What Can We Do To Reallocate Benefits Costs?

There are still a few of us around who can remember when fringe benefits were truly benefits. Not all companies offered the same level of medical insurance coverage. Some programs were not in force until an employee had been with the company for a certain amount of time. Dental insurance was not a reality and vision care was unheard of.

In the 1980's organizations began offering a wider array of benefits to differentiate themselves from other organizations and to retain employees in the face of increased competition. Most benefits plans were introduced or improved when the cost of the introduction or improvement was inexpensive. Medical insurance coverage once had a one hundred thousand dollar lifetime maximum! As the years have passed, these inexpensive add-ons have become more costly and costs spiral up each year.

Today, prospective employees do not consider benefits levels when making employment decisions. Benefits levels and offerings are taken as a given. Not having a specific benefit is usually a negative in the decision process. Benefits have become an entitlement, not a "benefit".

What can an organization do to attempt to control some of these costs? Companies are finding that they have few choices in controlling benefits costs. These choices usually involve cost shifting or benefits reductions. Companies are often reluctant to try either approach. ~ Most employees will readily admit that they have more than enough benefits. In fact, some employees have requested that some benefits levels be reduced and that some benefits programs be eliminated with the savings going into salaries and bonuses.

Companies are fearful of reducing benefits, changing deductibles, co-pays, etc. as they feel employees will revolt. With the increasing costs of benefits programs and the need to find monies to reward performance, organizations should consider conducting employee surveys and employee focus groups to identify which benefits employees regard as most important and least important. Questions can be asked about co-pay levels, employer/employee sharing, what benefits they would like to see and what they are willing to trade for them, etc. Organizations may be surprised to find that benefits costs can be shifted as long as the workforce has a voice in the decision. Honest explanations go a long way in gaining employee acceptance. The organization should not make any other changes which could be considered to be funded by the benefits reallocation.