Employee Benefits, depending on your orientation, constitute either one of the biggest costs or the biggest investments an employer makes and therefore merit a bit of strategic thinking before introducing or making changes to these.
Benefit dollars, expressed as a percentage of Base Pay can range from between 12 % to greater than 25% and can be used to fund such offerings as: Vacation, Health Benefits, Life Insurance, Disability Insurance, Retirement Plans, Dental Benefits, Employee Stock Purchase Plans, Sickness and Short-Term Disability Benefits, Tuition Refunds, Transit, and Employee Assistance. Benefits vary by industry and by employer and in a previous article of mine, you would have read about how these can form a powerful part of any Company's "EVP" (Employment Value Proposition).
First a disclaimer. I am not a Benefits expert, not having worked for one of the truly excellent benefits consulting firms out there, and so come at this subject rather from the perspective of a customer who has negotiated with and signed many benefits agreements with vendors over the years.
When considering introducing or adding to a Benefits Programme, I always try to start with some foundation questions.
1. What purpose do Benefits serve in our Company?
2. How do the planned programme/changes align with these identified purposes?
3. Have I considered alternatives as well as having identified all material tangible and intangible investment costs for what is being proposed?
4. Does what I am proposing help or hurt employee productivity?
5. Why now?
Without answering each of the specific questions above, let me offer a few more general observations on why I ask these or variations on these questions, and what I believe is important to consider when tackling Benefits for your organization.
First of all, Benefits serve two broad purposes: 1. They reflect the fact that employers have a role to play in the well-being of their employees, and in fact, this feeds into the second purpose: 2. Employers have a vested interest in ensuring that their employees are well and able to focus as close to 100% of their work time as possible on engaging in activities that contribute to the success of the organization.
Although the above sounds like common sense and the right thing to do, often times, employers act in ways that run counter to this. They implement flex benefits programmes, which share the costs of benefits and benefits premiums increases to both make employees more accountable for what they purchase through benefits programmes (so as to consume only what they need and only on the most economical basis), and to defray some of the ongoing benefits cost increases faced by organizations. In theory, this reduces benefits dollar costs for the organization. In theory too, this helps to make employees much more accountable.
In reality, these cost savings may be more than offset by 3 factors: a) lost productivity as employees spend scarce work hours getting educated on what benefits programmes and sub-programmes they should enroll in and then in making additional choices/changes on a regular basis; b) poor choices that leave employees without a Benefits safety net when this is most needed; and c) vulnerable to being poached by a competitor who offers a better Benefits package as part of their more compelling "EVP".
Secondly, Employers who are miserly with their Benefits offerings or who don't trust their employees to be responsible in terms of using Benefits provided, may turn out to be penny wise and pound foolish.
In my experience, 99+% of employees are extremely conscientious when it comes to consuming Benefits, often times foregoing vacation time or neglecting a medical or dental treatment due to their commitment to their employer and their work. Also, Employers who are miserly with Benefits send a clear message to their employees about the value of Human Capital in the organization.
Note that I have not said that Employers need spend a lot on employees. Employers can and should for example, depending on financial circumstances, put in place a non Employer funded Group RRSP or 401K programme, and fund health programmes to reimburse 25% or 50% of employee expenses incurred.
Key though is to have a comprehensive benefits programme that addresses employee needs, is aligned with your organization's goals, and is competitive for your industry.
For if not, Benefits at 12-20+% of base pay, will not offset the direct and indirect costs of replacing valued employees, who leave you for a better "EVP".
Use your Benefits as a strategic opportunity to attract, retain, and get full productivity from your highly talented and hard to have found human capital.
As you do so, you will find that your business results lead those of your competitors.