Between elevated food, transportation, and energy prices; plunging home values; and volatility in investment markets, consumer attitudes have been shaken. Businesses across industries are feeling the pinch as consumers tighten their belts.
Human resources (HR) departments particularly face complicated and unique challenges during difficult economic times. For guidance on managing HR risk and benefits during downturns, see Human Resource Consulting Services Insurance.
A business facing financial cutbacks may be tempted to reduce the benefits budget and then ask HR to motivate employees who feel the results of those cuts. That can seem impossible, but there are tactics that either ease employees' financial burdens or help contain benefits costs.
One of the largest items in most companies' benefits budgets is health coverage, so health benefits often have the greatest cost-cutting potential. Consider putting the health plan out to bid for both your current coverage and alternative plan designs and assess features that could yield significant savings, such as prescription drug programs that encourage generic use. You should also make sure employees can get the most from their benefit dollars through premium-conversion plans and flexible spending accounts, and explore health savings accounts and consumer-directed health plans. For additional ideas on plan design, see Transforming Employee Health Benefits.
Since 100% of the cost of voluntary benefits is paid by the employee, expanding or adding voluntary benefits can strengthen the company's offerings without large employer expense. Employees pay through payroll deductions and often receive better group rates than they could get individually. For options around executive or supplemental plans, see Executive Benefits.
Assess the benefits you offer to ensure they aren't the most costly items while still helping to retain and attract employees. Disability and life insurance are two examples that often matter to employees even when budgets are tight.
High gas prices make commuting a significant expense. Offering qualified transportation benefits such as transit passes, vanpooling, or qualified parking funded by employee pre-tax dollars is a relatively inexpensive way to help workers with commuting costs and can save on payroll taxes.
Simple scheduling changes can also help employees save on transportation. Allowing carpool-friendly schedules or permitting employees whose duties allow it to work one or two days from home can reduce commuting costs.
Flexible schedules, such as a 10-hour/4-day workweek, may reduce employees' transportation costs and the employer's energy costs while giving employees more leisure or family time.
Even with a tight budget, communicate the value of benefits to employees. Many see only their out-of-pocket costs and do not realize how much the employer contributes; a concise summary of benefits and employer cost goes a long way.
These tactics are a starting point to help HR departments meet the challenges presented by difficult economic times. If you need assistance implementing any changes, ask an agent.
Frequently Asked Questions
How can employers reduce health benefits costs without cutting employee coverage?
Employers can request bids for alternative plans, encourage generic drug use, and offer consumer-directed plans and HSAs to shift some costs and promote cost-conscious care.
What are voluntary benefits and why offer them?
Voluntary benefits are employee-paid policies offered through the employer that often provide group rates, letting employees access coverage more affordably than purchasing individually.
Can transportation benefits reduce employee taxes?
Yes, qualified pre-tax transportation benefits can lower employees' federal and Social Security tax liabilities on the amount used for transit, vanpooling, or qualified parking.
What is a simple first step HR can take to improve perceived employee value of benefits?
Provide a short, clear summary showing total employer contributions and the benefits available so employees understand the full value of their package.