Management Consulting/Humen Resource Management


Dear Sir, please help me to solve the below Assignment questions.

1.   "Human Resource Planning is the continuous and critical  process for an organization" - Comment.
2.   Construct a well-defined Recruitment policy for an Hotel Industry, for all levels.   
3.   a) "360 degree Performance Appraisal is essential for all levels of management people". Yes or
No - Substantiate your Answer.  
b) "Placement Policy of an organization maintains cream of the Human Resource". - State the implications.
4.   a) "Training to the Human Resource leads to Development of an organization". - Comment this statement.
b) "Fringe benefits are the real boosters for the Human Resource working in an organization". - Give your view with suitable example.


I  will send  the balance  asap.

3. a) "360 degree Performance Appraisal is essential for all levels of management people". Yes or  No - Substantiate your Answer.

360-degree feedback is an evaluation method that incorporates feedback from the worker, his/her peers, superiors, subordinates, and customers. Results of these confidential surveys are tabulated and shared with the worker, usually by a manager. Interpretation of the results, trends and themes are discussed as part of the feedback. The primary reason to use this full circle of confidential reviews is to provide the worker with information about his/her performance from multiple perspectives. From this feedback, the worker is able to set goals for self-development which will advance their career and benefit the organization. With 360-degree feedback, the worker is central to the evaluation process and the ultimate goal is to improve individual performance within the organization. Under ideal circumstances, 360-degree feedback is used as an assessment for personal development rather than evaluation (Tornow, W., 1998). Unfortunately, not all circumstances are ideal.

Factors Linked to Success
Organizations who experience success with the 360-degree feedback methods have many environmental attributes present. Some of these are:
•   Organizational climate fosters individual growth
•   Criticisms are seen as opportunities for improvement  
•   Proper framing of feedback method by management
•   Assurance that feedback will be kept confidential
•   Development of feedback tool based on organizational goals and values
•   Feedback tool includes area for comments
•   Brief workers, evaluators and supervisors about purpose, uses of data and methods of survey prior to distribution of tool
•   Train workers in appropriate methods to give and receive feedback
•   Support feedback with back-up services or customized coaching

If performance appraisals are done in the correct manner, they can provide us with a series of valuable results. However, done incorrectly, the process of evaluating employee performance can actually lead to lower levels of job satisfaction and productivity. In this section, let’s discuss three major reasons why organizations complete performance evaluations—communicating, decision making, and motivating.
The first major reason for performance appraisal is to provide an opportunity for formal communication between management and the employees concerning how the organization believes each employee is performing. All of us know intuitively that successful communi¬cation requires two-way interaction between people. “Organizations can prevent or rem¬edy the majority of performance problems by ensuring that two-way conversation occurs between the manager and the employee, resulting in a complete understanding of what is required, when it is required and how the employee’s contribution measures up.” 8
Communication always requires that employees have the opportunity and ability to provide feedback to their bosses in order to make sure that the communication is under¬stood. So, in performance appraisals the communication process requires that we as man¬agers communicate with the employees to provide them information about how we believe they’re doing in their job, but the process also requires that we provide the opportunity for the employees to speak to us concerning factors that inhibit their ability to successfully per¬form for the organization.
Factors in a job that management may not know about can include many things, including lack of training, poorly maintained equipment, lack of tools necessary to per¬form, conflict within work groups, and many other things that management may not see on a daily basis. If the communication component of the performance appraisal process does not allow for this two-way communication, managers may not know of the obsta-cles that the employees have to overcome. The only way that we can resolve problems is to know about them. So, as managers, we need to communicate with our employees to find out when issues within the work environment cause loss of productivity so we can fix them. Thus, two-way communication is a critical component of correcting problems through the performance appraisal process.
Decision Making (Evaluating)
The second major purpose of performance appraisals is to allow management to make decisions about employees within the organization. We need to make decisions based on information, the information we get from our communication. Accurate information is necessary for management decision making and is an absolutely critical component to allow the manager to improve organizational productivity.9 We use information from annual per¬formance appraisals to make evaluative decisions concerning our workforce including pay raises, promotions, demotions, training and development, and termination. When we have valid and reliable information concerning each individual within our division or depart¬ment, this gives us the ability to make decisions that can enhance productivity for the firm.

If, for instance, through the process of coaching (the third step of the performance appraisal process) we find that several machine operators are having trouble keeping their equipment in working order, this piece of information would quite likely lead to a needs assessment to determine whether or not maintenance training is necessary for our group of operators. Without our rigorous evaluation process, we might not learn of this common problem as early, and as a result could do some significant dam¬age to very expensive equipment. This and similar types of information frequently come to the forefront as we go through the performance appraisal process. Decision making based on good communication is a very large part of why we take the time to do annual perfor¬mance appraisals.
Motivating (Developing)
The third major purpose for performance appraisal is to provide motivation to our employees to improve the way they work individually for developmental purposes, which in turn will improve organizational productivity overall.10 What is motivation, and are per-formance appraisals normally motivational? Well, from a business perspective, motivation can be defined as the willingness to achieve organizational objectives. We want to create this willingness to achieve the organization’s objectives, which in turn will increase organiza¬tional productivity.
Our evaluative decisions should lead to development of employees. Returning to the machine operators having trouble keeping their equipment in working order, mak-ing the decision to train the employees leads to their development through improving their performance, as well as better utilizing the resources to improve organizational performance.
Evaluating and Motivating (Development)
An effective performance appraisal process has two parts (evaluating and motivating), and it does both parts well. Evaluating is about assessing past performance, and motivating is about developing employees to improve their future performance. But, are both parts done well? Have you ever been in a position of being evaluated and debriefed as an employee? Was the process motivational? Probably not. Think about the appraisal process and how it was carried out. Here we discuss problems with evaluation and how to overcome them, explain how to motivate, and suggest separating evaluation and motivation.
Problems with evaluation. A common problem in appraisals is overpowering employ¬ees during an evaluation debrief with large amounts of negative information that they have not heard during coaching. This tends to cause the employees to “turn off,” or stop listen¬ing to their managers as they explain what is wrong. Employees will just “raise their shields” to ward off all of the negative information. This is a natural human characteristic. We are naturally suspicious of negative information for a variety of psychological reasons (defense mechanisms), so when employees are presented with a large amount of negative informa¬tion, they tend to discount or even disbelieve it. They may consider the process unfair or one-sided and not an accurate measure of their performance, and as a result the evaluation may be useless as a motivator.
Avoiding problems with evaluation. To help overcome such problems with evaluation, an effective manager who is a good coach will generally never identify a weakness that the employee has not previously been made aware of during the formal appraisal interview— there are no surprises. The evaluative part of the appraisal should only be a review of what the employee already knows and should be willing to hear. However, avoiding surprises is not enough.
The appraisal debrief must be a well-rounded look at individual employees; it should identify both positive and negative factors in the employees’ behaviors and results within their job (and remember that the communication needs to be two-way). As managers, we want to tell employees what they are doing right, but also where they have room for improvement. This more balanced approach to the debriefing process will minimize the potential that the employees will raise those shields and avoid listening.
Motivating development. The important part of development is the need for managers to provide motivational opportunities for employees to improve their performance over time. In other words, we need to tell them how to fix the problem. We need to provide them with tools, training, or other methods that will allow them to improve to the point where their behavior is sufficient, and we then must continually strive to get them to perform at an above-average level and ultimately to be superior through ongoing coaching between formal reviews.
If we provide employees with tools to allow them to improve over time, we’re focus¬ing not on the negative past results but on the positive future potential results.12 If they are given an honest opportunity to fix something that they know is a problem and are given the necessary tools or training, most will take advantage of that opportunity. So performance appraisals can be motivational if they are properly used and debriefed.
Separating evaluation and development. To improve both parts of the perfor¬mance appraisal, we suggest splitting the debriefing into two separate interviews. The first meeting is to evaluate the employees’ past performance, pointing out strengths and areas for improvement; the employees are asked to think about how they can improve their per¬formance. At the second meeting, manager and employee jointly come up with a develop¬mental plan that should lead to increased performance that will result in a higher future evaluative rating during the next formal appraisal.

Performance appraisal is important for employees at all levels throughout the organization. The parameters, the characteristics and the standards for evaluation may be different, but the fundamentals of performance appraisal are the same. But as the level of the employees’ increases, performance appraisal is more effectively used as the tools of managing performance.
Performance appraisal of Managers:

Appraising the performance of managers is very important, but at the same time, it is one of the most difficult tasks in the organization. It is difficult because most of the managerial work cannot be quantified i.e. it is qualitative in nature like leading his/her team, guiding, motivating, planning etc.

Therefore, the two things to be noted and evaluated for the purpose of appraisals are:
•   Performance in accomplishing goals, and

•   Performance as managers
Performance in accomplishing goals

Managers are responsible for the performance of their teams as a whole. Performance in accomplishing goals would mean to look at the completion or achievement of the goals set for a team of employees which is being assigned to or working under a particular manager. The best measuring criteria for a manager are hi goals, his plans of course of action to achieve them and the extent of achievement of the goals.

Performance as managers

The responsibilities of managers include a series of activities which are concerned with planning, organizing, directing, leading, motivating and controlling. Managers can be rated on the above parameters or characteristics

Criteria for measuring performance at different levels:

The criteria for measuring performance changes as the levels of the employees and their roles and responsibilities change.

A few examples for each level are described below:

For top level management
•   Degree of organizational growth and expansion

•   Extent of achievement of organizational goals

•   Contribution towards the society

•   Profitability and return on capital employed
For middle level managers
•   Performance of the departments or teams

•   Co-ordination with other departments

•   Optimal use of resources

•   Costs Vs. revenues for a given period of time

•   The communication with superiors and subordinates
For front line supervisors
•   Quantity of actual output against the targets

•   Quality of output against the targets

•   Number of accidents in a given period

•   Rate of employee absenteeism

The comprehensive performance appraisal system, 360-degree feedback, provides employees with feedback from people all around them in the organizational hierarchy: supervisors, co-workers and subordinates all contribute their input on the employee's performance and behavior. A number of distinct benefits can be realized from this type of appraisal, and this technique has been gaining widespread popularity among small businesses.
Perspective and Impact
By using a wide range of perspectives, 360-degree feedback allows employees to gain a more thorough understanding of their impact on people they interact with every day. Individuals tend to judge others based on their own experiences and expectations, which can skew results. Supervisors, for example, may judge employees based on their output, while co-workers judge others based on their pleasantness, and subordinates judge supervisors based on their fairness. Combining perceptions from all of these viewpoints helps provide a more complete analysis. Multiple perspectives also lend credibility to the results of 360-degree feedback, making appraisal results more meaningful to the one being reviewed and increasing the likelihood that it will result in real behavioral change.
Relationships and Trust
Traditional review systems can damage superior-subordinate relationships through a number of factors, including superiors basing their appraisals on recent performance while subordinates base their expectations on the entire year. Unlike these traditional appraisals, 360-degree feedback fosters an environment of teamwork and trust. Employees work together, committing themselves to total honesty and helping each other gain an understanding of their performance and actions. This experience, especially when appraisal results are positive, can build trust among employees to foster high-performance teams and effective organizations.
Executive Appraisal
The 360-degree feedback is ideal for conducting appraisals for top-level executives. Executives have traditionally found it difficult to obtain genuine feedback on their performance, often assuming that the company's success or failure is a reliable indicator of their personal effectiveness. While this is true to a certain extent, much can be gained by allowing lower-level managers and employees to provide feedback without the fear of retribution. Reviews can be conducted openly or anonymously. With executive appraisals, however, conducting an anonymous review can elicit the most honest, genuine responses.
Job Satisfaction
In addition to offering managers a closer look at their own performance by reading their appraisals, subordinates can derive added job satisfaction simply by assessing their supervisors. Asking a subordinate to rate a supervisor proves that management cares about employees& opinions and satisfaction. Watching a positive change occur in a manager&s behavior due to the results of 360-degree feedback makes employees feel they are valued and have the power to effect positive change in their workplace. This can help promote long-term employee loyalty.

b) "Placement Policy of an organization maintains cream of the Human Resource". - State the implications.


A SOUND  PLACEMENT    POLICY process involves
-job analysis,
-written tests,
-personal interviews,
-medical examination,
-final selection, etc.
It is conducted by different types of experts. It involves a lot of time, energy and money (cost). Even then most organisations use a scientific selection policy to select their employees. This is because of its various advantages. Its main advantage is that it avoids the "Tragedy of Misfits" and it selects the "Right man for the Right Job." The employees who are selected through this policy are the greatest assets of the organisation. They have an unlimited potential. They help the organisation to achieve its objective easily, quickly and economically. The success of the organisation depends on them.

the PLACEMENT  policy is given importance due to these reasons:-
1.   Right job for the Right Person : Scientific selection policy helps to find the right man for the right job. It also helps to find the right job for the right person.

2.   Reduces Labour Absenteeism and Turnover : Labour absenteeism refers to the employees remaining absent from regular duty (work). Labour turnover refers to the employees leaving the company. Scientific selection policy helps to reduce both labour absenteeism and labour turnover. This is because it helps to select the right candidates for the right jobs. These candidates get job satisfaction, and they have a high morale. So they will not remain absent, and they will not leave the company.

3.   Reduces wastages, damages and accidents : The scientific selection policy results in the selection of qualified and interested employees. These employees will be very careful while handling machines and materials. This will reduce wastage, damages and accidents.

4.   Reduces Training and Supervision Costs : The scientific selection policy results in the selection of qualified and interested employees. These employees require less training and supervision. This will reduce the training and supervision cost.

5.   Improves Goodwill of the Company : Scientific selection policy results in the selection of interested employees. These employees will maintain very good relations with the shareholders, customers, public etc. This will improve the goodwill of the company.

6.   High Morale : The employees who are selected through scientific selection policy do get job satisfaction. This will increase their morale. High morale brings many benefits to the company.

7.   High Efficiency and Productivity : The employees selected through this policy will perform their jobs very efficiently. This will increase the productivity & profitability of the organisation.


Motivates  People with Relatedness Needs
• Show respect
• Delegate – give responsibility
• Give recognition
• Communicate
• Involve people in decision-making
• Encourage ideas
• Praise people
• Get to know people
• Team building days and office away days
• Celebrate success

Motivates  People with Growth Needs
• Offer support to complete new tasks
• Give staff and employees a challenge
• Work should be made interesting
• Encourage people to think for themselves
• Keep people informed
• Ask people what motivates them
• Stretch people with new work
• Offer training where possible

4. a) "Training to the Human Resource leads to Development of an organization". - Comment this statement.
Training and Development
Function of Training
The singular function of training is to produce change. It is the upgrading of a person’s skill or the addition of a new skill, which in turn can bring about the desired change an agency is seeking. It is important to understand that training in and of itself cannot motivate a work force. However, it is an integral part of what is needed to accomplish the long-term goals of the agency.
Value of Training
Often supervisors ask, "Why should I provide training to my staff?" There are many reasons agencies provide training to their employees:
•   to foster growth and development
•   to provide opportunities for employees to accept greater challenges
•   to aid employees in contributing to the achievement of department goals and the agency’s mission and vision
•   to build employee self-confidence and commitment
•   to produce a measurable change in performance
•   to bring about the desired changes that can solve a variety of problems
Benefits of Training
Providing training to an employee benefits both the employer and employee by:
•   improving an employee’s performance
•   developing the group and team skills needed to achieve organizational goals
•   giving employees the needed skills and knowledge to complete assigned jobs, duties and tasks
•   motivating employees to achieve higher standards
•   increasing overall efficiency
•   improving customer service, which leads to customer satisfaction
•   preparing employees for promotional opportunities
•   decreasing employee turnover, which reduces down time
•   enhancing employee morale, motivation, and creativity
•   enabling managers to reach unit goals and objectives
giving employees the tools needed to analyze interpersonal and situational factors that create obstacles to achieving high performance


1.T & D Broadens  the participants'  interests  /  awareness.

2.  T & D  broadens  the  participants' business  perspectives.

3.T & D  Exposes the  participants  to new avenues  of  practices  thoughts.

4.T & D  Prepares the  participants  for  greater  responsibility.

5.T & D Permits the  participants  to  greater interaction  internal/external channels.

6.T & D Helps  to  prepare participants  for  promotions  within  the  organization.

7.T & D Helps  to  prepare the  participants    for  additional  responsibilities.

8.T & D Helps to  provide  the  participants   with modern  practices/ techniques.

9. T & D Helps  the  participants     to  share  ideas concepts  with  others.

10.T & D  Helps  the  participants    to  accept / manage  new technologies.

11.T & D Helps  the  participants    to  accept / manage  new  processes.

12.T & D Helps  the  participants    to  accepts / manage  new  culture.

13.T & D Helps  the  participants    to  accepts / manage  new  OD programs.

etc  etc.

How Training Benefits the Organization

•   Leads to improved profitability and/or more positive attitude towards profit orientation
•   Improves job knowledge and skills at all levels in the organisation
•   Improves workforce morale
•   Helps people and organisational alignment
•   Enhances corporate image
•   Fosters authenticity, openness and trust
•   Improves boss-subordinate relationships
•   Aids Organisational development
•   Learns from the trainee
•   Helps prepare guidelines for work
•   Aids implementation of organisational policies
•   Helps predict future needs
•   Enhances decision making and problem solving
•   Enhances “promotion” probability
•   Aids replicating “success” factors
•   Enhances productivity
•   Optimizes resources
•   Enhances “learning orientation”
•   Improves labour-management relations
•   Enhances internal expertise / reduces dependence on consultants
•   Helps transition from Q1 to Q2
•   Helps conflict management
•   Enhances communication
•   Helps “change management”

b) "Fringe benefits are the real boosters for the Human Resource working in an organization". - Give your view with suitable example.

•   Job satisfaction depends on many factors, such as:
•   Nature of rewards and benefits offered to the employee
•   The corporate culture and the individual’s fit with such culture
•   Opportunities for the employee to utilize talents and abilities and realize potential
•   Training and development opportunities available
•   Company recognizing the candidate’s abilities and achievements
•   Quality of leadership of the company and the success enjoyed by the company
•   The leadership style and temperament of the employee’s immediate supervisor
•   Job design and other working conditions that cause or reduce stress and fatigue
Employer advantages
• Boost employee's morale and pride in the company.
• Helps attract and retain better qualified employees.
• Provides high risk coverage at low costs easing the company's financial burden.
• Improves efficiency and productivity as employees are assured of security for themselves and their families.
• Premiums are tax deductible as corporation expense, which means savings with quality coverage.
Employee advantages
• Provide tax benefit to the employees.
• Peace of mind leading to better productivity as employees are assured of provision for themselves and families in any mishap.
• Employees with personal life insurance enjoy additional protection.
• Confidence in company's employee benefit schemes boost staff morale and pride in company.

A fringe benefit is a benefit provided to you or an associate (for example, your spouse or children) through your employment. You can be a current, former or future employee. Benefits can be provided by:
n your employer
n an associate of your employern a third party under an arrangement with your employer. The term benefit includes any right (including any property right), privilege, service or facility.

A benefit could be:
-the use of something, for example, a car, house or equipment
-ownership of something, for example, items of clothingn enjoyment of a privilege or facility, for example, staying at a holiday home.For example, you could receive a benefit when your employer gives you:
-a work car for private purposes
-a cheap loan
-free private health insurancen home cleaning services.
You could also receive a benefit if you enter into a salary sacrifice arrangement.

Some work-related benefits are exempt from The following work-related benefits are not considered to be fringe benefits.
A mobile phone or car phone used mainly for your employment.
Protective clothing required for your employment.
A briefcase.
A calculator.
A tool of trade.
An electronic diary, a personal digital assistant (PDA), or similar item.
A notebook, laptop or similar portable computer (limited to one a year).
A portable printer designed specifically for use with a notebook computer, a laptop computer or a similar portable computer.
1.When  the  bonus  is   added  to  the  annual  income,
if  the  total  crosses   the  threshold  level, the  amount  above
the  threshold  is  taxed.
2.When  the  fringe  benefits   is   added  to  the  annual  income,
if  the  total  crosses   the  threshold  level, the  amount  above
the  threshold  is  taxed.
[in  most  cases  of  fringe  benefits, the  employers  pay the  fringe benefit tax.]

FRINGE  Benefits

401(k) plans
403(b) plans
457 plans
Actuarial - PBGC reform
Actuarial - aging workforce
Actuarial - funding of pensions  
Age discrimination, incl. ADEA
Cafeteria plans (125, flexible spending
Death benefits, incl. life insurance
Dependent care
Disability plans
Distributions - QDROs
Distributions - phased retirement
Distributions - req. minimums
Distributions - rollovers
Domestic partner, same-sex benefits
ERISA preemption of state law
Educational assistance
Employee assistance plans (EAPs)
Executive benefits
Family and medical leave, incl. FMLA
Fiduciary duties of trustees, directors, others
Flexible work time
Fringe benefits - transit, discounts, other
Government plans - federal
Government plans - state and local - investments of
Health plan admin - COBRA
Health plan admin - HIPAA
Health plan costs - disease management
Health plan costs - healthcare delivery
Health plan costs - managed care
Health plan costs - prescription drugs
Health plan costs - preventive care
Health plans - consumer-driven
Health plans - design
Health plans - fraud
Health plans - info for employees
Health plans - mandated benefits
Health plans - policy
Health plans - retiree coverage
Health reimbursement accounts (HRAs)
Health savings accounts (HSAs)
International, expatriate issues
Leased, contract, contingent workers
Long-term care
Medical Savings Accounts (MSAs)
Medicare and Medicaid
Military - benefits for, incl. USERRA
Multiemployer plans
Multiple Employer Welfare Arrangements (MEWAs)
Reporting requirements (to gov't agencies)
Ret plan investments - costs
Ret plan investments - self-directed
Ret plan investments - social
Ret plans - admin
Ret plans - amendments required, incl. EGTRRA
Ret plans - audits by gov't agencies
Ret plans - design
Ret plans - info for employees
Ret plans - policy
SIMPLE 401(k), SIMPLE IRA plans
Severance pay
Social Security - benefits, incl. coverage
Social Security - integration
Social Security - reform
Stock options
Stock plans - employee stock purchase (423)
Voluntary benefits


Short-term Employee Benefits
Short-term employee benefits include items such as:
(a) wages, salaries and social security contributions;
(b) short-term compensated absences (such as paid annual
leave) where the absences are expected to occur within twelve
months after the end of the period in which the employees
render the related employee service;
(c) profit-sharing and bonuses payable within twelve months after
the end of the period in which the employees render the related
service; and
(d) non-monetary benefits (such as medical care, housing, cars and
free or subsidised goods or services) for current employees.

Accounting for short-term employee benefits is generally straightforward
because no actuarial assumptions are required to measure the
obligation or the cost and there is no possibility of any actuarial gain or
loss. Moreover, short-term employee benefit obligations are measured on
an undiscounted basis.

Post-employment Benefits: Defined Contribution
Plans and Defined Benefit Plans
Post-employment benefits include:
(a) retirement benefits, e.g., gratuity and pension; and
(b) other benefits, e.g., post-employment life insurance and postemployment
medical care.
Arrangements whereby an enterprise provides post-employment benefits
are post-employment benefit plans. An enterprise applies this Standard to
all such arrangements whether or not they involve the establishment of a
separate entity to receive contributions and to pay benefits.

Post-employment benefit plans are classified as either defined
contribution plans or defined benefit plans, depending on the economic
substance of the plan as derived from its principal terms and conditions.
Under defined contribution plans:
(a) the enterprise’s obligation is limited to the amount that it agrees
to contribute to the fund. Thus, the amount of the
post- employment benefits received by the employee is
determined by the amount of contributions paid by an enterprise
(and also by the employee) to a post-employment benefit plan
or to an insurance  company, together with investment returns arising from the

(b) in consequence, actuarial risk (that benefits will be less than
expected) and investment risk (that assets invested will be
insufficient to meet expected benefits) fall on the employee.

Examples of cases where an enterprise’s obligation is not limited to
the amount that it agrees to contribute to the fund are when the enterprise
has an obligation through:
(a) a plan benefit formula that is not linked solely to the amount of
contributions; or
(b) a guarantee, either indirectly through a plan or directly, of a
specified return on contributions; or
(c) informal practices that give rise to an obligation, for example, an
obligation may arise where an enterprise has a history of
increasing benefits for former employees to keep pace with
inflation even where there is no legal obligation to do so.

Under defined benefit plans:
(a) the enterprise’s obligation is to provide the agreed benefits to
current and former employees; and
(b) actuarial risk (that benefits will cost more than expected) and
investment risk fall, in substance, on the enterprise. If actuarial or
investment experience are worse than expected, the enterprise’s
obligation may be increased.

Insured Benefits

An enterprise may pay insurance premiums to fund a postemployment
benefit plan. The enterprise should treat such a plan as a
defined contribution plan unless the enterprise will have (either directly,
or indirectly through the plan) an obligation to either:
(a) pay the employee benefits directly when they fall due; or
(b) pay further amounts if the insurer does not pay all future
employee benefits relating to employee service in the current and
prior periods.
If the enterprise retains such an obligation, the enterprise should treat the
plan as a defined benefit plan.

The benefits insured by an insurance contract need not have a direct
or automatic relationship with the enterprise’s obligation for employee
benefits. Post-employment benefit plans involving insurance contracts are
subject to the same distinction between accounting and funding as other
funded plans.

Where an enterprise funds a post-employment benefit obligation by
contributing to an insurance policy under which the enterprise (either
directly, indirectly through the plan, through the mechanism for setting
future premiums or through a related party relationship with the insurer)
retains an obligation, the payment of the premiums does not amount to a
defined contribution arrangement. It follows that the enterprise:
(a) accounts for a qualifying insurance policy as a plan asset

examples of benefits
The most common benefit packages include health insurance, dental insurance, life insurance, disability insurance, paid vacation time, paid holidays, paid sick leave and retirement plans. Many employers are beginning to lump all time off into one group called paid time off, or PTO. A more comprehensive package may include child-care services, flexible work schedule, maternity leave, relocation expenses, and education programs. Benefits are most often offered in packages, but there are also cafeteria style plans where employees choose the types of benefits they want. You need to decide which benefits are the most important to you.
Disability Insurance
Disability insurance allows you to continue to have income in the event that you are disabled and cannot work. Most companies have short and long term disability insurance. You will want to ask what the percentage amount (the percentage of total salary) is, whether it can change over time, and what it is based on.
Medical/Health Insurance
One of the first things to know is what type of plan the company has. The most prevalent types are PPOs, HMOs, and Blue Cross/Blue Shield. A PPO is a list of company approved health care providers for insurance coverage. HMOs offer comprehensive health care in one integrated facility. They emphasize preventative care so an HMO may pay for some services that others may not. Blue Cross/Blue Shield is a widely recognized nonprofit organization offering hospital and health benefits. Here are a few things you should ask:
•   What expenses are covered and are there any deductibles or co-pays?
* Often times there will be annual or per-office visit deductibles. Co-pay is the percentage the company pays verses the percentage you will pay. Are there any exclusions for pre-existing conditions?
•   Does the plan have open enrollment or is there a medical exam or evaluation needed to enroll?
Dental and Optical Insurance
You will want to know what expenses are covered. For example, is preventative care covered? Exams, dental cleanings, and dental x-rays are usually covered. You will want to ask:
•   Are there any deductibles, co-pays, or annual and lifetime maximums?
•   Are surgical care and orthodontics covered?
•   Are eyeglasses and contact lenses covered?
Life Insurance
Although it may not seem important now, as you add loved ones to your life, life insurance will become important. This benefit will make sure your family receives compensation for their loss in the event of your death. You will want to know the rates and whether or not the rates are set for the duration of employment. Some companies also offer accidental death insurance or business travel insurance. If it's offered free, take it, but these types of insurance are not necessary.
Vacation Days, Holidays and Sick/Personal Days
Vacation Days
A standard vacation plan provides 2 weeks during the first year and one additional day per year of service after that. They may accumulate in different ways. You will want to ask:
•   How many days are allowed the first year? In future years?
•   When do vacation days begin accumulating and are they according to the calendar year or is it based on your date of hire?
•   What is the maximum number of days allowed?
Most employers cover six standard holidays including New Years Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day, and Christmas Day. Most will also cover the day after Thanksgiving or Christmas Eve. Many companies will offer set holidays and one floating holiday to be used at the employee's discretion. If you are starting midyear, you may want to ask how many will be offered to you in the first year.
Sick/Personal Days
Many companies have formal sick days for salaried staff. They may also provide personal days where an employee may take off for any reason. You will want to know how many days are allowed and how they accumulate.
Profit Sharing and Stock Options
Profit Sharing
Profit sharing is the sharing of a company’s profits with the employees of the company. It can be a great benefit if the company is profitable, but the amount may be stated as an "up to" amount. Ask what the company has paid out in the past. Do not count on any promises that it will be greater in the future.
Stock Options
ESOP is the acronym for employee stock ownership plan. This gives you the advantage of buying stock below market value which gives you an automatic profit. The stock purchase is often free from any broker fees. Most companies will allow you to reinvest your dividends commission-free to buy more stock. You should sign up for the maximum allowable unless you have little faith in your company's financial performance.
401(k) Plans
401k is a tax deferred retirement plan that both the company
and the employee contribute to. An employee usually does not
have access to the employer’s contributions until the employee is vested. Vesting is the right to receive the pension fund especially in the event of termination or early retirement. Some important questions:
•   How much is the company matching?
•   What is the maximum amount of matching and employee contribution?
•   How long does it take to vest the company matching and is there partial vesting during the interim?
Tuition Reimbursement
Tuition reimbursement is when a company pays for courses completed by an employee. Courses normally covered are those relating to the job the employee holds. Ordinarily, the IRS considers this benefit tax free if you are studying in your current field. You will want to know what types of courses are covered and what the yearly maximum is.
Certain companies also allow you the opportunity to earn your Master’s Degree while working for their company. Most will pay for your course work to earn the degree, granted that it is in your particular field of study or related job. Asking about these benefits may allow you to continue your education at your employer’s expense.
other less visible benefits
•   Some companies offer a free/reduced rate to a health club or have an on-site facility.
•   Dependent care is another benefit which includes child care or elderly care. This can include on-site child care facilities where a parent can have lunch with his/her child. Some companies may not pay directly for these costs, but will offer programs for allocating funds for these expenses from pretax funds. If you do not currently have children, you may want to ask about maternity leave also.
•   Employee assistance programs help employees with any special needs or counseling.
•   Comp time allows employees extra time off for extra hours worked.
•   Some employers offer adjustable work schedules with flex days (employees pick the hours they want to work).
•   Parking reimbursement can be a great benefit if you work in a city like New York where parking is expensive.
•   Many companies offer expense reimbursement where the company pays for any business-related costs like travel or meals.
•   Many times an employer will cover expenses associated with relocation.
Cafeteria Plan
An employee benefit in which an employee may contribute so much of his/her pretax income into a special account that may be used for a broad range of purposes. One may use the funds in a cafeteria plan for matters such as medical expenses, life insurance premiums, or other things. This allows the employee to structure his/her employee benefits in a way that best suits their needs for a given period of time. For example, a young, healthy employee may have the ability to choose a less expensive, less comprehensive insurance plan than he/she might otherwise receive from an employer. It is formally called a Section 125 plan. See also: Flexible Spending Account.
Cafeteria plan. Some employers offer cafeteria plans, more formally known as flexible spending plans, which give you the option of participating in a range of tax-saving benefit programs.
If you enroll in the plan, you choose the percentage of your pretax income to be withheld from your paycheck, up to the limit the plan allows. You allocate your money to the parts of the plan you want to participate in.
For example, you can set aside money to pay for medical expenses that aren't covered by insurance, for child care, or for additional life insurance coverage. As you incur these kinds of expenses, you are reimbursed from the amount you have put into the plan.
Since you owe no income tax on the money you contribute, you actually have more cash available for these expenses than if you were spending after-tax dollars.
However, you must estimate the amount you're going to contribute before the tax year begins, and you forfeit any money you've set aside but don't spend. For example, if you've set aside $1,500 for medical expenses but spend only $1,400, you lose the $100.
In some plans the deadline for spending the money in your flexible spending account is December 31. Other plans provide up to a three-month extension.
•   Cafeteria-Style Fringe Benefits -- Allow employees to choose the benefits they want (up to a certain dollar amount).
•   Soft Benefits include:
-   Onsite haircuts and shoe repair
-   Concierge services
-   Free meals at work
-   Doggie daycare
-   Onsite farmer’s markets

Cafeteria Plans
A cafeteria plan is a written plan that allows your employees to choose between receiving cash or taxable benefits instead of certain qualified benefits for which the law provides an exclusion from wages. If an employee chooses to receive a qualified benefit under the plan, the fact that the employee could have received cash or a taxable benefit instead will not make the qualified benefit taxable.
Generally, a cafeteria plan does not include any plan that offers a benefit that defers pay. However, a cafeteria plan can include a qualified 401(k) plan as a benefit. Also, certain life insurance plans maintained by educational institutions can be offered as a benefit even though they defer pay.
Qualified benefits. Qualified benefits include the following benefits discussed in section 2.
•   Accident and health benefits (but not medical savings accounts or long-term care insurance).
•   Adoption assistance.
•   Dependent care assistance.
•   Group-term life insurance coverage (including costs that cannot be excluded from wages).
Benefits not allowed. A cafeteria plan cannot include the following benefits discussed in section 2.
•   Archer medical savings accounts.
•   Athletic facilities.
•   De minimis (minimal) benefits.
•   Educational assistance.
•   Employee discounts.
•   Lodging on your business premises.
•   Meals.
•   Moving expense reimbursements.
•   No-additional-cost services.
•   Scholarships and fellowships.
•   Transportation (commuting) benefits.
•   Tuition reduction.
•   Working condition benefits.
It also cannot include scholarships or fellowships (discussed in Publication 520, Scholarships and Fellowships).
Employee. For these plans, treat the following individuals as employees.
1.   A current common-law employee (see Circular E for more information).
2.   A full-time life insurance agent who is a current statutory employee.
3.   A leased employee who has provided services to you on a substantially full-time basis for at least a year if the services are performed under your primary direction or control.
Exception for S corporation shareholders. Do not treat a 2% shareholder of an S corporation as an employee of the corporation. A 2% shareholder for this purpose is someone who directly or indirectly owns (at any time during the year) more than 2% of the corporation's stock or stock with more than 2% of the voting power.
Plans that favor highly compensated employees. If your plan favors highly compensated employees as to eligibility to participate, contributions, or benefits, you must include in their wages the value of taxable benefits they could have selected. A plan you maintain under a collective bargaining agreement does not favor highly compensated employees.
A highly compensated employee for this purpose is any of the following employees.
1.   An officer.
2.   A shareholder who owns more than 5% of the voting power or value of all classes of the employer's stock.
3.   An employee who is highly compensated based on the facts and circumstances.
4.   A spouse or dependent of a person described in (1), (2), or (3).
Plans that favor key employees. If your plan favors key employees, you must include in their wages the value of taxable benefits they could have selected. A plan favors key employees if more than 25% of the total of the nontaxable benefits you provide for all employees under the plan go to key employees. However, a plan you maintain under a collective bargaining agreement does not favor key employees.
A key employee during 2002 is generally an employee who is either of the following:
1.   An officer having annual pay of more than $130,000.
2.   An employee who for 2002 was either of the following:
a.   A 5% owner of your business.
b.   A 1% owner of your business whose annual pay was more than $150,000.
Form 5500. If you maintain a cafeteria plan, you must report information about the plan each year by the last day of the 7th month after the plan year ends. Use Form 5500, Annual Return/Report of Employee Benefit Plan, and Schedule F (Form 5500). See the form instructions for information on extensions of time to file.
Advantages for Employees
•   Section 125 cafeteria plans can help employees get access to needed health and welfare benefits through their workplaces that they would not be able to access efficiently on their own. Furthermore, employees can save substantial amounts in taxes by participating in their Section 125 plans --- especially on items they would purchase anyway, even if these items weren't offered in a plan. Specifially, employees can save income tax and on their portion of the Social Security and Medicaid payroll taxe
Disadvantages for Employees
•   Occasionally, plans offered within workplace plans are not as good or provide less in benefits than employees could get if they purchased plans individually, away from the Section 125 plan. Also, when the Section 125 plan includes a 401k plan, the 401k plan typically restricts investors to just a few options. The investor could get the same tax deduction and potentially better returns by investing within an IRA than within the 401k plan. If you use a salary deferral program such as a flexible spending account, and you don't spend the money, you lose the contributions. Some employers, however, provide matching funds to employees' 401k contributions, which is an important planning consideration. Last, since participating in Section 125 plans reduces taxable wage income, workers do not get credit for contributions when filing unemployment insurance claims.
Advantages for Employers
•   Employers offer Section 125 plans as a way of showing appreciation for employees and because employees frequently appreciate access to benefit plans. Cafeteria plans are frequently an important part of retaining and recruiting quality employees. Additionally, since employee contributions to Section 125 plans are not subject to payroll taxes, employers save approximately 7 percent on payroll taxes for every dollar employees divert to Section 125 plans.
Disadvantages for Employers
•   Employers may not discriminate against the rank and file. The benefits of Section 125 plans must be offered to all qualified employees and may not be reserved for highly compensated employees, managers or owners. If the employer matches or subsidizes the cost of any Section 125 plan for employees, the cost of the plan can directly affect the company's bottom line. Further, the use of Section 125 plans potentially allows employees to use substantial benefits early in the year prior to leaving the company.

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Leo Lingham


management consulting process, management consulting career, management development, human resource planning and development, strategic planning in human resources, marketing, careers in management, product management etc


18 years working managerial experience covering business planning, strategic planning, corporate planning, management service, organization development, marketing, sales management etc


24 years in management consulting which includes business planning, strategic planning, marketing , product management,
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