Investing in Employees
While many companies cut back on health care options, freezing contributions to 401(k) plans or low-balling salaries, Western National Mutual Insurance Co. is applying its slogan, "The Relationship Company," to its 425 employees by offering deluxe benefits to recruit long-term, reliable employees.
The Edina, Minnesota-based property and casualty insurance company invests 25 percent of an employee's total compensation on benefits. It pays 84 percent of workers' insurance premiums, and 100 percent of premiums for short- and long-term disability as well as long-term care. The 401(k) plan offers a 100 percent company match up to 3 percent of the employee contribution, and then a 50 percent match up to the next 2 percent of the employee contribution.
"We want to be the employer of choice," says Stuart Henderson, Western National's president and CEO. "It's quite important to us. Benefits play a very big part in helping us attract employees who are in it for the long term."
In this volatile economy, offering great benefits is a challenge for many small- to midsize companies. Yet despite hard times—the cost of benefits still outstrips the cost of living adjustments, according to a recent Mercer study—10 businesses, including Western Financial, were recognized for their commitment and were named to the Principal Financial Group's 10 Best Companies for Employee Financial Security-2011 list. These companies have shown that a commitment to outstanding benefits can be a factor in having a successful business.
"Companies have been through a lot and have had to make difficult decisions," says Luke Vandermillen, Principal's vice president of marketing for retirement and investor services. "These companies have remained committed to investing in the well-being of the most important asset of the company, and that's their employees."
Western National also offers free loans of up to $1,500 and doesn't ask what the money is for. Employees can get one loan at a time, and payback can be as long as two years through payroll deductions.
One result of these benefits is a 2.8 percent employee voluntary turnover rate, Henderson says. Compare that with the national average of 21.2 percent.
According to data from Principal, its top 10 invest an average 26 percent of total compensation on benefits and have a 9.3 percent turnover rate. All offer health benefits and a defined contribution plans with an 88 percent average participation rate and a 7.6 percent average employee salary deferral rate. In addition, four companies offer a defined benefit plan.
This year, six of the winners are Principal clients.
Every year since 2001, Principal has named 10 companies, ranging from five to 1,000 employees, to its list. To date, only one—a mortgage company—has gone out of business, Vandermillen says. This track record shows companies can be successful in their industries while providing top-line benefits to employees.
"We've got 100 really good case studies showing where a commitment to benefits has paid off," he says.
The winners this year come from various industries and average 272 full- and part-time employees. Mathew Greenwald, president of the Washington-based Mathew Greenwald & Associates Inc., says tough economic times have forced winners to be more creative in designing successful benefit programs.
"It's gone from something that has been more cookie-cutter to designing programs that get the result" companies want, Greenwald says, adding that his company provides the algorithm judges use to whittle the list from the hundreds of applicants to a short list and finally the winners.
For example, workers at the Philadelphia-based Educational Commission for Foreign Medical Graduates get discounts on health care premiums if they complete health risk assessments. Also, employees participating in the company's Total Health Rewards program earn points toward prizes for participating in wellness programs.
"We are trying to find ways to cut the escalating cost of health care," says Joe Plush, the Educational Commission's benefits and training manager. "Our wellness programs show we have a culture of being a great place to work."
At Western National, employees are notified when they are not contributing the maximum amount to their 401(k) plan. While the company recently started automatically enrolling employees and increasing salary deferrals to the 401(k) plan, Henderson attributes the notifications to the 8.9 percent average employee deferral and 96 percent participation rate.
"We try not to be paternalistic in a bad way, but to some extent people expect us to keep after them," Henderson says.
Instead of passing on a packet of retirement plan information, all of Principal's winners offer one-on-one meetings with financial professionals, Vandermillen says.
"All good benefits programs start with knowing your employees," he says. "Doing one-on-one education, instead of passing out a packet of information, is a much better way" of informing and engaging employees.
Corey Rosen, senior staff member for the Oakland, California-based National Center for Employee Ownership, says providing financial security for employees does help attract and maintain better workers, and ultimately helps the company's bottom line.
"The model that prevails in corporate America today is backwards," he says. "The most important factor [for business success] is employee engagement. When people are distracted and not fully at work every day, they aren't contributing ideas and aren't wanting to stick around."