Apply strategic planning to benefits modeling
November 16, 2016
By Lori Stewart, SPHR®, SHRM-SCP, HCS, Partner, Human Resources Consulting
Like most sports teams, businesses find themselves in fourth quarter dealing with a lot of pressure to make budget and benefit decisions with just a small amount of time left in the game. If you resemble the majority of companies in administering your benefits program, you typically have a trusted broker/advisor; request your new premiums every year; communicate those changes to the employees; offer open enrollment; implement on January 1 and move on.
Perhaps it is time to reconsider your current benefits modeling process, and instead, take an assertive and strategic approach to evaluating your benefits program. Begin with a planning meeting. In addition to your vendors, consider inviting other individuals who can collectively contribute to the process like employee representatives, trusted advisors such as your attorney or CPA, and/or non-vendor consultants who are able to help you objectively evaluate your current benefits model. When reviewing your company’s overall cost in employee benefits, ask yourself, “Are our employees receiving what they need, and what is our return on investment?” While it is difficult to keep up with current trends, it is imperative to do so.
First, make sure benefits truly benefit your employees. Do not make the mistake of offering benefits simply because they have always been offered. For example, an employer who offers group health care coverage to their employees may inadvertently be creating a financial disadvantage in certain circumstances. This can be the case if the employee was receiving an Advanced Premium Tax Subsidy (APTC) for their healthcare coverage through www.healthcare.gov. If the employer offers coverage that is affordable and of minimum value, the employee would not be eligible for the subsidy.
Another mistake many employers make is not quantifying the total investment they make in employee benefit programs. Most benefits (not necessarily all) come with some cost to the employer to administer and/or contribute to. The total dollar amount associated with these benefits is critical to know and monitor for two primary reasons:
1. Increases in cost: Each time a premium changes or an additional employee signs up for a benefit, it has the potential to increase the expense to the company. Employers must be aware of premium increases and budget accordingly for the upcoming year.
2. Return on investment: The total dollar amount your company spends on benefits is an investment in the employees and the company as a whole. Employers who know their return on investment are able to make decisions related to changes in benefits as well as potential salary adjustments.
Benefits are a vitally important component of “best places to work” evaluations. Companies who enjoy high talent retention rates do not leave benefits administration to chance. By using simple survey tools and/or conducting employee interviews or focus groups, you can gather data early in the year to use during your benefit strategic planning sessions. Also, leave some room for open ended questions so employees may freely offer suggestions and/or comments.
Regardless of how you choose to gather the information, ensure you continue to communicate to employees proactively throughout the year. Provide opportunities for feedback as well as easy-to-understand educational materials and communication materials.
It is highly likely that benefit packages will continue to evolve as we see new generations entering the workforce. The prescribed tradition of health, dental and vision may continue to be affected by regulation, law and other economic factors. Be proactive and engage in an annual review of your benefits modeling to ensure you are positioning yourself competitively, maximizing your investment, and educating your employees so they can understand and appreciate their total compensation package.
This article was published in the November 2016 Business Times.