Benefit Programs In The Airline Industry Essay

, Research Paper

Benefit Programs in the Airline Industry

The Human Resource topic that we selected is to analyze the benefit programs of four major airlines. Benefits are important to employees as well as their families, and can be a powerful recruiting tool. Benefits also play a major role in managerial decisions and wise benefit choices can have a long-term impact on the quality of life. Some characteristics of a sound benefits program are, they must have clear specific objectives, they must allow for employee input, they must be responsive to societal and environmental change, provide for flexibility, and there must be clear communication with employees. One of the main challenges that companies face are the overall costs of these benefit programs to the companies themselves, as well as staying competitive in hopes to attract high quality employees. Almost 40% or $14,678 per employee is spent on benefit programs per year.

American Airlines

American Airlines like many other airlines are facing many challenges in the HR area of benefits and incentives. American Airlines as we all know is one of the leading airlines in today s airline industry. This status reflects upon Americans benefit program. American Airlines realizes that it must stay competitive in this area to ensure that they get the most qualified employees. American Airlines offers many benefits and incentives for their employees with hopes to attract the best. Many of the benefits are standard and required by law such as social security, unemployment, workers compensation, and leaves without pay. What really must be paid attention too are the benefits and incentives that are offered in addition to the ones required by law. These benefits and incentives are what attract individuals to work for American rather than another airline. Benefits such as a 401 K – Super Saver, which allows up to an ample 20% tax provision, a stock purchase plan, a credit union which could help one to buy a house, and personal emergency coupled with sick pay, just to name a few. American Airlines also recognizes ten major holidays for which employees do not have to work, yet they still get paid. Most of these are benefits that competing airlines offer, but one benefit stands out. American Airlines pass travel program is a benefit that many do not tend to overlook. American does not offer free stand-by tickets to its employees until they have been with the airline for 10 years. What they do offer are special discounted rates. This is the major weakness in their strategy to attract employees with benefits. American offers a very long list of benefits and incentives but this is one that is left out. I believe that American Airlines is making a big mistake by not allowing employees to fly for free. To become more effective American Airlines should add this benefit to its list so that it can be competitive with the other airlines. American has many strengths which include benefits that the other airlines do not offer such as a 401 K plans of up to 20%, and a credit union. Although at the same time it has a very large weakness, which is their travel plan that only offers its employees discounted rates, instead of free airfare. American Airlines must feel that it does not have to offer this benefit to attract potential workers, because it has so many other benefits to offer.

Continental Airlines

Continental Airlines prides itself on offering a wide variety of benefits to their employees. The eligibility for these benefits varies according to the length of time an employee has worked for the company, and the position that they hold. One challenge that Continental Airlines face is the cost of providing these benefits to their employees. They have to make sure that they are financially able to provide these benefit programs, while still attracting high quality employees to their company. Some of these benefits include travel passes, profit sharing, stock purchase plans, retirement plans, 401(k) savings plan, vacation and sick pay, an expense reimbursement plan, medical and dental insurance, vision insurance, life insurance, and accident insurance. Although Continental employees and their families are able to travel at reduced rates; they are not able to fly completely for free, which may be considered unfavorable by some employees. Continental employees are also able to share in the financial growth of the company by purchasing Continental stock at a discounted rate. Continental also provides a fully funded retirement plan, which employees vest in after five years of service. It also provides the 401(k) savings plan, which is a great way for employees to save for retirement. The employees can save up to 19% of their salary before taxes are withheld. Continental also matches a portion of their employees contributions to the 401(k) savings plan. Full and part time employees of Continental are able to take advantage of paid vacations, as well as the sick leave policy which gives employees time off from work, with pay, when they are ill or unable to work. Continental also provides immediate accident insurance upon employment for all of their employees. Continental does provide many benefits upon the initial employment of their employees; however, some benefit plans are not available until seven months after they have been employed. These include medical and dental insurance, vision insurance, long-term disability plan, and life insurance. Most of the plans are pre-tax, which allows employee tax savings. For every employee, there is a benefits program that best suits him or her. Younger employees who do not have the responsibility of families may not be looking for the same benefits as an older employee with a family. Continental needs to realize these differences in employees, in order to provide a benefit program that will attract the high quality employees they are looking for.

Southwest Airlines

Southwest Airlines is currently the fastest growing airline in the business. Over the past 10 years Southwest have grown its revenues by 388% and its net income by 1,490%. Some of the things that have helped Southwest to grow so quickly are their personnel. They have found ways to hire employees that have out-performed every major airline for the past three years. Their hiring tactics can be accredited to a healthy business network, in-depth research, a good job database, strong recruiting staff, and an outstanding benefits program. Southwest offers its employees a very competitive benefits program. Their program offers passes and travel privileges, medical insurance, dental insurance, life insurance, long term disability insurance, sick leave, vacation and holiday pay, profit-sharing, 401 (k) plan, stock purchase plan, and a employee assistance plan. One of the special benefits to working at Southwest is flying for free on Southwest and flying free or at a reduced rate on other carriers with whom Southwest has a pass agreement. Effective from the first day of employment, all employees, their spouses, dependant children, and parents of employees all have unlimited travel privileges on Southwest. An employee may view this as a huge benefit when they decide they would like to travel. On the downside of this part of the benefit program, Southwest does not fly everywhere in the United States, and that may pose a problem for an employee that would like to travel somewhere that Southwest does not offer service. Another benefit is Southwest s medical, dental, and life insurance plans. Employees may choose to incorporate their families with their medical and dental plans in order to save the employee money. The medical and dental plans will cover 100% of the employee s medical and dental needs, as well as their families needs, with minimal cost to the employee. For the life insurance plan, employees may choose coverage up to 4 times their base annual income in order to protect their family. The long-term disability program is set up in case an employee becomes disabled and can no longer work. Funds are still paid to the family in order to compensate for the employee s inability to work due to disability. Depending on employment classifications, employees are able to gather time off for personal illness and vacations. Employees celebrate several paid holidays throughout the calendar year, based on their employment classification. Southwest offers its employees a 401-(k) plan. The plan is designed to help employee s plan for their retirement. Eligible employees may contribute up to 15% of their pay to the plan on a pre-tax basis. Employees direct their investments and may borrow against their account balance. Employees are the basic fiber of Southwest Airlines, so they feel that employees should be able to share in the success of the company by investing in Southwest Airlines Co. stock through payroll reductions. Employees pay only 90% of the market value for the stock, and broker commissions are paid for by Southwest. Southwest cares very much for their employees well being. They offer their employees an assistance plan that helps when employees need it most. The plan provides professional assistance for employees and their families in order to solve personal problems that may arise that would cause their personal lives and job performance to suffer. Southwest Airlines realizes that without its employees the company would cease to work. Southwest offers these benefits to help keep their employees happy and provided for and in return their employees strive to keep Southwest on top.

United Airlines

United Airlines is a true global airline that has over 140 stations in more than 30 countries around the world. United prides itself on being a company where opportunity and advancement are determined solely on merit and individual achievement. United supposedly values diversity not only because it is the correct thing to do, but because it is the right business thing to do. United s stated position is that all employees should be treated with respect and dignity. The policy not only extends to employees, but to United s customers, vendors, and independent contractors as well. Some of the benefits that United offers to its employees are; company-paid medical, dental, life and long-term disability insurance, pension plan, paid vacations, travel passes, stock purchase plan, 401(k) plan, and credit union.

Going against the company s policy, United Airlines has been in litigation with the city of San Francisco concerning the Equal Benefits Law . Last year United Airlines supposedly negotiated a two-year exemption from the law in order to renew a 25-year lease with the San Francisco Airport. After opposing letters from the National Writers Union (NWU) United Airlines has joined with Air Transportation Association (ATA) in a lawsuit against the city of San Francisco challenging the ordinance. United claimed they never made an agreement with San Francisco and has not yet made a commitment to providing domestic partner benefits. The ordinance states that any entity that contracts with the city of San Francisco must provide equal benefits to its employees registered domestic partners that it provides to married spouses. Out of its 94,000 hired employees, United currently has approximately 10,000 lesbian, gay, bisexual, and transgender employees.

We believe that United is not very committed to diversity. It is obvious to see that United is trying to limit their benefit packages to those individuals that are not registered domestic partners. Some states still do not recognize domestic partners as legal binding marriages, and as a result, these individuals cannot receive equal benefits.

United s problem is that almost 11% of its total workforce is comprised of lesbians, gays, bisexuals, or transgenders. If United is committed to having diverse employees they should also be diverse in their benefit coverage. United should recognize that they have a diverse background and these select individuals need to be given equal benefits regardless of the added costs. The text mentions that part of providing a sound benefit package is allowing employees to given input into the benefit system. Having employees participate in designing benefits programs would help ensure that management is moving in the direction of satisfying employee wants. To meet the many changes occurring in society, management must reflect these changes in the employee benefits programs. The fact is that benefit plans sometimes provide little advantage to employees. Even though United might be trying to save money, their treatment towards domestic partners are limiting the organization s ability to attract and retain quality employees.

Comparitive Analysis

Some of the most effective policies and strategies for dealing with benefit programs are encompassed within each of the four airlines benefit programs offered. There are several benefits that are required by law, which include Social Security, Unemployment, Workers Compensation, and Leaves without Pay. Overall, American Airlines seemed to offer the most versatile benefits program. Although other programs offered similar benefits, we found that American Airlines offered the most conservative program. For example, United Airlines, and Southwest Airlines both offer free flights to all employees as well as their families, which may be more appealing to a young employee without a family. On the downside, we discovered that Southwest Airlines has a limited flight area, which minimizes their costs when employees take advantage of these programs, and allows them to offer these strategic benefits. We feel that American and Continental Airlines are overlooking an important strategic hiring strategy, by not offering free flights to all their employees, since cost of flights are fixed. For example, a flight that is only at 85% capacity will fly for the same price as a flight that is at 100% capacity. Continental Airlines, has a competitive benefits program as well, but it lacks the flight area which both United and American Airlines offer. We felt that American and United Airlines offered the best benefit programs, although American does not offer free flights from day one of employment, they offer many other compelling incentives such as, personal emergency assistance, vacation buying programs, credit union assistance, as well as flight discounts for their employees.

References

Web Pages:

1. http://www.ual.com/home/default.asp

2. http://www.southwest.com/

3. http://www.continental.com/

4. http://www.aa.com/

Texts:

1. Managing Human Resources : Sherman, Arthur / Bohlander, George / Snell, Scott