Courtesy Pinnacle Human Resources LLC
By Rose Miller
Benefits are a very important issue for current and potential employees. In past years, surveys show employees place a higher importance in health insurance than even wages.
The representative of management needs to be knowledgeable about all the organization’s policies and benefits programs. Although administering benefits and explaining all the details is usually the job of human resources, employers need to know basic information about employee benefits for a variety of important reasons.
First, a small employer may not have an HR department and employees will look to the person who handed them the large packet of information to answer complex questions. Even some HR departments are not a part of the benefits purchasing resulting in large gaps of knowledge regarding plan documents.
Job candidates, during a job interview, are likely to inquire about benefits, and the hiring manager will want to be able to provide decent answers (or the correct answers). Benefits are a selling point when interviewing job applicants.
If the hiring manager is able to promote the organization's benefits package well, it can help attract high-quality employees to the company. When new employees come on board, they will undoubtedly have even more questions about benefits and they may also need help with the enrollment paperwork.
The tricky part is how employers balance the cost of insurance programs and desire to attract the best talent. I'm dating myself when I tell you that "once upon a time" employers paid the entire cost of premiums. Premiums began to escalate in the double digits back in the early 1990s. Believe it or not, this was decades before Affordable Care Act. As a cost containment strategy, employers began sharing premiums costs with employees.
The most common strategy began with a 75/25 split, employer paying the larger portion. Then the trend became, employer picking up individual coverage and employees paying for any additional cost for selecting higher premium options.
With Affordable Care Act (ACA), the newest strategy is to develop a flat amount that the employer contributes towards any option selected. For example, all employees receive $200 per month toward any plan option selected.
In past trends, we have seen premium-sharing lower as an employee climbs the corporate ladder. To become a partner, for example, may mean the organization picks up the entire cost of health insurance.
Due to the affordability provision of ACA, we are seeing a trend whereby the lower income employees may receive a higher amount than highest paid employees so to satisfy testing.
In smaller businesses, we have seen them drop health insurance and send employees to state healthcare exchanges. These small businesses add a new taxable amount to the employees base wages to help pay for the premiums.
Bottom line, there is much more to putting together a benefits system than just gathering the paperwork. There is a great deal of fiduciary responsibility to developing benefits that meet the needs of the employees and systems that comply with the never-ending regulatory aspects of the plans.
Offering benefits is still a way that a company differentiates themselves (or keeps up) with their competition. Evidence points to employees placing a greater than ever value on health insurance benefits. This is supported by another trend, where we've seen an increased use of health insurance in termination agreements. Rather than a number of weeks salary, the severance offers a number of months of payments towards COBRA continuation of benefits.
The best strategy is to begin with understanding what senior management personally needs in a benefits package. Then the employer should surround themselves with trusted advisors who can help them navigate the fiscal and legal aspects of the plans. This basic information sets the stage on developing sound plans and basic information the employer can then communicate to its workforce.
Miller is president of Pinnacle Human Resources LLC.