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The ROI of Employee Benefits Programs

by Kimberly Horton, on October 30, 2017
Considering the penalties that can be imposed on businesses for non-compliance with the Affordable Care Act (ACA), many companies have grappled with the delicate balance between the business cost for providing benefits for their employees and the return on their investment.  Even if your organization isn’t considered to be what the ACA defines as an “Applicable Large Employer”, offering employer-paid benefits is still something to consider.  While it is true that health insurance and other employer-paid benefits can come with a hefty price tag, some organizations may be short-sighted to dismiss the value of providing access to those benefits. 
As it turns out, employee benefits are a critical piece of the total employee compensation puzzle.  Many employees consider time off, healthcare, and retirement benefits to be three of the most popular and important to their mental, physical, and financial health.  If your company isn’t offering the items at the top of employees’ wish lists, then efforts to motivate and retain could fall flat.
Some smaller companies may have the mindset that they will pay their employees additional money in base compensation to offset the burden of maintaining a benefits program.  That may be short-sighted, because increased compensation is taxable to employees, whereas a company provided benefit plan would normally not be taxable.
The added bonus is, when employees don’t have to worry about how they will get health care, they can actually spend their time helping to grow the business.  Happy employees tend to stay for the long haul.  In fact, in a survey conducted in 2014 by The Principal, The Principal 10 Best Companies, the average turnover among those companies rated highest in the survey was less than 5%, compared to the national average of 21.1%.  Among those companies ranked highest, it was also noted that half of them covered 100% of their employees’ health care premiums.  Now, companies covering 100% of insurance premiums is definitely not the norm; however, employers should consider their efforts to make benefits programs affordable to employees.  Otherwise, participation will wane. 
Another study conducted in 2015 by Optum and National Business Group on Health revealed that some of the emerging reasons employers offer health and wellness benefits included the following: 
1.  Improved job satisfaction;
2.  Positive impact on business metrics and profitability;
3.  Attract and retain employees;
4.  Reduce the number of sick days taken; and,
5.  Improve employee morale. 
Another finding of the study revealed that, even though the reporting companies’ senior leadership teams remain focused on health care cost reduction, they were even more concerned with improving their employees’ daily health decisions with health and wellness programs.
 It’s important to remember that, if you offer benefits and your employees don’t understand them, they won’t appreciate them.  If they don’t appreciate the benefits you offer, then that may have the unintended effect of causing them to be viewed as a negative.  Let’s face it.  Health insurance plans are difficult to understand for the average person, if you aren’t familiar with the terminology and the jargon. Employees want and need communication about their benefits programs.  Younger generations of employees want more information more frequently, personalized, and through multiple channels so they can make smarter decisions.  Decisions about health insurance are no different. 
If your company currently provides health coverage, it’s a good idea to communicate to employees when the company absorbs any increases in benefit premiums.  Otherwise, employees may be left feeling that the benefits plans didn’t get evaluated or are unimportant.  If the employee portion of premiums will be increased, they should understand what the underlying factors were, and what they can do differently to positively impact the premiums in the coming year.
The bottom line is that, employees will likely not leave a company for a small increase in pay if they feel their company appreciates and invests in them.  Though base compensation is one way to make that investment, a company-provided benefits program is another way to seal the deal. 
Message us today to learn how working with a  PEO like LandrumHR can help you offer a Fortune 500 benefits program to your employees today!
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Kimberly Horton

Kim Horton has nearly 20 years of Human Resources experience in corporate, financial, manufacturing, customer service and consulting environments, collectively. She currently serves as an HR Manager for LandrumHR. Her experience in the field has been acquired through focus on employee relations, training and development, team building, employment law compliance, strategic planning, high-level talent assessment and succession planning, employment law compliance, and employee compensation and benefits. Kim holds a Master of Arts degree in Industrial/Organizational Psychology. During her course of study, her primary research and thesis focused on procedural and distributive justice in both formal and informal mentoring relationships and perceptions of fairness. Her work was selected for presentation during a poster session at the national Society for Industrial/Organizational Psychology (SIOP) conference. She has also taught at the college level for both graduate and undergraduate courses in Industrial/Organizational Psychology. Kim is a member of the national chapter of Society for Human Resources Management.

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