Controlling Benefit Costs One of the Most

Controlling Benefit Costs

One of the most serious dilemmas facing organizations today is how to maximize profits in an extremely competitive global environment. Of course, organizations need employees, and there is a cycle that has been growing over the past three decades or so in which employees and other stakeholders are expecting greater benefit packages in order to stay with their employer. The reality of 21st century organizational environments is so competitive for some positions that employers are faced with the issue of having to increase benefits or lose top employees. Governmental regulations are now encroaching into this paradigm as well, and employee costs are now almost always one of the top two expenses for the organization. For most employers, managing these costs has a direct relationship to profitability, the ability to remain competitive in the marketplace and even new business development. However, over the last few years these benefit costs continue to rise an average of 10-15% per annum, now seeing renewal rate increases as high as 40% in some markets. Organizations cannot, in good conscience, remain competitive by raising their prices to offset these costs, and despite stakeholder liberalization and pleas for transparency, cannot diminish profits for stockholders or commitments to the environment, sustainability and modernization.

From a strategic point-of-view, this conundrum has forced many organizations to rethink their Human Resources Department. In the past, Human Resources Management was more of an industry dependent way of filling open positions within organizations, managing some training, ensuring compliance with legal issues, and acting as a buffer when an employee needed to be disciplined or terminated. Modern Strategic HR Management, though, is not simply using computers to recruit and assist in hiring or firing, but the planning and implementation of information management, organizational management, and marketing to support the entire business operation. In effect, it is taking the idea of staffing, retention and training and deconstructing the HR portion to individual managers and employees. The organization thus looks to HR for expertise in planning and adapting both strategic and tactical planning (Walker, 2004).

Benefits are inexorably tied with both functions and effeciencies within the organization, and if benefits are to be offered at greater costs, it is also imperative that HR helps manage effeciencies as well. To improve and match stakeholder expectations, the modern Strategic Human Resource management department must be in place and attuned to the strategic and tactical goals of the organization. SHRM also includes risk management and planning, legal compliance, improvement in diversity issues, retention and employee development and above all, anticipating strategic needs and finding ways to act upon them. HR operates under the paradigm that individuals all have unique motivations, goals and drives. It is the HR professional's job, then, to define and implement the diverse needs that will benefit all stakeholders. When HRM is properly employed, members of the workplace feel safe to express their goals and opinions about operating practices within the organization; and the organization feels safe in dialog between management and employees, the sharing of both strategic and tactical goals, and to find ways to develop and enhance job satisfaction while, at the same time, achieving fiscal goals and objectives (Effron & Goldsmith, 2008).

Now we add another conundrum, the Affordable Care Act and the requirements for many organizations. Healthcare reform of some type is no longer an illusion nor is it a maybe -- it is a fact and will have widespread and radical transformative issues during the next few years. In fact, most experts believe that after getting through the recession, most providers are finally on more sound economic footing, just in time to face the deadlines and changes from the Health Information Technology for Economic and Clinical Health (HITECH) Act of 2009 and the Patient Protection and Affordable Care Act of 2010. Of course, the Affordable Care Act impacts organizations in different ways, depending on their size and the employee issues and population. Certainly, there are more initial costs, getting set up and retooling the benefit packages to match Federal requirements. However, despite the polarization between whether it is good or not, employees now expect to have at least basic health care offered to them regardless of their job. Statistically, the health care benefit laws are more problematical for the retail and restaurant industries because they have fewer full-time employees and more seasonal, temporary and part-time workers. Thus, there is a disparaty between putting a worker on a full-time position, or hiring two part-timers, or, to keep the business small enough to remain under the 50 employee and 30-hour limit (Nather, 2013).

This also bodes to the way pay plans are administered within any organization. Because of the new requirements, there are rules for the number of employees, how many hours they work, whether they are considered part or full-time, their longevity with the organization, and the organization's policy on benefits. Timely and accurate controls need to be made on this in order to avoid confusion for the employee, keep records straight, avoid complicance penalties, and be prepared for any audit that may occur. In addition, without adequate information, the government cannot keep accurate records of healthcare issues, and thus tweak or modify the program as necessary (Harrison, 2013).