Time was when the only major issue in employee benefits was rising healthcare costs. Company leaders could swing the problem over to the human resources department and not really worry about it.
Now, however, what to do about benefits has risen to the fore in corporate governance—pushed there by the labor squeeze, disruptive effects from the pandemic, rising anxieties and expectations of younger workers, high-profile recent gains by unions in industries from automaking to moviemaking and even newly surging healthcare costs. As with everything else in America these days, politics has also complicated the matter.
It’s time for boards to step in. “Five years ago, if you started talking about benefits at a board meeting, directors would say, ‘Take care of it; just do what you have to do,’” says Paul Reitz, CEO of Titan International, a $5 billion manufacturer of heavy-duty wheels and tires, and a director of staffing company TrueBlue. “Now, costs of benefits are so high that they show up in the P&L, and they have to become a part of board discussions.”
Jason Lippert, CEO of $5 billion transportation-parts maker Lippert Industries and a director of diversified manufacturer Quanex, agrees that benefits “are something that have to be talked about at the board level now. The key is to have conversations about how to be creative with them.”
Employers have been regaining some leverage lately after more than a decade of bowing to scarce workers. Not only the Great Resignation but also “quiet quitting” seem to be over. Companies are even pushing back against what they see as worker abuse of sick days.
Yet, 35 percent of U.S. employees were still actively considering a job change, according to the most recent survey by Arthur J. Gallagher benefits consultants. “The types of benefits that organizations need to offer need to evolve, and so does the strategy,” says Tom Kelly, a principal for the Buck division of Gallagher.
Investing in better benefits raises employee wellbeing, says Anthony Klotz, a management professor at University College London. “And when she’s happy, a worker will engage in more of the extra behaviors that boost productivity.”
Here are some ways directors can engage the issues, navigate the trends and add a little creativity in their board’s approach to the future of employee benefits.
Get up to speed. Directors must prioritize efforts to care for talent—not just to recruit and retain people—as a strategic imperative, says Deb Smolensky, engagement practice leader at NFP consultants. “They’ve got to incorporate it into the lens of their fiduciary oversight that they use to assess the health of the company’s leadership and the organization as a whole.”
One way is to go beyond “simply talking to the CEO and HR departments” by pressing for annual engagement metrics and survey results that show whether the workforce is engaged. Ask probing questions, especially before annual enrollment decisions for healthcare plans are finalized. Demand data on “scheme take-up” so directors can tell if their benefits plans are a match for employee demands, Kelly says.
Engage a compensation consultant to get the most current information, especially for private companies where information is harder to come by, suggests Kathy Shaw, an employee-benefits attorney for Lathrop GPM.
Be “mindful.” Whatever is contributing to the self-described mental fragility of younger-generation workers—Covid trauma, helicopter parenting by boomers, opioid addiction and the isolative effects of social media are among factors that get blame—they are pleading for employers to help manage their psyches. Regulators are also pushing companies to provide mental-health and substance-abuse services as robust as those for other conditions.
More than 70 percent of employers paid great attention to mental health in 2023 in the Gallagher survey. “It needs to become less stigmatized,” says Jeri Hawthorne, CHRO for disability insurer Aflac. “It’s important for companies to offer programs and services for employees to increase their overall wellness, including the mental piece.” So, for instance, Aflac offers tele-therapists 24 hours a day and even includes available online consultations with Corporate Chaplains of America.
Tap into technology. Digital services are helping tremendously in increasing access to various health-related benefits. Companies, for instance, use “wellness” apps such as Virgin Pulse, which provides mental health tools, including self-guided courses that are accessed by nearly half of users at least once a month, according to the provider.
Sword Health connects patients on the employer’s dime with remote physical therapists who lead them through the same exercises they would do in a personal visit. “But they’d have to pay a deductible or co-pay in the office,” says Jeff Smokler, chief brand officer for health insurer Gravie. “Having this option has led to a reduction in the number of surgeries that are required.”
Help with the kids. Even with the new flexibility brought to many jobs by remote or hybrid work, many employees struggle with childcare and eldercare demands. Average U.S. prices for daycare and preschool services have been rising at about twice the general inflation rate, according to the U.D. Department of Labor.
Emburse already offered parental leave at 100 percent of compensation for either parent for up to three months and a program that allows employees to spend pre-tax dollars for preschool or daycare. Now the financial software provider is rolling out “caregiver leave,” which offers a percentage of pay for an as-yet-undetermined amount of time off to care for loves ones such as a critically ill spouse or aging parent.
Confront the bogeyman. Rising wages, labor shortages and consolidation in the healthcare sector are greatly inflating the prices of medical services, raising employer healthcare-plan premiums by about 5 percent to 6 percent in 2023, up from 4 percent to 5 percent the year before, according to Gallagher, and bringing the average tab for a family to nearly $24,000 a year, per healthcare researcher KFF.
“We’re seeing the biggest health insurance premium increases in 10 years and trying to figure out how to manage those increased costs and still provide a great experience for employees,” says Kristin Hales, vice president of people operations for Impartner. She says the retail software provider is trimming expensive but little-utilized benefits such as its post-Covid provision for virtual doctors’ visits, among other measures.
Boards should be gagging on the disappointing returns for their increasing spend, some argue. “Most companies aren’t getting good value, paying handsomely for mediocre care and diminishing access,” maintains Elizabeth Mitchell, CEO of Purchaser Business Group on Health, which buys services for many large companies. “Boards have got to address that as a strategic investment.”
At the same time, boards and management are under more pressure to exercise fiduciary responsibility of self-funded health insurance plans after the 2021 passage of the Consolidated Appropriations Act, which requires employers to show that the healthcare services they purchase are cost-effective and high-quality, among other criteria.
Reckon with stay-at-homes. There’s a significant value to employees to being able to work remotely, put at the equivalent of about a 6 percent pay increase by some surveys. Yet remote workers keep pressing for more benefits than mere flexibility.
Aflac, for instance, has fitness centers at its handful of core locations for on-premises employees. Beginning in 2024, it will offer an app for online access to yoga, other fitness programs and even remote health-counseling sessions. “It’s different than a lot of telehealth,” Hawthorne says. “This is actually, ‘Hey, this can be your primary-care physician.’”
Seeing the wiggle room remote workers get, however, is one reason employees tethered to physical locations are getting more demanding. Sentry Equipment, a maker of manufacturing-monitoring equipment, last year added more time off for workers with five years of employment as it also padded parental leave. “Folks are now focused on benefits that have to do with time off,” says CEO Brian Baker.
Give it to them. Sentry Equipment workers have owned the entire company since 1986 and get 8 percent of their pay put into an investment plan based on the private company’s stock, over and above the rest of their compensation. The disadvantage is that younger workers, especially, have a harder time grasping the importance of a benefit that won’t directly help them until they leave the company or retire. They also aren’t necessarily motivated by it in their daily work.
“The challenge is to connect the dots for them,” Baker says. “We’re trying to show them that when you serve customers better and make them more efficient, that will translate into a stronger retirement plan for you.”
Communicate continuously. Many employers can notch big gains in worker satisfaction simply by communicating what benefits are already available and how employees can use them. “In many organizations, the corporate center has designed and made available all sorts of benefits, but most employees don’t know these things exist or how to access them easily,” says Christophe Martel, CEO of Fount Global, a workplace-culture consultant. “Typically, the front line is most unaware. It’s not just about communications but about having tools and processes and an environment where this is easy to do.”
This means more than just reminding employees of all their goodies at health-insurance reenrollment time in the fall. Aflac, for instance, stages “mental wellness weeks” and conducts other activities that hammer home the message. “There has to be an ongoing heartbeat or drumbeat,” Hawthorne says, “of educating employees about offerings.”
Smolensky suggests, “Even if you don’t add benefits, you need to market and communicate them like a brand, making sure your employees see that they add value.”
Beware the culture wars. Directors have been pulled into the ESG fray in many ways during the last several years, and employee benefits are the latest such battleground. A major flashpoint: As more companies are adding fertility benefits, reimbursement for adoption services and even child car-seat subsidies in support of family expansion, some are also reimbursing travel costs for employees who must leave home to obtain an abortion in the wake of state measures that restrict them.
Several corporate leaders declined to talk with Corporate Board Member about this sensitive matter. “It’s one thing our CEO [Joe Wang] hasn’t wanted to touch yet, and understandably so,” Hales says. “It’s still something we don’t have a hard and firm hand on how to best support or not support.”
Emburse now offers reimbursement for travel for any employee who has to go elsewhere for any specialized medicine. “We wanted employees to have access to the same healthcare no matter where they live,” Tabor says. “We thought of it as an equal benefit, not to penalize people who live in certain states.”
The decision was not universally appreciated. “It’s very political, but we decided it was something we were going to take on,” Tabor adds. “Some folks found that was a very liberal approach and didn’t appreciate that. We haven’t had anyone take advantage of it, but maybe in the future.”
Next up: a travel benefit to obtain gender-changing treatment? “I’m not sure how much further companies will take it, but some states are banning transgender services for minors,” Shaw notes. “Companies are doing what they feel is best. But it’s a matter of: Can you get the people you need with the policies you have?”
Launch new benefits. Changes in employee demographics and expectations keep forcing companies to create new benefit types. “Employees are starting to expect less common benefits—not necessarily demanding them, but they’re hopeful that companies have them,” Hawthorne says.
For instance, more companies are wrapping menopause-specific care into benefit expansions, including virtual access to the small national pool of certified specialists and coverage for often-expensive hormone treatments that may not be included in some insurance plans.
Others are diving into new areas. KPMG, for example, offers parents with high school-age children a college counseling benefit that includes creating a customized college list and providing up to 15 college application essay reviews with feedback. Other companies are offering employer-sponsored “lifestyle accounts” that give employees a set amount, say a few hundred dollars a year, for discretionary spending. They can be applied to expenses including childcare and transportation, home office equipment and even vacations.
Put it on employees. The sheer variety of employee asks—there are now 75 different kinds of unique benefits, up from 10 to 12 just a few years ago, according to Gallagher—has some leaders deciding to offer and arrange new options only if workers pay for them. Nearly two-thirds of companies in the Gallagher survey are expanding such programs. “With the new, evolving voluntary-benefit programs, employees typically pay all the costs, but they’ve been negotiated by the company at special group rates that employees couldn’t get on their own,” Kelly says. “That gives employees greater choice and personalization, too.”
Emburse, for example, provides increased voluntary benefits, including additional insurance for critical illnesses. “It’s not super-expensive for employees to take on, but it can provide an extra level of coverage,” Tabor says. “Some people might want to be covered, and some people might be completely fine without it.” CBM
