Human Resource Management 7th Edition by Raymond Noe, John Hollenbeck, Barry Gerhart, Patrick Wright

Exercise 5

We have seen that many organizations have become less paternalistic in their employee benefits strategies. Employees now have more responsibility, and sometimes more risk, regarding their benefits choices. One change has been in the area of retirement income plans, where employers have moved toward greater reliance on defined contribution plans. Such plans require employees to understand investing; otherwise, their retirement years may not be so happy. The risk to employees is especially great when defined contribution plans invest a substantial portion of their assets in company stock. One reason companies do this is because they wish to move away from an entitlement mentality and instead link benefits to company performance. However, if the company has financial problems, employees risk losing not only their jobs, but also their retirement money. Another change has been in the area of health care benefits. Employees are being asked to increase the proportion of costs that they pay and also to use data on health care quality to make better choices about health care. Of course, different companies have different benefits strategies. We saw at the beginning of the chapter (and later in the cases of Google and Patagonia) that tech companies, for example, are not in the mode of reducing benefits and/or passing on more costs to employees. Rather, they are looking for ways to make their benefits packages more attractive to help them compete in the labor market for valuable human capital.
QUESTIONS
If you were advising a new company on how to design its health care plan, what would you recommend