By: John Rossheim, Monster Senior Contributing Writer
For business owners, especially those who know the names of many of their workers, there’s a town meeting agenda that’s almost as repugnant as a layoff announcement: Why it has become necessary to reduce costs by trimming employee benefits.
Indeed, like cutting off someone’s livelihood, reducing or eliminating healthcare coverage, retirement contributions or other vital benefits threatens the business-critical relationship between a small- to midsized employer and its employees.
“If you start taking away core benefits that the best employees expect, then you’re putting the whole business in jeopardy,” says Vince Ashton, CEO of HealthPass, a New York nonprofit agency that gives small businesses access to an array of health plans.
So what’s the best approach if you are forced by financial circumstances to reduce benefits outlays? You’ll be wise to take the same approach you may have asked of your employees in these hard times: To undertake an unsparing reexamination of your benefits program and squeeze more value out of each dollar spent.
Healthcare Benefits: Reconsider Carriers
Especially at small and midsized companies, healthcare benefits have been under pressure for years, costing employers ever more while simultaneously placing a greater burden on employees.
But many smaller employers are approaching a crossroads.
“More companies are having trouble paying their premiums, but most are maintaining health coverage,” says Ashton. “Health insurance is seen as a part of compensation; it’s a difficult thing for employers to take away.”
Dropping financial support for health coverage can cost your business in at least two ways: lost employee loyalty and declining employee health, which can lead to lower productivity and higher absenteeism.
If your workers are like many others at American businesses, they might rather forgo some pay than venture into the chaotic marketplace for individual health coverage, which can run into five figures for a family policy. “Some businesses are reducing employee hours but maintaining health coverage as the anchor benefit,” says Jim Walsh, publisher of Silver Lake Books.
Suppose you’ve decided to maintain a health insurance benefit. Is there anything you can do to control costs other than jacking up your workers’ copays and premium contributions? If you’re like most small-business executives, you don’t know all the answers.
“Business owners often feel there’s not a lot they can do about out-of-control healthcare costs,” says Earnest Youngblood, CEO of NavigatorMD, which makes health-plan design software. “But a broker-consultant can go to the market to try to find carriers that can save you money.”
A health insurance broker can put your company’s coverage out to bid, revealing opportunities for savings for you and your workers. “This stuff is hard for an HR person to handle adequately,” says Ashton. “I’m a big broker advocate, but you need somebody who’s knowledgeable and well-trained.” Ashton recommends getting a referral from a local business owner whose business is similar in size to your own and find out how they regard their broker. “Absent that,” says Ashton, “the trade association that brokers, benefits professionals, and agents join is the National Association of Health Underwriters.
But finding a fiscally sustainable health plan is about more than just seeing which carrier comes in with the low bid. “You have to look at plan design,” says Youngblood. “You have to motivate people to be more responsible for their health. Maybe higher copays and deductibles have been keeping people from getting treatment for chronic disease, or from seeking preventative care.” A good broker-consultant or independent consultant work hard to find the best option for your workforce.
Many insurers have resources dedicated to helping members live healthier lifestyles, including value-added programs (discounts for weight loss centers, for example), smoking cessation programs, while others may have specific financial incentives (reimbursement toward gym memberships.) “Many will have materials to use,” says Ashton. “Often there is no associated fee. Employers should contact their insurer to find out what is available."
If you are successful in reducing costs while maintaining crucial health benefits, be sure to clearly communicate this management victory to your employees.
Retirement Benefits: Are Lower Fees Available?
Retirement benefits, though many employees consider them a more distant concern than healthcare, have also been at the forefront of cost-cutting measures in the depths of this recession.
Some observers believe that in times of crisis, employees will forgive you for trimming benefits in order to remain solvent. “People aren’t leaving jobs now because the benefits ‘over there’ are better,” says Christine Soscia, vice president and plan consultant at InVest, which advises businesses on financial products. But the best of your employees will continue to expect that you’ll do your best for them.
Is there any way to maintain your 401(k) contributions, or at least minimize any reduction in them? Take a look at your 401(k) plan fees, says Soscia: “We’ve gone to plan providers and asked them, ‘What can you do here?’ Sometimes they’ll make adjustments and sometimes they can’t because they’d be losing money.” One rule of thumb from Soscia: “Plans that are five years old or older tend to be high.”
If you find a way to reduce 401(k) fees, reap your loyalty dividend by telling your employees about it.
Voluntary Benefits: Eliminate Little-Used Perks
Voluntary benefits -- those paid for by employees -- have also been on the table as employers sought out savings.
Some employers are shifting employee benefits from employer-paid to voluntary, to shift the cost of premiums. Others are eliminating little-used voluntary benefits -- such as legal advice programs or long-term care insurance -- to cut administrative costs and the drain on HR management resources.
How can you know which benefits are most important to your employees? Ask them. Develop and field a simple survey to determine which benefits are most important to your workers. Then incorporate the survey results into your cost-control program, communicating to your employees how their preferences made a difference.