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MetLife research suggests benefits innovation to help smaller firms compete for talent

Since large employers can use economies of scale to offer generous benefits, the pressure is on smaller firms to be as innovative as possible when competing for talent.

"Investing in benefits does not have to equate to a financial investment," according to Robert Bucci, vice president, MetLife Institutional Business. He says voluntary benefits can go a long way toward expanding the breadth and depth of coverage. This, in turn, can help improve employees' benefits satisfaction without adding to the employer's overall benefits spend.

There's certainly a demand for such action judging from MetLife's 6th annual Employee Benefits Trend Study. Of the 1,380 full-time employees polled alongside 1,652 benefits decision-makers, 91% of respondents working for smaller firms (with fewer than 500 employees) say they're interested in having more voluntary benefits, with 40% saying they're very interested.

Bucci says voluntary benefits can present a more robust suite of benefits offerings to supplement core coverages that most people expect will be offered. Given how controlling health and welfare costs ranked a close second to employee retention in terms of being the No. 1 benefits objective for smaller employers, voluntary benefits can help these firms strike a careful balance in addressing both challenges.

Other keys to innovative and affordable benefit solutions in the smaller-employer market that he identified include the use of technology and cafeteria plans to help deliver flexible and customized benefit programs designed to better meet personal needs.

Recognizing loyalty

Despite these suggestions, one eye-opening finding is that 36% of smaller employers reported paying the entire share of their employees' medical coverage and 29% picked up all of their prescription drugs compared to 15% and 13%, respectively, at larger companies with 500 or more employees. This could help explain why smaller firms felt a stronger sense of loyalty to their employees (60%), compared to their larger corporate counterparts (45%).

"However, if employees aren't recognizing this effort, it is a missed opportunity for employers," Bucci cautions.

As smaller employers increasingly use benefits as a tool to try to improve loyalty and retention, Bucci suggests they need to tailor these strategies to different age groups and life stages when communicating the value of their benefit packages. One such example is dental insurance, which ranks in the top three most-desired benefits among Generation Y employees and the top five among Baby Boomers.

With most working Americans (52%) obtaining the majority of their financial and retirement products through the workplace, it's not surprising that survey respondents say they want a helping hand. The number of individuals interested in financial planning advice at work rose to 44% from 30% the previous year.

"These two trends present a tremendous opportunity for employers of all sizes to optimize the real and perceived value of their benefit plans," Bucci says.

While 55% of firms with fewer than 500 employees and 65% of larger employers say that workplace benefits play an important role in retention, there's a gap in their recognition of benefits as a retention strategy. Only 37% of employees at smaller companies say they're highly satisfied with their benefits, compared to 49% of those at larger firms. Moreover, only about one-third of workers at smaller firms consider their benefits a compelling reason to remain with the company, in contrast to more than half of those at larger firms.

"A one-size fits-all model can buy coverage that people don't need or desire at the expense of not providing coverages that would most improve employee satisfaction and loyalty," says Bucci, noting how even smaller employers are finding that they must cater to a diverse, multi-generational workforce.

Total compensation statements

Working Americans in small and midsize organizations with fewer than 500 employees haven't taken the necessary steps to determine their families' benefit needs across several key areas to the degree of their counterparts in larger firms. They include life insurance (52% versus 62%, respectively), retirement income (47% versus 59%, respectively) and disability income (33% versus 47%, respectively).

Total compensation statements can help increase benefits appreciation and satisfaction, though only 35% of smaller employers said they provided this information compared to 65% of larger employers. Another strategy involves decision support tools such as product calculators, though just 47% of smaller firms considered it important, versus 70% of larger employers.

With a graying workforce and critical labor shortages seen on the horizon, smaller employers appear to enjoy at least one competitive edge over larger companies: They're able to accommodate flexible schedules for retirees who'd like to continue working. Forty-four percent provide part-time employment opportunities, compared to 35% of their larger corporate counterparts.

"This may be a reason why the average employee at a larger company is anticipating retiring from full-time work at age 63, while the average employee at the smaller employer is planning to retire at age 65," Bucci observes.

The 6th annual MetLife Study of Employee Benefits Trends is available at whymetlife.com/trends along with a wealth of other related resources, including interactive polls on the latest benefits issues and access to other MetLife research.

About the author Bruce Shutan, former managing editor of Employee Benefit News, is a freelance writer based in Los Angeles.