During the booming industrial age when a potential employee would seek out employment at a medium to large sized company, they would look at wages as the main reason for choosing one company over another. Most employers would typically offer the same benefit plan which included medical and dental insurance. This same employee also knew that if they stayed with this employer until retirement, their retirement needs would be met through a defined benefit plan.
Employees during this time period did not need to be educated on their employee benefits program because they had little to no choice in the matter. Typically, these employees were enrolled automatically in their benefits and could not make any adjustments or changes to their plan or plan design. Benefits were viewed as and became entitlements.
Now enter the information age. With the cost of offering a competitive employee benefits program at an all time high, employers are having to share some of the costs associated with offering such benefit plans with their employees. As employers are struggling to attract and retain good quality employees, they are finding wages are not the only issue as it pertains to hiring a new employee. The employee benefits program has now taken center stage.
The result, as employee benefits continue to cost more and more each year, employees will now make changes to their employment over benefits not just wages.
The one constant between the two ages is the perception that employees are entitled to these employee benefits and they are not viewed as an employee perk.
So how does this perception get changed? By introducing employee driven benefit plans.
By allowing employees to take control of specific design elements of their own personal benefits plan, the employee and the employer receive huge dividends. Although, this may sound like the old cafeteria plans of yester year in which the employer gave their employees a sum of money to purchase benefits from a benefit bank, this strategy works much differently. The cost of this program becomes transparent to the employee and therefore they see the total cost of their benefit program.
Since the employee sees the actual cost of their own employee benefits program, this strategy requires input from the employee to design their own program in which variety is the key. By offering a multitude of benefit options, the employee is in control of their own plan design as well as the cost. Most employee driven plan designs offer multliple medical, dental, short term disability, long term disability and many other insurance offerings including voluntary benefits such as accident, cancer, life and identity theft coverages. Just to name a few.
So how does this employee driven benefit plan work and what is the best strategy for implementation?
There are three main aspects to developing this type of benefit strategy:
1. Communication. Communicating the features and benefits of this type of strategy should be the foundation of offering an employee driven benefit plan. It is important for an employee to be educated on their benefit options as it pertains to their situation and allow them to make good decisions as it relates to the benefits and their cost.
This can be accomplished through group meetings, newsletters, informational call center or through licensed benefit couselors. Of all the options, the latter is preferred.
2.Enrollment. As the employee designs their own benefit plan, each design may be different from one employee to another. For this reason there must be an electronic enrollment system in place for ease of enrollment and to assist in the transfer of data electronically to multiple vendors and/or carriers.
3. Administration. As employers look to cut their budgets or to reduce costs, it is important that a strategy like this does not increase the overall cost of administering the employee benefits plan or add an additional administrative burden. So having an electronic enrollment system that can be used as an administrative and billing tool is of the essence.
Once this strategy is implemented there are 4 main benefits for the employee and the employer.
1. Since the employees become educated through this process, he or she has a higher level of understanding of their own benefit plan and how to maximize the benefits for their own use.
2. Benefit statements can be produced and printed from the enrollment/administration system so the employee can see the total costs of their benefits and the amount the employer is contributing on their behalf. The employer may also include items on this benefit statement such as the cost of additional taxes or benefits paid on behalf of the employee to show the employee their total compensation received for that year. Most employees never see this type information.
3. Tax savings. Since most of the additional benefits in this employee driven benefit model are pretax, the overall costs are reduced for both the employee and the employer.
4. By including the employee in the overall process and by allowing them to understand the costs associated with offering an employee benefits plan, the employee understands the employer cost and feels appreciative of the benefit. Their benefit program becomes a benefit again.
So what is the end result?
The end result of this employee driven benefit strategy is plan understanding, employee appreciation and transparency of cost which will allow all parties to maintain control the costs associated with offering a complete benefits program. As technology continues to develop, more options related to this type of plan design will be available.
Rick L. Guetzkow has been a employee benefits broker and consultant for over the past 15 years. He has helped many companies design, build and enroll this new employee driven benefit strategy with great success.
To learn more please go to http://www.bluechip-advisors.com
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