Comparing employee benefits in the public and private sectors

William J. Wiatrowski

While employee benefits are an important part of the compensation package for all workers, the characteristics of the benefit programs vary considerably between the private and public sectors. Differing employer and employee needs affect the types and characteristics of benefits received.

This article compares the incidence and administration of employee benefits for full-time employees in the private and public sectors, and examines the characteristics of work schedules and paid leave plans. Accompanying articles appearing in this issue of the Review compare other private and public sector benefits-employer-sponsored health and life insurance and disability benefits, and defined benefit pension plans and defined contribution plans (such as savings and thrift, profit-sharing, and stock ownership plans). Taken together, these articles represent a current, comprehensive look at benefits provided to employees in medium and large firms in private industry and in State and local governments.

The data are from the Bureau of Labor Statistics’ annual Employee Benefits Survey.’ They show that:

* Paid vacations are granted to nearly all full-time employees in medium and large firms in private industry, compared with about three-fourths of those employed by State and local governments, Teachers are the least likely of public employees to receive paid vacations; police and firefighters, the most likely. Private firms generally provide many single-purpose types of leave (such as separate vacation and personal leave plans); State and local govemments are more likely to provide a multiple-purpose annual leave plan.

* Defined benefit pension plans for State and local government workers, which are often jointly financed by employers and employees, provide more generous benefits than do plans in the private sector, which typically are financed by the employer only. However, private sector pensions are almost always accompanied by Social Security benefits. In the public sector, approximately one-fourth of pension plan participants work for jurisdictions not in the Social Security system.

* Participation in health maintenance organizations (HMO’S) is more prevalent among public employees. Concentrations of public sector employers in metropolitan areas, where HMO’S are widely available, may help to explain civil servants’ greater participation in these prepaid health plans.

The survey

The Bureau of Labor Statistics’ Employee Benefits Survey, begun in 1979, initially looked exclusively at benefits in medium and large firms in private industry. The survey coverage mirrored that of the Bureau’s National Survey of Professional, Administrative, Technical, and Clerical Pay (PATC survey), yielding both pay and benefits data. In 1987, for the first time, the Employee Benefits Survey focused on benefits in State and local governments. both the private and public sector surveys, geographic coverage is limited to establishments in the 48 contiguous States.

The Employee Benefits Survey provides information on the incidence and characteristics of paid leave, insurance plans, defined benefit pension plans, defined contribution plans, flexible benefits arrangements, and work schedules. Eligibility (but not details of plan provisions) for several additional benefits, such as severance pay and employersubsidized parking, is also provided. With a few exceptions, the survey is limited to benefits financed at least in part by employers. It is constantly revised in an effort to keep abreast of new developments in employee benefits plans.

Private sector survey. During the 1979-86period, when medium and large firms in the private sector were surveyed, the industrial coverage included manufacturing; mining; construction; transportation, communications, electric, gas, and sanitary services; wholesale trade; retail trade; finance, insurance, and real estate; and selected services. The minimum number of employees required for an establishment to be surveyed varied by industry, ranging from 250 employees in mining, construction, and other industries to 50 employees in accounting service firms. The survey covered about 21 million workers.

Employees are grouped into three broad occupational categories-professional and administrative, technical and clerical, and production-to capture possible occupational differences in benefit plan availability and design. The first two occupational groups are often characterized as white collar, while production employees are referred to as blue collar. The data refer to all employees, unless differences among occupations warrant a more detailed treatment.

Public sector survey. The 1987 survey covered State governments and local governments classified as either administrative units, school districts, health services, or special districts, such as water and sewer authorities and regional transit operations. Minimum employment for local government units was 50 employees. The entire State government was considered a single unit for sampling purposes; thus, both administrative units and other units, such as State university systems and hospitals, were included. The study provides representative data for 10.3 million full-time workers in State and local governments, approximately three-quarters of the State and local government work force.

To reflect differences in benefit plans, employees in State and local governments were classified as either “regular” employees, teachers, or police and firefighters. Regular employees are all workers except teachers or police and firefighters. Because of benefit differences among these occupations, the discussion compares the plans available to each group of these State and local government employees .

Incidence of benefits

When comparing benefit practices between public and private sectors, one must consider groups of benefits: whether workers receive a particular benefit often depends upon what other items they are receiving.’ For example, only 14 percent of public sector workers receive sickness and accident insurance, but these workers are almost universally covered by paid sick leave, which reduces the need for such insurance.

Health insurance, one of the benefits studied in detail by the Employee Benefits Survey, shows practically no variation by sector. About 95 percent of employees in private industry in 1986, and 94 percent of those in State and local government in 1987 had health insurance coverage. (See table 1.) Life insurance is provided to 96 percent of private sector employees, while in the public sector, 91 percent of police and firefighters and just over 80 percent of teachers and regular workers are covered. Participants in public sector pension plans are often eligible for lump-sum death benefits, which make up for the lower incidence of life insurance.

Short-term disability coverage is similar in both sectors-94 percent of private sector employees and 97 percent of public sector employees participate. But, as noted earlier, the method of providing benefits differs considerably. Long-term disability insurance is most common among white-collar private sector employees; in contrast, blue-collar private sector employees and public sector employees often have pension plans that provide disability coverage after short-term disability benefits have been exhausted.

Defined benefit pension plans, which specify a formula for determining the recipient’s benefit, are provided to more than 9 of 10 workers in State and local governments and to 3 of 4 employees in medium and large firms in private industry. The incidence of these plans in the private sector has declined from 83 percent of employees in 1980. In their place, defined contribution plans (such as savings and thrift and profit-sharing plans), which specify the contribution of the employer but do not guarantee a benefit, have grown in popularity as a source of retirement income and capital accumulation. Few defined contribution plans are found in the public sector.

Paid time off can range from a few minutes for a coffee break to several weeks of vacation. These benefits vary significantly among occupations and between the private and public sectors; often, unusual work schedules necessitate unique time-off provisions, as for teachers. Paid holidays and vacations are widely provided to all workers except teachers, who are often employed by contract for a fixed number of days, and whose stated pay is based on the contracted days. In contrast, personal leave, available to an employee for any reason, is provided to nearly threefifths of the teachers; about one-third of the remaining public sector employees and one-third of the white-collar private sector employees receive such leave. Only 15 percent of the blue-collar workers in the private sector have personal leave provisions.

Formal paid rest time is most commonly provided to blue-collar workers in the private sector and regular employees in the public sector; such rest time is least common among teachers, whose daily schedules often do not allow for such a break. Paid lunch time is not usual for any of the worker groups, but is most prevalent among teachers and police and firefighters. Paid time off for jury duty is provided to nearly all employees; military leave is more common among public sector workers, except teachers; and formal paid funeral leave is more common in the private sector.

Additional benefits. In addition to providing data on the incidence and characteristics of paid time off, insurance, and retirement and capital accumulation plans, the Employee Benefits Survey gathers information on the incidence of a number of other benefits. The survey measures the number of workers eligible for each of these benefits, whether or not employees actually use the benefits. Twelve benefits were studied in the surveys of medium and large firms in private industry in 1985 and of State and local governments in 1987. Benefits typically found in only one of the sectors-such as sabbatical leave in the public sector or employee discounts in the private sector-are not discussed in this article.

For many of the benefits, incidence is greater in the private sector than in the public sector. (See table 2.) For example, severance pay is available to almost half of the employees in medium and large firms in private industry, but to fewer than 10 percent of State and local government employees. Other benefits occurring more frequently in the private sector include supplemental unemployment benefits, relocation allowances, and travel accident insurance. The incidence of these benefits partly reflects the more uncertain nature of job security in private industry, compared with State and local governments, and the lack of need to move public employees to different locations, as is done in private firms.

Benefits that attempt to meet employees’ personal needs are available to a small number in each sector. Employer-subsidized child care benefits, either an onsite facility or employer reimbursement of costs for an independent facility, are available to 2 percent of public sector employees and I percent of private sector employees. Similarly, financial counseling, prepaid legal services, and subsidized commuting are available to about 10 percent or fewer of the employees. There appears to be little difference in the incidence of these benefits between the public and private sectors.

Employer-subsidized parking, either in an employer provided facility or through reduced rates in a commercial facility, is available to more than 70 percent of employees in both the public and private sectors. However, employers in major metropolitan areas, where parking facilities are scarce, often do not offer subsidized parking. Employerprovided recreation facilities, subsidized meals, and inhouse infirmaries are more common among private sector employees than public sector employees.

Amount of paid time off

Paid lunch time is not a common benefit, but is most often given to elementary and secondary schoolteachers, police and firefighters, and private sector blue-collar workers. Teachers are often required to remain on the school premises during lunch, and may even have specific duties, such as monitoring students. Similarly, the private sector blue-collar workers most likely to receive paid lunch time are those who are unable to leave the worksite, such as coal miners. Paid lunch time averaged just more than a half hour in the public sector, and just under a half hour in the private sector. (See table 3.)

Paid rest time includes coffee breaks and cleanup time. This benefit was counted if it was formal; that is, established provisions existed. Informal policies, which may be more common among white-collar workers, were excluded. A majority of private sector employees and regular public sector employees had formal paid rest provisions, usually two daily breaks of 10 to 15 minutes each. Teachers and police and firefighters, because of the nature of their work and unusual work schedules, were less likely to receive formal paid rest time.

Nearly all employees in all occupational groups, except teachers, received paid holidays. Teachers often were paid on the basis of the number of school days in a year, and were not considered by their school system as paid on holidays and other days off. In the private sector, employees most commonly received 10 holidays; public sector workers often received 11 or 12 holidays, the result of State and local observances.

One significant difference between public and private sector paid time-off benefits is in paid vacations. In the public sector, vacations are often considered “annual leave,” time available for a variety of uses, including vacations. Annual leave plans often provide more days than do private sector vacation plans.

However, annual leave must be used for such personal matters as funerals, while private sector employees are more likely to have vacation and other leave policies .

Employees in establishments that require around-theclock staffing, such as hospitals, may be part leave bank” or receive “all-purpose leave.” These plans often combine holidays, vacation, sick leave, and other leave into one block of time off. Employees then coordinate their leave requests so that adequate staffing is maintained.

In both the private and public sectors, paid vacation days usually increase with length of service. The following tabulation details the average number of days provided at selected service intervals for employees who participated in a vacation or annualleave plan: length of service increases. For the small percentage of teachers receiving a paid vacation, the number of days varied only slightly as years of service increased.

Paid personal leave allows employees time off for a variety of purposes. Teachers are the most common recipient of this benefit, perhaps because they seldom receive paid vacations. Personal leave plans typically provide 1 to 5 days per year. The average of 3.7 days per year in the private sector is about 1 day more than that of the public sector.

Separate formal funeral leave plans are more common in the private sector; public sector workers without such a plan may use annualleave for this purpose. Where plans are available, they most commonly provide 3 days of funeral leave per occurrence in both the public and private sectors. About 23 percent of private sector employees and 17 percent of those in the public sector were in plans that varied the number of days according to the relationship of the employee to the deceased.

Paid military leave was available to a majority of all employees in both sectors. On average, State and local government employees could receive just over 3 weeks of paid leave, while private sector employees could receive just over 2 weeks.

Paid time off for jury duty was almost universally provided to all employees. These plans usually provided leave as needed, rather than specifying a fixed number of days.

Work schedules

For many years, employees worked 40 hours a week, usually in 5 days, with relatively few departures from this pattern. However, this schedule is gradually becoming less common, as flexible work hours and the need to have services provided at different times have reduced uniformity in working patterns. In the private sector, the 5-day, 40-hour week is still the most common, applying to 82 percent of all employees, including 90 percent of production workers. Those not on a 40-hour schedule generally work fewer hours; 13 percent of technical and clerical workers, for example, work 37.5 hours per week-7.5 hours per day.

In the public sector, two-fifths of the employees work fewer than 40 hours per week. Elementary and secondary schoolteachers and regular public sector workers were generally scheduled for 5 days, 35 or 37.5 hours. Scheduled hours for teachers often included preparation and grading time. Private sector workers were more likely to work a standard 5-day, 40-hour week. The survey did not collect data on work schedules for college and university teachers because they often do not work fixed schedules.

Police and especially firefighters were more inclined to have unusual work schedules. A firefighter might work 24 hours, then have 24 hours off, work another 24 hours, and, finally, have 72 hours off. This cycle would then repeat. For the survey, this type of schedule was adjusted to determine the average number of days and hours worked in 7 days. For example, the above schedule yields a workweek of 2.3 days and 56 hours, a common schedule for firefighters.”

Plan sponsors

The Employee Benefits Survey also develops data on sponsors of insurance and pension plans. (See table 4.) For private sector employees, benefits are sponsored by single employers, a multi-employer trust, or an employer association.”

Public employees, on the contrary, are under plans sponsored by either State or local governments. The only benefit plan found in both surveys is the mandated temporary disability insurance plans in New York and New Jersey. (These plans are tabulated as sickness and accident insurance plans; they appear in table 4 as mandated benefits in the private sector and State-sponsored benefits in the public sector.)

Data on plan sponsors reveal that single-employer plans dominate in the private sector, while public sector plans vary between State and local sponsors. Defined benefit pension plans for public employees are frequently State-sponsored; local governments either may be required to join these plans, or may choose to join rather than establish their own plans. Conversely, health and life insurance benefits for local government employees are more likely to be sponsored by the local governments.

Employers may provide benefits to employees either individually or through a flexible (package) arrangement. The Employee Benefits Survey included the incidence of two types of flexible arrangements: flexible benefits (or cafeteria) plans and reimbursement (or flexible spending) accounts. Flexible benefits plans allow employees to choose between plans in two or more benefit areas, such as health, life, and disability insurance, and added vacation days. Reimbursement accounts provide funds to pay for expenses often not included in benefit packages, such as health insurance deductibles and coinsurances, 1 2 and employee child care costs. Flexible benefits packages were available to 2 percent of employees in medium and large firms in private industry, and to 5 percent of State and local government employees, most commonly teachers. Reimbursement accounts were available to 5 percent of all employees surveyed.

COPYRIGHT 1988 U.S. Bureau of Labor Statistics

COPYRIGHT 2004 Gale Group

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