Employers Resisting Cutbacks on Benefits
In order to cut costs and avoid permanent layoffs, many employers are struggling with difficult decisions in terms of actual cutbacks. Some businesses are looking at cutting travel expenses and freezing bonuses, while others are evaluating reduced hours or salaries. Another potential area of reduction, of course, is employee health and welfare benefits, where the current economic situation may force some employers to drop their benefit programs altogether. However, according to recent research, most employers are actually resisting cutbacks in employee benefits and some are even enhancing their offering in order to retain a competitive edge in the current market.
According to MetLife’s 7th Annual Study of Employee Benefits Trends, less than 15% of employers are planning to make reductions in employee benefits in 2009 – and most of those are in relation to 401(k) matches. The numbers are even more encouraging from a global perspective as a recent study by LIMRA International indicates that 95 percent of employers intend to continue providing the same health and retirement benefits to their employees over the next 12 months. The reasons for this are varied, although most survey respondents have indicated they still believe providing a competitive employee benefits package will help keep the right talent in place, which they perceive as critical to survival when the economy recovers. In affirmation, nearly 70% of employee respondents to the MetLife study say that the availability of these benefits plays a strong role in workplace loyalty.
A More Strategic Approach
In lieu of cutting back on benefits, many employers are becoming more proactive in boosting plan participation. According to another recent survey of nearly 500 employers conducted by Towers Perrin, over half (53%) of the respondents indicated they are considering new benefit strategies they would not have considered otherwise. In addition, several employers are planning to use more targeted communications to promote a better understanding of the products and services being offered to employees. In fact, according to the Towers Perrin study, 70% of respondents intend to increase plan communications in order to address employee concerns, educate on plan usage, and build perceived value.
In terms of plan design, employer respondents to the Towers Perrin survey are considering several different options, including: tightening benefit provisions in prescription drug plans (60%); increasing employee cost sharing (52%); and increasing enforcement of dependent eligibility provisions (18%).
Increasing Investments in Employee Health
According to the Towers Perrin study, half of surveyed businesses are currently increasing or are planning to increase investments in wellness and health promotion in 2009 and 2010. For those already promoting wellness initiatives, many are looking closer at financial incentives or penalties based on participation. The study indicates that 32% of employers plan to introduce or increase financial incentives for wellness or health promotion activities within the next two years, and another 30% are considering the action. In addition, nearly half (45%) are considering introducing or increasing penalties for non-participation.
Analysts see this commitment to strategic benefits, increased benefit communication and worksite wellness as an indication that more employers are recognizing the long-term financial benefit and business advantage that can be achieved by improving the health of their employees. This is clearly a different approach by employers from previous economic downturns where such investments were the first to get cut. Will it hold true if the recession continues? That remains to be seen. However, employers are certainly clear about how they value their benefit programs.
For more information on this topic, please click on the links below:
MetLife Trends Study Says Employers Resisting Cutbacks as Benefits Appreciation Mounts
LIMRA Survey Finds Most Employers Maintaining Benefits During Recession
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By visiting the HCW Wellness Corner, employers can order various resources to help them initiate, strengthen and/or enhance their wellness initiatives. Best of all, these resources can be sent directly to the employer completely FREE OF CHARGE!
So visit the HCW Wellness Corner today at www.hcwbenefits.com, and let us help you get your company on the road to wellness!
Important Notice: Hill, Chesson & Woody does not engage in the practice of law, accounting, or medicine. Therefore, the contents of this communication should not be regarded as a substitute for legal, tax, or medical advice.
July 17, 2009
Hill, Chesson & Woody strives to keep our clients' group decision makers abreast of trends influencing the employee benefits market. Look for Eyes on Benefits to bring you news and information affecting you and your employees.
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