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Economic Factors
The most obvious indicator that a benefits plan needs revisiting is cost. Employers’ health care costs, for example, have risen steeply in recent years and will take another significant hike in 2003—up as much as 18 percent, according to some analysts. The Washington, D.C.-based consulting firm Watson Wyatt reported that more than half of the employers who responded to its Health Care Costs 2002 Survey said they expect to raise employee contributions to keep up with cost increases. More than 70 percent said they are considering reducing benefits or boosting co-payments in the coming year.
To counteract the skyrocketing costs, employers are reducing health care benefits or raising co-payments. However, it is important to take into account how employees will perceive major modifications to their coverage. “Employees view any changes to health plans as something being taken away, so be careful,” says John Smoyer, a Mesa, Ariz.-based consultant and member of the Compensation and Benefits Committee of the Society for Human Resource Management (SHRM). “It’s easier to ask employees to pay more in deductibles and co-pays than ask them to give up benefits they really like, such as dental and vision,” he says. You can reduce the coverage, he suggests, but it’s not worth the poor public relations to eliminate popular benefits completely. If you do need to cut whole benefits, consider replacing them with low-cost benefits or with no-cost benefits such as flexible scheduling.
One hard-to-ignore trend is the rapid rise in the cost of prescription drug benefits—17 percent last year, according to Watson Wyatt. St. Louis-based Ascension Health, the nation’s largest not-for-profit hospital and health system, is revising its prescription drug benefit for its 80,000 employees. “This is a major revamping of a benefits program,” says Dale Wilder, senior director for benefits services. It was triggered by data showing employees’ costly prescription drug utilization levels, and by Ascension’s desire to gain control over that. Employees are issued a prescription drug card to be used at participating pharmacies, and they are charged co-payments. “With our focus now on utilization and clinical management, this change is going to help us better manage our drug costs, which had represented 15 percent of our premium.”
On the financial side, stock market volatility has placed retirement plans under new scrutiny, prompting some companies to suspend their contributions to employee 401(k) programs until earnings rebound. “The trend really began in 2000 when SEC filings revealed that employers as a group contributed less money to 401(k)s than the previous year,” says David M. Neikrug, a principal of Bluefinch Corp., a consulting firm in Valley Stream, N.Y., that specializes in employee benefits and HR. “The point is that while turning off the spigot to contributions may raise a few eyebrows, it’s necessary to change with the times. The caveat is that you have to communicate these changes to staff skillfully.”
Complaints and Departures
Another clue that your benefits offerings need a fresh look comes from employees themselves. “Your No. 1 priority for your benefits program is keeping employees happy,” says Ronald Snyder, president of Benefits Strategies Group Inc., in Salt Lake City. “If a significant number of employees complain or are asking for benefits you don’t have, it’s a sign you may be out of step with your competitors.”
And don’t ignore employees who quietly vote with their feet. “Be aware of unusual changes in turnover,” says Smoyer. “If you’re losing employees from certain demographics—younger, older, parents, singles—it could be a morale issue brought on by benefits dissatisfaction.” In an ideal world, he says, HR should conduct employee focus groups every couple of years. Exit interviews with departing employees also can be revealing.
In addition, companies should benchmark their benefits against local hiring competition, against national industry data and against themselves over time, just as they would for compensation.
But perhaps the best way to gauge employee satisfaction is to be out there, available and listening. Aligning benefits with workforce desires “is pretty intuitive,” says Neikrug. “You have to stay involved. A good HR person is out and about, always talking to folks.”
Rexall Sundown Inc., a Boca Raton, Fla., manufacturer and marketer of vitamins and health care supplements, takes this strategy one step further by re-evaluating company benefits for its 1,200 employees each year, says Sandra Sipari, director of compensation, benefits and human resource information systems. “We are learning that first you have to understand the demographics of your employee population and you have to reach out to discover what’s important to those people generally,” she says. “We want to make sure what we are offering is in the ballpark with our competitors.”
The company also continuously tracks employee satisfaction, Sipari says. “Employees tend not to be satisfied in this climate. They feel like they are getting less. But we try to keep on top of their needs, and if there’s something we feel has to be changed, we’ll do it at any point in the fiscal year.”
Demographics
Sipari and her team are taking a qualitative approach in assessing benefits by using their “Life Cycle Grid”—a chart of the company’s workforce by age, gender, marital status and other characteristics, aligned on a grid, with company offerings sorted into financial and other benefits, work/life, environment and culture. “We can compare what we have with best practices, look at how our employee demographics are evolving, and put changes on a timeline,” says Sipari.
Bear in mind that you won’t be able to please everyone in the organization. “Somebody is always complaining,” says Smoyer, “so you’ll never have an optimum program. Outside of a full cafeteria plan, it’s difficult if not impossible to meet the needs of 20- and 50-year-olds consistently. You have to constantly keep your eyes open for new products, go to conferences and read magazines. Stay on top of the trends.”
Work/life benefits are always ripe for re-examination, however. These often cost the least but give employers the most bang for their buck. New offerings come into vogue, such as domestic partner benefits, while once-popular offerings may eventually look excessive and irrelevant, particularly in a period of belt-tightening (concierge services come to mind).
Check frequently to make sure your benefits are adequately serving your employee demographics. “Have a variety of health plans based on age,” Smoyer recommends. “Younger people want time off and money; older people want 401(k)s and good medical. Those in the child-bearing years want child care and flexible leave.”
Change May Not Be the Answer
When a benefits review is set in motion, the goal shouldn’t necessarily be change. “Before you make adjustments, you need to understand what you have now and how it’s being utilized,” says Neikrug. “If your health costs are skyrocketing, look at how employees are using the plan. Are they going to the [emergency room] instead of a primary care physician? Does the company need a wellness center? In other words, just because a benefit is costing you more doesn’t mean it has to be adjusted or thrown out. Sometimes a little employee education is in order.”
Bluefinch, Neikrug’s company, has developed a model utilization audit for clients that prompts them to examine patterns of claims. “You can tell a lot just by looking back at three years of claims,” he notes.
Likewise, when employees complain or demand additional benefits, it’s not always necessary to comply. Neikrug suggests furnishing each employee with a single-page benefits statement—essentially a list of each benefit the individual receives, and the dollar amount that each benefit costs the company. “Doing a simple benefits statement annually costs just $10 to $20 per employee. But it shows them exactly what they are getting, and demonstrates their value to the company.”
It also may alleviate some dissatisfaction.
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company’s benefits package is a work in progress. Each fall brings revised health insurance contracts to consider, and each swing of the economy can affect recruitment and retention strategies. But apart from yearly health plan tinkering and long-range strategic planning, company benefits plans often lie dormant. As a result, HR departments may be missing signals that it’s time for an overhaul.
