5 Strategies to Help Companies Save Money on Employee Benefits
A Prudent Employee Benefits strategy is key to savings
A company’s Employee Benefits package is customarily one of the largest line items in its budget (besides payroll), so any savings you can find can really affect your bottom line. Evaluating your organization’s employee benefits strategy entirely through a Micro lens of cost savings is more likely to backfire on employers. One alternative is to switch to a less popular carrier that might save your organization money upfront, but doing so may hurt your ability to attract and retain employees. To the contrary, you can’t sacrifice profitability in the name of offering your employees a good health care coverage.
1. Develop an Understanding That Employee Benefits are a Fixed Cost
ACA requires that employers offer health insurance to employees that work 30 hours per week or more. Most companies have chosen to bring their other insurances like dental and vision to match the same requirement. We advise companies to maintain employee schedules as close to 40 hours per week as possible. Consider the following chart to show the cost per hour advantages of paying for insurances for employees that work 40 hours per week vs. 30 hours per week.
|Employee A||Employee B|
|Hours per week||40||30|
|Wage per Hour||$15.00||$15.00|
|Employer Paid Benefit/Month||$250||$250|
|Employer Paid Benefit/Hour||$2.44||$2.92|
|Difference||$0.48 per hour|
2. Align your Employee Benefits spending more closely with employee wages
Employee incomes are a rumination of the value that they offer to their company. For example, an experienced skilled worker will be paid more than someone with less experience, training or skills. In addition, losing a top income earner is much more calamitous to a business compared to losing unskilled, low paid workers. With this in mind, most companies utilize the same employee benefits plan to attract and retain employees at every income level.
An employee earning $150,000 annually is unlikely to be impressed with receiving the same benefits plan as someone earning $35,000 per year. The solution is to align the benefits plan more closely with each employee’s personal income. One significant way to accomplish this is to segment the employees into classes. Classes are simply sub-groups of employees. Each class can be based on occupations or years of service , both of which tend to have employees of identical income levels. By creating employee classes, you can assign different benefit levels to each group. An employer can create as many classes as they wish based on their company’s needs.
If an employer decides not to segment their employees into classes, there are ways of aligning employee benefits with employee incomes without using classes. This involves having the benefit based on a percentage of each employee’s income. The chart below shows 6 different examples of how a company can align its benefits with incomes without the use of classes.
|Type of Employee Benefit||Benefit Examples Based on Employee Incomes|
|Critical Illness||Critical illness coverage is equal to 100% of each employees reular annual earnings|
|Health Spending Accounts||Each employee will recieve a Health Spending Account equal to 1% of their regular annual income|
|Life Insurance and AD&D||Life Insurance and AD&D are equal to 100% of each employees regular annual income|
|Wellness Spending Accounts||Employees will be reimbursed for expenses related to fitness or wellness up to a maximum of 2% of their annual income|
|Personal Spending Accounts||Employees will be reimbursed for education and personal development cost up to a maximum of 2.5% of annual income|
|Group RRSP Plans||Your employer will match your contributions into your RRSP plan up to a maximum of 2% of your annual income|
In each of the examples provided, an employee earning $150,000 would receive twice the benefits as an employee earning $50,000.
This strategy allows a company to save money by directing company spending towards the employees that are highly valued and hardest to replace.
3. Mental health Offerings
The amount of stress Americans are facing over the past couple of years is unprecedented and seeing a therapist can be hundreds of dollars per session. As a company, you can offer Employee Assistance Programs. Employee Assistance Programs generally offer a set number of free counselling sessions to employees. The number differs by employer, but usually ranges between three and 10 per year. In addition, some employers offer those free sessions per issue, meaning that if you have completed all of your sessions for one problem, you could start over with another one. Some EAPs may also help you find a therapist or refer you to one in your insurance network, Buckey said.
4. Flexible Spending Accounts
To stretch your dollars further, take advantage of employer-offered Health Savings Accounts or Flexible Spending Accounts. “HSAs are triple tax-advantaged, meaning you never pay taxes on the amount you contribute, invest or spend,” said Steven Auerbach, CEO of health-care company Alegeus. “The money is yours to keep forever, so the more you put in, the more you’ll have available later in life for expected and unexpected needs.”
While HSAs are for health-care costs, FSAs can generally be used on a wider range of expense such as childcare or even adult daycare. The two accounts are similar, but have some key differences. HSAs are tied to high-deductible health insurance plans and can be rolled over at the end of the year. If your employer offers an FSA, you can open one even if you opt out of health insurance but funds might not roll over.
5. Educate your Employees
The costs of HMO and PPO plans are not the same thing. So, educating your staff on the costs and features of each of them and helping them choose the right plan can remarkably impact overall benefits costs. This is especially true for companies with a younger demographics. Most of the plan providers are willing to educate companies and their employees about the options by holding seminars on-site.
Every company should start the process of selection by breaking the benefits into three main groups: health care, retirement, and specialty benefits. There’s no one-size-fits-all solution, but plan providers can give you guidelines for choosing the right benefits package. The also can advise you while picking a local broker to help you steer the multitude offerings.