What’s the Difference between Performance & Proficiency?

By Mykkah Herner, MA, CCP, Compensation Consultant at PayScale.com

Here at PayScale, we often talk about compensation philosophies answering 3 main questions:

  • How do you define your market?
  • How competitive do you want to be relative to the market?
  • What do you want to reward?

In working with clients, I find they know the answers to the first two questions within a heartbeat. The third question, however, often leads them to stumble and to look to me for guidance. What are the options? What should we reward? At that point, I have to dig in deeper to their organization.

There’s no single right answer for what companies *should* reward. In some orgs, there will be just one thing to reward, in some it will be a combination of factors. At a time when most companies are focused on pay-for-performance, I want to explore this third question a bit further.

What do you want to reward?


Ultimately, for me, it will always come down to some variant of performance. If your employees aren’t going above and beyond, exceeding expectations most of the time, it’s likely that your organization will stagnate. Stagnation is close to death in a highly competitive environment. The number one question I ask myself when defining a compensation strategy is how am I going to motivate employees to perform? In measuring performance, it is about setting clear expectations, in the form of metrics, for what it looks like to excel and then following up on those expectations.


What’s the difference between performance and proficiency anyway? I see proficiency as one’s ability to perform the tasks required to do the job, having the right skill-set, etc. Performance refers to how well one performs those required tasks, exceeding expectations vs. meeting expectations, and so on. I know that’s simplistic, but breaking it down to that level helps me then think about how I might measure proficiency. Some measures for proficiency include checking that one has skills and ensuring that tasks have been completed.


The average tenure in my parents’ generation was 5+ years. My generation can boast a meager 3 years. The average tenure in newer generations to the workforce can be measured in months, not years (usually 12-18, according to one researcher). With that in mind, rewarding tenure can sometimes be helpful to the continuity of your organization, but it still may not be the right motivator for performance. You may have better luck achieving continuity through structural means rather than through compensation.

Other options?

There are plenty of options besides the big three listed above. For some, it will make sense to reward certain skills. I’ve worked with clients who couldn’t get by without their technical staff. For them, targeting a higher percentile for their technical staff was crucial to accomplishing their business goals. For other clients, security clearances are a hot commodity. You know what’s important to your organization. Put your money where your priorities are.

Remember, you don’t have to reward all things equally. You may decide that you want to tie a large part of your compensation to performance, but still give token acknowledgments for proficiency and tenure. But be sure to keep it simple. Explain it easily and succinctly – and maybe you will avoid a few headaches for your payroll team.

Whatever you decide, live it as an organization. Make sure your managers and leaders buy in to your decision around what to reward. Explain your philosophy to your staff so they are clear about what’s important to your organization. And, as with all policy decisions, once you decide what you want to reward, stick to it.


Company Car Drivers Need Extra Care, Not Extra Costs

By David Brennan

The budget was a mixed bag for business drivers. Whether you simply own a company car or have responsibility for managing a corporate fleet, the Chancellor’s announcements have important implications.

The good news is that many businesses can expect to benefit from a competitive 22% corporation tax rate by 2014 and credit easing under the Chancellor's budget. From our own experience, and what clients are telling us, we are optimistic about a recovery in 2012, but it is fragile.

In the need to balance the books, the Chancellor is inevitably giving with one hand while taking away with the other. While the tax relief for businesses will have come as welcome news to many, this reprieve will, unfortunately, be made up in other areas. This year, it is company cars that must face a tax raid.

As many organizations rely on business vehicles to function, these unanticipated costs threaten to hit the heart of the economic recovery.

The combination of significant increases to Company Car Taxation, together with reductions in the Writing Down Allowance and Leasing Disallowance main threshold to 130 grams of carbon per kilometer, creates a challenge for vehicle manufacturers and fleet managers alike. As many manufacturers were working to the previous guidelines, there will inevitably be a period of re-adjustment, which could see demand for contract renewal and slowing in the take-up of new vehicles.

We are not surprised by the direction of this policy to reward the choice of vehicles emitting lower emissions. Indeed, we have long supported businesses' efforts to reduce the CO2 footprint of their fleets. However, the scale of the taxation does come as a surprise, given the Government's previous rhetoric and pre-budget indications.

Businesses should now be looking to their fleet providers to advise on a tax-optimized fleet profile as costs can still be contained, but the criteria for vehicle selection to make these savings will most likely be tighter than ever before.

Despite this heavy blow, there were some more encouraging automotive developments. The decision to abolish the 3% diesel supplement is a positive move. Bringing diesel vehicles into line with equivalent petrol engines from 2016 should encourage environmentally-responsible vehicle choices.

I was also pleased to see the Chancellor mapping out the planned company car tax rates for the next five years, allowing drivers to recognize and consider the long-term benefits of driving lower-emitting vehicles, as well as helping companies such as ours plan for the future.

Away from company vehicles themselves, I have misgivings about the direction being taken with regard to Government spending on the roads. While the Government's commitment to find new ways to finance our road infrastructure is welcome, this could open the door to more toll roads, which I am skeptical about.

I would highlight the example of the underused M6 toll road, which has some of the highest charges in Europe. Unsurprisingly, motorists are still opting to use the neighboring M6, where traffic levels are rising. Tackling congestion is important, but this must not come at an additional cost to business drivers – many of whom will be unwilling, or indeed unable, to pay.

Finally, there is the issue of fuel. While it is impossible to insulate the UK from the volatility of the global oil market, the Chancellor is able to control pump prices to a large extent and the decision to retain August's fuel 3.02p per liter duty hike is therefore short-sighted, at a time when business travel risks becoming prohibitively expensive for some. Right now, business drivers need extra care from the Government, not extra costs.



Read why flexible benefits don’t always have to be online

By Steve Hemsley

Whether it is reading books on a Kindle or buying groceries online, the technology industry has long proclaimed we are heading for a paperless society.

When it comes to communicating and then administering something as important as flexible benefits, HR directors can find it hard to resist the temptation to switch to an online solution.

From a time-saving point of view, changing to a web-based system should make perfect sense, because one of the reasons for dumping paper is to shift some of the back office admin work onto the employee. And why wouldn't someone want to spend some of their free time looking at an online benefits portal? After all, 85% of employees rate benefits as 'important' or 'very important', according to the CIPD.

Yet any benefits program is only successful if it engages staff by making it clear what is being given, why, how benefits will work and when new ones will be introduced.

Charles Cotton, adviser for performance and reward at the CIPD, says at first glance technology may appear to make schemes easier to administer and communicate - and in some cases cheaper. But, he argues, HRDs must think carefully before committing to what could be a hefty, long-term investment.

"Ultimately, an employer must consider how having flexible benefits supports what it is trying to achieve and what it needs from its employees," says Cotton. "If the benefits scheme is relatively simple, then paper is perfectly fine and the HR team will not gain anything from switching to online. In fact, data can go missing or be incorrectly inputted and the HRD must decide if he or she is happy for the information sent electronically to be accessed by a third party." Even when paper folders are consigned to history, there still remains an administrative burden. The HR team must study and respond to the data reports being generated, for example.

Traditionally, HR has worked closely with the payroll and the internal communications teams to communicate flexible benefits.

A switch to online can complicate the working relationship, because the IT department and a third party technology provider become involved.

HRDs can also underestimate how long it will take to implement a technology solution (up to six months) and the ongoing costs involved during the length of a web-based contract (often three years or more).

Claire St Louis, HRD at digital marketing agency Essence, whose clients include Google and eBay, agrees with the CIPD and urges HRDs not to rush into technology for technology's sake.

She says technology can be a barrier to some staff understanding and engaging with the benefits on offer, especially in companies where employees do not work in front of computers, are on the road, on the shop floor or in various manual roles.

"Many companies wrap themselves up in HR processes, ultimately forgetting the reason why they are doing them," says St Louis. "Benefits are there to retain, motivate, attract and maintain competiveness and, in many cases, people-based internal communications and paper administration is still the right way to go."

Kuljit Kaur, head of business development at the Voucher Shop, says organizations must certainly not ignore the importance of internal communications and the power of having HR staff and specialists available to explain how and why particular benefits exist.

"People are naturally cynical and think there must be a catch when it comes to benefits. A more 'people-based' approach allows you to communicate why this is not the case," says Kaur. "Using real people as advocates of particular benefits to talk to other staff face-to-face works better than just sending an email telling people to log on to a website to view benefits. Technology assumes people will make the effort to find out more."

Even Matt Waller, CEO at online provider Benefex, accepts that for some organizations a paper system can be cheaper, remove reliance on involving third parties and enable more control internally. But, he points out that an online option allows data to be centralized and makes it easier to communicate benefits to large numbers of employees.

"For businesses that want a flexible benefit or total reward scheme to reach as many people as possible in the most time- and cost-efficient way, technology has to be the way forward," he says. "Benefit selection errors can be corrected more quickly and paper document hell is avoided when informing payroll and benefit providers."

Matt Duffy, head of online benefits at Lorica Consulting, backs him up, although he agrees that technology is not right for every organization. "Online is a simpler solution for an increasing number of companies, although when setting up a flex scheme there is less of a build phase with paper," he says. "However, what actually takes the time is devising the rules and working out who is eligible and what the rules are. Companies still have to do this, even with a paper system."

In reality, this is not a black and white issue between paper and internal communications or online. Most organizations now adopt a multi-channel approach, supporting an online system with various forms of offline communication.

Even at technology giant Telefónica O2, paper has not been abandoned completely. It supports its tailored online benefits system with leaflets posted to an employee's home address. There are also benefits roadshows.

Telefónica rewards manager Kirsty Read says offline communication uses simple messaging to draw people into the website, where they can discover more detailed information on complex areas such as salary sacrifice and tax.

"We have actually re-introduced the paper leaflet after a five years' absence," says Read. "Staff told us they wanted a range of different communications relating to benefits. If they receive a leaflet at home, they can start to think about their benefits and discuss them with their family."

A multi-channel approach is supported by Thomsons Online Benefits' MD, Chris Bruce. "This is about ensuring that even with an online solution, staff can still talk to real people at workshops and clinics and read paper benefit guides alongside the online content," he says.

While it can make sense for larger employers to move online, many SMEs are concerned about the cost of the technology and perceive it as complex."

Julia Turney, head of benefits management at Jelf Group, says a flexible benefits system can certainly work without technology, particularly in small companies that have simple salary exchange benefits without complicated calculations.

"The administration side of things tends to be the deciding factor for companies moving to an online system, but technology alone will not engage staff with benefits, even if it makes the HR department's job easier," says Turney.

Benefits consultancy Mercer has teamed up with software firm Sage Employee Benefits to develop packages for organizations with fewer than 100 staff. SMEs are offered an online portal, but employers still have access to Mercer's specialist advisers.

"Technology is not always the answer," says Matthew Forrest, head of services at Sage UK. "Many SMEs want to offer benefits and can do so with paper-based and telephone support. This product allows owners of small businesses to manage a flexible benefits package at an affordable price, shaped to their needs."

The technology providers' message that online is best does seem to be winning over SMEs, with an increasing number ditching their paper systems. This trend is likely to accelerate as benefits packages become more complex and employers prepare for the phased introduction of auto-enrolment pensions this year.

Law firm D Young has 180 staff in London and Southampton and switched from paper to a predominantly online system in June 2011, with the help of Thomsons Online Benefits. An employee survey in December revealed staff are more aware of the benefits available to them now than they were under the paper system.

"In the first year, we used paper-based marketing to communicate the online benefits system, but in year two we will do this online with an e-brochure," says D Young HR manager, Jennifer Mead.

One company in the process of switching to online is Sumitomo Electric Wiring Systems, based in Staffordshire. Its HR manager, Liz Brown, says the move from paper will take place on 1 April.

"We are introducing flex benefits and felt online was a more efficient and flexible option, as we wanted something people at our different UK sites could access easily," she says. "Until now, a paper system has been adequate for the salary sacrifice and other benefits we offered our 230 staff, because there was not much data to deal with."

The technology companies will vigorously fight their corner to demonstrate that organizations running benefits programs can miss out by not moving online. Savvy HRDs, however, will only switch from paper when the time is right.

Northern Rail: paper trail

Should Northern Rail retain the franchise to run train services across the north of England, it will look to move from a voluntary to a flexible benefits system, but it won't ditch paper.

This 50:50 joint venture between Serco Group and Abellio, formed in 2004, has 4,800 staff scattered across the north, and most employees are drivers, conductors or engineers and do not have access to company computers.

An employee survey in 2009 discovered a low satisfaction rate regarding its benefits scheme, which is a combination of voluntary benefits and an employee assistance plan (EAP), as well as salary sacrifice, free travel and a final salary pension.

Northern Rail compensations and benefits manager Paul Stephens(pictured left) says communication was an issue, so the company introduced a benefits booklet and increased coverage of the scheme in its staff magazine, Your Northern, sent to every worker's home address. There is a telephone helpline and benefits roadshows are held at different depots.

"The culture of our business is paper-based and people still like to receive hard paper copies of anything to do with their job," says Stephens. "The difficulty with a booklet is that things can change and the content can become out of date quickly, but staff like to get paper copies of their total rewards statements, for instance."

Despite its traditions, Northern Rail appreciates the advantages of moving some of the administration online when the flex scheme is introduced and it is working with benefits provider, Personal Group.

Stephens wants to encourage staff to check the internet at home, but many paper aspects - such as the magazine coverage as well as the telephone helpline - will remain.

"We fear we will lose the engagement levels we have generated since 2009 if we move everything online - and we cannot afford to do that," Stephens says.

Hilton Worldwide: engagement online

Sean Thomas, cluster HR director at hotelier Hilton Worldwide, says he could not run the company's benefits scheme without technology. In fact, he says it would be "a nightmare".

He is convinced paper-based schemes will die out within a few years and everything relating to employee benefits will be online, especially in large organizations.

Many of Hilton's thousands of staff globally are young and have an expectation of a technology solution. For the HR team, it makes administration simpler and the reports the online platform generates mean the scheme is more effective, according to Thomas.

"We can see from the click through rates what things people are interested in and what is not so popular and react to that in a timely fashion.

"I believe that without technology, communicating when the benefits window is open would be harder. We send regular emails, although we do support this with posters around the offices."

He says that, as a US-centric organization, the whole group has to adapt to ideas and technology coming out of the US designed to help the business.

"Without this technology, I do believe it would be much harder to communicate our benefits to staff and they would be much less engaged with them."

There can be confusion among employers about whether a flexible or voluntary benefits scheme is right for their organization. A flexible scheme lets employees choose the benefits package that best suits their lifestyle and personal circumstances. They may prefer tax-efficient benefits such as childcare vouchers or to make salary sacrifices to boost their pension.

Flexible or voluntary?

Flex is a good way to bring consistency across a group of companies, as part of a harmonization process, or to tailor benefits to staff if a workforce is diverse.

Staff can usually change their core benefits once a year, during what is known as a 'benefits window' and, whether it is a paper or an online solution, employees can see a menu of benefits and the price of each. They usually receive a 'total rewards statement' outlining their total remuneration.

An employer can make a scheme as flexible as it wants to, so staff feel valued. Ultimately, a well thought out flexible benefits package can help to retain and attract talent.

Companies often add additional voluntary benefits, which are products and services staff can buy, at a discount. The main difference between voluntary benefits - such as retail discounts or gym membership - and flexible benefits is that they are paid for by an employer allowance or benefits pot, or their own salary, through payroll.

Many employers use the tax and national insurance savings gained from introducing salary sacrifice benefits to fund the cost of administering a voluntary benefits discount program.


Employees Placing Greater Reliance on Benefits

By Brian M. Kalish

Tough times have employees placing greater reliance on benefits for financial security, as employers affirm their commitment to sponsoring those benefits albeit with increased cost sharing.

That’s one upshot from the 10th Annual MetLife Annual Study of Employee Benefits Trends released Monday. It found that since 2002 employer’s top benefits objectives -- controlling costs, attracting and retaining employees and increased productivity – have remained fairly constant. However, some delivery aspects have changed, such as the growth of auto-enrollment features in 401(k) plans. For advisers, the trends seem to point toward stable expenditures for core benefits, but greater funding from employees, including voluntary benefit purchases.

Nearly half of the 1,412 employees surveyed said that, because of the economy, they are counting on their employer to help them achieve financial security through employee benefits such as disability and life insurance and health.

For younger generations, that number is even higher. More than half (55%) of Gen X and two-thirds of Gen Y workers said economic pressures leave them counting on employers’ benefits program to help with their financial projection needs, according to the study, presented by MetLife’s National Medical Director Dr. Ron Leopold, an EBA Advisory Board member, at a MetLife Symposium in Washington.

Employers say they are hearing these concerns and rising to the challenge. Regardless of company size, of all companies surveyed, only 10% said they planned to reduce their benefits.

“The workplace has changed rather dramatically over the last decade since MetLife began doing its annual study,” says Anthony Nugent, executive vice president of MetLife.  “Ten years ago, many Baby Boomers were planning to retire at age 65, Gen Y workers were just entering the workplace, and communication vehicles like Facebook and Twitter didn’t exist.”

As employees rely more on benefits, they are willing to bear most of the cost of them. Of surveyed Gen X and Gen Y employees, 62% said they are willing to bear more of the cost of their benefits rather than lose them.

And that may happen. While a third of employees believe their employer is likely to soon cut benefits, 70% of surveyed employers said they intend to maintain their current level of employee benefits. However, 30% will do this by shifting costs to employees.  Some 57%, are interested in a wider array of voluntary benefits offered by their employer, as compared to 43% of Baby Boomers.  The study also found that employers recognize this interest as 62% of employers agree that in the next five years employee-paid benefits will become a more important strategy than they are today.

With the ever-changing benefit landscape, loyalty continued to fall. Only half (42%) of employees feel a strong sense of loyalty to their employer, a seven-year low. Conversely, 59% of employers said they feel a very strong sense of loyalty to employees. One in three people would like to work for a different employer in 2012, but that number climbs to one in two for Gen Y employees.


More than 80% of employers look to adviser for PPACA education

Beginning in 2014, the Patient Protection and Affordable Care Act requires employers with more than 50 employees to offer minimal essential health coverage to employees or be subject to a penalty. More than three-fourths of employers plan to continue to offer coverage for employees once this new requirement takes effect. However, a majority of respondents are also concerned about their ability to offer affordable health coverage to full-time employees.

The 2012 Health Care Reform Survey was conducted from January 6 to February 24 by Milwaukee-based Zywave, a software provider for the insurance and financial service industries. More than 7,800 employers nationwide participated in the survey.

Respondents are from 14 business sectors, with heaviest representation from services (18%), manufacturing (15%), nonprofit (11%), health care (10%) and construction (9%). Respondents spanned organization size: 43% with less than 50 employees, 17% with 50–99 employees, 27% with 100–499 employees and 14% with more than 500 employees.

Among those surveyed, 51% will definitely continue to offer health benefit coverage, 29 % will likely continue coverage, 3% will likely discontinue coverage and 1% will definitely discontinue or have already discontinued coverage. Meanwhile 19% are unsure what they will do when the requirement goes into effect in 2014.

“These findings are consistent with other recent surveys on the topic,” says Zywave attorney Erica Storm. “Given the uncertainty surrounding health care reform, employers do not appear eager to make big changes to their benefit offerings. Plus, employers remain concerned about competing for talent and seem nervous that dropping coverage could affect recruiting and retention efforts, despite other health care options provided for in the law.”

Other survey results include:

• 57% of employers responding are concerned about their ability to offer affordable health coverage to full-time employees.

• More than three-quarters of respondents have already seen an increase in their organizations health benefit costs or expect to see an increase as a result of PPACA provisions. Sixty-three percent of employers plan to pass these increases on to employees.

• PPACA requires group health plans that provide dependent coverage of children to make that coverage available to children up to age 26. In response to this requirement, 10% of employers surveyed increased the employee share of premiums or benefit costs for all coverage, 9% increased the employee proportion of dependent coverage cost and 2% eliminated dependent coverage.

• PPACA provisions that employers are most concerned about implementing and administering include: new reporting, disclosure and notification requirements (57%), the requirement to automatically enroll new employees in a health plan (40%) and additional W-2 reporting requirements (49%).

By Marli D. Riggs

Not as Simple as Paying or Playing

By Jenny Ivy

With roughly half of employers saying they'll definitely be offering health coverage even after insurance exchanges begin, speculating with certainty (a bit of an oxymoron) that it's only a matter of time before companies drop health coverage is a futile argument.

Likewise, it's fair to say that there are several legitimate reasons for companies (particularly the bigger ones) to keep offering coverage, but we're only assuming the status quo won't change dramatically once health reform is in full effect. All you have to do is look at the numbers that are already dropping, and dropping hard. [See: Reform driving up health plan costs]

Studies, including the one released last week by Towers Watson and the National Business Group on Health, show there is a commitment among employers to do what they can to keep offering coverage in the near-term. Beyond 10 years, however, is when things get debatable. According to their employer survey, only 3 percent of employers are somewhat to very likely to discontinue health care plans for active employees in 2014 or 2015 without providing a financial subsidy. By the same measure, 45 percent of employers are somewhat to very likely to offer coverage to only a portion of their work force and direct the others to the exchanges.

While most employers will remain focused on sponsoring the design and delivery of their health care programs through 2015 (77 percent), they are much less confident that health care benefits will be offered at their organization over the longer term. Less than one in four (23 percent) companies are very confident they'll continue to offer health care benefits 10 years from now, down from a peak of 73 percent in 2007.

Unless there's a revolutionary way of delivering health insurance, employers will be circulating through all the options to combat high health care costs. The Towers Watson/NBGH survey shows health care costs per employee are expected to rise 5.9 percent this year, as compared to 5.4 percent in 2011. Health care costs per employee averaged $10,982 last year, and is expected to rise to $11,664 in 2012. Employees’ share of costs increased 9.3 percent during this period, to $2,764. This amount represents a 40 percent increase in costs from just five years ago, as compared to a 34 percent increase for employers over the same time period.

“As employers try to maintain the balance between containing costs and offering competitive total rewards packages, they are realizing that their future health care benefit choices are not quite as simple as ‘paying or playing,’” says Ron Fontanetta, senior health care consulting leader at Towers Watson. “In fact, there is a wide spectrum of design choices that will allow employers to develop a health care strategy that matches their unique objectives and workforce demographics.”

Besides actually cultivating healthier employees, the survey shows there are several emerging tactics they plan to use to control their costs:

  • Spousal and dependent coverage surcharges: Roughly half of the companies (47 percent) increased employee contributions in tiers with dependent coverage, and about a quarter (24 percent) are using spousal surcharges, with another 13% planning to do so next year.
  • Growth in Account-Based Health Plans (ABHPs): Nearly one in six companies (59 percent) are offering an ABHP today, and another 11 percent plan to do so by 2013. ABHP enrollment has nearly doubled in the last two years, from 15 percent in 2010 to 27 percent in 2012.
  • Changing pharmacy landscape: Six in 10 companies have added or expanded step therapy or prior authorization programs, and 21 percent reduced pharmacy copays last year for those using a generic with a chronic condition (with another 16 percent planning to add this feature in 2013).
  • Vendor management and transparency: Three in 10 companies (30 percent) have consolidated their health plan vendors in the past two years, and 11 percent plan to do so next year.

Confidence in Voluntary Benefits Rises

Profitability outlook increases over 2011 estimates

More brokers are confident about the voluntary employee benefits industry, a new survey shows. Results from Eastbridge Consulting Group’s Voluntary Industry Confidence Index finds confidence increased to 99.7 at year-end, up from 98.4 in a mid-year 2011 survey.

The index is calculated using three key expectation measures about the voluntary industry: sales growth, profitability of the industry, and employee enthusiasm about voluntary products.

“Feelings about the profitability of the industry rebounded the most,” says Gil Lowerre, president of Eastbridge. The percentage expecting lower profitability declined to just eight percent (down from 18 percent last time) and the percentage expecting increased profitability was up to 54 percent. “The percentage expecting sales growth for 2012 also improved nicely, with 95 percent expecting more sales,” Lowerre says.

The only measure that showed a decrease was employee enthusiasm about voluntary products. The mean was down from 3.82 to 3.80 primarily because more people said there would be “no change” in employee enthusiasm, explains Eastbridge vice president Bonnie Brazzell.

Eastbridge conducts the survey semi-annually and includes responses from individuals active in the market, among them carriers, brokers, vendors and employees. Like other confidence indices, the index is a single number that compares the current results to a baseline measure. The first Confidence Index survey was completed in December of 2005; the results from that survey serve as the “base” year (meaning the index was at 100 for that year).

By Kathryn Mayer

Employers Continue to Look for Savings

The recent trend of shifting more health care and benefit costs to employees is showing no signs of letting up, according to new industry research.

A survey displayed that 22 percent of employers had medical deductibles of at least $1,000 this year for in-network services for their most popular plans, according to a report in Business Insurance, compared with just 8 percent in 2008. Twice as many employers (44 percent) imposed that deductible level on out-of-network services this year, the survey found.

"The biggest change in the past two years has been the increase in cost sharing with employees," said Michael Thompson, a principal. "Employers have been careful not to shift premium costs to employees, but have decided that the better way to shift costs is to require those who use health care services to pay more."

A separate report by Milliman also points to an increase in cost sharing in PPO family plans. According to Healthcare Town Hall, a website sponsored by Milliman, the survey found that the average premium cost of those plans this year increased $1,319, or 7.3 percent. Of the total cost increase, employers paid $641, while workers picked up the rest, totaling an increase of $275 in additional cost sharing and an additional $403 in payroll contributions..

Many employers, however, are searching for solutions beyond deductible increases. More employers -- especially midsize companies -- are turning to voluntary benefits to reduce their burden while still offering valuable benefits to their employees, according to a new LIMRA study. While employers traditionally have used voluntary benefits as a morale booster, nearly 80 percent of polled employers said they are most interested in voluntary worksite benefits because they bring no direct costs to their business, an onlinePLANSPONSOR news report noted. Two-thirds said they offer such benefits because it boosts their overall benefits package and allows workers to receive services cheaper than if they tried to buy coverage in the marketplace.

Although the trend of cost sharing is growing, U.S. workers are starting to see improvements in their overall compensation, which is creeping back toward pre-recession levels, according to a recent survey published on the Society for Human Resource Management's website. Only 9 percent of polled employers still have a pay freeze in place - down from 48 percent in mid-2010. More companies also are restarting bonus programs in an effort to retain top talent, the survey said.

Voluntary benefits can help contain company costs

To recap a previous blog post before jumping straight in to the questions:  Voluntary benefit plans help employers round out their employee benefit offerings amid cutbacks in company-paid core health care, allowing employers to provide employees with additional benefits without bearing the weight of increasing cost pressures.  These optional benefits can serve as value-added tools to help attract and retain top talent. Employees often pay 100 percent of the premium on these voluntary benefits through payroll deduction.  Many of these benefits can be offered to family and friends as well.  It's up to the employee; it's their money, and it's not costing the employer anything.
How can companies determine if adding a voluntary benefit program is the right choice for them?

They have to look at the true cost of running a company.  Adding a voluntary benefit program can help offset those costs for them.  Many companies are looking to ways to cut costs in the health insurance  arena.  It is extremely costly to maintain these major benefits.  Often, what these companies are doing, ultimately, is passing those costs on to their employees.

Most voluntary benefit programs will help reduce that cost to employees because of the unique system of these benefits.  If employers decide to lower their cost of mandatory benefits by passing some of that cost on to their employees, the employees can then offset those costs by participating in, for example, auto and home insurance programs saving them money over the traditional coves they would shop on their own.

What should companies look for in a voluntary benefit program?

You want to choose a company that can provide access to a variety of types of voluntary coverage and choice for your employees in the plans available.  The last thing you would want to do is to present a variety of new benefits to your employees, only to have them ultimately be confused about the different types of coverage, from different sources and the costs of each one.  You will want to work with a company that can provide a powerful, effective and simple voluntary benefits package that will be communicated clearly to your employees to achieve the highest level of participation and acknowledgement of the added perks.

What is the benefit of having several policies within the same voluntary benefit package?

Simply put, the renewal process for any benefit plan can be extensive to research and implement at the term of each and every policy, not to mention having to do that multiple times across multiple carriers for multiple plans.  That is a huge migraine in the making just thinking about it!  By having your plan developed and presented in a unified way to your employees, you will not only save administrative costs communicating these benefits, but you will also save time and money when it comes time to renew.


If you have additional voluntary benefit questions, please do not hesitate to contact our office to learn more!

Employers Get Creative with Tight Budgets....

Voluntary benefits are on the rise, but why is that the trend we are seeing?  The economy is in recovery, but it is and will continue to be a slow climb up a very tall mountain.  Company belts have not loosened and with the overall impact of healthcare reform still uncertain, it still may be quite some time before they let those belts out a notch or two.

According to HR Daily Report, this is why more employers are looking at Voluntary Benefits as a lower-cost incentive to attract new and retain existing talent.  Employers are taking to offering employees everything from auto and home insurance to legal plans or even pet insurance.  All of these being growing trends in employers looking to stay competitive.  That's the assertion at a recent presentation at the 2011 Health Care Benefits NY conference.  Outlined in the course of that presentation was a list of the most popular group voluntary benefits, now and in the future.

Most popular now included:

  • life insurance
  • disability (long and short-term plans), and
  • vision plans
Projected to be the most popular in the future:
  • long-term care
  • legal plans, and
  • auto and home insurance
There is one secret to success however, according to experts on the subject.  The success of your voluntary benefits program has absolutely nothing to do with WHAT you are offering, but rather HOW you are offering it!  The biggest tip to success is to be sure that your company sets up a payroll deduction for employees to participate.  This accomplishes two goals.  One, it helps employees sock away the money to cover the costs of premiums, etc, and two, it further reinforces with employees that your company endorses that specific benefits plan.
So the question still hangs as to why these types of benefits are the growing trend, especially when employees are paying for these benefits themselves?  For one, organizations can get group rates, allowing employees the chance to obtain these benefits less expensive than if they went and shopped for rates on their own.  Disability and life insurance are benefits companies may be offering already.  However, companies are now taking a closer look at enriching these benefit packages.  "Not only does offering voluntary benefits cost employers virtually nothing and help level the benefits playing field with much larger companies, it also affords employees access to various types of insurance coverage, typically with looser underwriting requirements and at group rates that are lower than is they went out and got the coverage on their own," explains Entrepreneur.com.
So how much savings potential for employees are we really talking about and how?
  • Because it provides protection against lost income, disability insurance (short and long-term) is perhaps the most popular voluntary benefit today.
  • The financial security afforded by life insurance makes it an especially popular voluntary benefit in uncertain economic times.  While term life is still most prevalent, a "fight to qualify" among employers and employees is making permanent life insurance more popular.
  • Voluntary dental insurance holds great appeal to both employees and employers because you can design plans so that it is not very expensive.
  • Relatively new among voluntary benefits, supplemental limited-benefit plans that provide a set dollar amount per day for hospital stays are gaining popularity, as are gap insurance policies that pay a certain amount up to a deductible.
  • More targeted in their coverage, but also appealing, especially to small businesses with high-deductible plans, are supplemental accident insurance and critical illness insurance.
Bottom line is that voluntary benefits can help keep your employees happy with little to no effect on your budget.  That is the type of Win-Win scenario that most companies in today's economy jump on.  If your organization already includes these types of benefits, be sure that they are being highlighted as part of your recruitment strategy.  Just because the employee ultimately covers the costs, doesn't mean that the accessibility of the benefits isn't very valuable.  Voluntary or now, you should utilize any perks or benefits your organization provides to set you apart from the competition!