Cost Control Is Top Priority For Benefits Specialists
Controlling health care benefit costs remains the top benefit priority for the overwhelming majority of American employers in 2005, but providing rewards programs that attract, motivate, and help retain employees is also becoming increasingly important for companies, according to the 11th annual "Top Five Total Rewards Priorities Survey" by Deloitte Consulting LLP’s Human Capital practice and the International Society of Certified Employee Benefit Specialists (ISCEBS).
The 350 employee benefit specialists surveyed identified health care spending as their leading concern for the sixth year in a row, with more than 90% calling it their top issue in 2005, Deloitte and ISCEBS reported. The other leading benefit priorities cited by respondents were providing benefits to attract and retain talented employees (56%), addressing employee willingness to pay a larger portion of benefits coverage (52%), increasing employee responsibility for managing their own rewards budget (42%), and managing retirement benefit costs (41%).
"Employers are concerned about not only the cost and management of benefit plans for their employees, but also how those plans will actually shape who makes up their workforce," said Tim Phoenix, principal of Deloitte Consulting. "As baby boomers approach retirement and the talent race becomes more competitive, cost-effective and consumer-friendly benefit packages will become increasingly important to employers wanting to succeed in talent management."
Except for the second priority, which deals with recruitment and retention incentives, all the priorities cited by benefits specialists are related to finances or costs, researchers noted. Two of these priorities involve cost control by the employer, while the remaining two are concerned with encouraging employees to play a greater role in managing their own benefits.
"Most of this year’s top five priorities surround health benefit cost management and consumer-driven programs," said David V. Repko, president of ISCEBS. However, he added, "though reducing costs of employee benefit plans and finding ways to give greater control to employees remain consistent concerns for employers, the need for organizations to provide total rewards programs that can help them retain and engage those employees needed for success is an emerging challenge for 2005."
In addition to identifying their priorities, survey participants were also asked to report changes they have made over the past 12 months—or intend to make over the next 12 months—to their companies’ rewards programs. Some 83% of employers said they are increasing employee cost-sharing in health and welfare programs, and 72% said they are placing greater emphasis on consumerism for employee health and welfare programs. In relation to post-retirement plans, 23% said they are emphasizing consumerism and 33% said they are increasing cost-sharing.
Some of the actions being taken by the employers surveyed over this two-year period include shifting to lower-cost providers (40%), increasing the use of outsourced administration providers (44%), and eliminating or freezing participation in post-retirement plans (16%). In addition, 29% of respondents said they are scaling back rewards packages and benefit levels for employees by reducing the number of plan options they offer to employees.
To help employees navigate changes to benefits and rewards programs, most respondents (85%) said their organizations are stepping up their employee communication and education efforts. And to assist employees in managing their own benefits, around two-thirds of survey participants are increasing the use of employee self-service technology (68%), and providing employees with improved retirement-planning tools (65%).
"We see a rising trend in employer-employee partnerships surrounding benefit plans as employers seek ways to reduce costs by providing employees with more control over their own careers and futures," said Mike Fucci, leader of Deloitte Consulting’s Human Capital practice. "Employers understand the need for effective guidance during these transitions and are dedicated to providing employees with the tools necessary to be successful in their individual planning."
