How voluntary benefits can save you money
Every workplace is unique. So is every person who works in it. And each employee has different wants, needs and ambitions.
Take a look at the employees in your workplace. One might be young and single. The person sitting next to her might be a father in his thirties with young children. Across from them? A married woman in her fifties who runs marathons and has three dogs. Presented with a menu of options for, say, insurance coverage, they are each likely to make very different choices.
Given the wide diversity of people in the workplace, it only makes sense to offer a wide array of options for coverage—from student loan assistance to supplemental life insurance to pet insurance. In recent years, the concept of voluntary benefits has gained traction to help business owners cover this broad variety of needs—a menu of options above and beyond traditional health insurance and 401(k)s.
However, there’s a lot of confusion about what voluntary benefits are, and how much employees really value them.
What Are Voluntary Benefits?
Let’s start with what voluntary benefits are. In the past decade, more companies have realized that, just as employees can pick and choose the apps on their smartphones, they also want to pick and choose what kinds of benefits they’d like to get from their employers.
Voluntary benefits meet that demand. These supplemental options can include dental and vision coverage, disability and cancer insurance, group purchasing plans—whatever the employees want.
It’s really that simple. Voluntary benefits are simply a customized package of additional insurance products and other group programs, presented to employees on a menu from which they can pick what they want and leave the rest.
Firms with as few as three employees can offer voluntary benefits. Most of these options are paid for by the employee, through payroll deductions with pre-tax dollars—an extra perk for the employee.
The good news for employers is that these voluntary benefits can be offered at little to no cost to the company. Administrative services, such as online billing, cost very little, especially if the company’s existing insurance vendor offers the package.
How Voluntary Benefits Lower Turnover Costs
The big takeaway for employers that offer a package of voluntary benefits is employee satisfaction. Satisfied employees don’t quit. Having a rich array of choices is one way to keep those valued employees from leaving for greener pastures.
The small costs associated with voluntary benefits are insignificant when weighed against the cost of losing a valued employee because someone down the street has a better benefits package.
Research by the Society for Human Resource Management suggests that the cost of replacing an employee can be as high as 60 percent of the employee’s salary. Total costs, including lost productivity and engagement among remaining staff, can send the cost of losing a good employee as high as 200 percent of salary.
These estimates don’t even include some of the intangible costs to a workplace when a good person leaves, such as the blow to morale among the remaining staff and the long trajectory to get a new employee up to speed while co-workers pick up the slack and correct the newbie’s mistakes.
One way to keep those valuable staffers from leaving in the first place is to give them what they want, when they want it, in the way of benefits.
SHRM’s 2017 benefits survey found that one-third of employers had increased their menu of benefits over the past year, and the reason why was clear: “Recruiting difficulty has continued to increase over the last five years, and competition for talent is high. To attract and retain top talent, organizations must leverage the benefits package they offer to their employees.”
A 2017 study by the Kaiser Family Foundation found that among small firms offering health benefits:
- 67 percent of firms offer dental insurance;
- 47 percent offer vision care insurance;
- 23 percent offer critical illness insurance;
- 16 percent offer hospital indemnity insurance;
- 16 percent offer long-term care insurance.
The data showed that small companies are actually more generous than all companies combined. Among all firms offering these supplemental benefits in the survey, small companies have the same rate of dental coverage (67 percent) and a higher rate for vision coverage (54 percent). However, employers as a whole are considerably less likely to offer critical illness (3 percent) or hospital indemnity (5 percent) insurance than the small businesses in the survey.
Workers overwhelmingly (87 percent) consider health insurance to be the most important workplace benefit when considering whether to stay in a current job or choose a new job, according to the 2017 report on the value of voluntary workplace benefits by Employee Benefits Research Institute.
“Employers who offer a strong employee benefits package that balances costs and choice should find themselves with a competitive advantage over other companies when it comes to attracting and retaining desirable workers and will have more satisfied employees overall,” the EBRI report concluded.
Voluntary insurance pays financial benefits regardless of any other insurance coverage employees have in place—including policies available through government health care exchanges.
However, voluntary benefits can go well beyond the insurance space to softer benefits of all kinds.
In its 2017 global benefits survey, Willis Towers Watson found that 92 percent of U.S. employers believe voluntary benefits and services will be important to their employees over the next three to five years.
The firm highlights four critical life needs that voluntary benefits fulfill:
- Health, usually covered by traditional and supplemental insurance products.
- Wealth accumulation, such as IRAs and other savings plans offered through the employer.
- Security, such as life insurance, long-term care insurance, or identity theft assistance.
- Personal products that cover what’s important to the individual interests and needs of the person.
In addition to traditional policies, voluntary benefits can include umbrella insurance, which provides extra liability insurance against claims and lawsuits above that typically provided by homeowners or automobile insurance.
Voluntary benefits can also include wellness products, such as gym memberships or day care, or even more untraditional offerings, such as group purchasing programs and discount merchandise. Among these softer voluntary benefits are concierge services, which can range from travel agents to personal shoppers.
What Are the Benefits to Employees?
Here are five good reasons your employees may welcome a package of voluntary benefit offerings, according to Colonial Life’s Employee Resource Center:
- Confidence: With the vast array of voluntary benefits on the market and a number of outside companies willing and eager to sell them, people are understandably worried about making the right choice. When plans are offered at work, employees are more comfortable, knowing that their employer has vetted the carrier.
- Flexibility: The wide range of options available allows employees to choose those voluntary benefits that suit their personal circumstances and lifestyle, whether they’re age 20 or 75.
- Bridging the gap: Voluntary benefits complement core offerings such as life insurance or disability insurance. Even if an employer provides a core life insurance offering, employees can choose to increase their coverage by adding voluntary life benefits. Voluntary benefits can also provide a financial safety net to help employees with expenses that may not be covered by their core medical plan, such as cancer care.
- Affordability: As well as potentially being less expensive if purchased through an employer, voluntary employee benefits can usually be deducted via payroll. That means that there’s no need to set up bank drafts or worry about missing premium payments. Plus, pretax dollars are often used to pay for many voluntary benefits, which will save employees money on federal income taxes.
- Portability: Many voluntary benefits are also portable, so the employee can keep the coverage even if they leave the company, as long as they pay the premiums.
The bottom line is that good employees are critical to a company’s survival, especially in a small business. Savvy employers look for effective ways to keep their staff and recruit the best talent. When your people worry less about their own lives, they will focus more on the company’s needs and goals.
Offering a personalized package of voluntary benefits is a relatively easy and inexpensive way for small businesses to make life easier and less stressful for their valued employees.
A flexible, personalized menu of optional benefits can help smaller businesses compete with larger competitors in the war for talent. And for those already on the payroll, a benefits package that employees choose themselves, tailored exactly to their changing needs, is hard to give up.