Employee Benefits: Rising Costs Will Eat Into Your Paycheck
With jobs scarce and pay raises slight, workers can take heart in at least one positive trend: Businesses are restoring some of the benefits they axed during the recession.
The flip side of the trend is not so encouraging: Firms seem resolute in holding the line on benefit costs. So workers who want new benefits from their firms will probably have to pay for many of them themselves.
“ Employers are not willing to take on any more” costs of benefits, says Chris Covill, of the national integrated benefits practice at Mercer, a New York-based human-resources consulting firm. “They’re looking for ways to mitigate cost increases and to shift the financial responsibility” for benefits to employees.
The most obvious move is that benefits cut during the recession are starting to reappear. FedEx Corp., the shipping service based in Memphis, Tenn., announced in late 2009 that it would resume merit raises and restore company 401(k) contributions to half their prerecession levels. This past January, FedEx fully restored its 401(k) match. In October, trucking firm Conway Inc. plans to resume basic and transition contributions to its retirement savings plan, which it had cut temporarily in April 2009 (still not restored: its matching contribution to the retirement plan).
Already, 59 percent of companies had restored all or some of their employee perks that they had cut during the recession, according to a poll of human resources executives by Challenger, Gray & Christmas, a Chicagobased outplacement consulting firm. (Another 23.5 percent of respondents said they had introduced new perks.) Within the next two years, 51 percent of companies that recently trimmed or suspended their 401(k) plan matches expect to reinstate them, says a recent survey by the Transamerica Center for Retirement Studies, a private nonprofit foundation in Los Angeles.
But even as employers reinstate some benefits – to help attract and retain workers once jobs open up – they’re also aiming to keep a lid on costs. That means that more employers want workers to pay a larger share of the benefits bill, especially as the costs of that bill go up. If employees want more employer sponsored perks, they increasingly have to pay for them out of pocket.
Already, many workers have seen health-benefit costs rise in the form of higher deductibles and copayments. In some cases, plans no longer cover certain items, experts say. Last year, employees paid a larger share of the total health insurance premium: an average of 19 percent for singles and 30 percent for families, up from 17 and 27 percent, respectively, a year earlier, according to the Kaiser Family Foundation. The private nonprofit foundation in Menlo Park, Calif., called it a “notable change from the steady share workers have paid on average over the last decade.”
That trend seems likely to continue. For instance, in its 2011 survey, consulting firm Aon Hewitt found that, while employers still bear most of the cost of insurance, they are accelerating cost-shifting. “There’s no evidence to suggest that the costshifting is temporary,” says Covill of Mercer. “I think staying the current course will be as good as you’ll get” on benefits.
All the while, some organizations are reclassifying as “voluntary” certain benefits – such as vision or dental care – that they once paid for. So employees who want these benefits, or any new ones added to the roster, must pay for them partially or fully.
Such offerings can still be attractive: Buying them at an employersponsored group rate can save employees money. In a study of employee benefits trends, insurance giant MetLife found that 61 percent of employees value voluntary benefits as a way to obtain perks that meet their personal needs.
Firms still can be creative with their benefits dollars. Thumbtack.com, an 11-employee online directory firm based in San Francisco, can't compete for talent with the likes of Google and Facebook on salary, says cofounder Sander Daniels. It does offer healthcare coverage, transportation cost benefits, and in-house exercise equipment, but no 401(k) retirement plan.
“So we introduced a perk that everyone loves,” Daniels says. Five days a week for lunch and three nights a week for dinner, employees can sit down to a meal prepared by a chef trained at Le Cordon Bleu culinary school. “At our Wednesday night dinners, anyone can invite any guests they want.”
The cost to the Thumbtack staff: zero. The cost to the company: probably less than the cost of having to replace workers recruited away.