Just as many areas of your business involve potential risks, there are also risks associated with offering benefits packages. After all, benefits plans can be costly, so you want to make sure that the benefits you decide to offer appeal to both your current employees and the top talent you hope to attract. And in a business landscape filled with regulatory complexity, you face benefits-related compliance risks, too. Here's an overview of some of the potential risks of benefits packages and how to mitigate them:
Financial and Investment Risks
Offering and administering benefits is an expensive proposition, and what you offer needs to be limited to what you can afford. All companies want to hire top talent, and offering competitive benefits is part of that, but you need to weigh your benefits offerings against your revenue and other cost structures.
Like any investment you make, offering benefits needs to be carefully analyzed against projected returns. Benefits do indeed help you recruit and engage employees, but you run the risk of overshooting the mark if you provide a one-size-fits-all package. It's far better to develop a laser-like focus on where you need talent, and then use your most generous benefits packages to engage that talent. In order to maximize your ROI, you should align your benefits investments with your talent needs.
For example, younger talent tends to be attracted by benefits that are different from the benefits that more experienced workers want most. While offering a generous retirement savings plan might engage a 55-year-old employee, it may be less attractive for a 25-year-old, who might prefer scheduling flexibility and more paid time off. In today's multigenerational workforce, you'll need to offer benefits that appeal to the different needs of your talent base. ADP offers a complimentary engagement meter to help business owners understand preferences for various age groups.
As Benefits Pro explains: "It's important that a benefits program is in sync with your company's talent goals, broader business strategy and meets the needs of every employee." Overall, targeting your investment is crucial for getting the return you seek.
Benefits are expensive, but they also come with administrative and compliance burdens that can be quite heavy. For example, some benefits may be accompanied by tax liability for you or your employees. Benefits could also trigger additional reporting obligations to a variety of state and federal agencies. Having gaps in your compliance efforts can lead to costly penalties and potentially disruptive regulatory enforcement actions.
As benefits programs have evolved, the level of expertise necessary to manage regulatory requirements and risks across the full spectrum of plans has become wider and deeper. Any company offering benefits must assign compliance responsibilities appropriately, keep careful track of the quality and timeliness of required tasks to meet ongoing compliance obligations, and find sufficient support to meet specialized needs as they arise.
For example, when you offer a health and wellness benefit and collect health-related data from an employee in order to administer that benefit, you're required to comply with the Health Insurance Portability and Accountability Act of 1996 (HIPAA). This regulation places strict guidelines on how you can manage and store employee health data, requiring you to develop procedures for protecting such data in your IT systems and with people who handle that data. The U.S. Department of Health and Human Services (HHS) takes HIPAA violations very seriously. In fact, they have an entity that conducts investigations and gives teeth to the regulations with a large array of enforcement options. You may find yourself in a world of trouble both with HHS and your impacted employees if you mismanage your HIPAA obligations.
Mitigating the Risks of Benefits Packages
Due to the cost and complexity of administering benefits, including related compliance issues, your best bet may be to seek outside help. An array of vendors and brokers can help you here.
Benefits brokers, for example, have existing relationships with benefits providers and a deep understanding of the intricacies of different plans, so they may be able to negotiate a better deal. You'll obviously need to sit down and explain your particular business needs with any broker, and then evaluate the broker's experience and capabilities. According to the Society for Human Resource Management (SHRM), "it makes sense for many employers, particularly those with small HR staffs, to work with benefits brokers who are familiar with carriers for all lines of coverage: health, wellness, dental, life, disability, long-term care and voluntary benefits."
Brokers can also help with benefits-related compliance, offering you critical expertise and resources. So while there are risks of benefits packages, you can mitigate those risks in a way that allows you to effectively engage your talent by offering them the perks they want.