How Your Benefits Plan Comes Together
Employees tend to think about all the components of their benefit plans for only a short time each year, when they are asked to enroll. It would be easy to think that’s the only time their employers think about it, too, but the fact is, by the time open enrollment rolls around, organizations typically have spent a lot of time on the plan.
To give a sense of how they spend that time, here is an over-simplified overview of the process employers use to choose a benefits package.
Strike a balance. At its more basic level, the process starts with striking a key balance: Give employees a solid benefits package at a cost that is manageable for both the employer and employee. For that aspect, the employer considers such matters as whether it wants to be known as a company with great benefits, whether it is focused on retaining the current workforce or attracting new workers, and how it wants to compare to competitors.
Consider total compensation. Savvy employers will put the benefits discussion into the context of total compensation, considering all the factors that contribute to an employee’s return on employment.
Set a budget. An employer can only supply to employees the benefits it can afford. Some employers will designate a certain percentage of the total budget for benefits; others will put together a package and then find the money to pay for it. A key factor in this consideration is how much of the total cost the employer will pay, and how much will be passed on to employees.
Work with a broker. Most employers will work with a benefits broker to put together the full benefit options they present to employees, relying on the broker to have the knowledge and relationships needed to get the right benefits at a good price. The broker usually brings several scenarios to the table so the employer can choose the ones that work best for the firm and its employees.
Make the choice. The HR team and leadership will weigh these and other factors to make the choices that best meet their criteria, and then communicate the options to employees so they can, in turn, make their choices.
While the final choice often seems to come down to dollars and cents, most employers spend a lot of time considering intangibles such as how employees will react to change, what they thought of past benefit packages and so on. With all of these steps in mind, that once-a-year process for employees can be an all-year process for the HR team.
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