Are You Wasting Money on Some Benefits?
Posted on Monday, April 29, 2019 Share
How much money is your company wasting on benefits your employees either don't want or don't fully appreciate?
How might your company better invest its employee benefits dollars for a greater impact on employee satisfaction, on employee retention, and on employee productivity?
Facts About Employee Benefits
Employee benefit costs, on average, were about 31 percent of civilian payroll in 2012, according to the Bureau of Labor Statistics.
Included in the total for benefit costs are the cost of legally required benefits and other traditional benefits, including paid leave, supplemental pay, health insurance and retirement plans. When you add in costs employees do not generally consider, such as Social Security taxes, workers compensation insurance, unemployment insurance payment, the cost of benefits is a great deal higher.
A relevant study of about 2,400 employees, released by Towers Perrin, raises those questions.
The survey asked employees about their current health care and retirement benefits, and found most said these benefit programs were not very effective in meeting their needs.
In a companion survey of 140 HR and benefits managers, only 25 percent agreed their programs are very effective at meeting cost control objectives. Only 42 percent of the managers said their benefit programs are very effective at meeting recruiting objectives. And only 45 percent said the benefits are very effective at meeting retention objectives.
The responses to the surveys support the insights and recommendations from employee benefits consultant Gary Kushner. He flat-out tells employers to re-examine their employee benefits and the cost of benefits. He urges employers to answer questions like these:
Is the investment in employee benefits getting us the results we want?
If not, why are we spending the money on them?
What benefits could we invest in that would better get us the results we want?
"The issue to focus on is, 'do the benefits we're delivering make sense both for our organization and for our employees?'" says Kushner, president of Kushner & Company.
He continues: "The old way is the 'one size fits all' approach. Here's our health plan, here's our life insurance plan. Take it or leave it. One size fits all. But in today's world of diversity of demographics and diversity of needs, one size fits very few people. So the employer is in the position of paying thousands of dollars a year per person and having the employees shrug their shoulders and say 'So what?' because they don't perceive the value. It's like the employer takes the employee to the clothing store and buys something off the rack with the sleeves too short, and the employer says it looks good on you, but the employee knows better."
An example of this disconnect between the benefits the employer is offering and the benefits the employee values, according to Kushner, is the typical paid vacation benefit.
"That benefit started more than 100 years ago with the intent to get the employee to stay with the company. The vacation benefit scales upward, with the employee earning more vacation as the employee's employment years add up. Kind of a vacation pyramid," Kushner explained. "But today the typical employee stays with an employer only a few years. So today we have it upside down. The 65-year-old employee doesn't put a high value on 10 weeks of vacation. And the 22-year-old employee looks at the rich health plan and says 'I don't need that, but give me an extra week of paid vacation.'"
What One Study Shows
As for some employees not valuing all their paid vacation, there is evidence this is true. Expedia.com's Vacation Deprivation survey found nearly one in three American employees do not take all their earned vacation time and concludes the average American employee gives up approximately four vacation days per year.
Other examples of the disconnect between offered benefits and the benefits valued by some employees are what are called family-friendly benefits. These are benefits targeted to married employees and employees who have children, benefits like these: leave for a new child, daycare for employees' children, health insurance for employees' family members... and for employees of Google, $500 in take-out meals for new parents during the month after having a new child.
But not all employees are married. Not all employees have infants and young children. According to government statistics, single-person households increased to 26.4 percent in 2003 from 17.1 percent in 1970. Add in married couples without children, and the total of adults without children represent 55 percent of the U.S. households. The Unmarried America association reports about 40 percent of the U.S. workforce is made up of unmarried employees.
And these employees without family needs and without children are starting to ask for benefits they can take advantage of that are comparable in value to the family-friendly benefits their employers offer.
What's the Answer?
"We've been watching employers moving towards more employee empowerment, and allowing the employee to tailor benefits to fit their own individual or family needs," Kushner says. "Employers are moving to more flexible plans, more cafeteria style plans, where the employer says to the employees, 'I'll provide you with X dollars and here's an array of benefits with their price tags, and you select whatever you want.'"
When the employer moves to this type of flexible or cafeteria type array of employee benefits, Kushner says, "what we see is that the employer can spend the same or less on the overall benefits, but the employees view it much more favorably. That's because now the benefits fit them. It's the difference between getting something off the shelf that doesn't fit quite right and getting something tailored to fit the individual."
What's the employer to do? "Lay out a road map," Kushner recommends. "What are your strategic objectives for your benefit dollars? Do a strategic benefit review. What are you spending? What's your employee population look like? What benefits will your employees value? Look at utilization. You have to collect a lot of information and have someone who knows what they are doing interpret the data. Then decide the most cost-effective manner to get to where you want to be."
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