Offering a range of voluntary benefits is an effective, modern way to elevate the employee experience and make a company more attractive to prospective hires. Yet when it comes to voluntary benefits, the question remains: Should the employer foot the bill?
There’s rarely one factor behind this kind of decision, but in working with large and small organizations across the country, our team identified three key areas that can help employers determine the best funding approach.
1. Cost considerations
Employer-paid, voluntary benefits are an appealing incentive for workers, so naturally they attract the most attention. Adding them to the overall benefits package isn’t always simply a matter of dollars and cents, however. Employers must weigh costs against expected value:
- Is this a cost we can easily absorb? An investment in voluntary benefits shouldn’t siphon resources from the core benefits package. Employers should consider whether the benefit aligns with what employees will need and use regularly. Such alignment can make a greater impact, even with a small investment.
- Are there direct benefits to the organization? While voluntary benefits can help the employee and employer alike, demonstrating concrete value can sway decisions when the employer covers the cost. Offering identity theft protection to employees, for example, has grown in popularity because informed, aware employees are less likely to fall for scams — which also strengthens a company’s cybersecurity posture. In addition, identity protection services can include breach response services, helping the employer comply with regulatory requirements and mitigate costs should an incident occur.
- Is there a tax benefit? Some employee benefits can provide a tax benefit for both employees and employers when they’re included in an employee’s W-2 wages. Employers should always consult a tax professional to confirm their specific eligibility, but the right benefits can help create a more attractive and competitive compensation package while potentially reducing the overall tax burden.
2. Benefits utilization
Voluntary benefits can improve employee satisfaction and engagement, but only if they align with employees’ needs and preferences. At the end of the day, benefits that go unused are a wasted investment and do little to attract and retain employees. Employers must consider whether a benefit will be valued and used.
Most employees don’t provide direct feedback to their employers about how they’re using their benefits, which can leave questions about whether the investment is worthwhile. Quarterly reporting can help answer those questions by giving employers visibility into employee engagement rates and utilization.
What’s more, some benefits can provide advantages and generate satisfaction — even if an employee doesn’t register for them. Some identity theft protection plans, for example, enable employees to access remediation and cyber insurance reimbursement if the worst happens, as long as the employer initially connects the account to their Social Security number. For employers that worry about paying for benefits that aren’t immediately used, this capability can help provide some peace of mind regarding the value.
Alignment with employee needs and preferences, combined with solid metrics help to maximize utilization, can help ensure employers and employees are both getting the most out of the benefits package.
3. Experience and impact
The decision to fund benefits should consider both the employee experience and organizational impact. A well-rounded benefits package with thoughtfully selected options can improve the reputation of an employer — which enhances morale, reduces turnover and fosters a positive workplace.
In the wake of rising health care premiums, one employer we work with decided to add employer-paid financial wellness and identity protection offerings — delivering extra, more holistic support to employees and increasing the value of its benefits package. Utilization data showed immediate receptiveness by employees of this large organization: Within 90 days, nearly half had registered to take advantage of the new benefits. What’s more, 46% expanded the protection offered by registering additional family members, a benefit that was included with their employer-funded coverage.
Benefit offerings that address key areas of an employee’s total wellbeing not only send a positive message but can also improve employee engagement and productivity. Stress and burnout have a damaging effect on workplace culture — and can come from many sources outside the workplace.
Striking the right balance
Deciding whether to fund a benefit offering is not a one-size-fits-all proposition. While employers must balance the value of a benefit against the budget, it isn’t just about cost management. By aligning their benefits offering to meet employee needs while supporting overall business goals, investing in employer-paid benefits can create a win-win scenario where both the workforce and bottom line thrive.