Do I Want to Implement a Benefit Program?

A benefit program can serve the objectives of a company in several ways, when well-thought-out and implemented with deliberation. The key here is for the company to decide on its objectives and then develop programs that support those goals. Within the larger group called benefits, there are specific aspects.

Mandated benefits.  Legislatively required benefits (unemployment compensation, social security, and workers’ compensation) serve several functions in themselves. They:

  • reduce the burden of direct public relief,
  • attempt to relate family and individual economic assistance to levels of need,
  • make the cost of work-related benefits a part of the cost of doing business and a charge to consumers.

Voluntary benefits.  These are the benefits the company sponsors or offers.  These programs include:

Insurance. Not just medical or dental (although those are the most common). Types include pensions, life insurance, termination pay, health insurance, accident and sickness coverage, and disability.

Paid leaves. Payment for time not worked includes holidays, vacations, sick leave, and rest periods.

Income supplement. Supplemental income programs include profit sharing, savings plans, credit unions, tuition refunds, and discount purchases.

Common services and programs. Other typical benefits include counseling, employee assistance programs (EAPs), transportation tax relief or payment, child care services, relocation reimbursement, parking, cafeteria facilities, training, and social or recreation programs.

Implementing a Benefits Program

Too often a company adds a benefit to the company program because a manager read a magazine or took a meeting with someone selling a service. Just because you could offer on-site massage does not mean you should. Starting a new service or benefit deserves a study of costs, employee preferences, and how the benefit fits into existing company programs.

Just as no company would introduce a new product without significant prior market research, and no recruitment campaign for new employees would be initiated without first considering the employee qualities desired and developing a job description for the position, no benefits program should be initiated without doing the research.

Determining the Objectives

In broad terms, corporate benefits objectives are functions of leadership, competitiveness, employee security, and equality of benefit options.

EXAMPLE: Attracting new employees. If a company seeks to attract outstanding employees, benefits should have minimal waiting periods for eligibility, early participation, and short vesting periods.

EXAMPLE: Reducing turnover. One of the ways a benefits program can reduce turnover is when it is more progressive, with service rewards and penalties for early termination. One key way of motivating employees places an emphasis on incentive provisions.

Leadership objectives.  Leadership objectives refer to a company’s desire to be a leader in offering innovative benefits, either within an industry or a market. Simply surveying other firms and then matching or exceeding their benefit plans does not fulfill this objective.  A company needs to determine whether it wants to be a benefits leader in its industry or whether it wants to meet what other companies are offering. Further, a company may choose to establish a leadership position in one or more types of benefits.

The need for, and timing of, benefit improvements must depend also on employee needs and attitudes.  A company concerned only with what other firms are offering may miss a real opportunity to help its own employees if the demographics or needs of the two employee groups do not match.  Statistics must be tempered by human concerns.

Competitiveness objectives.  Companies may decide to attain a position that is competitive in the benefits area. The attempt is to have comparable and observable elements of the benefit package at a competitive level of prevailing practices.

Some less profitable companies attempt to juggle the benefit package by cutting back in expensive areas where it is difficult even for trained professionals to make a comparison between benefit systems. Their objective is to appear to be competitive, but simply copying prevailing practices and lowering the funding may not serve that objective.  It may be better to develop a totally different system that is not readily comparable to competitive benefits in order to disguise any discrepancies.

Employee security objectives.  Security interests offer employers the best chance for meeting employee benefits concerns. Benefits such as sick pay protect employees’ security needs by preventing lost income. The goal is to increase employee “peace of mind.”

On a somewhat lesser level, the security aspect of benefits may tend to make the everyday life of employees simpler and less uncertain. The employee who knows there is a dependable ride to work, who knows that his or her children are being adequately cared for, or who can receive help in weathering a rough time in life is likely to be able to work more efficiently on the job.

Equality in benefit systems:  Management and staff.  Achieving equality in benefits systems is a goal that can have a company-wide effect on working atmosphere. It is another goal intrinsically related to the concept of giving employees more say in their work; equality in benefits tends to create a climate where all employees are treated alike and management reacts with rank and file as equals. The feeling promoted is “We are all in this together,” which many of today’s flatter organizations try to achieve.

Simple examples of this policy include providing the same company-provided health insurance or the same amount of life insurance to all employees regardless of position or salary. Other examples include not providing preferential parking or private dining rooms for senior management only.

Evaluation of the Program

No matter what goals are chosen for a benefits program, the program must be periodically assessed in order to determine whether it is meeting both the objectives set by the company and the needs of employees. Consider:

  • Measurement.  The benefit program can be measured according to a management-by-objectives approach, whereby a periodic assessment of progress against stated goals is undertaken. Continuous assessment of employee needs through informal interviews and meetings or formal surveys is necessary.
  • Priorities.  Measuring the relative importance of services to employees and how well current programs are meeting stated needs offers a good indication of whether any revisions to the benefits programs are needed. Work force demographics change constantly, as do employee expectations, legal requirements, competitive pressures and benefit alternatives.
  • Trends and benchmarking. In order to get the most employee satisfaction and company return on the benefit dollar, the company must be in tune with the changes in benefit opportunities and the requirements of employees and be able to adjust to those changes. Trends in restructuring or re-engineering welfare plans should be explored. Benchmarking -- both in terms of industry competitors and geographic competitors and also against “best practices” -- is periodically necessary.
  • Outsourcing, a typical byproduct of re-engineering, should be objectively reviewed periodically.

An excellent benefits package can attract excellent candidates and may allow the company to pay a lower (or 'competitive') wage while reducing turnover. How does your benefits package compare?

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