There’s a divide that has cropped up in talent management planning overtime. I refer to it as the Silo Approach.
There are two main aspects that go into recruiting and retaining talent: compensation and benefits. In the past, compensation was given much of the weight and benefits was an easy box to check because primary health plans were rich, deductibles were low and health expenses were—I won’t say cheap, but—more reasonably priced than today.
The division between these two talent management components has widened over time. Especially prevalent in larger companies, one team will manage compensation, and another will handle benefits. It’s not uncommon for one team to make plans and decisions without consulting the other, simply because the roles haven’t crossed over in so long, and making independent decisions has become the norm.
Needless to say, the benefits aspect is no longer an easy box to check. Primary medical plan premium costs are soaring, so much so that controlling benefits costs is the leading priority for HR Professionals at 52%. On top of that, coverage is lessening, and out-of-pocket costs for employees are rising. And all the while, healthcare coverage remains the #1 benefit employees value. And don’t forget, the majority of employees consider benefits a top factor in accepting or leaving a job.
With all of this in mind, HR professionals on the benefit side must both meet cost objective and find benefits to bring on and keep talent. And yet, they are doing so in a vacuum without insight into the compensation perspective. This disjoined approach is flawed.
Employee Perception
When a job candidate or employee is considering joining or leaving a company, they are reviewing compensation and benefits. This much is obvious. But it’s important to realize that they aren’t looking at one and then the other. They are considering both aspects simultaneously because that’s how they receive them.
Compensation and benefits aren’t a pick and choose arrangement; they are a package deal and should be planned for as such. Planning these aspects without insight into one another makes it impossible to see how the employee will view them together. That cuts off any ability to predict how successful they will be because viewing it from two separate sides is not viewing it in the way that an employee will.
OOP Costs Consideration
As I touched on before, healthcare primary plan costs are rising, and to keep them in check, employers are shifting some of that additional cost onto employees. This, in turn, drives up out-of-pocket costs for employees.
More out-of-pocket costs means that there is a larger chunk of an employee’s paycheck going toward health expenses. But if compensation and benefits aren’t looked at in tandem, there is no way to look at this impact or attempt to strike a balance between the added cost and employee compensation.
It’s important to consider these two channels together to ensure that a proper stability is being maintained. For example, is an increased deductible completely overtaking a 3% raise? Or will a year-end bonus be less than a typical employee’s OOP spend for the year, after health plan changes? These are questions that should be taken into consideration.
Benefits that Double as Compensation
There are types of benefits that have the ability to play two roles and bring both compensation and benefits together under one product.
For instance, there’s a type of supplemental insurance, expense reimbursed insurance, that has the ability to play two roles. Expense reimbursed insurance works like a traditional supplemental benefit in that it is layered on top of the primary medical plan to offer additional coverage. But it’s different in that it can cover various categories of expenses without disease or event conditions to trigger the coverage. That’s very different than supplemental voluntary insurance that requires an event or disease to occur before any coverage is offered.
These plans can range from $5,000 to $100,000 in annual coverage that reimburses for everyday deductibles and coinsurance, as well as more unexpected expenses, like cancer treatments, screenings, IVF and medical equipment.
While this is clearly a healthcare benefit, it’s also working as a compensation tool. The reimbursements that employees receive is money that they no longer have to subtract from their paycheck. Implementing such a plan should be looked at differently: not just as another benefit, but as a compensation element as well.
Joint Effort
It’s clear that keeping talent management planning divided into silos can be limiting to the overall benefits strategy. Drawing a line between the two objectives only hinders how successful the plan can be. Taking a holistic view of benefits and compensation can better able HR departments to tackle today’s talent market. If both teams come together, it’s possible to strike the ideal balance that will ultimately earn the company the talent they need to maximize profitability.
Sources:
AJG.
EBN.