For the majority of companies, people are the most important asset. Unlike physical assets, such as machinery that wears out over the course of a few years, employees actually become more valuable to an organization the longer they are on the job. Over the span of their employment, employees will ideally gain a comprehensive knowledge of the company’s systems and products, along with an improved ability to work together. Your benefits package may be more important to keeping good people at your company than you think.
The Importance of Your Benefits Package
Strong benefits are essential to recruiting and retaining top employees. According to a Harvard Business Review report, it is even more important than offering a high base salary. Meanwhile, more than 75 percent of employees cited benefits as an important reason for accepting a job. Health insurance is by far the most significant benefit for employees, according to the Employee Benefit Research Institute, and it is the benefit that is most likely to keep employees engaged and motivated.
Employees are also attracted to benefits packages that are tailored to their specific needs, according to CIO Magazine. There are four distinct generations in the workforce — traditionalists, baby boomers, Generation Xers and millennials — each with its own expectations and lifestyles. Offering benefits that are relevant for each stage of life, even when not specifically requested, can help employees manage work-life conflicts and family dynamics. People of different ages typically require different levels of health care, and employees appreciate the option to select a plan that suits their monetary and health care needs. Benefits must address both workers and their families; complementary, self-directed benefits, such as flexible spending accounts with options for dependent care, are an example of such an approach.
Benefits packages can be used as a strategic tool in building a company’s culture by helping employees feel valued and appreciated, instilling a sense of fairness and loyalty. Benefits are a meaningful, tangible connection between the company and its people.
The Real Cost of Turnover
As the economy continues to improve, employers have to work harder to retain talented workers who may now have a wider range of employment options. Talent retention has become a top priority for business leaders regardless of company size or industry, according to Business News Daily. Leading companies realize that benefits are a significant differentiator that can help retain key staff, even when other employers offer higher paychecks. For example, some employers are offering flexible working hours and telecommuting; the freedom to work anytime and anywhere is especially appealing to millennials but also attractive to other generations.
Creating a better benefits package is a formula for improving retention and cutting down on the very high costs of turnover. Although it may at first seem expedient to save money by instead lowering or eliminating certain benefits, this can cost you much more in the long term, especially if dropping benefits leads to valued employees leaving your company. The cost of losing an employee can be well into the tens of thousands of dollars; this is true even in industries with modest wages. As Bersin by Deloitte explains, the full cost of turnover includes many factors — such as the hiring cost itself, onboarding, lost productivity and mistakes in customer service — and can result in lost revenue and broken relationships. Employers lose the money that they’ve spent training employees who leave, and there can be intangible cultural losses as well.
Retention and recruitment of high-quality staff is an essential component of a successful business strategy. Historically, large, sophisticated companies have created a competitive advantage over their small and midsize competitors by offering better employee benefits, but that gap between large and small companies is shrinking now, with organizations of all sizes prioritizing the use of benefits as a strategic tool for retention and recruiting. Leading companies, large and small, are providing flexible packages and offering customized plans to enhance their attractiveness as employers and to improve productivity.
New cohorts of employees, focused less on cash compensation and more on the total work-life equation, are challenging companies to craft benefits plans that meet their aspirations. Successful organizations are reacting accordingly, doing so in ways that benefit everyone on the payroll.
David E. Williams is president of Health Business Group, a strategy consulting firm serving clients in technology-enabled health care services, pharmaceuticals, biotech, medical devices and software. He is frequently quoted in the media on the business of health care and is the author of the Health Business Blog. David sits on the board of both private health care companies and nonprofits.