Question

What are controlling HR costs and how it can be done ? Define and explain

Explain the ways to control hr costs:

1/ employee health care costs

And 2/ employee pension plan costs

+ give clear explanation and exapmles

Answer 1

Solution:-

Human resources costs associated with operating a business can be significant. From rising healthcare expenses to basic HR administration costs, companies increasingly have to balance budgets to offset funds allotted to attracting and retaining top talent.

You may need to reduce one or many items from your human resources budget, but this doesn't mean your company's productivity or potential has to suffer in the process. Bloomberg's HR Department Benchmarks and Analysis 2017 report indicated that HR costs related to benefits, employment and recruiting, training and development, and compensation account for about two-thirds of a human resource department's total annual budget. But these critical functions may be better managed with a focus on efficiency, and optimizing the return on investment associated with each.

1/ employee health care costs:-

Annual healthcare premiums reached $18,764 in 2017 for average family coverage, according to Kaiser's 2017 Employer Health Benefits survey of employers. Respondents said they paid about 70 percent of that cost. Some of the human resources cost associated with this benefit can be better managed by ensuring employees are enrolled in a plan that suits their needs, or with a high-deductible health plan combined with the option for employees to contribute to a health savings account (HSA).

To contain employee benefit costs, you may want to consider:

• Having employees share some of the expense;
• Whether you can afford to cover dependents, spouses, and domestic partners;
• Offering benefits that make sense for your workforce; and
• Aligning your workforce with a larger entity, which can give you access to more comprehensive and less expensive employee benefits.

And 2/ employee pension plan costs:-

The other area where organizations are looking to control costs is employee pension plans. Corporate pensions have been around since the nineteenth century. But the days when companies could afford to give employees a broad-based pension that provided them a guaranteed retirement income have changed. Pension commitments have become such an enormous burden that companies can no longer afford them. In fact, the corporate pension system has been described as “fundamentally broken.” It’s not just struggling companies that have eliminated employee pension plans. Lots of reasonably sound companies—for instance, NCR, FedEx, Lockheed Martin, and Motorola—no longer provide pensions. Only 42 Fortune 100 companies now offer pension plans to their new hires. Even IBM, which closed its pension plan to new hires in December 2004, told employees that their pension benefits would be frozen. Obviously, the pension issue is one that directly affects HR decisions. On the one hand, organizations want to attract talented, capable employees by offering them desirable benefits such as pensions. But on the other hand, organizations have to balance that with the costs of providing such benefits.

In the best of times, sponsors of defined benefit (DB) plans enjoy what is essentially a free ride in terms of funding their pension plans. That was the case from 1982 through 1999 when strong stock market returns made it virtually cost-free to provide retirement benefits. With the volatility of the economy in the past decade, pension plans again require funding and have experienced similar volatility. DB plan sponsors are asking what their options are to stabilize pension costs and expenses.