Breaking the Benchmark

Why Employers Should Dispel Benefits Myths for Effective Plan Strategies

It’s difficult to find an HR decision-maker who does not use benchmarks as a kind of goal post for salary structures, benefit strategies and other aspects of a robust total rewards package.

That’s not a bad thing. Different types of benchmarking – competitive or functional, for example – can offer helpful insights that contribute to optimal employee benefits plan design. But they aren’t the end-all/be-all, for a variety of reasons. 

Sticking with conventional wisdom that holds they are the ultimate guide to plan design is an all-too-common weakness in employee benefits planning. It can keep employers from creating benefits strategies and packages that make a real difference to their employees. Like? Specifically, programs that are individualized to meet people where they are at, professionally and personally, and ultimately make the difference in recruitment and retention.

A new year is just ahead, presenting a good time to rethink employee benefits and conventional wisdom as organizations position themselves for the challenges of 2024 and beyond. 

A good starting point is to dispel three common myths, starting with benchmarking:

Myth #1: Benchmarking – don’t make a plan without it. 

Of course, benchmarking is a helpful component of benefits plan design. But it isn’t the ultimate tool. One company we know ran a beautiful benefits program, by all appearances, including the way it aligned fully with key benchmarking standards. But somewhere there was a disconnect as the plan only had a 20% participation rate among the firm’s employees.

“Big Data” is only getting bigger and that makes benchmarking even more complex given the huge expanse of information that can be pulled. That means benchmarks have to be as strategically charted out as benefits plans themselves. 

The diversity of employee populations – generations, gender, ethnicity, life and work stages – and the trend toward customized benefits makes a real argument for customized data inputs to create customized benchmarking that’s the basis of an effective plan.

Myth #2: Medical plan costs are the biggest benefits expense.

No question. Medical plans are the source of a lot of financial pain to many sponsoring businesses. But they also alleviate employee pain in a way that removes many of the pressures that can pose a bigger long-term cost to the business. 

When employees are disengaged or absent, for example, productivity often plummets. That can also lead to increased use of medical and pharmaceutical benefits and disability claims.  Recruiting and training expenses are sub-optimized. Think about this: replacing one $50,000 wage earner costs an employer between $25,000 to $100,000 in hiring and training expenses.

By looking at such cause-and-effect scenarios, employers will lay the groundwork for a more strategic benefits strategy that understands and responds to what’s at play in individual employees’ work and home lives. Benefits solutions that address their life-stage concerns – financial, emotional and/or family stressors – have any number of payoffs, such as improved loyalty and engagement, and, over the long-term, lower medical costs, too.

Myth #3: Medical benefits are a top recruitment draw.

Actually, the real draw to a job is an organization’s culture. People don’t quit a job over benefits. They do quit when co-workers and management contribute to a bad working environment. For example, as many as 80% of American workers say they would quit their jobs due to bad managers; 50% have left.

Savvy employees are looking for more than traditional medical programs. Short- or long-term disability benefits, for example, feature income replacement and can offset medical costs. Claiming a work-related injury provides 100% coverage through Workers’ Compensation. State disability insurance (SDI) or paid family medical leave (PFML) are other options. Flexibility in the workplace, time off policies, and many non-traditional benefits are becoming as important to the workforce as core benefits.  And another job might get them benefits better aligned to their needs.

The human element

What makes a difference today in finding and keeping good people is a benefits strategy that is grounded in the human considerations. This is a strategy that delves into the forces influencing employees’ life and work experiences and goes beyond a cookie-cutter lineup of benefits in response. 

Data and analytics are pre-requisites for drilling down to individual situations and needs. It’s not enough to look at claims data and who is using which programs. What matters is how much they are being used – and why. Various tools can help. Persona analysis, for example, provides insights into where people are in their work and life journeys and relationship with benefits. A 20-something in his first job is in an entirely different place, with entirely different priorities than a 60-something manager nearing retirement.

Looking for “lifequakes” that can impact an individual personally and on the job is important, too. The value that many place on pets, for example, might suggest adding pet loss to the bereavement policy. And offering parental and/or family leave is a start, but more than time, employee needs can span lactation and diaper services, child and adult daycare, and mental health resources.

Benchmarks are fine for developing an employee benefits strategy. But it’s by understanding the humans and the particular needs that need serving that makes the strategy work.

About the author

Nicole Floyd, CPA, SPHR is executive vice president and employee benefits sales leader at global insurance brokerage Hub International.