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The Changing Tide of Employee Benefits By Patricia Lawrence, Human Resources Manager Although an employer’s benefits package is a big incentive to attracting and recruiting top talent, employers are struggling to keep their benefits package intact amid a down market and rising costs. The Past Five years ago employers could lure cream-of-the-crop candidates with the promise of a lucrative benefits package at virtually no cost to the employee. Today the tide has changed as the high cost of providing employee benefits has forced employers to become more strategic and creative. A Big Piece of the Pie When an applicant interviews for a job, he or she invariably asks about the organization’s or company’s benefits package. The traditional benefits package usually includes dental and health insurance, long- and short-term disability, life insurance, a 401(k) or pension plan, a transit program, a flexible spending account program, and the like. The average package runs approximately 25 percent of payroll, but it can go higher. For example, employee benefits at the Topps Company, an international marketer of confectionery and entertainment products, represents 33 percent of payroll, according to Leon Gutmann, assistant treasurer at Topps and cochair of the 2003 New York State Society of CPAs’ Employee Benefits Conference. Health insurance, the cost of which has dramatically increased over the last five years, is a hefty part of that package. The cost to provide health insurance for employees at Flemming Zulack, & Williamson, LLP, in New York City has increased 70 percent, according to Flemming’s controller, Scott Jaffee. At home fashions manufacturer Croscill Inc., health insurance costs 80 percent more than it did five years ago, says Anthony Cassella, Croscill’s CFO. Sharing the Cost In an effort to continue providing employee benefits in the face of their rising costs, employers have had to make many changes to their benefits plans. During the last several years, an increasing number of employers have asked employees to contribute toward the cost of their benefits. Over the last five years, Topps employees have helped subsidize the cost of their medical insurance. Prior to that, Topps paid 100 percent of all benefits, Gutmann said. As they figure out ways to continue providing benefits, companies are also trying to address the needs of their employees, which can also affect the types of benefits offered. Such is the case at Flemming, where, at the employees’ request, the company recently implemented a dental plan. However, Jaffee points out that the cost of the dental plan premiums is borne completely by the employees. The employee’s share of insurance premiums can vary from a nominal amount per month, to a sliding scale based on income, to a fixed amount per month. Other benefit items such as dental, life insurance, long-term disability and the 401(k) usually fare much better than health insurance plans because these benefits are more flexible in terms of the cost structure and the premiums can be fixed for more than a year at a time, unlike medical premiums, which are renewed and normally increase on an annual basis. Creativity Is Key Innovation is the key to continued employee benefit success as associations, companies and firms look for various ways to preserve their benefits plans. Changing a medical plan design is a good way to keep costs at bay, although employers are at the mercy of annual renewals. Gone are the days when one employer would have several health insurance plan options that could include a health maintenance organization (HMO), a point-of-service (POS) and a preferred provider organization (PPO). Instead, a large number of employers have turned to managed care, which gives employees the option of going out of network, though at a higher cost to them. “At Flemming we reduced the benefits provided to employees when we implemented an HMO plan,” noted Jaffee. “We also moved from a two-tier prescription drug program to a three-tier prescription program, which not only spread out the cost of prescriptions, but also reduced the monthly premiums as well.” The Future Employers
continue to contemplate the future of the employee benefits
package and have differing views on how it will be preserved.
While some believe the government will lead the way, others
feel it is shifting toward consumer-driven care, and still
more suspect it will be maintained through the current method,
cost sharing. The solution remains to be seen. |
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