to you instead of being paid for through insurance though.
I cannot see why one cannot buy these types of insurances privately; but in any case so what? Why should my employer force me to buy something with what is essentially my own money, and of which I can do without or buy as and if I want?

The "so what?" is the cost. As an example, (again, speaking of the U.S. since I'm not familiar enough with Canada's systems) when an employer buys insurance for it's employees the rate is set by the number of employees being covered. An employer with 10 employees will pay (significantly) more for the same policy than an employer with 10,000 employees. What you pay for it individually is crazy.

Whether it would be to your benefit to have the cash instead of the benefit would depend on who your employer is at any given time. If my employer can provide me with insurance at a cost of $500/month and they gave me that as cash it wouldn't do me much good if I can't buy a policy for myself for less than $1,000/month. I'd lose in the long run. The cost/person is based on the total size of the group being covered. The fewer the number the higher the cost.

With my last employer I refused the eye care coverage. The HR people basically begged me to take it but I didn't need it so I refused it. Then the company president called me and explained that if I didn't take it the cost of the policy was $15/month for every other employee. If I did take it it would push them over a certain number of employees in the plan and the cost would drop to $3/month per employee. He offered to pay my cost for it if I'd just sign the papers to accept the plan because of the savings to everyone else.

But, again here in the U.S., you aren't forced to pay for anything. If you don't want it you walk into the HR office and sign the form declining the benefit. Easy enough. Your assumption that the money that the company pays out for it is somehow "essentially" your's is misguided. It isn't your's. It is a benefit of your employment - hence the use of the word.

Yes but why do you need the employer to interface on your behalf? Surely the insurance company can sell to a group of employees directly without employer interventionism and infrastructure costs? In any case employees of companies do not have trouble getting home insurance individually and I would assume are packaged as group risk. I don't see why that business model could not be transposed to employment benefits. With my three unions I am forged to pay for everything - often enough three times - for services I don't want.

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fishin wrote:

Chumly wrote:
To say that benefits are part of a tradition does not answer the germane query that being: what's the inherent logic behind employment benefits?

Do you really need that spelled out for you?

I think yes! Particularly within the context of my posted experience, but also as an argument of logic.....in its essence.

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Chumly wrote:

With my three unions I am forged to pay for everything - often enough three times - for services I don't want.

Don't fuss about the employer or the insurance industry - talk to your union reps about how they're ******* you over - or get used to being in a bent-over position.

(this is one of the only subjects that makes me swear, really swear, IRL)

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Union versus non-union is somewhat outside the scope of this thread, unless of course you know of the union's logic for the type of all encompassing, in for a penny in for a pound rationale when it comes to benefits?

I do think it's safe to say that in Canada a very large percent of the workforce is unionized, and that the major unions do follow this one for all - all for one benefits approach.

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Chumly wrote:

I do think it's safe to say that in Canada a very large percent of the workforce is unionized

how do you define large percentage?

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a bit behind on the stats, but an interesting piece of work nonetheless

http://findarticles.com/p/articles/mi_qa3711/is_199802/ai_n8788362/pg_3

Changing employment relations: what can unions do?

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Chumly wrote:

fishin wrote:
Chumly wrote:
To say that benefits are part of a tradition does not answer the germane query that being: what's the inherent logic behind employment benefits?

Do you really need that spelled out for you?
I think yes! Particularly within the context of my posted experience, but also as an argument of logic.....in its essence.

At one point in time (you could go back to the 1930s or so...) most people didn't have insurance - health or otherwise. If something happened you paid for it out of your own pocket. In North America there were no government health care systems either. You either paid it yourself or found some private charity to do so. And, of course, there was usually only one family member that was actually working so if they couldn't work the family went under...

These were the sorts of things those unions fought for back in their heyday. Initally they stared with things like a reasonable length to the work day, clean facilities, lunch breaks, etc... Then they moved on to the typical benefits package that most people have today.

Post-WWII when the economy picked up and employers were having a difficult time retaining employees they increased benefits packages to retain their better employees. In many cases employers offered the benefits as an incentive to their employees so that they wouldn't unionize. In the end pretty much every employer ended up offering benefits of some sort. (The bitch against unions here is that they have held up any changes to many of these even though it would benefit their own members to do so.)

As an element of logic it's pretty simple - you go looking for a job and you look at employer A, B and C. All 3 are interested in hiring you and they all offer you $15/hr to work for them with identical working conditions.

Employer A offers no benefits.

Employer B offers you medical, dental and vision insurance for you.

Employer C offers you medical, dental and vision insurance for you and any family members as well and short and long term disability insurance, reduced rate loans on home mortages and reimbursement for any college classes you take related to your job.

Which one would the average person go with?

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http://www.hrsdc.gc.ca/en/lp/wid/union_membership.shtml

gotta love those dicks on sticks

not

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Chumly wrote:

Yes but why do you need the employer to interface on your behalf? Surely the insurance company can sell to a group of employees directly without employer interventionism and infrastructure costs? In any case employees of companies do not have trouble getting home insurance individually and I would assume are packaged as group risk. I don't see why that business model could not be transposed to employment benefits. With my three unions I am forged to pay for everything - often enough three times - for services I don't want.

The employer being in the middle is going to result in lower cost for the policy. Go out and price any individual policy and then ask for the same coverage in a group of 1,000 people.

The insurance company is going to offer the employer a lower rate because the employer is going to take care of all that silly paperwork you complained about for them. The employer is also insuring a group of people - some of whom will never use the benefit so teh insurance company is getting paid for that employee and averaging thier cost across the entire group.

Any other group could do the same sort of thing - employers are just a common source since it is a common place for people to group. They all show up for work at the same place... Your unions probably offer similar benefits using the union membership as the group.

Home owner's policies aren't generally sold as group policies. (they may be sold that way on the secondary insurance market but that's between insurance companies and you can't get there...) You'd find that your home insurance would cost would drop drastically if you lived in a large building and everyone in the building got a common policy. Compare the cost of a policy on a single family hiome to the cost of a policy of a 4-family house. The cost won't go up by a factor of 4.

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ehBeth wrote:

Chumly wrote:
I do think it's safe to say that in Canada a very large percent of the workforce is unionized

how do you define large percentage?

Quote:

Union membership as a percentage of non-agricultural paid employment) is 30.3% for 2007

http://www.hrsdc.gc.ca/en/lp/wid/union_membership.shtml

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fishin wrote:

Chumly wrote:
Yes but why do you need the employer to interface on your behalf? Surely the insurance company can sell to a group of employees directly without employer interventionism and infrastructure costs? In any case employees of companies do not have trouble getting home insurance individually and I would assume are packaged as group risk. I don't see why that business model could not be transposed to employment benefits. With my three unions I am forged to pay for everything - often enough three times - for services I don't want.

The employer being in the middle is going to result in lower cost for the policy. Go out and price any individual policy and then ask for the same coverage in a group of 1,000 people.

The insurance company is going to offer the employer a lower rate because the employer is going to take care of all that silly paperwork you complained about for them. The employer is also insuring a group of people - some of whom will never use the benefit so teh insurance company is getting paid for that employee and averaging thier cost across the entire group.

Any other group could do the same sort of thing - employers are just a common source since it is a common place for people to group. They all show up for work at the same place... Your unions probably offer similar benefits using the union membership as the group.

Home owner's policies aren't generally sold as group policies. (they may be sold that way on the secondary insurance market but that's between insurance companies and you can't get there...) You'd find that your home insurance would cost would drop drastically if you lived in a large building and everyone in the building got a common policy. Compare the cost of a policy on a single family home to the cost of a policy of a 4-family house. The cost won't go up by a factor of 4.

If we assume you are correct here then I suppose this then begs the question as to why people in single family dwellings don't band together on the same street (for example) to get a discount group rate.

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