Costing of employee benefit

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13-1 13-1 Dr. G C Mohanta, BE(Mech), MSc(Engg), MBA, PhD(Mgt) Professor

description

Costing of employee benefit

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

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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.

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13-1513-15(c) 2007 by Prentice Hall

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