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What benefits can your organization afford?
Organizations differ widely in their ability to offer benefits.
Benefit plan decisions must be based on the employer's ability to pay.
Our prior emphasis on employee needs and preferences painted a picture of benefit programs as a collection of individual benefits. When this approach is used, the level of the benefit is the focus of attention. The cost can be overlooked.
For example…
Health insurance costs have risen dramatically year after year. When benefits are based on providing an established level of coverage, it's nearly impossible for employers to maintain or lower their costs.
When benefits are established based on employee preference, the employer must be concerned with the issue of rising costs. The employee may be in the position of helping to control costs by decreasing use or making cost-effective choices on health care providers, but they must have incentives to do so. In fact, employees may be totally unaware of the total cost of their benefits to the organization. So, employers are beginning to realize that effectively communicating the meaning and value of benefits programs can help to optimize the return on investment in benefit plans.
Before making a final decision about your organization's benefit plans, always compare the costs of direct compensation to benefits.
This comparison is important for a couple of reasons:
- To maintain a balance between direct compensation and benefits. Granting salary increases and benefit changes independently can lead to excessive increases in payroll costs if the organization loses control of the situation.
- Changes in salaries directly affect the cost of benefits. This is especially true in areas such as vacation and holiday pay.
Memory Jogger
What's wrong with considering only employees' needs and desires in designing benefit programs?