Creating a Benefits Strategy to Avoid Employer Landmines

You Don’t Know What You Don’t Know

Employers need to focus on their businesses, but in the current labor and economic environment the success of an enterprise depends on its ability to recruit and retain employees. There are many strategies that have been advanced including improving company culture, transparency, employee engagement, clear paths for advancement, and opportunities for on-the-job education and training. But studies show the biggest reasons for employees choosing a job or looking elsewhere are healthcare benefits.

Your benefits strategy may be the biggest difference between business success and failure.
Employers, scrambling to recruit employees in a labor-shortage, have been inundated with a cornucopia of inessential voluntary benefits and are being told these benefits are now crucial to attracting and retaining employees. These benefits include dozens of options, from pet insurance to pre-paid legal counseling to commuter insurance and everything in-between. The faulty argument is that employees are demanding these options. This has been proven untrue by a number of studies on choice.

The key is to know the difference between valuable healthcare benefits that provide real care when employees need it, and superfluous “fluff” voluntary benefits that provide little to no actual value. Beyond just low, or no, participation in employer-sponsored healthcare benefits, there are hidden landmines for employers.

Operational Breakdowns and Administrative Nightmares

Uninformed employers can seriously undermine HR operations if they get on the runaway train of excessive and nonessential voluntary benefits. The truth is, most of these lightweight voluntary benefits are better utilized and administered on an individual basis. Peripheral voluntary benefit providers may not have administrative platforms that work with an employers existing systems, if at all. That is just the beginning of a downward spiral that could happen to your business.

Employee Complaints

If you are operating with a limited HR staff, employee complaints will undermine business productivity.

Real Life Stories:

  • One employer tells of an employee who attempted to use her coverage for legal services and found the provider was no longer in business.
  • In another story, providers engaged in over-billing through auto-deductions for services that employees intended to opt-out of, but the directions were unclear. The employer was called in to attempt to get refunds when the provider refused.

When these things occur with less than reputable vendors, the employer pays the price.

HR Loss of Productivity

Business literature today is laden with articles about employee distrust of HR. Admittedly, HR personnel walk a fine line between protecting the business and devising strategies to increase employee productivity and job satisfaction (and therefore retainment). The last thing a company needs to do is increase distrust of HR by offering a multitude (or any) employer-sponsored benefits and THEN not take responsibility if something goes wrong. Inevitably, when employees bring their complaints to HR, productivity goes down. Rather than focusing on positive activities that affect the bottom line of the business, HR personnel ends up spending their time on crisis-management.

Employee Turnover

One of the biggest reasons for employees to leave a job is to get better benefits. This turnover costs employers a lot of money. According to a LinkedIn study of over a half a billion people:

“The industries with the highest levels of turnover are restaurants (17.2%) and retail (16.2%). The positions most frequently vacated include lower-level, often-seasonal jobs, like retail salesperson (19.3%), food service professional, (17.6%) and hospitality professional (17.0%).”

The Center for American Progress (CAP) published a paper that utilized thirty case studies taken from the 11 most-relevant research papers on the costs of employee turnover. The research showed that it costs businesses about one-fifth of a worker’s salary to replace that worker. Other studies show that the cost can be anywhere from 6 to 9 months of the employees salary (SHRM). For businesses that experience high levels of turnover, these costs can add up to significant numbers.

With the high cost of employee turnover, employers cannot afford to make easily-avoidable mistakes. While voluntary health insurance increases retention, creative voluntary benefits have the potential to cause employees to leave in frustration.

Injury to Your Employer Brand

Glassdoor, an anonymous online employer review site, did research on how candidates are using their site. They found that 70 percent of job-seekers now look to reviews as a main decision factor when choosing employment. “The employee voice is an essential piece of a company’s employer brand,” said Carmel Gavin, CHRO at Glassdoor.

Employers need to understand the effects that bad reviews have on their recruiting. Benefits have already been proven as a big factor in employee decision-making and employer recruitment. “The search for better workplace benefits is among the three top reasons why younger employees change jobs,” according to new data from LaSalle Network, a recruiting firm. That is why negative reviews about the benefits you offer employees can cause such harm to the recruiting and retention efforts of your firm. It is nothing, if not ironic, that the benefits strategy an employer is convinced will lead to a competitive recruitment advantage, actually turns into an employer brand-crisis.

The Cumulative Effects of Succumbing to the “Little of Everything” Benefits Strategy

The reality is that an employee-sponsored plan with too many irrelevant voluntary benefits can cause a cascading downward spiral. Many voluntary benefits are not created for implementation by employers, and cannot readily be payroll-deducted, if at all. The introduction, implementation, and execution of a multitude of benefits by a multitude of providers can stress operational systems and cause an internal administrative breakdown.

Too many choices create employee confusion, and inevitably low plan participation in voluntary healthcare plans. And when providers fail to deliver, it is the employer who is inundated with complaints. Unhappy employees go elsewhere, causing more turmoil, as well as sky-rocketing turnover expenses.

When word gets out, as it does in the age of Internet reviews, the “employer brand” and company goodwill is injured. And the ultimate result is that the employer will have difficulty recruiting and retaining good employees.

The Bottom Line:
Superfluous voluntary insurance causes employee confusion and undermines the true voluntary value of employer-sponsored medical benefits. The biggest tragedy is that employees walk away from benefits they truly need because of overwhelming choice. You must not let this happen. With decision-overload, the employee may even turn down a truly valuable employer-sponsored medical benefit that they really need. This is the worst possible outcome that leads to employee dissatisfaction, attrition and negative brand impact – the exact opposite of what a valuable benefits program should provide.

J. Marshall Dye is founder, President and CEO of Insurance Applications Group, a technology-forward benefits design and marketing firm creating health insurance products for specific industries and employee groups. For more insights and helpful information, visit the IAG Benefits Resources page. 

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