Flexible spending accounts. Cafeteria-style benefits programs. Personalized benefits statements.
As more and more options become available in the employee-benefits arena, the importance of effective communications has grown.
Karen LaFauci and Robin Flaherty maintain that more effective communications produce improved employee morale, decreased absenteeism and increased productivity.
The two believe while many larger companies do a decent job of communicating their benefits, small and midsize firms need to do the same. They recently started For Your Benefit Communications to assist employers in this effort.
Although some industries such as the information technology field seem to understand the importance of benefits, many businesses have been slow to catch on. In fact, Flaherty says, the IT industry is so competitive right now that good benefits packages are one factor used to bait employees from one job to another.
“It’s the carrot in the high-tech industries,” says Flaherty, a benefits consultant.
Outside of high-tech businesses, experts agree not enough companies are focusing on benefits communications. According to a recent Towers Perrin report on the changing role of employee benefits, 60 percent of U.S. workers estimated the value of their benefits packages as significantly lower than they really are.
The study concluded that effective and concise benefit program communications is an issue for most companies that contributes to undervaluing benefits or viewing them as an entitlement rather than part of a performance-based contract with the company.
“There has never been a better time to educate employees about benefits,” says LaFauci, who has extensive experience writing benefits and human resource communications for local companies through her other firm, the Write Stuff Communications.
One local standout in the employee benefits communications category is Eastman Kodak Co.
The Wall Street Journal recently praised Kodak’s new cash-balance style pension program.
“Its effort could be a model for all those companies that generally prefer less to more,” the newspaper stated. It went on to call Kodak’s communications endeavor “something hardly any other company is doing.”
When Kodak rolled out the program in January, employees were given the option to stay with the old plan or move to the new one. In order to help them make an informed decision, Kodak created a communications plan.
The plan included a letter from Chairman and CEO George Fisher and an informational brochure, mailed to employees’ homes the day of the announcement; a personal benefits statement and decision guide, also sent to employees’ homes; group meetings for employees; a telephone hotline; and software packages that allow employees to calculate differences in earning potential between the cash balance program and the old Kodak retirement income plan.
A key component of this program, Flaherty and LaFauci note, is mailing information to employees at home, rather than just distributing memos in the workplace.
Many times, they say, benefits decisions impact both employees and their spouses. By disseminating information only at the office, companies risk leaving spouses in the dark.
The bottom line is that ineffective benefits communications can end up costing employers money in myriad ways. A prime example, Flaherty says, is flexible-spending accounts.
FSAs traditionally have very low enrollment rates, most likely because employees do not fully understand how they work. When FSAs are fully utilized, Flaherty explains, they can, in a sense, pay for themselves.
Money put into FSAs by employees is done so on a pretax basis. Consequently, both the employee and the business save the taxes they would be paying on that money. The higher the number of people who use the plan, Flaherty adds, the higher the number of dollars that are saved.
Companies that do not spend the time needed to educate their employees about FSAs have a smaller chance of high enrollment and, therefore, end up spending more to administer the plans.
A key component of FSA plans is that money not used before year’s end is lost to the employee.
At Frontier Corp., Linda DeBalso, director of benefits and administration, takes steps to ensure employees do not lose their contributions. DeBalso sends out reminders, letting participants know when the deadline is approaching and reminding them of their options for spending the money in their FSAs.
In addition to FSAs, 401(k) plans also are typically underutilized, Flaherty and LaFauci say. Again, many employees do not understand what they miss out on by not contributing to their 401(k).
Both Kodak and Frontier have 401(k) information available on the Internet, in addition to the information packets employees receive at the time they are hired. Frontier recently conducted a survey to find out how employees would like to receive 401(k) information, DeBalso notes.
As a result, Frontier plans to send out a brochure in the next few weeks outlining how the accounts work. The brochures, says DeBalso, will be aimed especially at non-contributing employees, in an effort to demonstrate what they lose out on by not putting money into the fund. (Because Frontier contributes to the 401(k), everyone at the company has some money in their account, she adds.)
As long as businesses are expending time and resources on employee benefits, it behooves them to ensure employees understand how they work.
“Employees need to be educated so they can make the right decisions for themselves,” DeBalso says.
Jan Peckham, manager of worldwide total compensation communications for Kodak, agrees.
“When you add choice (to the benefits program), you must add the communications component,” she explains, “so people are familiar with and understand the content of their total compensation.”
This total compensation is what Flaherty and LaFauci refer to as the “hidden paycheck.”
In an era when many companies have been forced to downsize, low employee morale can be a critical issue.
Flaherty and LaFauci say by increasing awareness of the hidden paycheck–money the employee receives through 401(k) and pension plans, and the costs of administering medical, dental, vision, and FSA plans–businesses have the ability to impart a greater feeling of self-worth to their employees.