Getting the most out of a benefit program, especially
in the long run, requires aligning benefit programs with an organization's
overall business strategy and compensation philosophy. Benefit planning
inevitably involves trade-offs between an ideal package and one that
will maximize the desired impact at an affordable price. The three most important factors
that must be weighed are:
• What benefits can the employer afford?
• What benefits will best attract and retain the employees
needed to execute the organization's business strategy?
• What benefit vendors provide a quality and consistent
product now and will continue to do so in the future?
Strategic planning allows employers to take the initiative
in balancing employees' needs with a budget. It can involve taking
advantage of new tools, such as electronic plan administration, and
offering new benefits beyond the traditional health, disability, and
life insurance and retirement plans with the addition of benefits
such as financial planning assistance, gym memberships, and long-term
Strategic planning can provide for controlled budgets
over a period of years and provide meaningful benefits that aid in
recruiting and retaining key employees. Steps to take to define and
implement a plan for achieving these objectives include:
• Evaluating current benefit plans and programs;
• Identifying corporate objectives;
• Spelling out strategies that relate to corporate culture;
• Coordinating benefit strategies with other compensation
and human resource programs;
• Designing a communication plan; and
• Establishing budgets to accomplish these steps.
Benefits play a crucial role in both attracting and retaining
employees. Innovative benefit packages are often what distinguishes
an employer from the pack. While benefit costs can account for as
much as one-third of payroll costs, there are still many opportunities
to provide current benefits more efficiently and to provide attractive
benefit packages that appeal to employees without greatly increasing
payroll costs. For instance, benefits such as group and payroll deduction
purchasing plans cost virtually nothing.
Benefit programs are most effective in attracting, motivating,
and retaining employees if they are part of a complete compensation
strategy targeted for the employer's workforce. Employers should determine
what they can afford to spend on benefits and what components they
need to accomplish the specific goals of their compensation strategy.
These strategic goals, however, cannot be achieved unless employees
understand the components of their benefit program. A good communications
program consistently informs employees of the utility and value of
the benefits they receive. Poor communication will result in employees
who take the benefits that they receive for granted.
If for no other reason, employers must view benefits
as an element of the overall business strategy because benefits are
such a big part of payroll costs. According to the U.S. Bureau of
Labor Statistics (BLS), private industry employers spent an average
of $34.15 per hour worked
for total employee compensation in September
2016, the most recent month for which statistics are
available. Wages and salaries averaged $23.42 per hour worked, and benefits averaged $10.73 and accounted for 31.4 percent of total compensation
costs. This statistic includes such items as health and other insurance,
retirement plans, paid leave, and legally required benefits such as
Social Security. For more details on employer costs, visit http://www.bls.gov/news.release/ecec.toc.htm