Voluntary Benefits 101 As the worker-pay-all model gains momentum, biz owners should learn the pros and cons of voluntary benefits.

By Elizabeth Wilson

entrepreneur daily

Opinions expressed by Entrepreneur contributors are their own.

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:

  • Flexibility can boost morale because the employees' needs are being met.
  • Studies show that employees with "schedule control" have lower turnover; increased productivity and quality; greater engagement; and reduced absenteeism, overtime and sick leave.
  • Flexible work schedules or arrangements require managers to think less about "line of sight management"--(e.g., "I can see Bobby at his desk so he must be working")--and creates a management philosophy that focuses more on outcomes or results of an employee's work.
  • Workplace flexibility teaches managers how to manage their team by their "business contribution" instead of personal interaction or hours logged.

The cons are:

  • Flextime is often offered to those who can be trusted to accomplish their work on their own time. Therefore, it's not a one-size-fits-all program because employees who want a flexible schedule have to earn the right to manage their time.
  • It takes planning and training to institute a successful flextime program. Training is needed for managers and employees to focus on how to make the new arrangements successful. And mangers and employees need to understand the new accountability and performance focus.
  • Flex program success, or lack thereof, should be evaluated regularly by comparing measurable criteria for productivity and employee retention pre- and post-implementation.

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:

  • Reducing employee burnout
  • Facilitating cross-training and career development by providing opportunities to learn aspects of leave-taker's job
  • Broadening the professional skills of the leave-taker
  • Strengthening recruitment efforts

Here are some cons:

  • The impact on the business or employee's team might be too great.
  • Changing business needs may require modification and/or cancellation of a requested leave.
  • Conversely, the employee might not be missed and his job could be in jeopardy or his responsibilities amended upon return.

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

  • Studies show that employees are more loyal to companies that support their educational and career goals.
  • Providing education benefits demonstrates that the employer is willing to invest in employees and their futures.
  • When intentionally linked to business goals, learning can be designed to address specific issues associated with the business or initiate a culture change.

The cons are:

  • Investing in employee education not only makes employees more valuable to you; it also makes them more attractive to your competition.
  • With tuition costs on the rise, this perk can be a financial burden to a small or medium-size company.
  • There may be an impact to productivity as the extra schoolwork takes a toll on the employee's schedule.
  • Employers need to carefully identify learning programs and link them with organizational goals.

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:

  • The positive for cash-strapped employers is that economic uncertainty gives them credibility to remain conservative with raises unless directly tied to outstanding performance.
  • Employers have the upper hand in a recession and the fear of the unknown or possibility of a reduction in force creates more productive employees.

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.

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