The True Value of Voluntary Benefits

Workers have come to expect certain benefits. When they describe a "good job", that usually means the employer offers affordable healthcare insurance and contributes to some form of retirement savings plan.

However, during periods of low unemployment, employers must up the ante to compete for workers. Economic research shows that wages have not kept pace with the rise in jobs, which it usually does. Over the past year real wages have increased by only 1.5 percent and, on an inflation-adjusted basis, wages are actually below levels from the 1970s.

In lieu of significant income increases, many employers are using supplementary voluntary benefits to entice workers to jobs and retain them. Voluntary benefits are additional plans offered at a lower, group rate. They are typically 100 percent paid by workers through payroll deduction.

Voluntary plans are a cost-efficient way for employers to offer value-added benefits with little expense or administration. Premiums are paid through salary-deferred contributions, so there are no eligibility rules to determine and no reimbursement checks to cut, making them easy to administer.

Because they are easy to offer and cheaper than raising wages, voluntary benefits have become extremely popular over the past decade or more – and continue to grow in breadth. The following is a round-up of voluntary benefit statistics from various surveys conducted over the last couple of years:

• Since 2016, there's been a 138% increase in the share of employers offering at least three voluntary benefits
• 85% of workers see a growing need for voluntary insurance benefits (up from 63% in 2014)
• 79% consider voluntary benefits necessary
• In fact, 62% of workers under 50 wouldn't consider working for a company that didn't offer voluntary benefits
• 83% of workers with healthcare coverage say they would enroll in a voluntary benefits program without expecting their employer to pay for it

Customization
One of the problems associated with offering benefits is that not every worker can take advantage of them. For example, workers without young children may not be able to benefit from a Dependent Care Flexible Savings Account (DCFSA), which enables workers to use tax-exempt income to pay for childcare. In contrast, working parents may say they are too busy to take advantage of an employer-subsidized gym membership.

The point is, there will always be workers who feel unfairly treated because they do not enjoy all the benefits that other workers do. Voluntary benefits helps address, if not solve for, this complaint.

In general, most workers take advantage of or at least expect health insurance and a retirement plan. Beyond that, employers can offer a vast array of voluntary benefits so that workers can customize options to suit their needs and circumstances.

This is particularly important now that today's workforce spans five generations:

• Generation Z (Centennials) – the oldest of which are now 22 years of age
• Millennials – age 23 to 38, now representing the largest generation in the workforce
• Generation X – age 39 to 54
• Baby Boomers – age 55 to 73
• Silent Generation – the youngest of which are 74

Each of these demographics are in different circumstances and have different views on work, life, money, and finances. Therefore it stands to reason that they have different benefit needs. Voluntary benefits empower workers to choose the benefits that suit their unique situation and preferences.

Implementation
There are two important components to offering voluntary benefits. The first is for employers to know their workforce demographics so that they can select voluntary benefit offerings that will resonate. This criteria ranges from age groups to socio-economic backgrounds to the family/single person ratio to pet owners to a company's culture of health and fitness. It's not a bad idea to conduct periodic surveys to ask your workers what types of voluntary benefits they would like offered.

Some employers may deploy data analytics to create a diverse voluntary package that appeals to its workforce. Employers may wish to create models of various worker profiles for a more advanced analytical approach to worker segmentation and interest. This type of predictive modeling can enable greater business value and a better worker experience through benefit offerings.

The second component is whether or not to help fund voluntary benefits. An equitable way of doing so is to offer a fixed sum or flat percentage of wages that workers can use to contribute (all or part) toward the voluntary benefits of their choice.

Selection
According to a study by MetLife, employers that offer 11 or more benefits yield the greatest employee satisfaction. Large employers tend to offer a variety of voluntary benefits that include both traditional and non-traditional products. Traditional voluntary products include:

• Term life insurance
• Short-term disability
• Dental insurance
• Accident insurance (personal injury, not AD&D)
• Critical illness insurance

Non-traditional voluntary products include:

• Paycard (instead of a paycheck or bank deposit)
• Short-Term Loans
• Student Loan Payment Assistance
• Employee Purchase Programs
• Employee Discount Programs
• Credit Union
• Flexible Spending Accounts
• Child Care
• Elder Care
• Pet Insurance
• Auto Insurance
• Adoption Assistance
• Cyber Security Insurance
• Identity Theft Protection
• Legal Assistance
• Financial Counseling Services
• Wellness Programs
• Employee Assistance Program
• Tuition Assistance Programs
• Home Warranty Insurance
• Homeowners' Insurance
• Long-Term Care Insurance
• Prepaid vacation package

According to MetLife, the most popular non-traditional voluntary products are wellness programs, followed by ID theft coverage, legal plans, pet insurance, and computer/appliance/furniture purchase programs and vacation programs.

Retention Appeal
The Millennial generation, in particular, has been saddled with the reputation of frequently changing jobs. However, this may be a trait borne more out of circumstance rather than disposition. The reality is that Millennials entered the workforce when there were few jobs available, cut-throat competition to get them, and low wages offered while having to pay out dearly for healthcare insurance and student loan repayments.

Consequently, when a Millennial finds a good job today, he is more inclined to keep it. Employers simply need to give them a reason to stay. First and foremost, Millennials are seeking control/flexibility, respect, and opportunity in their career. They are attracted to tech-savvy companies and opportunities to learn new skills, participate in advanced projects, and work closely with experienced personnel. However, they will not hesitate to job hop to advance their careers and improve their pay and benefits.

Supplementary voluntary benefits – particularly unique and value-added options – provide all the more reason to stay with an employer. About 75 percent of workers have indicated that the ability to customize their benefits increases their loyalty to their company.

Workplace Diversity
Workers appreciate when their employer demonstrates consideration for their individual circumstances and provides thoughtful ways to address financial and logistical challenges as well as work/life balance. When employers approach a benefit program with this goal, they are more likely to achieve recruitment appeal and retention loyalty.

The real value a of well-executed voluntary benefit program is that workers have some flexibility and control over the way their employer compensates them.

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