Measuring up: The strategic use of benchmarking and voluntary benefits 

Despite economic pressures, employee retention tops the list of most employers’ benefits objectives. However, successfully achieving that objective can be challenging, as it often vies with the desire to control costs. A good starting point to help address these goals is to establish a baseline for how your clients’ benefits programs compare with those of their industry peers.

Competitors in the war for talent can take many forms. A solid understanding of the benefits trends among a particular industry is table stakes. A deeper analysis that compares other characteristics, such as company size and geography, against peer programs may help increase your client’s competitive edge. It is also important to understand the preferences of the employee demographics comprising a company’s workforce. This can be even more challenging for those clients with international locations. Keep in mind that cultural expectations will likely also influence what employees consider an attractive and valued benefits program.

It is hard to ignore the impact of these multiple influencers. Building a benefits plan that is appealing to a diverse workforce requires the same care and due diligence afforded to other strategic decisions designed to support a company’s current and future growth. It also takes a significant investment - not necessarily referring to increasing the benefit spend. This can also mean researching and offering a wider spectrum of voluntary benefits. MetLife’s 7th annual Employee Benefits Trends Study found that nine out of 10 employees have indicated a willingness to pay for workplace benefits themselves if it means access to additional coverage.

Benefits benchmarking data can provide the insights needed to help you suggest solutions to optimize the value of your clients’ benefits programs from both an employer’s and employee’s perspective. The data can help employers to determine what benefits they might want to add to increase the breadth and value of the offering. This would include deciding on an appropriate mix of employer- and employee-paid coverages to achieve the maximum value and return on investment.

Benchmarking
There’s a wealth of insights available and free of charge from MetLife’s Online Benefits Benchmarking Tool at whymetlife.com/benefitsbenchmark. This tool provides an easy way to compare and contrast benefits offerings, objectives, strategies and preferences across more than 80 dimensions. As an example, users will see that the value employees assign to different benefits can vary significantly among different demographics, including type of workforce. While medical insurance tops the list for both blue collar and white collar workers, their second and third choices are strikingly different. Blue collar workers prefer prescription drug coverage and dental benefits, while white collar workers say they want vacation time and retirement benefits. This presents a great opportunity to revisit a client’s benefits program, and to offer up solid, research-based solutions.

While it stands to reason that interest in certain benefits can vary by the age and life stage of the employee, it may come as a surprise that certain coverage needs are almost universal in their appeal. For example, older employees aren’t the only ones concerned about retirement. Similar to the level of interest expressed in retirement planning by their older colleagues, 46 percent of Gen Y employees (compared to 52 percent of Gen X employees and 46 percent of Baby Boomers) are interested in access to retirement planners through the workplace. Likewise, 44 percent of Gen Y employees are very interested in workplace access to retirement planning seminars (compared to 46 percent of Gen X workers and 44 percent of Baby Boomers). These findings indicate that employers should not underestimate the value of offering workplace retirement planning advice to employees of all ages.

Various data slices by industry can also yield interesting findings. For example, take a look at retailers and their employees - employee retention is the top benefits objective for employers in the retail industry, with 60 percent of retail employers citing its importance. With retention a key goal, it is vital for employers to understand what factors are the key influencers of employee loyalty. However, a gap in perception of loyalty between employers and their employees may surface a missed opportunity. The following loyalty ranking helps to make this point:

The most significant gaps between employer and employee beliefs include:

• Retirement benefits: 62 percent of retail employees said retirement benefits were a significant factor in influencing loyalty, compared with only 31 percent of retail employers.
• Non-health insurance benefits (life, dental, disability, etc.): 56 percent of retail employees say these non-health benefits play a strong role in workplace loyalty, yet only 36 percent of retail employers seem to realize this.

Helping clients understand the preferences of their workforce is a key step for making sure that the benefits offered are those that will be valued and utilized, and ultimately help support the achievement of retention, satisfaction and other goals.

Voluntary Benefits
The nine in 10 employees who are interested in voluntary benefits, as mentioned above, appear willing to absorb the cost because they see the advantages of group rates, the convenience of payroll deduction, and appreciate the ability to easily purchase multiple products all in one place. The appetite among employers and employees for voluntary benefits will continue to grow for two main reasons: Many employers want to offer a suite of benefit options to meet the needs of an increasingly diverse workforce, but they simply cannot foot the whole bill. And employees, who are shouldering greater responsibility for their own health care and retirement, are finding financial protection benefits of increasing value.

The MetLife study shows just how big a role non-medical insurance protection benefits - such as life insurance, dental and disability - are now playing in affecting employee loyalty. In 2008, 69 percent of employees said these non-medical benefits played a strong role in workplace loyalty, up from 51 percent in 2007. The study also found that 41 percent of workers overall, and more than half (52 percent) of those at larger employers (with 2,500 or more employees), strongly considered their workplace benefits to be the foundation of their financial plan.

Voluntary benefits are a convenient way for employers to expand their benefits offerings and help employees build a personal financial safety net. In particular, small businesses can take advantage of voluntary benefits to deliver the more robust benefits programs that larger employers typically provide. For example, although employees report that life, disability and dental insurance are major contributors to their sense of employer loyalty, only 61 percent of small businesses with fewer than 500 employees offer disability income coverage, compared to 87 percent of those employers with 500 or more employees. But having disability coverage not only provides employees with valuable income protection. Employers should be reminded of the potential benefit to themselves as well, such as disability specialists involved to help effectively return employees to work where appropriate.

Overall, dental insurance historically has been within employees’ top five most important benefits, according to the MetLife study. However, for employees at companies with less than 500 workers, it is of even greater importance, with only medical, vacation, and retirement benefits ranked ahead in priority. However, again, there is a divide between the offerings of small and large employers - 65 percent of businesses with fewer than 500 employees offer dental insurance, compared to 93 percent of those employers with 500 or more employees. For those employers not currently offering this benefit, a voluntary dental program can be an effective way to offer a competitive benefits program while maintaining overall cost structure. A voluntary dental plan can be designed to cover preventive and diagnostic services, with more employee cost-sharing for the more expensive services.

While you are looking at how to maximize the value of core benefit offerings, life insurance is a benefit that warrants a closer look. While life insurance is a core to many employers’ benefits programs, many Americans remain dramatically underinsured. MetLife’s Study of the Financial Impact of Premature Death, which polled 1,000 widows and widowers, found that of those who did receive life insurance proceeds, most only received one or two years of household income as a benefit. Approximately three-quarters of beneficiaries did not feel that the amount of the life insurance proceeds they received met all their needs. So, in addition to looking at the employer-paid offering, it can be helpful to evaluate the supplemental life offering. Younger employees need coverage too. MetLife’s annual Employee Benefits Trends Study has found that nearly half of Gen Y employees are married and/or have children. Providing a voluntary life offering for employees and their spouses/partners is a way to provide a valued benefit to employees of all ages.

Improving Benefits Communications
While benchmarking can help better align a company’s benefits offering and strategies with employee attitudes and expectations, a benefits program can still fall short of expectations if the communications are not effective. The full value of the program will not be realized, and will perhaps be underutilized, if the communications do not effectively educate employees about their choices.

It is this simple: people who aren’t aware of their benefits can’t take advantage of them. Of employees who believe their employer’s benefits communications educate them effectively, 70 percent said they were satisfied with their benefits. In contrast, of those employees who do not believe their employer’s benefits communications educate them effectively, only 7 percent said they were satisfied with their benefits. Still, only slightly more than one-third (36 percent) of employees overall think that their benefits communications are effective. Furthermore, employers also realize that their communications are falling short - only 33 percent of employers strongly believe that current benefits communications educate employees effectively. This clearly spotlights the opportunity for improving benefits communications.

Improving benefits communications doesn’t have to be daunting. Some employers could potentially see greater employee awareness of benefits offerings by simply increasing the frequency of the communications. For example, many employers only communicate once a year - typically during open enrollment. However, ongoing communications can help reassure workers of the employer’s commitment and strengthen employee engagement in the benefits programs. In addition, communicating around specific life events can be very helpful in reminding employees to update their coverage. Life events, such as marriage or the birth of a child, should prompt employees to revaluate their financial needs, and clearly, these occur throughout the year, not just around open enrollment.

Communications that are disseminated through multiple channels help ensure important messages are reaching all audiences within a workforce. The MetLife Benefits Benchmarking Tool found that Gen Y employees say HR meetings and seminars are most helpful for making benefits decisions, while Gen X and Baby Boomers cite tools and calculators.

Another tactic to consider is holding an off-cycle enrollment for certain voluntary benefits. This can help increase employee participation rates since there is typically more time and attention paid to the offering. The MetLife Benefits Benchmarking Tool found that only 18 percent of employers offer an off-cycle enrollment. Public administration and education employers lead the way with 27 percent and 22 percent, respectively.

Taking strategic steps now with respect to benefits is critical. Businesses that are able to maximize both the breadth and depth of their benefits offerings, and effectively communicate their value to employees, will likely be better positioned for success, both now and in the future. A forward-looking approach to benefits may also help employers address business objectives, including the retention of top talent, in a competitive and challenging environment.