How to Find the 'Hidden Paycheck'
Fringe benefit statements highlight employees' true compensation.
Five years ago, SV Life Sciences was in growth mode, going from just a few U.S. employees to its current staff of 24. The Boston-based venture capital advisor and manager company was looking for the right hiring tool, something to help with recruiting and retention, something that would remind current employees how good their benefits were and show recruits the true value of working for the company. That's when management discovered fringe benefit statements, according to CFO and partner Denise Marks.
Whether Marks knew it at the time, she was uncovering one of the most important weapons in the small-business arsenal: the hidden paycheck. It's the combination of salary and every other benefit offered--costs that run the gamut from health insurance, vacation and Social Security to disability insurance, 401(k) matching contributions and free turkeys at Thanksgiving. It all adds up. Employers can tell their workers, "We spend an additional 25 percent to 40 percent beyond what you see in your paycheck." But until those benefits and dollar amounts are presented in an organized, understandable fashion, the impact is lost.
"Benefit statements show an employee's true compensation," says Romy Wightman, owner and president of Scottsdale, Ariz.-based RW Benefit Communications, a provider of benefit statements to employers of all sizes for more than 10 years. "Benefits are a really large part of compensation. A benefit statement can show a worker his true compensation may be $60,000, not $40,000."
Benefit statements can be one-page or multipage documents packaged much like an annual report; they can even be presented online. The objective is to communicate value to workers. And there may be no better time than now to show your employees the value of their benefits. The latest MetLife Study of Employee Benefit Trends shows that, after salary and wages, employee loyalty hinges on health benefits, retirement benefits and all other insurance benefits.
A good benefit statement will look like a company-created marketing brochure, because, Wightman says, you should use it to "advertise to employees a benefit package that you maybe spend $1 million on." Obviously that number will change based on a company's size, but on a percentage-basis the impact is the same. While huge corporations may be able to offer glossy, multipage documents with nice photographs and personalized letters from the CEO, small companies can absolutely benefit from the smaller, simpler statements that providers have created for just that segment of employers.
Included on any persuasive statement will be the obvious candidates: health insurance, dental, vision, short- and long-term disability, life insurance, federally-mandated withholdings and retirement contributions. However, some employers forget to include other items as benefits.
Richard Rosenberg, principal owner of New York City-based Atlantic Benefits, says he goes through an inventory of more than 150 benefits with his employer clients, bringing to the fore many employer-provided benefits that get lost to oversight. The list includes items like parking passes, vacation days, adoption services, concierge services, after-school care and pet insurance.
"We even include things we may not be able to put a price tag on," Rosenberg adds, because they may have a perceived value to the employee, which only makes the benefit package look stronger, especially in a small-business environment.
Wightman points to a few other costs that get missed: flu shots, automobile allowance, tuition reimbursement and company parties. "We like to take into account all of these things." She adds that rounding up all of these costs can be a burden, which is why she encourages small-business owners to find every benefit cost they can easily get their hands on. A good benefits broker should be able to help in this situation, too, and many of them provide a benefit statement as part of their comprehensive service. They often rely, however, on companies like RW Benefit Communications and Atlantic Benefits for the software and expertise.
Is it Worth it?
Granted providing these statements seems like a good idea on a feel-good level: Employees get to see the value of their benefits and maybe see their employer in a new light. But does that measure up to any real value for the business, especially at a time when every expense is scrutinized? Well, if you're looking for an ROI that can be measured financially, you may be disappointed. Though if you manage to hang on to a couple of employees and not have to hire and train new ones, that must be worth something, especially if the training staff is you, the owner. Your time is better spent running the business.
"Employers shouldn't expect a line of people at the HR office raving about them," Wightman says. "Most satisfied employees won't say anything. It's when you stop doing statements that people speak up."
The real value here is a more qualitative measure. "People love them," Marks says of the employees at SV Life Sciences, which has $1.6 billion in assets under management. "We started using them five years ago. Now, if they're not out [by the end of March] people start asking for them."
Company management was hoping to get employees to recognize that benefits are an important part of their overall package, especially for the rank-and-file. She says the ROI has exceeded expectations--if for no other reason than there has never been any negative feedback.
"If people said, 'Oh, I just throw mine away,' then we'd probably not use them," Marks says. "I know that people read them, use them and rely on them."
She adds that her vendor makes it easy; minimizing the time it takes for SV Life Science's staff to gather the necessary data. And that is a positive ROI before the statements are even created, especially for a small company with little or no HR staff.
Benefit statement providers like Wightman and Rosenberg point to the statements' usefulness in recruiting and retention, and Marks' experience echoes that. She has anonymous statements created for use during the interview process, so qualified candidates get a glimpse of the overall compensation they can expect at the company. Marks also uses the statements with recruiters.
"We give them a statement that has the standard benefits and a made-up salary for someone in an administrative support role," she says. "Everyone is bowled over by them."
Wightman points to another use for the statements, one that unfortunately, many employers have to consider these days. She worked with a group that had just experienced a large layoff. The employer wanted to avert a panic and didn't want the remaining employees looking elsewhere out of fear. So they put together a benefit statement for the remaining employees that showed how strong the benefits package was and exhibited the company's commitment to keeping the package strong. It worked.
Expose the hidden paycheck and don't lose a valuable employee who, Rosenberg says, may see $5,000 more in salary at another place but lose $8,000 in benefits.
Entrepreneur Editors' Picks
If You Focus on Problems, You'll Only Find More Problems. Here's How to Focus on Solutions.
Apple Asks This Jarring Interview Question as a Secret Way to Evaluate a Candidate