Costing of employee benefit
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Transcript of Costing of employee benefit
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Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt)
Professor
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They are non-wage/non-salary facilities and services provided to employees
Benefits are getting more expensive year after year◦ 24.7% of pay-bill costs in 1959 were made up of
benefits◦ Today 41.3% of pay-bill costs are made up of benefits
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Data required for costing health insurance benefits:
Premium rates for each type of enrollment- Single- Husband/wife- Parent/child - Family Number of members enrolled in each category Premium rates for each category Total cost of health insurance = (Number of employees in each category of
enrollment) X (Annual cost per category)
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Assume 52 employees in organisation
48 full-time and 4 part-time Organisation to identify whether part-time employees eligible for benefits
Assume organisation pay full cost of insurance benefits for all 52 employees
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Type of Enrollment
Number of Employees
Annual Cost/ Employee ($)
Total Cost ($)
Single 12 4,200 50,400
Parent/Child 6 6,144 36,864
Husband/ Wife 10 9,180 91,800
Family 24 10,728 257,472 Total 52 436,536
Total cost of medical insurance for organisation is $436,536
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If employee requires to contribute 10% of premiums for dependent coverage
Employee contribution can be calculated using information in previous slide
Organisation’s cost for medical insurance = Total Cost – Total Employee Contribution
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Type of Enrollment
Annual Cost/
Employee ($)
Minus Single
Portion of Prem. ($)
Cost of Dep.
Coverage ($)
10% Contribution ($)
Number of
Employees
Total employeeContribu
tion($)Parent/Child 6,144 4,200 1,944 194 6 1,164
Husband/ Wife
9,180 4,200 4,980 498 10 4,980
Family 10,728 4,200 6,528 653 24 15,672
Total employee
contribution
21,816
Organisation’s cost for medical insurance = $436,536 - $21,816 = $414,720
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Cost of dental insurance can be calculated based on:
Number of employees in each category of enrollment
Premium rate for each category Assume dental insurance is provided for all 52 employees and their families
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Type of Enrollment
Number of Employees
Annual Cost/ Employee ($)
Total Cost ($)
One person 12 463 5,556Two persons 16 921
14,736
Three persons 24 1,314 31,536Total 52 51,828
Organisation’s cost for 52 employees are $51,828
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Dollar cap limits organisation’s expenditures Actual cost will be based on dollar cap If cap applies for each employee
individually, cap would not affect costs for 12 employees
as cost of coverage less than $700 cap Cap would affect costs for 40 employees
who have two or three persons’ coverage
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Type of Enrollment
Number of Employees
Annual Cost/ Employee ($)
Total Cost ($)
One person 12 463 5,556Two persons 16 700 (921) 11,200
Three persons
24 700 (1,314) 16,800
Total 52 33,556
Organisation’s cost is $33,556
13-1213-12McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
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13-1413-14McGraw-Hill/Irwin Copyright © 2009 by The McGraw-Hill Companies, Inc. All Rights Reserved.
13-1513-15(c) 2007 by Prentice Hall
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13-1613-16(c) 2007 by Prentice Hall
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