Most employers’ investment in the benefits packages they provide to employees is significant. According to data from the Department of Labor’s Bureau of Labor Statistics, employee benefits account for close to a third of employee compensation costs, an average $8.63 per hour worked (includes legally required benefits such as Social Security). With such an investment, employers of all sizes want these benefits to engender loyalty within the workforce. In smaller businesses, benefits do play this role to some degree, according to a survey from MetLife, but employers are not utilizing their benefits packages to their full strategic advantage.
MetLife polled employees and benefits decision makers in companies with at least two employees. More than half—55%—of the employers with fewer than 500 employees said that benefits play a very important role in employee retention. However, only 34% of employees at companies of this size said the benefits they receive are a very important reason to remain with their current employer, compared to 53% of employees at larger companies. This last finding is somewhat puzzling, since among employers that offer benefits, a higher percentage of smaller employers contrasted to larger employers pay the full cost for many benefits, including medical, dental and prescription drug coverage. Specifically, 36% of smaller employers paid the entire cost of employees’ medical coverage and 29% footed the full bill for prescription drug coverage, compared to 15% and 13%, respectively, of larger firms that did this for employees.
Whether or not your company is among those that pick up the full tab for certain employee benefits, you do invest significantly in the benefits you provide, and you want to realize a good return on this investment. The key to maximizing this is to take steps to use benefits strategically.
Using benefits strategically requires that the benefits your company offers are those that your employees really need and want. Although you can safely assume that medical, some type of retirement plan, and time-off programs would top this list, beyond these employees’ benefits needs can vary greatly. If you haven’t done so recently, get input from employees—through surveys, focus groups, even a suggestion box—as to what’s on their benefits “wish list.” You might find that some of the most coveted benefits are those that require little financial investment, though they could demand some creative thinking on your part. For example, flex-time, job sharing and telecommuting are prized by many workers, and if you are able to figure out a way to implement them in your company you will score a hit with employees without dipping into the benefits budget.
Similarly, you can greatly expand your menu of benefits offerings at little or no cost through voluntary benefits. Your company can give employees convenient access to coverages such as dental, vision, hearing, group legal, various types of Life insurance, and disability through a voluntary benefits strategy. Though employees pay the full cost of voluntary benefits, they generally get a good price because they’re purchasing at a group rate; plus, they save time not having to shop for the benefits in the open market and have the convenience of paying for them through payroll deduction. Most importantly, since employees choose which, if any, voluntary benefits to enroll in, they’re only paying for what they’ve decided they want and need, which is important, psychologically, to feeling that they’ve gotten their money’s worth.
Finally, regardless of the benefits you decide to offer to employees, don’t skimp on communications. The MetLife survey suggests inadequate communications might be part of the cause for employees’ under-appreciation of their benefits, with only about a third of both smaller employers and their workers rating their benefits communications as highly effective. Where to start in shoring up your benefits communications? Consider personalization, for which 54% of employees in smaller companies expressed a preference.