HR101 Benefits

July 1, 2000
So your company is now paying to walk your employees' dogs and treating workers to weekly on-site massages. Or maybe your firm doles out personal laptops, portable retirement plans, pet insurance, and coverage for alternative medicine. These perks would have sounded absurd to the HR director of the 1970s or '80s. But over the past decade, things have changed dramatically. Companies are offering workers a variety of new perks and benefits to help them better balance work and life.

Such extras as eldercare and domestic-partner benefits have become so common that they almost seem to be a given. For example, Seattle-based ConneXt, a leading provider of sophisticated, packaged customer-information system software targeted to utilities, gives workers all the usual benefits plus as well as a maximum of eight taxi rides per year and reimbursements for transportation expenses up to $40 a month.

These benefits certainly can add the wow factor to an employment package, especially in the eyes of an applicant or a new hire. But when it comes right down to it, are benefits really helping employers keep employees on a short- or long-term basis?

Benefits -- a swing issue?

Are benefits really a make-or-break issue when an employee is considering a job change?

"My sense is that that's not the case," says Karol Rose, managing director of consulting for, a work/life services company based in Westport, Connecticut. "What we find from research is that a lot of people are looking for a more flexible, supportive work environment, one that lets them be themselves, do good work and be acknowledged as an adult. If they think they can find an environment that's [more] in sync with their needs, they will make changes for that. But people, as a rule, don't change [jobs] that much for a slightly different medical package."

While benefits might not be a dramatic employment-relationship maker or breaker, there has been increased attention paid to benefits packages, by both employees and employers. "There definitely is a swing to look at benefits from a strategic point of view," says Melissa Meller, a senior consultant in the HR innovations practice at The Segal Co., a New York City-based HR and management-consulting firm. There's so much more information in the mainstream press such as Fortune's list of 100 Best Companies to Work For. And information is more readily available on the Internet. Employees can visit virtually any company's Web site to find out what benefits they're offering.

Employees still want the basics: good insurance (health, vision, and dental care), short-term and long-term disability coverage, a pension plan and a 401(k). But given the media attention that many of the new economy startups are getting, with emphasis on their seemingly wacky bring-your-pet-to-work perks, old economy workers can't help but sit up and take notice.

The problem for employers is that the costs of benefits keep rising. (See "Health Care Costs Increase"). Employers can't keep adding on benefits without worrying about costs and return on investment. HR is trying to figure out how to make the benefits package attractive, especially by beefing it up with things that don't cost money (such as casual-dress work environments) but make a big difference for employees.


The more user-friendly, the better

Competition from dot-coms and startups is forcing all types of organizations to revisit their benefits plans. Because one benefits package will never satisfy everyone, companies need to be vigilant in surveying employees about what they want as a way to solidify the employment relationship. In a world of customer service and niche marketing, it's not surprising that HR would turn the same kind of attention to employees' needs.

Technology has also influenced benefits choices. "The Internet has dramatically changed the way corporate employers provide access to benefits of all types," says Ken Barksdale, president of Baltimore-based RewardsPlus. "As employees become more familiar with customized service over the Internet, they'll expect and appreciate the availability of customized benefits. Employees are going to select what makes sense for them, not just take what the employer is giving to everyone."

Barksdale notes that aside from advances in technology, many other factors are influencing the change in the benefits landscape, including an aging workforce, more dual-income households, alternative work schedules, and changes in health coverage and medical protocols. It's also important to note that employees' attitudes are changing toward benefits, bringing forth a greater understanding of the value of various services and products.

"Today, the lines between work life and daily life are blurry, so we need tools to help us manage them more effectively," says Rosalia Bacarella, founder of, headquartered in White Plains, New York. Through the Web-based portal, employees can get discounts on anything from shampoo to auto insurance rates. They can get information about what their health insurance will, or won't, cover. Organizations such as Hewlett-Packard, Metropolitan Life, Harris Bank, Novell and other Fortune 500 companies are providing such services to employees to help them be more productive and satisfied.


The basics still shine

No doubt about it, stock options are the sexiest benefit in the new economy, even though they are increasingly costly to employers. The cost of options (as measured through potential dilution) has increased 2 percent in the last three years, according to a new study of 63 Fortune 100 U.S. companies, conducted by Hewitt Associates LLC, a management-consulting firm based in Lincolnshire, Illinois. Although 52 percent of the companies surveyed expressed a moderate (48 percent) or high (13 percent) level of concern over the cost of stock options, few are taking major steps to alleviate or control these costs. However, the study did also uncover a modest trend toward increasing vesting schedules to four years to more effectively retain talent in a hot labor market.

On the employee side, stock options may also be losing their luster. "I think the recent fluctuations in the market have caused some people to reevaluate if they're going to jump ship for a dot-com, where it's not such a sure thing," says's Rose. It's clear from a new nationwide survey that many workers don't want to play Russian roulette with their careers by jumping to a dot-com without serious thought. Commissioned by Irvine, California-based technology recruiter BridgeGate, LLC, and conducted by MarketFacts, Inc., of Chicago, the survey examines the degree to which Americans value working for a pre-IPO firm and how much they gravitate toward the familiar. While more than half of all respondents expressed interest in working for a pre-IPO company, some 44 percent said they'd be interested only if they got a competitive salary. Overall, young, urban, better-paid workers with some college education were the most likely to be willing to sacrifice salary to work for a start-up. "The new economy attracts mostly young, urban, educated professionals who are already testing their earning power," says Dudley Brown, managing partner for BridgeGate. "Employees in more traditional organizations exhibit the greatest aversion to joining the pre-IPO bandwagon. Employees realize that a great many other factors make up a positive work environment -- good benefits, training, flexible hours, a nurturing environment in which they're given the opportunity to thrive, and these can come from any kind of employer."

Employees are, in a word, smarter about what employers can -- and can't -- offer them. "At this point in the labor market, I see benefits as expected, not as a retention tool per se," says Max Wagoner, human resources manager for Los Angeles Freightliner. "In other words, if you don't have a reasonable benefit program, people won't give you a second look and they won't stay. But, given anything resembling a reasonable benefit program-medical, dental, maybe vision, life, long-term disability insurance and, of course, a 401(k)-then most employees aren't too particular about the enhancements of one over the other.

"In my opinion, the labor market is still [primarily] looking for 'How much money am I going to take home?' as the deciding factor. Stock options were simply the key to riches and now, as a benefit, they don't quite shine like they did."


Benefits aren't the sole retention factor

While benefits often can be a big influence in why an individual chooses one job over another initially, there's solid evidence that benefits aren't a primary reason why people stay.

A new 15-country study called "Meeting the Global Rewards Challenge" (culled from two related surveys) found that high-performing companies take a different approach to rewarding employees than do other companies. In short, the study by New York City-based management consultant Towers Perrin, found the following four issues to be of prime importance for high-performing companies:

  • They provide a consistent and meaningful level of differentiation in pay for their top-performing employees.
  • They make performance a priority in their reward systems.
  • They believe that employees today want different things than past generations.
  • They communicate openly about pay and rewards and how those relate to strong individual performance.

Retention is a bottom-line issue for companies, especially in this tight labor market. But benefits, no matter how exceptional or trendy, are only one part of the retention equation. Other issues consistently have been proven to matter more in keeping workers on board. In the Towers Perrin study, for example, challenging work and work climate are the primary reasons that compel workers to stay with a company. Base pay is third on the list and benefits aren't in the equation at all.

This also rings true with John Sullivan, head and professor of human resources management at the College of Business at San Francisco State University. He confirms that most workers don't leave companies solely because of money issues. "Managers control over 75 percent of the reasons why people leave their jobs," he says. Those reasons include bad management practices, how people are treated on the job, communication, challenging and exciting work, continual opportunities to grow and learn, being recognized and rewarded for performance, having some control over their jobs and life, and knowing their work matters.

"The tendency in the past, [for HR has] usually been to throw money at the problem through comp programs," says Segal's Meller. "But I don't think (that) will really make your company able to retain." She advises that HR know, across the board, what benefits a firm is offering employees in the short- and long-term. And then determine if the benefits package is competitive, appealing, and understood by employees. If all three pieces are in place, "that's the best place to start."

In the end, benefits alone probably will never be the ultimate reason for why employees stay with one firm over another. But providing great benefits tends to keep employees with your firm longer -- as long as you're doing everything else right. Look at it in the reverse: If you don't provide the benefits that employees want, they'll certainly find what they're looking for with a competitor. The talent shortage keeps raising the bar. Whether HR will choose to raise or lower the benefits bar is an individual organizational matter. Just keep in mind that turnover rates may be at stake.