In the U.S. today, employee benefits constitute a significant portion of an employee’s total compensation. Although past studies revealed that many employees did not fully understand the value of their benefits packages, a 2008 MetLife Employee Benefits Survey showed that more workers are paying extra attention to the value of benefits. The study revealed an increased appetite among employees to receive benefits advice at the workplace. Furthermore, when asked about the significance of benefits in generating workplace loyalty and retention, employees ranked health benefits as the No. 2 factor, only trailing behind the importance of salary/wages. Advancement opportunities and retirement benefits tied for the third most critical factor in retention and loyalty.
According to the most recent (2008) Kaiser Family and Health Research and Education Trust study of employee benefits, the average annual premiums for employer-sponsored Health insurance was $12,680 for family coverage, and $4,704 for individual coverage. Although these numbers represent a 5% increase over 2007, in a 10-year period the cost increase of family coverage represents a whopping 119%!
As benefits become more expensive to employers, and more valuable to employees, effective communication regarding benefits is critical. Too often, employee benefits discussions are limited to the annual enrollment period. During this period, many employees’ focus will be on what their benefits are costing them, and not on what their employer contributes to the total benefits package. Communications regarding benefits need to continue on a year-round basis, and should reinforce regularly the value of the entire benefits package.
Beyond the heavy contribution most companies make toward Health insurance, there are other items, such as employer contributions to a pension plan or profit sharing plan or matches to a 401(k) plan, that need to be emphasized. As the work force ages, companies need to address the wishes of employees who are nearing retirement. The MetLife study points out that in 2007 63% of employers that offered retirement benefits expected the amount of the benefits to increase in the next five years. But in the 2008 study, 73% of employers said they expected this portion of benefits to increase, highlighting the importance employees are placing on retirement related benefits.
Other benefits that employers should highlight are: Employer premium contributions toward other health and welfare benefits (e.g., Life, Disability, Dental insurance); savings employees realize through purchasing any voluntary benefits at a group rate; the salary-in dollars-represented by paid vacation days; and employer contributions to mandatory benefits, such as Social Security and Medicare. Many employees are unaware of the dollar value of these extra benefits. Helping them understand the worth of such benefits increases employee satisfaction, and hence, retention.
Besides the annual enrollment information meeting, benefits communications should use a multi-media approach throughout the year to explain the value of the benefits package. Options might include: Did-you-know e-mails, colorful placards and posters, printed newsletters, as well as an annual total compensation statement that shows the employer’s actual outlay — in salary and benefits — for the employee. All communications should discuss benefits and their value in easy to understand terminology.
Although there is a cost to employers in continually reinforcing the monetary worth of benefits, it is an investment that will pay off in the long run. Employees will feel valued as they gain an understanding of the true worth of their total compensation, thus increasing goodwill between parties. And the carefully communicated value of benefits will help in both recruitment and retention of key personnel.