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Communicating value of benefits package a must

Published in the Rochester Business Journal

Imagine giving a big raise to an especially valued employee, hoping to enhance her loyalty -- and then forgetting to tell her about the increase.

Inconceivable, right? Why make a generous gesture and then fail to take credit for it?

And yet many employers effectively do exactly that when they fall short of communicating to their employees the total value of their compensation, the “hidden paycheck” that consists of health premiums, pension plans, vacation days and other benefits.

It’s been a long time since such benefits were appropriately called “fringe.” Taken together, perks such as paid time off, medical and dental plans, disability and life insurance, flexible spending accounts, social security and 401(k) plans can add 25 percent to 50 percent to an employee’s annual cash compensation. Most pay stubs, however, reflect only a portion of that, leaving employees to underestimate or dismiss the value of their “hidden paychecks.”

Corporate America spends billions of dollars on employee benefits each year. According to the Hay Benefits Report, employers spent 8.6 percent of total payroll on statutory benefits and another 8.6 percent on health care benefits in 1997. Pension plans accounted for 4.7 percent, followed by capital accumulation plans at 3.7 percent. Death benefits and disability together equaled about 1 percent, as did miscellaneous benefits, such as tuition aid and employee assistance programs.

Why commit these substantial sums? Some benefits are required by law, but others are provided because the employer wants to compare favorably with competing employers, to encourage employee loyalty and retention, and to appear generous.

As important as it is to company morale to convey benefits accurately, such communication is equally essential for showing evidence of compliance. Increasingly, current and former employees are filing lawsuits, accusing companies of failing to ensure that the employee fully understands or understood his or her benefits.

So why would a company ever provide outdated, inaccurate or incomplete communications -- or fail to deliver them altogether? Challenges such as costs, timeliness, internal politics and changing compliance issues often complicate or derail the best-laid efforts. And employers often assume -- incorrectly -- that if they’ve told an employee something once, they’ve ensured perfect comprehension.

The good news is that it’s never too late to enhance your communication with employees about their benefits. Because people respond differently to varied communication venues, I suggest several approaches, each of which reinforces the other:

1. Be sure your language reflects the total package, not just the cash portion.When recruiting a new employee, don’t say, “Your salary is $25,000 per year.” Instead, say,” Your total compensation is $34,000 -- of that, you’ll be receiving $25,000 in salary, $3,600 in health benefits, $1,200 in 401(k),” and so on. When giving a raise, spell out the percentage increase for both the cash and non-cash portions of the compensation package.

2. Hold an employee benefit fair. During open enrollment periods -- when employees can make changes to any of their plans -- invite representatives of health and life insurance companies, 401 (k) plan administrators and other benefit vendors to set up booths, meet employees, answer questions and provide literature. Many employers provide refreshments to encourage employees to attend the fair during their lunch or coffee breaks, and some vendors offer promotional gifts. Employees who won’t speak up during company meetings on benefits often feel more comfortable getting information directly from vendors.

3. Develop a system for providing written communications to each employee, ideally with each piece originating from the same office and designed to match its companion pieces. This communications package might include:

  • Employee handbooks. A comprehensive handbook enables employers to comply with federal and state statutes, including the New York State law requiring written communication of working hours and certain benefit programs. A handbook tailored to the employer also can serve as a long-term resource for communicating company policies, benefits and other important information to new and current employees.
  • Benefits-at-a-glance statements. These are not personalized reports but general overviews describing each benefit the company offers, details about eligibility, and the cost to the employee, if any. These are often included in employee handbooks and, when printed on a single page, can be very useful as recruitment tools.
  • Personalized employee benefit statements. These provide for each employee a dollars-and-cents breakdown of all the benefits the employer provides, in a way that helps an employee feel informed and valued. Often, until an employee sees these described in detail, precisely as they apply to him or her, he or she underestimates how much the company is contributing toward his or her well-being. Sending these statements to an employee’s home not only guarantees confidentiality but also includes the spouse in the communication loop. As a bonus, the technology now exists to print these statements as needed, at whatever time(s) during the year the company and employees need them.
  • Pay stuffers. Here’s an opportunity to get your employees’ attention in a fun way. Periodically, a pay stuffer might feature a trivia question that relates to benefits, such as, “What is the maximum percentage of salary an employee can contribute to his/her 401(k) plan per year?” To encourage employee interest, the employer might offer a pair of movie tickets or a dinner gift certificate to the first employee who responds correctly.
  • Employee newsletters. Regular communication, presented in an upbeat and informational format, is especially effective for conveying news, providing a refresher and strengthening the bond between employee and employer. If sent to the employee’s home, his or her spouse and family members also feel included in the company “family.”

If you find that employees don’t realize or appreciate the increasing amounts you’re spending on their benefits, it may be because you have failed to communicate them regularly to each employee in a personal way. Increasing the frequency, accuracy, completeness and personalization of your efforts will help you reap the full advantage of providing the “hidden paycheck.”


© HR Works, Inc.

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HR Works, Inc., headquartered at 200 WillowBrook Office Park in Fairport (Rochester), New York, with an office in East Syracuse, is a human resource management outsourcing and consulting firm serving clients throughout the United States. HR Works provides scalable strategic human resource management and consulting services, including: affirmative action programs; benefits administration outsourcing; HRIS self-service technology; full-time, part-time and interim on-site HR managers; HR audits; legally reviewed employee handbooks and supervisor manuals; talent management and recruiting services; and training of managers and HR professionals.