The employer handbook for better benefits
Employees unhappy? Unable to hire that leading AI guru? Maybe it’s time to rewrite your company’s benefits menu. Scores of employers are doing so as companies aim to attract the devotion of their workers and woo new hires in a hot job market.
“More frequently, we’re seeing [employers] sit down and take a fresh look” at their entire benefits menu and strategy, says John Bremen, a managing director at Willis Towers Watson and leader of its human capital and benefits consulting practice for North America.
“I have a lot of clients that say, ‘I want to look at everything,’ ” adds Melinda Riley, a senior principal at Korn Ferry Hay Group.
But rebooting benefits doesn’t just involve one new offering or benchmarking benefits against employers competing for the same labor force. It involves a serious, in-depth analysis of programs that includes looking at cost, surveying employees and working with multiple company departments to promote and better utilize company offerings.
The process doesn’t necessarily lead to top-to-bottom changes, but at least management can take comfort in the knowledge that it isn’t just operating on cruise control.
What prompts an employer to overhaul the benefits offered? Often that’s driven by a spike in costs, typically healthcare. A defined benefit pension plan sponsor might seek changes after a jump in pension liability costs or a poor performance in a pension portfolio.
Other common catalysts might include a drop in corporate profits, greater employee turnover, difficulties attracting talent, greater competition, a new CEO, owner or HR director.
But, HR and benefits leaders don’t need to wait for any of those to occur, Bremen advises. It’s always better to be proactive, he suggests. Then the question becomes, how to go about it?
“Start at the macro level,” Riley says. “What is the business strategy? Then cascade down to the talent strategy, then the rewards strategy.”
Employers should answer the broader questions, then determine the tactics and their implications. That requires effort by the most senior members of the executive team, typically the CEO and the CFO, to bring clarity to the strategic goals.
As that process moves along, competing priorities will bubble up,” Riley says. Often those are determined by financial constraints, the “what can we afford” question.
“The opening position is usually that whatever changes are made, they should be cost-neutral,” Bremen says. While that might be somewhat discouraging to a benefits leader bent on upgrading the company’s current offerings, it shouldn’t be, he adds. That’s because the process often reveals opportunities to add high-impact, low-cost benefits, and to trim back on other benefits on the opposite end of that value spectrum.
Bremen advises that the teams assembled to oversee a benefits reboot include representation from the international communications team. A marketing professional also can play a vital role, he adds, because marketers understand how to assess consumer preferences, even by demographic segment, and can determine the most effective ways to ensure that each group knows the array of benefits.
For instance, one of Bremen’s employer clients, a large consumer products company, found that nearly 80% of its employees were oblivious to the fact that the company matched 401(k) elective deferrals. It was clear to Bremen that the company’s marketing department had not been pulled into the process of imparting information about benefits to the company’s large workforce.
The research process in a benefits reboot goes beyond simply knowing whether employees are aware of the benefits already available to them, but seeks to gauge preferences and priorities. Asking certain employee groups to rate their interest in or appreciation of particular benefits on a fixed scale will yield limited information, consultants caution. Using the more sophisticated conjoint analysis approach — in which people are allowed to express their preferences against alternative choices — yields greater insight, they say.
Effective research aims to answer the question: “Are we getting our money’s worth?” notes Mike Boro, a partner at PricewaterhouseCoopers.
It doesn’t matter whether a segment of employees values benefit X over benefit Y, if the first is more expensive and doesn’t attract, retain and motivate employees.
In surveying employees, including an open-ended question like, “What new benefits would be of interest to you?” can sometimes lead to unexpected results.
For instance, when Joanna Stein Weiner joined Pure Insurance as director of compensation and benefits last year, she launched an employee survey to the 600 employees who work at the property insurance firm to gauge how they felt about their health coverage and other various perks.
“I asked them, ‘If you had to add a benefit, what would you be interested in?,’ she says. “And more than 70% said they wanted Pure to add a student loan benefit.”
“This really gave me the credentials to go to our senior leadership team and say, ‘I think this is something we should consider and stand out as an employer of choice — this is the next new exciting thing.’”
The company’s leadership agreed, and in January, Pure launched its new student loan benefit, which became an immediate hit for the company.
While surveying employees is vital — and works — employers might also want to consider researching the types of employees you want to attract, as well.
“Look at the preferences of your desired source of talent,” Bremen says. If your business strategy will require hiring more software engineers, find out what benefits will attract them.
In the process, employers shouldn’t overlook intangible benefits, such as workplace policies that include casual dress and flexible work scheduling. Those benefits are very popular with employees, and usually don’t cost a thing for companies. In fact, a recent poll of employees from benefits provider Unum found that flexible and remote work options was the second most desired non-insurance benefit offering, slightly trailing paid family leave.
Employee preferences aren’t the only lens to train on your existing benefits offerings, however. PwC’s Boro, a lawyer, urges employers to consider the risk management perspective. Plans and policies should be up to date with legal and regulatory requirements. Employers “need to check to be sure that plans are being administered equitably and are protected from fraud,” he says.
A compliance and security check-up probably would not be the sole cause of any changes in the benefit lineup, but they could be a factor if any inherent risks with particular benefits outweigh their value.
Changes in the benefits menu following a reboot are not necessarily radical, consultants say. Often the upshot is a new approach to a nagging old problem, like a stubborn pattern of ever-increasing health plan costs. Or it could be just the addition of some low-cost but popular new benefits, like identity theft protection.
Benefits, liberally interpreted, also include recognition programs, which are popular among employees. Korn Ferry Hay Group’s Riley notes that updated recognition programs often feature rewards “more immediate and timed to the event” that generates the award.
“We’re also seeing changes in cash compensation, like spot bonuses,” she adds. Bonuses have become a notable employer addition, especially as companies save money from the GOP tax overhaul. The Walt Disney Company, Starbucks, Apple, Hostess Brands and spice maker McCormick & Co. all handed out one-time bonuses to its employees earlier this year, citing federal tax savings.
Other more common changes feature HR policy initiatives such as more comprehensive career path advising and training opportunities — also a low-cost addition, but a high-value one for motivated employees.
Whatever changes are instituted, it’s important to establish a game plan to assess their impact against anticipated outcomes. If, for example, the aim is to reduce employee turnover, it’s essential to establish the statistical baseline, then create measurable goals against which to assess the effectiveness of the reboot.
When multiple changes are made, an analytical framework will need to be created to assess the impact of each change on the achievement of the overriding goal, Riley says. The more changes, the more difficult it is to pinpoint the role that each change made. Still, effort should be made to understand the reboot’s success, and to guide future changes.