Do You Offer Competitive Employee Benefits?
Employee benefits encompass a wide range of offerings that a company can provide to its employees. The most common benefits in the US include health and dental insurance, retirement savings (such as a 401(k)), vacation time, and other paid time off (such as maternity leave). But benefits don’t need to be common – they can be tailored to meet the needs of your employees. In recent years, telecommuting, compressed workweeks, and “bring your dog to work” have increased in popularity.
What are employee benefits?
Employee benefits include any non-cash reward that the employer provides to employees based on their employment. It does not include wages, salary, or other cash compensation (such as bonuses) that the employee receives. Other than that, the list of benefits is unlimited.
Interestingly, employee benefits arose from the Second World War. The War Labor Board introduced wage and price control in 1942, however insurance and pensions were not considered wages. At a time when there were labor shortages and no room to negotiate wages, these programs became important differentiators for companies looking to augment their staff.
Some employee benefits are required by legislation at the federal or state level. This includes social security, unemployment insurance, and workers’ compensation. Some states and localities also have paid leave (such as sick time and parental leave). While these are important benefits, they are unlikely to encourage employee engagement.
A more common understanding of benefits includes perks like health insurance, retirement plans, flexible spending accounts, and stock options. While these HR solutions tend to come with a high price tag, not every offer has to. Other perks might include things like transportation vouchers, flexible work schedules and telecommuting, childcare, fitness center memberships, and even allowing people to bring their dog to work. If it is something your employees will find valuable, it may be a benefit.
Why are benefits good for employers and employees?
The biggest advantage benefits provide is their power to attract and retain valuable employees. Aside from the impact that benefits have on morale and employee engagement, employers benefit from some favorable tax advantages for certain benefits.
Benefits are good for employees as well. Employers often have access to group markets that individuals cannot access. For example, group health or retirement plans are often more cost-effective than individual plans, which employees can access. In addition, some of these benefits such as health plans, are excluded from gross income and not taxed at the federal level. Some benefits, such as retirement plans, offer tax shelters to employees. Many employees benefit from paying for these programs through payroll deductions instead of out-of-pocket.
What do employees and companies prefer?
Health insurance continues to be the most important benefit workers want in the US, according to a 2016 EBRI survey, 87 percent of respondents said that health insurance was extremely or very important to them in that survey.
The majority of workers think choice is important when it comes to employee benefits, particularly when it comes to health insurance. Employees like it when the employer pays for the full cost of benefits or at least partial costs. 41 percent of workers indicated that having to pay the full cost of a voluntary benefit is a strong or moderate disadvantage to the employer.
It should be noted that no formula for the “right” mix of benefits exists. What’s important to your employees and what’s important to employees of other companies will differ based on their demographics and culture. Someone who plans to retire within the next five years may prefer better health insurance instead of a better retirement plan. Someone with a young family may prefer paid time off instead of another benefit. This is not to say that every employee of the same demographic has the same preferences, but HR solutions are unique to each situation.
A benefits package that attracts and retains the best employees is what employers are looking for. A benefits package can be used as a competitive advantage when it is strategically employed. Employers face challenges because once a benefit is offered, it is hard to take it away later on. If the benefits are offered without careful financial planning, employers may find that their costs exceed their expectations.
Correlation between employee benefits and competitive offerings
The Employee Benefit Research Institute (EBRI) found that employees who are extremely or very satisfied with their benefits are more likely to say they are extremely or very satisfied with their job. Employee satisfaction with offerings is subjective, so understanding your employee population now and in the future is critical to making the right choices.
HR technology allows companies to offer cafeteria plans to employees. A cafeteria plan is one where employees have a menu of options to choose from, which may include different levels within each benefit. Each choice has a cost associated with the benefit, usually funded by both the employer and the employee. This allows employees to prioritize their preferences, making your offering competitive. Working with professional HR consultants can help you sort through all of your options.
The advantages of offering a benefits package
Companies have been having difficulty in recent years with recruitment because the competition is high. In 2017, the Society for Human Resource Management found that nearly one-third of employers in their survey increased benefit offerings over the 12 months before the survey was conducted. When designing HR solutions, it is useful to have the guidance of an experienced partner like Vantage Point. We can help you design a benefits plan that will increase employee engagement through an attractive benefits package. Our HR consultants can help your organization balance the long-term cost of benefits with the advantage of having a competitive offering.
Employee benefits are a competitive advantage in the search for talent and retaining employees. While pay and company reputation are important to potential and future employees, benefits add value to the total package that employees receive. With HR technology making it easier to tailor offerings, companies can put together a generous package to make you stand out from the competition.
For more information please contact Mike Moncada: 516.599.2120 ext. 114 or mike@vantagepointbenefit.com.