How to Design an Employee Benefits Plan

Mary Gormandy White
Employee Benefits Definition

You don't have to offer every benefit that's available, or even offer more benefits than other employers. What you need, says Chris Duchesne, Vice President of Workplace Solutions for Care.com, is "a benefits program that meets needs across your workforce." The cost of offering various benefits is not the only important factor to consider. Duchesne specifies that your company's benefits plan needs to be "integrated with, and meeting the needs of, your company and its employees."

Getting Started With Benefits Plan Design

Prioritizing Benefits Options

To decide what kinds of benefits are most important, Duchesene advises to "proactively look at the market and employee needs. That's the critical part." He suggests, "Survey employees, listen to candidate questions and review market data to get an idea of the evolution of benefits to help decide what's most important to employees."

He illustrates, "Here at Care.com, we collect employee survey data, get informal feedback from employees and utilize market data, which our broker helps with. We then go through an executive review of each benefit package." He continues, "After you get a view of the landscape and talk to your employees, you'll need to begin boiling it down to budgetary considerations."

Consider Long Term Needs

Duchesne
Chris Duchesne

Duchesne advises, "Evaluate not only your immediate needs but looking down the road, as well. Consult with your brokers, get a sense for what your employees want, and develop a three-year plan that looks at issues of importance that could be driving costs and health of your employees to anticipate trends. For example, what impact will healthcare reform have on premiums, or do you have employee survey data indicating that stress is an issue that should be addressed?" Let this type of information impact the decisions that you make today.

Communication Considerations

Duchesne points out that is it also important to consider psychology when selecting and communicating benefits to employees. He states, "How you handle communication can have a real impact on employee morale and benefits participation - which, in turn, can have an impact on your bottom line." He advises, consider "how you are making and communicating decisions that impact your employees."

What to Include in Your Benefits Plan

When building a benefits plan, Duchesne advises, "Begin with the basics. Consider benefits that address and support the employee as a whole person."

Basics

Health Insurance

Health insurance is the most basic benefit to offer - employees need it and expect it to be available at work. Depending on the size of your company, you may even be required to offer health insurance under the Patient Protection and Affordable Care Act (PPACA).

Dental Insurance

While PPACA does not require employers to offer dental insurance, according to Duchesne, this is a "baseline" that workers expect their employers to offer. The Institute for HealthCare Consumerism reports that "employees with dental insurance ... value these benefits highly and perceive themselves to be in better oral and overall health" than workers who do not receive such benefits at work.

Life Insurance

Duchesne indicates that life insurance is also an important basic benefit to offer, and it's one that can benefit employees greatly. As a Yahoo! Small Business Advisor article points out, "Unlike individual policies, employer-sponsored plans often don't require that applicants pass a physical exam." It is much easier (and generally less expensive) to get life insurance through a group workplace plan rather than to purchase an individual policy, so this is a benefit that employees are likely to appreciate greatly.

Retirement Plan

According to Duchesne, offering a 401(k) plus match are the baseline that current and prospective employees are going to expect. Aon Hewitt's 2013 Trends & Experience in Defined Contribution Plans survey indicates that "a defined contribution plan is the primary source of retirement income" for workers at "three quarters of employers."

In an article about the Aon survey, Workforce.com points out that 401(k) plans are the top way that U.S. workers save for retirement and indicates that many employers are starting to match employee contributions dollar for dollar (up to six percent) rather than only a percentage of what each worker contributes.

Paid Time Off

An article on Entrepreneur.com points out that providing employees with compensated time off is "a very basic benefit that isn't too costly to businesses." Employers are well-served to provide benefits that allow employees to take a reasonable amount of time off from work with pay. This includes both paid holidays and a system that allows workers to schedule time off for their own needs, such as taking vacation or getting well when they are sick (above and beyond what is mandated under the Family Medical Leave Act (FMLA).

The number of days or hours available to employees typically increases as years-of-service benchmarks are reached. Some employers offer bereavement leave in specific circumstances, as well as paid time off to perform volunteer work.

Whole Person

Financial Protection

According to a Harvard Business Review benefits survey sponsored by SunLife Financial, employers considered "best in class" include benefits designed to provide employees with financial protection against serious injury or illness. These include insurance that pays benefits in the event that a covered employee experiences a critical illness, disability or the need for long term care. Such benefits can help convey a message that the employer is concerned about workers and their loved ones, wanting them to "thrive both on and off the job."

Stock Options

Publicly traded businesses and closely-held companies often offer stock option plans that grant employees the ability to purchase stock at a fixed price. According to the National Center for Employee Ownership (NCEO), as of 2012 approximated nine million U.S. employees held stock in the companies they work for. NCEO states that offering this type of benefit "can be a flexible way for companies to share ownership with employees, reward them for performance, and attract and retain a motivated staff."

Wellness Benefits/Programs

According to Duchesne, "If you want to be seen as an organization that cares about your employees, then you're going to have some level of wellness program. Depending on your workforce, that could be anything from gym reimbursements or on-site fitness centers to bringing in a chef for an organic cooking class or giving out pedometers so employees can track their steps during a month-long healthy living competition."

The Harvard Business Review also indicates that "best-in-class" employers often provide wellness programs designed to encourage workers to be proactive when it comes to managing their health, often with financial incentives.

Employee Assistance Programs

Duchesene states, "Employee Assistance Programs (EAPs), which provide mental health, legal and counseling services and referrals, are still popular - and typically at a fairly low cost per-employee." According to a Department of Labor (DOL) publication, "EAPs enhance employee and workplace effectiveness and are a vital tool for maintaining and improving worker health and productivity, retaining valued employees, and returning employees to work after illnesses or injuries."

Family-Friendly Benefits

Duchesne points out, "Family-friendly benefits are a growing trend. We see this not only through our business, but across industries and the country for that matter. As national awareness around work-life issues increases with events like the White House Summit on Working Families, we're going to continue to see more of a push for family-friendly benefits. As this evolves, you see organizations who offer family-friendly benefits, like paid parental leave or child care assistance, using these benefits to keep their talent and as part of their recruiting efforts, as well."

According to Idealist Careers, family-friendly benefits may also include things like flex time, comp time and telecommuting opportunities. These things are very important to workers with caregiving responsibilities. Allowing time off for new parents - mothers and fathers alike - beyond what is mandated under FMLA is also an option, as well as time off for eldercare responsibilities. Some employers even go so far as offer financial reimbursement to help offset the cost of adoption as a benefit.

Other Ancillary Benefits

According to MVP Healthcare, "There's a growing trend toward ancillary benefits (also called voluntary benefits) for employer groups." Duchesne states, "Ancillary benefits are the types of policies that employees pay for and you administer." For example, even though dental insurance is a basic benefit that employees tend to expect, it is typically an ancillary offering.

Other types of ancillary benefits include supplemental insurance (like AFLAC), prepaid legal insurance, pet insurance, vision insurance, long term care insurance, flexible spending accounts (FSAs), health savings accounts (HSAs) and more.

Sourcing Benefits Offerings

Duchesne states, "If you can find a broker who's the right fit, it can be like adding two extra people to your HR team. But the key is finding the right broker. He advises, "First and foremost, you want to look at someone who can provide service, and act as an extension of your internal HR department. Look for a broker with a breadth of clients, whose roster includes organizations similar to your own in terms of size, growth and geography. Essentially, you want to go about your search for a broker the same way you would for an employee, because the chemistry has to be good."

Ongoing Evaluation

You aren't finished once you decide what benefits to offer. Duchesne states, "Once you get the programs in place, ongoing evaluation becomes the critical part." He points out, "As you begin the evaluation of how reasonable is this plan for the company, your CFO is going to want to know the cost, whether your employees appreciate the program and if it meets the organization's needs." Use what you learn about satisfaction and utilization to make tweaks to your plan as you move forward.

How to Design an Employee Benefits Plan