Recovering financially from the pandemic hasn’t been easy. Some firms managed to avoid layoffs and furloughs by lowering their budget in areas like benefits costs.
In a time when some companies are throwing all sorts of benefits at employees, this is no easy feat. The key is to find a balance between controlling costs and providing adequate employee benefits, and be honest.
When employees understand why certain measures are being taken, they’re more likely to go along with them. For example, to avoid layoffs we needed to cut (fill in the blank).
On average, benefits costs account for 31% of total employee compensation. To cover benefits, like paid leave, health insurance, retirement and disability, it costs employers about $12 an hour.
Sharing this kind of info can help get employees on board.
Before you make a move …
But don’t just start making cuts to your benefits without looking at the following:
- 1. Evaluate employee use. Before you do anything else, evaluate the programs you currently offer and how much employees use them. More than likely you have programs that are barely used. If that’s the case, cut them first because they’ll cause minimal disruption. Then evaluate your healthcare program which is the biggest, most complex expenditure you have. If you offer low-deductible, high-premium plans and only a small portion of employees use it, you may be able to cut it. Also, things like weight loss and smoking cessation programs cost a lot of money for employers to provide, but don’t get a lot of participation because of the commitment they require.
- 2. Educate employees on cost-effective plans. Benefit pros spend an exorbitant amount of time creating effective benefit plans. But do your employees know which plan is the most cost-effective for them? If not, they could be using higher priced ones that cost the firm more. Invest your time in educating employees of their options.
- 3. Make sure you offer a health savings account. Employees can set aside money via an HSA for their healthcare expenses. Money saved through an HSA and used for medical expenses is pretax. This gives employees more bang for their buck when paying for healthcare expenses. They also roll over year to year and some plans pay interest or allow the unused portion to be invested in mutual funds and other investment vehicles. If the investments go untouched, it’s also tax free and can grow into a nice little nest egg. Health plans that offer HSAs often have lower premiums which means more savings for employers.
- 4. Take note of administrative costs. Benefits cost a lot, but they also have high administrative fees. Whenever possible use automation to cut those costs and use online portals. They allow employees to do their own enrollment, which means you don’t have to do it, therefore, cutting down on labor costs. Outsourcing benefits management to a third party is another way to cut down on administrative costs. And benefits consultants know the ins and outs of all things benefits and can help you provide only what employees need without excess expenses.
Info: 6 ways to lower your employee benefits costs
