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Employee-directed benefits: Balancing freedom of choice with employee accountability

Customized employee-directed benefits are integral for the modern workforce. Employees need to be educated and accountable for their benefits choices.

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Offer flexible benefits to meet the demands of the modern workforce.

Employee benefits have changed significantly over the last few years. Employees want more options and freedom of choice in deciding what they want from their benefits package.

And as the workforce landscape continues to evolve, companies must consider how their benefits package offerings factor into the big picture of being a sought-out employer of choice for top talent.

Today’s modern workforce is diverse and demanding. Employee benefits can no longer be viewed through a one-size-fits-all lens. Benefits need to be as diverse as the workforce demands to meet both employee and employer interests.

Cookie-cutter benefits are a thing of the past.

Flexible employee-directed benefits plans allow workers to customize a benefit plan that suits their needs and life stage, as well as being able to reselect options annually according to their evolving lifestyles. By giving employees the freedom to utilize their plans in a way that meets their personal lifestyle needs, companies benefit from increased employee engagement and a healthier workforce. Not to mention maintaining a fixed benefits budget with lucrative tax break incentives.

Balancing employees’ freedom of choice while upholding the responsibility of the employer to provide offerings in support of their employees’ best interests as well as empower them to make the right choices is an important factor to consider when evaluating employee-directed benefits options.

Customized employee-directed benefits improve employee engagement.

Giving employees the flexibility to choose their benefits

When employees feel companies are invested in their future — they’re more likely to be loyal and motivated. In the longer term, creatively developed benefits boost a company’s profile by promoting values that align with employees’ priorities.

Robert Swatland, senior principal at global consulting firm Korn Ferry, explains why savvy companies should seek input from their workforce before designing benefits packages.

“Younger generations want pet insurance and older generations are worried about elder care. It’s so competitive in the job market and benefits options present a great opportunity to offer something unique, to set yourself apart from other companies when wages are tighter.”

Flexibility and the ability to meet employees where they are is critical to a company’s HR mojo. Giving employees options must be a reality for companies to maintain a healthy and supported workforce.

Beth Thomas, CEO of Ohio-based Change 4 Growth Consulting and author of Powered by Happy, says her company often polls their staff to ensure the culture and benefits reflect what employees care about most. Often asking them about their motivations and what inspires them. Then the company’s Happiness Committee, comprised of employees spanning all generations set out to brainstorm social and professional development activities to augment perks like peer recognition prizes, spot raises, paid pet sittings, and unlimited vacations to address the varied employee needs.

The reality is a 25-year-old college grad in California will have drastically different needs compared to a 45-year-old woman planning for retirement. And the question companies must answer is how can they serve employees’ unique and differentiated needs?

How to balance employer-employee needs when selecting benefits

The best way to make sure your company is a happy place for all employees is to offer great benefits options.

But how do you know what’s worth offering and which ones are necessary?

The options for employee-directed benefits packages are as numerous and varied as the people who want them. It’s important for employers to not only take into account which benefits to offer but how employee-directed benefits fit within the organization’s culture before making any concrete decisions.

The all-important budget and the number of workers in your company all factor into this decision-making process as well.

Let’s run through the traditional types of employee benefits: medical insurance coverage, life and disability coverage, and retirement planning.

Medical coverage

Uninsured employees can be severely impacted by unexpected medical expenses. This may lead to poor performance and increased absenteeism. Medical benefits generally cover basic insurance for health services, with some companies offering additional healthcare add-ons. Employees may be accountable for a small percentage of the monthly cost if they opt for medical insurance through an employer.

Life and disability insurance

A life insurance benefit will assist the employee’s family with living expenses if the employee passes away. This is often paid out in a lump sum. Short-term or long-term disability insurance on the other hand covers an employee who is unable to continue working due to an injury or health condition for a certain period of time.

Retirement planning

There are two main types of retirement plans: defined benefit plans and defined contribution plans. Also known as pension plans, defined benefit plans include an amount that is pre-determined based on the employee’s salary and the number of years of service. With a defined benefit plan, the employer takes most of the risk. In a defined contribution plan, such as a 401(k) plan, employee or employer contributions are specified and the benefit amount is often tied to investment returns. Employees who choose to contribute to 401(k) retirement plans take responsibility for their retirement income.

The importance of benefits education and communication

Personalized benefit programs have expanded largely due to new generations with different needs entering the workforce as well as the extensive remote and hybrid workforce trends on the rise.

With 40% of employees agreeing that a wide selection of employee-directed benefits would increase their sense of loyalty to their company, traditional options now only form a small part of benefit package choices.

Companies are fast realizing that healthy employees are good business and therefore implementing options targeted at prevention rather than cure. These types of benefits include health screenings, gym memberships, as well as relaxation and mindfulness, and alternative therapies.

Other popular new additions to highly effective benefits programs include remote office expenses, commuting subsidies, food delivery, and continued education or professional development — which benefits both the employer and employee long term.

To maximize participation, many companies attempt to increase their use and accountability of benefits among employees by educating them on how to effectively access and select appropriate options for employee-directed benefits programs.

With 54% of workers stating that they require more assistance in understanding benefit programs and advantages, the main reason for employees foregoing benefits is a lack of education and effective communication.

Employees who feel the process is too complicated, don’t have the necessary information, or have to wait too long are likely to take out their own plans or seek benefits elsewhere. By implementing a digital portal employers can easily educate, personalize, and streamline the user experience. This may entail surveys to identify specific employee needs, technology-driven recommendations, and tips to streamline the benefits selection activation.

Using multiple, but effective communication strategies can increase employee engagement and knowledge. Not only does the full visibility and anytime access of a digital employee-directed benefits platform allow employees to be more confident in their selection, but it also provides all the necessary information for sign-up, submissions, and remaining accountable.

Employee-directed benefits designed for you

Employee benefit plans are evolving as fast as the post-pandemic workforce and work environments. This can be an administrative challenge to companies and HR departments. Employers are navigating how best to design and communicate benefits packages so employees are educated and accountable for their choices.

Technology-driven intuitive interfaces, such as the Forma platform, facilitate the education, communication, and administration of implementing customized employee-directed benefits programs.

Benefits should work for you, not the other way around.