Employee Benefits: Key Issues, Solutions, and Future Trends

Introduction: The Importance of Employee Benefits

Most permanent employees today receive at least some company-provided benefits. As a result, most human resource managers must help employees choose from a wide variety of options, ranging from health insurance plans to marriage counseling provisions and everything in between (Harrington, 1996). The importance of employee benefits cannot be ignored, as a competitive package often means the difference between attracting and retaining the best employees and losing them to the competition.

Employee benefits offer workers many advantages, including health insurance, retirement packages, investment funds, and paid vacation time. Companies that provide strong benefits frequently find that employees are more loyal and more likely to remain on the job, in part because they do not want to forfeit those benefits.

Four Major Issues in Employee Benefits

While employee benefits can be significantly helpful to companies in improving employee retention and providing workers with added job security, there are four major issues surrounding their use today. As one source notes, "Given the current business climate, it's more important than ever to have a competitive benefits package in order to attract and retain qualified employees" (Censor, 2001).

In most companies, the provision of employee benefits costs approximately 25 percent of the total payroll, yet employees are often unaware of what the company spends on their behalf. One of the central issues surrounding employee benefits, therefore, is a lack of effective communication. As Censor (2001) observes, "An effective communication effort need not be costly or formal. At the very least, candidates for an available position should be provided with a comprehensive (verbal or printed) description of the benefits offered; merely saying 'We offer a competitive benefits package' won't cut it anymore."

Government-mandated benefits represent the second major issue for organizations across the country. Federal and state legislation requires employers to provide certain benefits, including payment of workers' compensation premiums, unemployment insurance, and, in many states, disability insurance (Censor, 2001). These programs must be funded at least in part by the employer and can become costly as the workforce grows.

The overall cost of benefits has emerged as a pressing concern, particularly given shifts in the national economy. Companies that offer generous sick leave and vacation policies must account not only for the cost of paying an absent employee but also for the expense of hiring a temporary replacement to cover that person's responsibilities.

The fourth major issue is the management and supervision of employee benefits programs. Administering these programs requires time, expertise, and resources, all of which can strain an organization's human resources department.

Organizational Strategies to Address Benefits Challenges

To address the communication gap, companies should periodically remind employees of the full range of benefits available to them. As Censor (2001) suggests, "For current employees, it's a great morale booster to circulate a periodic reminder of available benefits. A hard-copy or e-mail may be sufficient for this purpose, depending, of course, on your company's protocol for such employee communication (and applicable state and federal laws). The printed version can be as utilitarian or as elaborate as your budget allows; the point is to get the word out." This approach applies even to legally mandated benefits, as reminding employees of these provisions reinforces the message that their compensation extends beyond their base salary.

To address government-mandated benefit requirements, companies should conduct regularly scheduled compliance reviews. The rules and regulations governing mandated benefits are constantly evolving, which can leave even well-intentioned organizations in a precarious position. A single complaint from a dissatisfied current or former employee can trigger a compliance investigation, with potentially significant financial consequences. Each organization should designate a staff member responsible for conducting periodic checks with relevant government agencies to ensure ongoing compliance.

The administrative burden of managing employee benefits can be reduced through outsourcing. For many years, web-based benefits management tools were prohibitively expensive for smaller companies; however, the market has changed considerably. Today, basic employee benefits administration can be outsourced for as little as five dollars per employee per month. Some of these services also provide online purchasing options that reduce the time employees spend on personal errands, effectively functioning as an additional workplace benefit.

One further measure that companies can take to protect themselves is to obtain an insurance policy rider covering the cost of damages in the event that the organization errs in the calculation or provision of employee benefits (Harrington, 1996).

Conclusion

Providing open communication about the benefits offered will also be an important step in the future of employee benefits packages, as it allows employees to understand which benefits they are receiving. Taken together, strategies such as regular compliance reviews, outsourced administration, self-selected benefit options, and transparent communication will be essential tools for organizations seeking to manage the challenges and opportunities that lie ahead in the realm of employee benefits.