News & Articles

Human Resource Management
Published in the Rochester Business Journal
August 26, 2005
© 2005 HR Works, Inc.

Benefit communication strategy pays dividends

By Candace Walters

While every business must contend with uncertainties, executives can be sure of one thing: The costs of benefit programs, specifically health insurance, will continue to spiral upward.

Benefits – which can represent up to one-third of an employee’s total compensation -- are critical to attracting and retaining talented employees. Research conducted by AON Consulting has found that, over a decade, employees’ interest in certain benefits has remained stable: Medical coverage is most important, followed by paid time off and retirement plans.

Yet few employers can absorb the full expense of these benefits. While companies have been shifting a portion of costs to employees for several years, some are now finding that this strategy is diluting a firm’s most vital asset: a committed, productive workforce. AON has found that, as employees are forced to take on more costs, their trust of management, alignment with organizational values, and perception of compensation and benefits suffer.

The good news is that, by communicating effectively and frequently about benefits, employers may neutralize some negative perceptions about higher costs and weaker coverage.

Research conducted by Watson Wyatt Worldwide reveals that the quality of the communication about benefits can be more important than the benefits package itself in satisfying and retaining employees. In companies that offered rich benefits but communicated them poorly, the research showed, the turnover rate among top performers was notably higher than at companies that provided the opposite – less expensive packages, but excellent benefits communication.

Employers that succeed in boosting employees’ appropriate use and appreciation of benefit offerings also may save money as absenteeism drops and fewer disability and workers compensation claims are filed. Increased employee contributions to Flexible Spending Accounts (FSAs) allow the employer to save on payroll taxes. Depending on the premium cost-sharing arrangement, an employer may save money if employees can be coaxed to choose lower-cost health plans and/or generic drugs.

Implementing an effective communication program

Traditionally, employees expected benefits programs to remain static from year to year. More recently, as double-digit annual increases in premiums have become the norm, employers often revise offerings every year or two. Some employees understandably resist such changes, particularly when they result in less coverage and higher co-pays.

An employer can boost employee acceptance of benefit changes by implementing an ongoing communications strategy. Ideally, the plan will be developed by human resource professionals who have determined what they want to achieve and how they will measure results. Some results are easier to track, such as communications that promote the value of increasing participation in a 401(k) plan.

By highlighting the business reasons for changes, employers can engage employees as partners. If employees understand that paring benefits costs will free up money to grow the company, for example, or avoid layoffs, they may see that they have a direct stake.

To communicate effectively, an employer must:

• Be persistent. Communicating about benefits during open enrollment is only the beginning. By keeping the information flowing throughout the year, employers may find changes more readily accepted. Even small companies have many tools available – employee handbooks, newsletters, bulletin boards, posters, email and Intranet. Some companies highlight a different program each month or quarter, and direct employees to a website where all benefit programs are explained and questions answered.



• Be clear. Providing employees with a stack of vendors’ documents, with a sales pitch clouding key information, guarantees that employees will tune out. Instead, tease out key features and costs into one clear document. Consider branding pieces with color-coding or a logo, so that employees will immediately recognize important communications from the benefits department. Small companies in particular often end up with a series of ad-hoc initiatives that are communicated disparately, creating confusion and lessening their impact. It’s much better to develop one cohesive message that fully describes each program.



• Ask employees what they want. No employer can afford to offer benefits that no one will use; the best way to align offerings with the needs of employees is to conduct surveys.



• Offer multiple delivery venues. Different age groups respond differently to various communication methods. In general, older employees may prefer printed materials that they can take home, read and show to their spouses, while younger employees often like websites, webinars and interactive materials. Stocking the lunchroom with posters and brochures remains a useful strategy, and many employers also offer email and websites. Often, a one-on-one meeting is necessary to show an employee how switching to a lower-cost, higher-co-pay plan will put money in his pocket, or how banking an extra $5 a week will fatten her 401(k) account.



• Customize. Without clear information, employees tend to underestimate just how much the employer is contributing on their behalf. By spelling out the employer’s contribution, and showing what percentage of total compensation is devoted to benefits, the employer may find employees more willing to help pare waste.



• Focus on areas most likely to deliver cost savings. Look at offerings that are misused, such as emergency-room visits, or underused, such as the FSA or 401(k) plan. Often, the tools and information necessary to use certain benefits efficiently are already provided, but employees have not been given enough encouragement to pay attention to them. Those resources might include nurse hotlines, after-hours clinics, cancer screenings, flu shots or stress-management classes.



• Consider low-cost options. Not all meaningful benefits are expensive. Employers can show they’re invested in employees’ well-being by hosting lunchtime speakers to discuss stress management, nutrition or financial planning. Offering discount tickets to movies, sporting or cultural events is an easy way to help employees feel cared for.

Going above and beyond: Campaigns that motivate behavior changes

As Rochester’s larger employers move toward experience-rated rather than community-rated health plans, wellness initiatives -- on-site or nearby Weight Watchers meetings, smoking-cessation classes and walking programs -- have become more common.

Nationally, some large organizations have slashed costs by providing and heavily promoting certain programs. According to AON, one large organization shaved $1 million off its health claims with an aggressive plan that discouraged emergency-room visits and use of brand-name and other drugs.

That doesn’t mean small companies with community-rated plans can’t benefit from encouraging more responsible resource usage. If all small firms asked employees to minimize use of the emergency room and accept generic drugs, upward pressure on community health insurance rates would be eased.

With community rating restricting the scope of employers’ opportunities to lower health premiums, small firms look to other types of perks that set them apart.

At the accounting firm of DeJoy, Knauf & Blood LLP, free access to a nearby health club for all 25 employees and partners gives the firm a recruiting edge in a field where top candidates are in great demand, says Partner Tim Thaney. Particularly during tax season when employees work long hours, some seize the opportunity to visit the gym in pairs or small groups, to relieve stress by working out or shooting hoops, Thaney says. At least a third of the firm’s employees and partners use the club regularly.

DeJoy, Knauf & Blood conveys information about club privileges at the time of recruitment and hiring, and publicizes other firm-sponsored athletic events through invitations, written memos, emails, casual postings of photos, and word of mouth. The winner of the annual golf outing is named on a plaque in the firm’s training room.

Other small companies with limited resources can offer interested employees access to websites that, for an employer-paid fee, will customize a diet and exercise program. Providing employees with pedometers and encouraging them to use their break time to walk, perhaps even providing incentives to those who stick with their regimens, is another low-cost way to encourage employee wellness.

What’s in it for employers?

For companies of all sizes, stronger communications strategies ensure that employees understand the options and value of this important aspect of their total compensation. And greater understanding can equal measurable results.

Underused FSA programs, for example, offer a ripe opportunity for hard-dollar savings. As companies and employees boost FSA contributions, employers pay lower payroll taxes.

In addition, greater participation in 401(k) plans can reap multiple rewards. Companies that succeed in encouraging lower-level employees to increase their contributions may find it easier to retain top managers and executives – typically those highly compensated employees (including the owner) who, by law, cannot contribute at a rate disproportionate to the overall contribution rate of that company’s workforce.

As wellness initiatives take hold with employees, employers may find less work time being lost to sickness, medical appointments and cigarette breaks, and a drop in the filing of disability and workers compensation claims.

But short-term savings, while valuable, are not the whole story. Employers that deliver benefits communications successfully enough to engage employees in improving their physical and financial well-being will likely enjoy the services of a committed, talented workforce, and a community-wide reputation as an employer of choice.

Alice Janecek, senior benefits consultant at HR Works, assisted with this article

Candace Walters is president and CEO of HR Works, Inc., an HR management outsourcing and consulting firm serving more than 600 clients in the Rochester, Buffalo, Syracuse and Baltimore/Washington areas. HR Works provides HR Department outsourcing, part-time and interim HR managers, affirmative action plans, HR*Stars recruitment services, legally reviewed employee handbooks and supervisor manuals, compensation programs, training and more. To offer comments, write walters@hrworks-inc.com

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