Employee Benefits Growing in Importance
Although wages receive the bulk of the attention, employee benefits are playing a more important role than ever in attracting employees, retaining them, and creating job satisfaction.
The 2016 Aflac Workforces Report reveals that 55 percent of employees are at least somewhat likely to accept a job with slightly lower pay if it has better benefits. Sixty percent of employees said having a benefits package is extremely or very important to their employer loyalty. Thirty-six percent said improving their benefits package is one thing their employers can do to keep them in their jobs.
Matt Pfeiffenberger, vice president of health benefits solutions at Murray Securus in Lancaster, says many central Pennsylvania small businesses recognize the value of employee benefits.
Despite the recent national reports of companies decreasing employee benefits, Pfeiffenberger says he hasn’t seen a pullback on employee benefits in the region in the past several years.
“Companies, for the most part, are still picking up the bulk of the costs, particularly for single-person health coverage,” he says.
He says health insurance, life insurance, some level of disability, and a retirement plan are the most commonly offered benefits.
“These benefits tend to cover events that could be catastrophic for employees and their families,” he points out. “Many companies look at these four as being financially crucial to employees.”
Pfeiffenberger said many smaller companies are family owned, and part of their corporate culture is taking pride in taking care of their employees and their families.
“To their credit, they aren’t just providing employee benefits from a dollar perspective,” he comments. “They care about their employees.”
For small companies that don’t offer any employee benefits, Pfeiffenberger suggests they first try to offer health insurance. If unable to do so, he recommends they offer an alternative insurance, such as life or dental/vision. Some benefits, such as flexible work scheduling, don’t cost anything.
“It’s always good for human resources managers to compare their company’s employee benefits offerings to those of comparable competitors. Benefits can be a clear differentiator,” he says.
According to a 2017 U.S. Bureau of Labor and Statistics report, employer costs for employee compensation averaged $35.64 per hour worked. Wages and salaries accounted for 68.3 percent of these costs, while benefits accounted for the remaining 31.7 percent.
“There is no rule of thumb on the percentage of employee benefits in regards to overall compensation,” says Pfeiffenberger. “Typically, benefits add thousands of dollars to the employee’s compensation value. Most employees, however, don’t realize this.”
Pfeiffenberger recommends that companies work to increase the awareness of the value of employee benefits.
“The average employee considers benefits important at the time they need them,” he says. “That’s when they are most engaged with the costs. Companies should help educate employees about the value of their benefits by sharing that information with them.”
In addition to helping employees develop a greater appreciation for their benefits, sharing the information can also aid them in becoming more conscientious healthcare consumers and developing healthier lifestyles, according to Pfeiffenberger.
Employee benefits also are a major recruiting tool.
When asked to rank their top benefits priorities, more employers (83 percent) chose retaining employees as an important benefits objective than chose increasing employee productivity (80 percent) and controlling health and welfare benefit costs (79 percent), according to MetLife’s 2017 U.S. Employee Benefit Trends Study.
More than half of employers (51 percent) said that retaining employees through benefits will become even more important in the next three to five years, according to the study.
“Companies will struggle to find talent without a comprehensive and strong benefits program,” emphasizes Pfeiffenberger. “It’s difficult to find dependable, talented people. Employee benefits help retain good employees and attract new employees.”
Regardless of a company’s employee benefits offerings, Pfeiffenberger says most companies can benefit from an audit of their plan.
He said one of the biggest components to look at in an audit is who is on the plan, and should they be on the plan?
Many companies have implemented a spousal carve-out clause, which requires the spouse to obtain health insurance through their employer, if it’s offered. Dependents can stay on a parents’ health plan until they are 26 years old.
“Companies have to make sure dependents come off the benefits plan when they are supposed to,” stresses Pfeiffenberger. “And that anyone, who is not legally entitled to be listed as a dependent may not be covered. It’s important to make a move before a large claim is filed.”
Pfeiffenberger says more attention has been paid to this issue in recent years as the cost of health coverage has increased.
Another major part of an audit is assisting with benefit plan compliance.
“Keeping up with the changes related to COBRA, HIPAA, and ADA can be daunting, particularly for small companies, which may have only one HR person,” he said. “These changes are usually rapid and complex. They can be overwhelming.”
An audit also includes non-discrimination testing for employee benefits. Rank-and-file workers must be offered the same benefits with the same cost structure as management, says Pfeiffenberger. He adds the same is true for medical benefits, pension plans, and 401(k) programs.
While all this can seem intimidating, Pfeiffenberger says businesses, such as Murray Securus, can support or handle the HR functions for small companies. BW