Most employers have run on the assumption that the more benefits they offered to employees, the happier their workers would be.
But in light of increasing health care costs and shrinking profit margins, a growing number of companies are rethinking that assumption. As a result, employers are surveying employees to discover what trade-offs in benefits and compensation they would be willing to make.
There is increasing pressure on HR executives and benefits managers to prove to CEOs and CFOs that the money they are spending on benefits is worth it, says Tim Glowa, a consultant with Hewitt Associates.
“Benefits costs are about to eclipse profits at many Fortune 500 companies,” Glowa says.
At the same time, companies are starting to realize that in many cases, there is a huge gap between how much employees value certain benefits and the amount of money companies spend on those benefits, he says.
Hewitt estimates that typically $1,200 is spent per employee on undervalued benefits. The Lincolnshire, Illinois-based consulting firm, which has an online tool for clients to help survey employees, has seen interest in its product double every year for the past five years, Glowa says.
American Express is among the companies surveying for potential trade-offs. The New York-based company has conducted employee engagement surveys but noticed that compared with other areas, the company received lower rankings on compensation issues, says Timothy Nice, vice president of compensation at American Express.
“The questions we were asking were too general,” Nice says.
For example, employees may indicate they want more compensation, but not what kinds of compensation they prefer. “So we decided to dig in deeper and see what employees wanted,” Nice says.
American Express is surveying employees in the U.S., the U.K., Australia, Spain and Mexico, asking whether they prefer restricted stock or cash bonuses, Nice says.
Companies asking employees about trade-offs need to be prepared to make changes to their benefits and compensation plans to accommodate employees’ preferences, says Steven Gross, worldwide partner at Mercer.
“You are creating the expectation that you are going to change something,” he says.
The next step could be that employers will take their set allocation of money for benefits and allow employees to choose which ones they want, Glowa says.
This could save employers a large sum of money in benefits expenditures, says Neil Crawford, a consultant at Hewitt Associates.
The money could be spent on HR services such as training, which actually contributes to greater productivity among employees, he says.
“It’s about using your budgets more effectively and giving employees what they want,” he says.
—Jessica Marquez
