The Need for Benefits Education
By Trey Meehan
©2020
It never ceases to amaze me when a business owner dismisses the need to educate their employees on the total value of a job. The reason it amazes me is because of the completely different valuations that the employer and the employee assign to that job.
For an employer, determining the value of a position can be a complex (and often changing) series of math functions. For example, if an employee receives a $52,000 salary, the employer attributes this at $1,000 per week, correct? Wrong. The employer has to factor many other aspects in to the total value of the position, including: tax burdens, CORE employee benefits (ie: health, dental, vision), ancillary employee benefits (STD, LTD, Life), bonuses and other compensation, vacation pay, flex pay, sick days, holiday pay and many more.
While compensation levels vary between employers, and within their employee base, what doesn’t vary is that no two employees are exactly alike. It is not uncommon for an employment package with many of the items listed above to actually cost an employer an additional 50% or more than the employee’s base salary.
Do employers just assume that employees understand, and fully value, all of the items in their employment and benefits package? Most employers assume this, some don’t.
And what about the employees? The reality is that some employees understand some of their benefits, but very few understand all of them. Even fewer employees understand how they all work together for their benefit.
Take Tom Smith for example. Tom has been a machine tech with ABC Manufacturing for 27 years. Based on his years of service, Tom gets 4 weeks of paid vacation each year. All employees at ABC Manufacturing get 5 flex days and 5 sick days. Paid holidays include: New Year’s, Memorial Day, July 4th, Labor Day, Thanksgiving and Christmas.
Tom makes $52,000 per year ($1,000/wk) and his “take home pay” is $720 per week (after taxes and other deductions). Tom sees that same $720 per week … paycheck after paycheck after paycheck. In Tom’s mind, he makes $720 per week. However, as we demonstrated above, Tom’s employer has a lot of other things to consider when valuing that particular job function: salary, bonuses, vacation, flex/sick days, benefits and more. To the employer, Tom’s position is valued at $83,400 per year, but Tom values it around $37,000. Houston, we have a problem.
Tom doesn’t see the value because Tom has never been educated on the value of his benefits. The employer is not getting the full value of what they are spending on benefits because they have never educated their employees on the real value of their total compensation plan. In this very common scenario, both parties are getting less value than what they could be receiving.
A well designed enrollment solution featuring benefits communication and education is critical to “bridging the gap” between employer and employee valuations. In a world that is constantly shifting to self-service technology platforms to deliver benefits in an attempt to reduce costs and improve productivity, how many employers have honestly assessed the values exchanged and if that exchange was to the company’s and its employees’ benefit?
While I am certainly in favor of utilizing technological advances to more efficiently deliver the overall enrollment strategy, I’m still looking for a study that shows me where moving to a self-service model actually delivers better results with improved participation and better understanding of benefits by the company or its employees. (FYI – I won’t hold my breath, because we will never see that result.)
In closing, I think it is wise to remember that the typical employee speaks English, Spanish, etc. What most employees don’t speak is … “Insurance”. As the cost of compensation and benefits continues to represent a very significant portion of an employer’s operational costs, the value of an enrollment solution that focuses on communication and education remains a very valuable component and should be part of the discussion.
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Trey Meehan is a 25 year veteran of the finance and insurance industry. He is currently the owner of The Meehan Agency LLC, an Employee Benefits Consulting and Enrollment Solutions firm based in the Orlando, Florida area. Prior to opening his agency in 2011, Trey was involved in investment management and venture capital, focused on capital markets advisory, mergers and acquisitions, public relations and management consulting. Trey has a detailed knowledge of employer compensation models and the costs associated with employee benefits programs and the financial impacts when utilizing education and communication as part of the overall enrollment strategy. The Meehan Agency LLC offers customized enrollment solutions to group health brokers throughout the United States, utilizing a wide variety of technology and human resource capabilities. To learn more about the capabilities of The Meehan Agency LLC, please visit us at https://themeehanagency.com or feel free to call our office at 866-ENROLL-0.