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Voluntary Benefits 101

As the worker-pay-all model gains momentum, biz owners should learn the pros and cons of voluntary benefits.
March 31, 2009

If you're like millions of business owners, the economy has probably forced you to do one or more of the following: increase the amount your employee has to pay or altogether eliminate a benefit--even health insurance--to cut costs. If so, you're searching for ways to keep your overall benefits package attractive to existing employees and new talent. Enter voluntary benefits.

According to a 2008 study by the Employee Benefit Research Institute, employer-paid benefits are declining while worker-pay-all benefits are increasing. These trends are "likely to continue," according to the report, but fewer than one-third of workers are willing to pay on their own without at least some employer funding. This leaves employers with the challenge of offering attractive, employer-funded benefits packages to keep workers happy, while striving to cut company costs at the same time. Learn about some of the available benefits options, and their associated pros and cons, in our interview with expert Greg Howard of TriNet, an HR outsourcing company based in San Francisco.

How can businesses offer employees discounted access to services, i.e., rather than pay for a set kind of insurance, can they offer a menu of different options for employees, such as pet insurance, a specific kind of medical insurance (like cancer insurance) or any other possibilities?
Although many factors contribute to a successful benefits program, one key to any successful benefits plan is a structure that permits employees substantive and economic choice. Some plan structures are more suitable for that flexibility, but nothing prevents any employer from allowing employees to self-direct funds to any benefits plan the employer offers. Typically, it is much easier for [an HR outsourcer] to do this, because they're able to secure multiple plans, benefits and perks, and make them available to employees.

What are some ways to restructure perks, rather than eliminate them?
Helping companies get creative in restructuring their perks can really help save money and strike a balance in tough times. [We] recently helped a customer allocate their benefits spending more effectively, leading to a more robust benefits strategy than they'd previously offered on their own. In turn, the customer realized a $250,000 annual savings to their bottom line. How? [We] converted them from fully funding a traditional PPO to fully funding a high-deductible health plan and fully funding the employees' health savings account.

What role can voluntary benefits play in building a robust benefits package that is beneficial to employer and employee? What do employers get from offering voluntary benefits? What do employees receive?
Voluntary benefits are an excellent way for a smaller company to establish its brand as an employer of choice, and compete with larger, more known organizations for top-quality talent. This is a huge value-add [for employers], because they're able to say, "You not only get the great suite of medical/dental/vision, but also everything from flexible spending accounts to pet insurance to entertainment/hotel discounts." For a small company that needs to attract and retain in-demand workers, this can often be a game changer.

[We offer] a slew of voluntary benefits such as pre-tax commuter benefits, supplementary life insurance, an employee assistance program, a credit union and much more.

What are your top 10 perks to replace pay increases or bonuses?

  1. FSAs (flexible spending accounts) and HSAs (health savings accounts), improving an employee's ability to pay for routine medical expenses through pre-tax dollars.
  2. Telecommuting programs that offer flexible work schedules.
  3. Health and wellness programs to encourage employee well-being and productivity.
  4. On-site day-care, if possible.
  5. Retirement and annuity programs.
  6. Leadership development programs to help develop star players.
  7. Fitness/gym memberships.
  8. In-office snacks and beverages.
  9. Cheap "fun" gatherings such as potluck lunches and other activities that build or contribute to the company's culture.
  10. Access to special services such as credit unions, AAA and employee assistance programs.

In general, [we're] seeing an increase in companies getting creative with ways to offer their employees flexible schedules and telecommuting benefits to help ease the financial strain. Examples include implementing modified work schedules, awarding employees with gas cards rather than other recognition or reward for a job well done, and supplementing or funding public-transportation costs.

What are the pros and cons of offering workplace flexibility as a perk?
A flexible work arrangement may not be an appropriate solution for every company, department or employee, but there are many cases in which it can be successful and can make a significant business impact.

The pros include:

The cons are:

What are the pros and cons associated with offering sabbaticals as a benefit?
Some of the pros are:

Offering sabbaticals proves that a company is vested in an employee for the long term and is open to allowing flexibility in the employee's job. Other perks include:

Here are some cons:

What are the pros and cons of offering learning opportunities to employees as a benefit?
Pros include:

The cons are:

How about pros and cons regarding tying raises to performance?
Now more than ever, annual performance reviews are critical as employees realize the need to communicate their value, and employers realize they need to keep and develop the people they already have in a way that helps grow their business.

Here are the biggest pros:

There are few cons for performance-based pay raises, but the approach does require a commitment to map out measurable goals for each employee at every level of the organization. One caution is that managers are typically the only [people] rewarded for moving the bar on performance objectives. Expanding this approach to all levels of the company encourages accountability and good performance overall.