It’s a fact: Rolling out annual benefits packages is a necessary but often challenging activity for most mid-market companies. Why? Options have become more complex, requiring more analysis to make solid decisions. For CEOs, CFOs, PE Sponsors and other leaders, it’s important to resist the urge to simply “rubber stamp” last year’s plan and instead, carefully examine your options. Benefits have emerged as a key factor in the retention and recruitment of employees. We can make a case that employee benefits now have a significant connection to business success.
Here, we discuss the most common blunders made when evaluating annual benefits to help you avoid costly mistakes.
Blunder #1 – Not diving deeper into options.
Often, companies rely on the CEO or CFO to manage the benefits renewal, a time-consuming and complex activity. Which means the decision most often made is to keep the same package as the previous year, striving to achieve as low of a renewal as possible. While we advocate that these two leaders do have final say, they need the support of others to fully analyze the options available to make a well-informed recommendation.
Most mid-market companies are at the size where they don’t have the same clout with insurance providers as larger, enterprise companies. Hence, mid-market firms are on age-based rates where pricing is dictated, and the company has no control over cost increases. But this doesn’t mean that the mid-market firm doesn’t have options. It just takes a bit more planning.
Begin by establishing a strategy and measurable goals for benefits that fit into the broader business plan. What does the company want to be able to deliver to employees now, and where do you aspire to be in 3 – 5 years with employee benefits?
Blunder #2 – Not looking holistically at the benefits package.
Many companies miss the opportunity to take a broad-based approach to benefits. While medical and dental tend to be the most expensive, and therefore the focus areas, the idea is to take a consistent approach across all benefit areas to deliver a well-rounded package. It requires a bit more work, but results in a better-balanced offering for all employees.
For example, a company may make decisions based on costs alone and not consider the benefits most valued by employees. Understanding your employee base allows you to make decisions aligned with their well-being, helping you to allocate budget where it matters most. A strategic approach conveys consistency, demonstrates concern for employees’ well-being and care, which increases satisfaction and can help improve retention.
Blunder #3 - Not actively engaging with your broker.
Brokers are important partners in the benefits renewal process. However, they are incredibly busy during renewal season, and occasionally may not go the extra mile to deliver creative solutions. Know the questions to ask, how to identify where your package is weak and dive deeply into the renewal information they are providing to you. This should be a partnership with your broker that is an iterative, meaningful process.
Again, brokers are partners in the entire process and should help you navigate it. Sometimes, they may suggest options that aren’t a good fit for your company. It may be a complex, new benefit that only applies to a few employees and could be expensive for the company. Be certain to assess every aspect of the benefit package presented and ask questions. If an option doesn’t fit your overall strategy, then you can confidently pass.
Blunder #4 – Not developing a Benefits strategy.
Just thinking about benefits once a year ensures you’ll essentially be starting from scratch in subsequent years. Starting at least a year in advance lets you map a plan that complements your broader business plan and proactively achieve retention goals. Think about what you want to be able to offer employees now, and in the future. Partner with your broker on those goals and hold them accountable for helping to identify the appropriate options over time. This planning step will save you and your team significant time.
For example, you may not be able to contribute to the employees’ health savings account as part of your package this year, but you can work toward it in future years. If your company is growing, you can plan additional benefits once you reach a certain size.
Blunder #5 – Not obtaining employee feedback.
Another key step in developing the benefit strategy is to solicit employee feedback, ideally year-round, not just before the renewal process begins. Throughout the year, your managers and/or human resources team receive feedback in the form of questions asked by employees about their benefits. They’re also hearing what the sore spots are in the plan – what’s not working for them. If they are having problems with specific carriers or coverage areas over time, these situations can be brought up during renewal meetings with the broker.
Putting a formal benefits feedback loop in place throughout the year can streamline this part of the process for you and your team. When you are thoughtful and intentional about your benefit planning, you can clearly explain the “why” to employees during the open enrollment meeting. It’s this transparency that improves understanding and helps to drive employee satisfaction.
When employees understand why certain benefit decisions are made, they are much more accepting and comfortable with what you are accomplishing as a business. They don’t feel as if benefits are an afterthought, and that their needs have been carefully considered throughout the process. Done well, employees should feel that leadership understands them, hears them, and is working to continue to improve. Without these critical steps, there is confusion and mistrust leading to a lot of internal distraction – taking people away from focusing on the business.
Are you ready for the upcoming benefits renewal period? Are you equipped to ensure you avoid these common blunders?
At Growth Operators, we offer Human Resources professionals to help companies navigate through the entire benefits process – and beyond. Our Growth Pros are proven experts who arrive ready to roll-up their sleeves and contribute day one. That’s because they are all operators, not career consultants. They’ll work side-by-side with your team to optimize the benefits renewal process, helping to drive the strategy and plan for future years to come.
Click here to connect with a Growth Pro.