A recent (and admittedly unscientific) spot survey of a group of our clients found that half of them depended on competitive benchmarks most or all of the time to shape their employee benefits program.
Logic tells you that benchmarking would be a pretty systematic approach to an always complicated matter. But that doesn't necessarily make it the right one – as traditionally structured. That's especially so given today's employment environment and employee populations.
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Benchmarks are fine. But a better approach to crafting an effective benefits policy is to gather and assess data about your own workers and workplace to find out what really matters to them. That's a sure path to leveraging employee benefits to create a quality employee experience that boosts recruitment and retention.
It helps to understand the common myths about benchmarking and benefits.
Myth #1: Benchmarks are paramount.
Actually, no. Benchmarking data is often outdated, and based on the premise that "one size fits all." (The fact that we can have as many as five generations in one workplace alone counters that.)
One organization we know of looked great on paper for an employee benefits plan that was fully aligned with benchmark standards. Thumbs up, right? Not when you saw the disconnect with their people, given its dismal participation rates of 20%. In fact, your employee population is unique to your organization, and that should be the primary basis of a benefits program.
Myth #2: Our medical plan is our biggest expense.
Yes, medical benefits are a big expense. But all things being equal, the exponential costs of turnover and decreased productivity are a bigger burden.
When employees are disengaged or absent, productivity rates plummet, use of medical, pharmaceutical benefits and disability plans rise, and recruiting and training expenses are sub-optimized. Costs also add up for quiet quitting. For example, if a single employee earning $50,000 quits, hiring and training the replacement costs between $25,000 and $100,000.
There's an argument for digging in to understand where employees are at, and what motivates them. Better returns often can be gained by investing in benefits that respond accordingly. Solutions vetted and offered under the business umbrella are valued when people are living with financial or emotional or family stressors. They don't have to cost a lot (if anything) to offer and will have a trickle-down payoff on business costs like medical benefits.
Myth #3: Employees stay for the medical benefits.
Actually, workers tend to stay with a job for the culture, not just their medical benefits. Over 80% of the average company's value these days is tied up in intangible assets. That's more than brand value or reputation. It's people, the most valuable asset, and they can make or break a culture. As many as 80% of American workers say they would quit their jobs due to bad managers; 50% have left to get away from them.
And, really, when it comes to benefits, savvy employees are looking for increased options outside of traditional medical programs. Short- or long-term disability benefits, for example, have income replacement and can offset medical costs. Claiming a work-related injury gets them 100% coverage through Workers' Compensation. State disability insurance (SDL) or paid family medical leave (PFML) are other options that help create stability in their budget and help meet their goals. And another job might get them benefits better aligned to their current needs.
The challenge to today's employers is to craft benefit strategies that take a human-centered approach, assessing the factors that shape employees' life outside of their relationship with their employer and creating valued quality work experiences by responding with more than the just the same old lineup of benefits.
This takes data and analytics that drill down to a more individualized level. It requires not just looking at claims data and who is using which programs, but how much, where, and why. Understanding, through a persona analysis, where people are in their work and life journey and relationship with benefits is also key. A 20-something in his first job is in an entirely different place than a 60-something manager nearing retirement.
Looking at "lifequakes" that can impact an individual personally and on the job is important, too. The value 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 from financial stability to lactation support and diaper services, to child and adult daycare, and mental health resources.
Benchmarks are fine for developing an employee benefits strategy. But they shouldn't be the ultimate arbiter. It's the human-centric approach that makes them effective.
Jessaca Latteier is an employee benefits strategist for global insurance brokerage Hub International out of Scottsdale, Arizona.
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