Here’s Why Some Employees Prefer More Benefits Over a Pay Boost
With a continued tight labor market, employers would do well to offer more attractive benefits packages that provide short- and long-term financial security, rather than a bigger salary.
That’s one of the takeaways from a recent survey by the American Institute of Certified Public Accountants. Some 80 percent of respondents reported that they would choose a job with benefits even if an identical job offered 30 percent more salary but no benefits. AICPA also cited that respondents overestimated benefits as making up 40 percent of total compensation, even though the Bureau of Labor Statistics puts the figure at 31 percent.
“There’s a peace-of-mind value that’s hard to measure,” says Neal Stern, a member of the organization’s National CPA Financial Literacy Commission. Younger workers tend to focus on paying back their college loan debt at the detriment of investing the max in their employer-matched retirement plans. Older workers are more focused on health insurance and retirement plans, since a lack of security in those areas could mean financial ruin for them in both the short and the long term.
The study also showed that people who have a good understanding of the benefits but don’t go on to take full advantage of them are “leaving money on the table,” says Stern. Employers must better communicate programs and make it easier for employees to take advantage of all the benefits offered to them, he says.
Behind the numbers is the ongoing financial insecurity lingering in the minds of many workers, say industry experts.
Steven Nyce, a senior economist at Willis Towers Watson and director of its research and innovation center, says the AICPA survey tracks well with his organization’s research.
“It’s natural with all the uncertainty with jobs, careers, and paychecks, to see employee’s flight to security” through benefits, says Nyce, tracing the trend back to the 2008 financial crisis. “The average middle-class American still feels on edge.”
He also notes that people in the lower half of the salary spread haven’t seen a real increase in wages since the early 2000s because increasing healthcare premiums and costs keep eating up the raises they do get. That stat comes from the 2018 report titled Health Care USA: A Cancer on the American Dream by the Council for Affordable Healthcare Coverage and Willis Towers Watson’s research arm. The study also examines the dynamics driving those health costs increases, a topic that employers are all too familiar with when they negotiate their annual plan offerings.
“I was pleasantly surprised at the high relative value that employees were putting on benefits,” says Peter DeBellis, research leader for total rewards research for Bersin by Deloitte.
Steve Wojcik, vice president of public policy for the National Business Group on Health, agrees that people are feeling less economically secure and that those with greater concerns are more willing to pay higher healthcare premiums to have that security against a catastrophic financial loss. That means more people with high healthcare utilization are rejecting high deductible plans with low monthly premiums in favor of more financial predictability and less impact on their out-of-pocket spend. Changes to the healthcare industry’s delivery, quality and affordability are also being driven by employers pushing to improve their workers’ experiences, he says.
The challenge for HR, Wojcik says, is how to improve the spectrum of benefits beyond security and into attractive options to recruit and retain employees in a tight job market.
Nyce notes that the healthcare-choice area is prime for disruption because effective, easy solutions are very rare.
“Given what we know about people’s healthcare costs, there’s no reason why you can’t go into a tool right now that says which plan is best for you,” he says, before adding that personalized selection programs are not yet widely available.
Some companies, says Wojcik, have begun providing advocacy services to help employees navigate challenges related to their healthcare programs.
Aside from retirement and healthcare benefits, lifestyle options might not be “sexy” but do improve quality of life, including commuting subsidies, concierge services, on-premises banking, gym membership discounts, group rates on cell phone services, retail store discounts, and backup child or elder care.
Meanwhile, wellbeing programs that focus on the physical, mental, financial and even social aspects of employees’ lives are centered around helping employees overcome the financial and emotional stress of student-loan debt, DeBellis says.