The current business environment is a difficult one. While businesses are still seeking to expand, prudent business executives and owners are also looking to economize in every way possible. These cost-cutting efforts will affect every department in a company, especially HR, as most companies spend the largest part of their revenue on salaries and wages.
Not only will salaries and wages be tightly controlled but the depth and range of benefits packages will also be reconsidered every year. Lessening benefits and thus lowering premiums may seem the most obvious way to achieve savings but there are hidden costs that should also be considered before reducing a company’s benefits package. These hidden costs involve the recruiting, hiring and training of employees and can have a significant effect on the financial health and bottom line of a company.
Lower Premiums Don’t Necessarily Mean Lessened Benefits
It seems an almost immutable law of the business world that if a company or its employees pay less in premiums that it will receive less in benefits. While this notion is typical, utilizing an outsource HR vendor or Professional Employer Organization (PEO) can change the dynamics for the better.
In many cases, an HR vendor can, because of economies of scale, reduce administrative costs and thus reduce premiums to some degree. More importantly, an outsourced HR vendor brings consolidated purchasing power to their negotiations with insurance companies. Since the HR vendor represents many companies and therefore many employees, they can achieve significant reductions in premium costs without negatively affecting the benefit packages.
Lessened Benefits DO Mean Lower Quality Candidates
For many employees, especially younger ones, the allure of benefits pales in comparison to the salary or wage associated with a job. However, there are many, more mature employees who recognize the advantages of a well-designed and affordable benefits package.
A business owner or executive should recognize that people choose a job for specific reasons, and are not always entirely focused on which employer offers them the highest salary. While a superior benefits package may not always entice a higher quality employee to apply, a meager one can unintentionally deter many highly qualified potential applicants.
Superior Benefits Packages Attract and RETAIN More Qualified Applicants
More qualified applicants mean more qualified hires. In general, these employees are secure in their positions, and are more likely to train faster, stay longer, and be more productive. The savings in “soft” costs that accrue due to higher employee morale and lowered turnover should not be underestimated. A superior benefits package can be instrumental in perfecting this aspect of the human resources equation.
Similarly, more highly qualified employees are most likely more familiar with the rules and regulations that affect their job, and are therefore more likely to follow company policy. In short, they are less likely to err when it comes to business laws, regulations, or company procedures. The result is lower workplace accidents, fines, and penalties levied by governmental agencies, and fewer harassment or other types of lawsuits. While not entirely an issue for some business niches, it is a significant benefit in many fields.
A Menu Plan Can Keep Benefits Affordable for Everyone
The multi-generational composition of most workforces demands that a company’s benefits package allow for customization. Different time-off options, medical benefits, educational opportunities, and other features can be chosen from a benefits menu, and unwanted options can simply be declined. The result is a benefits package that more closely fits the needs of every employee and also significantly reduces premiums.
For example, singles are more interested in investment options, families need the best health care plans, and seniors are probably looking for both. The only affordable way to accommodate these individual needs is to provide a menu plan. Even the simple expedient of offering separate medical, dental, and vision plans can make a difference to certain categories of applicants.
In short, the ability to “pick and choose” from a variety of benefits options allows your company to attract the broadest range of top tier candidates while keeping those benefits affordable for both the potential employees and your company.
Benefits Can be the Tiebreaker
While a good benefits package may not overcome a significantly deficient compensation package, it can mean the difference between candidates choosing your company’s total compensation package over another’s. This fact presides in every business environment, good or bad.
At times there may be a glut of applicants, but the best talent is always in demand. A superior benefits package will attract them and, even more importantly, keep them from leaving after you have invested time and energy in their recruitment, hiring, and development.
In the same vein, properly trained and developed employees are less likely to run afoul of company policies or government regulations, saving the company time, expenses, and possibly an otherwise excellent employee. Lastly, a superior benefits package engenders better morale and a more productive workforce.
Each of the relatively intangible factors will considerably diminish the “soft” costs to a company. The CFO may not be able to point to a line item where the savings appear, but the results will show on the bottom line.
This fact, when coupled with the great possibility that premiums can be kept constant or reduced, is a very strong incentive for a business owner or HR executive to examine the possibilities offered by an outsourced HR vendor or Professional Employer Organization.
About The Guest Author: Carolyn Sokol is a founder of PEOcompare.com and a frequent contributor to compareHRIS.com, both of which help match businesses to the right HR or payroll service provider for their particular needs. Her background is in marketing and communications, employee education and training, development of policies and procedures and the ongoing delivery of outstanding customer service.
Benefits Photo via Shutterstock