In the world of HR and employee benefits, we hear a phrase repeated over and over…
“Attracting and retaining top talent”.
What can your company do to attract great employees, while at the same time, keeping them performing and engaged for the long haul?
While this article isn’t going to tackle every factor involved in achieving this goal, I am going to focus on a very important part of the equation: Compensation.
If you were to ask your employees what factors are most important to them, Your employee’s compensation is probably the first thing that comes to many of their minds
It’s no secret employees want to be compensated well.
What they view as high-value forms of compensation may surprise you.
What Employees Value:
In a recent study by FRACTL, a case-study and market research firm they received a clear response in terms of what non-salary compensation was most valued:
“Better health, dental, and vision insurance topped the list with 88 percent of respondents saying that they would give this benefit “some consideration” (34 percent) or “heavy consideration” (54 percent).”
And if that survey leaves any doubt about the high value placed on health-related perks, consider this: Towers Watson’s 2013/2014 Global Benefit Attitudes Survey reveals something even more startling…
Job seekers and employees are valuing healthcare even more than retirement packages. (click here for the study)
So what can employers do?
With all of this in mind, I believe the perception of your employee benefits package (what you offer, how much you contribute etc…) is an often misunderstood, and underutilized component of your compensation strategy.
Quite simply, I think most employers are leaving a lot of value on the table.
To help fix this, here’s our simple, yet effective way to provide a benefit your employees value highly, without blowing your company budget.
And that value might not always coincide with the cost. What I mean by this is:
NOT EVERY DOLLAR INVESTED IN YOUR BENEFITS PACKAGE IS EQUAL
This is about perception.
Here’s an example:
To do this yourself, simply take the monthly cost of an employee benefit, like a dental plan for example, and divide by the # of hours worked a 40 hour employee in an average calendar month by 173 (40hrs/week x’s 52 weeks / 12 months = 173.33 avg hours worked/billed month)
So, if you were to sponsor 100% of employee cost for a DHMO (dental HMO plan) that costs say $20/month, and you want to consider the hourly cost of offering this to your employees, you’d take $20 and divide by 173, which equals an hourly cost of $0.12. You can also offer a PPO “buy up” option for those employees that want the PPO dental and are willing to contribute the difference.
Here’s the big question: Will this product produce an impact in your employees mind, and health for that matter, that is equal or greater to $0.12 per hour?
When I ask this question, the answer is a resounding YES!
This is for two reasons: First, benefits offered on a group-chassis are more affordable, and higher benefit, when compared to individual market plans. This is a very real value.
Second, your employees don’t focus on the cost of the benefit in this case, as much as they focus on the fact that the benefit is there in the first place, and will be there when they need it.
Third, your employees have a high likelihood of using your dental plan, in this example, more than they use their medical plan.
And here’s the point: This is a contribution strategy that results in big perceived value to your employees equal or greater to a wage increase many times it’s cost.
“That’s great, Steve, but we haven’t got a penny to spare!!!”
I understand. Let’s take this approach one step further, and explore the benefits of offering these new lines with zero cost to your company.
Let’s Talk Voluntary benefits:
Sometimes called supplemental insurance, voluntary benefits are any employee benefit offered to your employees (dental, vision, accident, life, etc…) that the employee pays part (up to 100%) of the cost, and has complete freedom to enroll in, or waive.
Implementing a voluntary benefits strategy involves the same philosophy outlined above, and makes these benefits completely optional to your employees. If they want them, they pay the full cost, and if they don’t, no one loses out.
Here’s the great thing about offering voluntary benefits:
- employees still value the opportunity to get these benefits through your company
- only the employees that really want the benefit choose to enroll (as opposed to just taking a benefit because it’s free… even if they don’t value the benefit)
- employees get reduced rates, compared to what they could buy direct with carriers
- employees will link this benefit, with their employment at your company (retention)
- your organization can pay as little as you’d like (all the way down to nothing)
- your organization gets a tax break based on the reduction in payroll (dollars are being spent on a pre-tax basis for most of these benefits)
- lower payroll also means lower payroll tax, FICA, FUTA, SUTA, and even work-comp costs in many cases
If you do choose to introduce new lines of coverage to your employees, communication is key. After all, the value they perceive is limited to how those benefits are presented.
To enable your organization and your employees to extract the most value from these plans, you need to plan on over-communicating these benefits to your workforce, and making them extremely easy to enroll in.
Our firm has found the following methods to be very useful when deploying a new benefit:
Start educating employees about the new coverage early: Up to 2 months prior to open enrollment.
Feature the new lines in an all-hands employe open enrollment meeting to discuss how the policies work, and why they’re of value to your workforce.
Use the right online benefits enrollment tool to make enrolling in these benefits as seamless as possible.
If you use the above strategies and tactics next time your employees are getting anxious for a raise, or just during your next open enrollment I have no doubt you’ll harness untapped value, while keeping your employees happier, healthier, and more productive than ever.