Posted by: Professionals In Human Resources Association (PIHRA) | October 27, 2010

Employee Benefits Strategy: What?

Michael Patrick, CEBS
Managing Director, Gallagher Equity Advisors

How many times have we heard about the importance of having an employee benefits strategy?  Has all that talk meant anything to your organization?  When we ask the question of our clients, “What is your employee benefits strategy?”, we find the answer can be surprising.

The responses we have heard range from cost reduction, efficiency, risk transfer/cost shifting, and total compensation competitiveness.  All of these are goals we might hope to achieve through a coherent strategy, but they do not form a strategy in and of itself.

In order to get there, we need to step back and ask the question, “What is the role of employee benefits in your organization?”

To help the organization grow, right?  Sadly, not everyone in a company will help the organization prosper.  Often though, we can identify who the key employees are.  In using the term, “key”, we don’t mean the c-level.  We mean the employees that are crucial to the operation and revenue generation of the company.  And here is where it helps to have data.

Workforce analysis tells us about our population – the age, tenure, participation, income level, gender mix as well as other important data.  Let’s look at some examples:

The first client conducted a workforce analysis and during the process identified a group of nurses as their key demographic.  When the results came out, we saw that more than 70% of this demographic was age 55 or higher.  In the next five to ten years, the employer could expect the large majority of this population to retire.  Additionally, the employees immediately below this group – the future key employees – were participating at a rate below their representation in the overall employee base.  As a result, the company chose to focus on two areas – ensuring the retirement plan was delivering for their key demographic and changing their employer cost share of benefits to retain that future key population.

In another example, a client conducted a workforce analysis where location managers were identified as their key employee group.  Two important pieces of information were gleaned from our analysis.  The first was that two thirds of the key population had been with the company less than three years.  The second was that while they represented 18% of the population, they only accounted for 13% of the cost.  In essence, the company was spending more on the employees who were valuable, but not integral to its growth, and less on those employees it needed most.  Our take away was that the employer was doing a good job of attracting employees, but not of keeping them.  While the average salary was in-line with their industry, the benefit plan was not.  Eventually, a three year strategy was put in place to bring the benefits in-line with the industry.

Conversely, without data we have found a client can get stuck.  One organization wanted to become an Inc. Top 100 employer, but ruled out any changes to the benefit plans ahead of time.  They did have the benefit of an employee survey, which showed some initial good signs, though a workforce analysis was not conducted.  Without knowing what to change, nothing was changed.   And today, they are still not a Top 100 company.

What’s your strategy?

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