Employee Benefits and Compensation

How to Get Your ROI on Employee Benefits Spending

If workers don’t understand their benefits, they won’t appreciate them.
Ron ShahApril 20, 2017

If you’re like most employers, attracting and retaining the right talent is critical to your success. You want the right people in the right position with the right training to meet your customers’ needs, and you’ve likely made significant investments in your human capital to achieve these goals.

Unfortunately, employees don’t always understand or appreciate the investments that we make on their behalf.

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Ron Shah

Ron Shah Ron Shah, Employee Benefits

We continue to use our best efforts to create a dynamic culture, offer challenging and rewarding jobs, and develop attractive compensation packages consisting of competitive salaries, bonuses, and benefits. Yet, the negative perceptions still exist. Clearly, there is a lack of awareness by employees in the investments that we are making. And nowhere is that lack of awareness more apparent than in employees’ perceptions of the benefits we offer.

Let’s face it, benefits are expensive and complicated.  In short, if employees don’t understand their benefits, they won’t appreciate them.

Employees may even view benefits as a negative. This means that you, as the employer, will recoup little to no value from your large investment. For example, if you have 1,000 employees, you may spend over $10 million per year on benefits with little, if any, ROI. Where else in your business would you spend that amount of money each year without requiring some sort of ROI?

The answer to this problem is not to spend more money. Instead, it’s about getting the most value from your existing benefits investments by:

  • Communicating your benefits and value proposition on a consistent basis throughout the year (not just during open enrollment).
  • Providing resources to help employees make better decisions about which benefits to elect, so they feel more confident in the decisions they make.
  • Offering tools that enable employees to access benefits when and how they want.

A comprehensive communications strategy that enables employees to understand their benefits, gain confidence in their choices, and use their benefits more effectively throughout the year will change how your employees perceive their benefits and their perception of you as an employer of choice.

Do These Examples Sound Familiar?

When employees think of benefits, they typically think of the medical plan offered by their employer. And when they think of the medical plan, they think of the most recent open-enrollment period. During that period, they probably saw their contribution towards the medical plan increase, while their co-pays, deductibles and out-of-pocket maximums also increased.

It’s a natural reaction for them to believe your value proposition for benefits has diminished since the previous year. Despite the attention that rising health care costs get in the press, most employees have little understanding of (or appreciation for) how much their employer contributes towards their medical plan.

During a recent conversation with human resources leadership at a large health system in the Southwest, we learned that the employer’s cost of medical insurance increased $9 million over the previous year. After much internal debate, the employer chose to absorb the entire $9 million, rather than share it with its employees. When we asked how they communicated this magnanimous gesture, they said they didn’t communicate at all. Not only did the increased investment go unnoticed, but the “no change” to benefits was viewed by employees in negative terms, such as, “My employer didn’t take the time to update our plans this year.”

When it comes to benefits, the perception rarely matches reality. The reality is that the employer could have passed on some portion of their cost increase, or reduced benefits to lower their expense. They chose neither of these options, because they care about the financial and physical well-being of their employees and want to be seen as a benevolent employer. Unfortunately, however, what was designed as a $9 million investment in employee loyalty ended up costing them in talent retention and employee satisfaction.

We had another conversation recently with a senior HR leader at a large technology company. The company had allocated significant dollars to new programs for their employees, including a wellness initiative, cost transparency tools, and a telemedicine program. But they struggled with driving adoption. The HR leader said that the biggest challenge to adoption was “information overload” and that employees did not have a convenient way to access the programs in a way that keeps them top of mind. As you might expect, the new programs floundered.

There again, perception didn’t match reality. The employer’s goal was to help employees reduce their overall health care costs, but employees had little appreciation for what the employer was trying to accomplish. When the employer asked employees why they weren’t using the new programs, many said they weren’t aware they had them or that they were too difficult to keep up with. In their attempt to do the right thing, the employer added complexity and further reduced employee satisfaction.

Stories like these aren’t uncommon. Benefits investment is often a missed opportunity for many employers, considering that the largest investment in most organizations is in their people, followed by their benefit programs. As financial experts within our organizations, we CFOs must change our communication strategies to design an employee experience that better represents our intentions.

A Painful Process

The reason employees don’t appreciate their benefits is that the material is dry, complex and confusing.  It’s not surprising when you consider the fact that most companies hand their new hires a 20-page benefit guide with countless details, benefit jargon, and acronyms, and expect employees to figure it out.

During open enrollment, companies provide updates with similar information. The employees’ eyes glaze over, and they try to get through the enrollment process as quickly as they can. In fact, most employees simply stay in the same plans they had in the prior year and hope they don’t have to deal with any of this again for another twelve months.

Further, employers shouldn’t rely solely on a benefit guide or newsletter to communicate benefits to their employees. Employees want more communication. They want more information, they want it more frequently, and they want it to be personalized. They expect to receive information through multiple channels, including video, online, mobile, and print. In short, they want to be educated consumers who have the information they need to make smarter decisions.

Think about your employees in the way you think about your clients. Develop a comprehensive communication campaign that lays out how you will reach your employees throughout the year to give them the information they need on how to use their benefits.

Examples of communications that may help employees during the year include texts about an upcoming flu shot clinic, an animated video about the benefits of saving for retirement early, and reminders about underused programs. Some employers include individual testimonials about how employees have used their wellness program to improve their overall quality of life.

Employees also want the information to be relevant to them. Generic, company-wide emails get ignored. Personalized communications do not. For example, an employee close to retirement may not want to hear about the new student loan repayment benefit that his or her younger colleagues are taking advantage of. But this person does need information on saving for retirement.

Finally, employees want to be able to access information more easily. Offer your employees an online platform and a mobile app that aggregates all of your different plans and programs in a single place. That way, employees don’t have to worry about different websites, or about downloading several different apps on their smartphone, along with remembering the user names and passwords associated with those distinct programs.

Remember, your employees are used to living in an Amazon and Netflix world. They need recommendations, easy-to-find information, and a single source for all of their employer-provided benefits. Connect your benefits investment with the concern you have for them and their families, and make sure they’re able to see and understand your investment. Over time, employees will become more satisfied, more productive, and more appreciative of you as their employer.

Ron Shah is the CFO of Hodges-Mace, a provider of employee benefits communication and custom enrollment services to large U.S. employers.