In an era of rising inflation and tightening household budgets, it’s surprising that many employees fail to maximize their employee benefits.
In fact, a survey by Voya Financial in 2021 found that 1 in 3 employees do not understand the benefits they selected during the open enrollment, including half of all millennials.
“The results show 35 percent of employed individuals report not fully understanding any of the employee benefits they enrolled in during their most recent open enrollment period. This rises among younger workers — with more than half (54% percent) of millennials reporting they don’t understand their benefits selections,” said Voya.
Failure to maximize employee benefits is important because research has shown that benefits are important factors in hiring, retention, and company loyalty.
“There’s a reason for all that non-stop media coverage of the talent shortage issue and a candidate-driven market. Job opportunities abound as the unemployment rate reaches levels not seen for almost two decades. Because of this, employees feel confident seeking other opportunities, thus creating a serious turnover issue,” said United Insurance.
United Insurance says research demonstrates the critical role of benefits in the workplace:
"While employees still look at pay as the most compelling reason to stay or leave a company, health, and retirement benefits have become a much more significant factor in their decision-making," said Monica Martin, senior director, of retirement, at WTW. "In this tight labor market, organizations that understand the importance that employees place on these core benefits and that provide highly valued benefit programs can differentiate themselves in their effort to become an employer of choice."
United Insurance points out that employee satisfaction with benefits pays off as almost half of employees said their company loyalty would increase if their benefit options were customized to meet their individual needs, and avoiding employee turnover saves employers on the 50 percent to 400 percent cost of replacing an employee in annual salary terms.
“To win the talent war and avoid turnover, you need to invest in benefits – the right kind of benefits that your employees will understand and value,” said United Insurance.
The Voya survey revealed that employees are eager for education, guidance, and support from their employers:
“Supplemental health benefits like accident insurance, hospital indemnity insurance, and critical illness insurance can be confusing — especially for younger workers, who might have enrolled in these coverages for the first time due to the pandemic,” said Andrew Frend, SVP of Product and Strategy, Voya Employee Benefits. “Plus, with COVID-19 shining a spotlight on the need for greater financial security, the challenge for employers moving forward will be connecting health and wealth benefits as their employees continue to have an increasing need for budgeting, planning, and guidance resources.”
Renee Cocchi, writing in HR Morning, tells employers to make it simple and avoid burying employees in an avalanche of benefits paperwork that is often written in legalese.
“Simplify the info you offer – workers don’t need to know everything, just what’s needed to understand if they need this benefit. Then provide additional info links for a deeper delve,” recommends Cocchi. “Also, make it easy to understand. Take out the HR/Benefits jargon, and make sure it’s in plain English.”
Cocchi reiterates Voya’s conclusion that employers need to commit to creating engaging benefits education programs year-round, and not focus only on the open enrollment period.
Sometimes employees are hyper-focused on their salary and fail to account for – and take advantage of – the benefits offered by their employer.
“Regarding how much one earns at their job, salary is not the only consideration. Employers' other incentives can play a part in the whole picture of what a worker is receiving. While the amount and type of benefits vary from each industry, company, and position the employee is in, these assets should be calculated when considering the worker's total compensation,” writes Katie Porter in the financial publication Stache Cow.
The key, of course, is fully understanding your benefits package. Some important incentives your employer offers that you should maximize include:
o Designing a saver-friendly 401(k) plan and making high-quality independent financial advice available.
o Encouraging employees to not only save enough to get the full company match but to save more when they can afford it.
o Automatically enrolling employees into the plan at the full-match rate, and automatically escalating savings rates over time.
o Past surveys have found that 24 percent of U.S. workers do not enroll in their employer’s vision plan and 30 percent of those who do enroll do not use their coverage to receive a comprehensive eye exam for themselves.
o While dental insurance is considered by many to be a “must have”, research has found that 1 in 4 employees who have dental insurance say they have not been to the dentist in the past 12 months for regular checkups and routine cleanings and that 50 percent felt their employer did not provide enough information about what is covered under their dental plan.
o Health Savings Accounts (HSAs): Allow employees to contribute untaxed dollars to pay for deductibles, copayments, and other medical expenses.
o Flexible Spending Account (FSA): Contribute pre-tax dollars to an account to pay for qualified health expenses. Unlike an HSA, these accounts are “use-it-or-lose-it” so employees can lose out if they contribute more in a given year than their health expenses.
o Preventative Health Care: Some companies offer wellness benefits that will pay for annual physicals, immunizations, tests, screenings, and more.
o Disability Insurance: Some employers offer their employees the option of short-term (usually 6 to 12 months) and long-term disability insurance that provides income to a worker if they are unable to work because of an illness or disability.
o Family and Medical Leave: Under the Family and Medical Leave Act (FMLA) employers with 50 or more employees must offer up to 12 weeks of unpaid, job-protected leave per year for family or medical reasons.
Employees should maximize the following benefits if offered:
o Financial Wellness Programs: Training and support can range from education on debt reduction, student loan repayment, credit building, and budgeting.
o Mental Wellness Programs: A “mental health day” now and then can make for a more productive workforce. Companies are offering mental health training, assistance for therapists, dedicated relaxation rooms, and other strategies to reduce employee stress.
o Paid Days Off, Holidays, Vacation Time, Sick Leave, and Sabbaticals: Your company has a benefits policy that will include some or all of the above. Americans fail to take advantage of paid vacation days with a 2019 study finding that 786 million U.S. vacation days went unused each year. CNBC reported that 236 million of those days were forfeited completely (did not carry over), resulting in $65.5 billion in lost benefits.
o Lifestyle Stipends: Some companies offer employees stipends for lifestyle purposes such as learning or improving on work-related skills. Other stipends can apply to food, travel, family, and pets.