They go by a multiplicity of names: “consulting businesses”, “advisory firms”, “risk management consultants”, “brokerage agencies”, “management consulting companies”, and so on. They are the businesses that advise other businesses on how better to operate those businesses. Or, they are the businesses that connect businesses to other businesses. But it’s important to always keep in view that, at root, what this actually involves are “people” who are serving other “people”.
With this in mind comes the recognition that these “service” companies don’t just need to hire and retain “employees” or “agents”; they need to hire and retain people who are happy, engaged, and confident that the work that they are doing each day is meaningful. Put conversely, a disengaged employee – one who is just “punching a clock” – is never going to go that extra mile to attract and retain those clients – the business-owning “people” – whom your business serves.
As 2020 draws to a close, amid widespread political and social unrest, and a hopefully-soon-to-be-tamed worldwide viral epidemic, the issue of “employee engagement” is certainly one that has been on the minds of many in the industry. Of course, entire MBA-level university courses have sought to address this issue, but in this article, we’d like to concentrate on one specific, but often overlooked, tool that advisory firms in particular can use to help engage their employees – employee benefits.
The sine qua non of employee benefits, even for small firms, has always been provision of employee health insurance and retirement plans. In 2020, 56% of all business – regardless of size – offered health benefits to at least some of their workers. Specifically, private employers offered health insurance to 67% of all sales and office employees and to 94% of all management, business, and financial employees. With respect to retirement plans, those numbers amount to 73% for sales and office employees, and 88% for management, business, and financial employees.
In the financial, insurance, and advisory sectors, it makes sense that those figures should hit 100% for both health insurance and retirement plans. Can advisors be expected to wholeheartedly recommend health and welfare and retirement to their customers and leads as essential elements of sound employee benefits planning if they themselves have been “locked out” of those very same benefits? Would you book your wedding with a baker whose employer didn’t “comp” its employees a cake every now and again?
Apart from the bare minimum discussed above, however, the superabundance of various and sundry benefit options can leave employers in the thrall of a “choice paralysis”. Once the financial impact of providing benefits has been analyzed and budgeted-for the question of which specific benefits to provide is really where the hard work begins. One authority, from a “management and growth consultancy” firm (an advisor who advises the advisors), recommends that employees themselves be engaged to pick their own perks – say, six – from a predetermined menu – say, eleven. After having conducted their own research study, this firm concluded:
It doesn’t seem to matter which six perks are offered, but hitting that critical mass shows a willingness and trust on the owner’s part that employees can manage their workload responsibly.
Their study recommends eleven specific benefits, which I’ll review briefly, along with some of the most pertinent “pros” and “cons”, informed by personal experience as a legal compliance and policy advisor:
With respect to the remaining perquisites recommended by the Herbers & Co. study – family leave, time off for volunteer work, payment for continuing, work-related, and non-work-related education, group discounts, and sabbatical leave – it is probably the case that no global guidance can properly be given; consideration of these sorts of benefits will really depend on the industry, size, culture, and budget of any given company, and will be almost a wholly fact-specific determination. As a final note, though, there is evidence to suggest that at least some of the apprehension expressed by employers about “giving away the store” to their employees in the form of benefits may be unwarranted. At least in an environment where corporate culture is clear and cohesive, employees do tend to police themselves when it comes to abuse of employer-provided benefits.
A financially-stressed employee does not a motivated employee make. If my wife calls me at work to tell me that the repo men are at the door minutes before a client meeting, I might find myself somewhat… distracted. And indeed, employers have readily taken on more and more responsibility for their employees’ financial well-being. The 2020 Bank of America Workplace Benefits Reports shows that, from 2013 to 2020, employer-provided counseling or training on retirement saving has increased from 70 to 81 percent, health care cost planning from 38 to 71 percent, budgeting from 14 to 63 percent, college savings from 13 to 55 percent, and debt management from 15 to 54 percent.
One area veritably crying out for employee education is where high-deductible health plans (HDHP’s) with a savings option are concerned. A July 2020 JAMA Network study gloomily reported that 1 in 3 adults enrolled in an HDHP hadn’t even opened an HSA, and for those that did, most had not contributed anything into it during the past year. This is truly unfortunate, especially given the expanded utility of HAS’s, HRA, and FSA’s by the federal Coronavirus Aid, Response, and Economic Security (CARES) Act, which permits these accounts to be used to pay for, e.g., over-the-counter medications and menstrual care products without a prescription retroactively, beginning January 1, 2020. The CARES Act also allows HDHP’s to cover telemedicine cost-free through the end of 2021. Yet these “perks”, as well as the 2019 Regulations and Notices permitting chronic-condition treatments and 14 other cost-effective items and services to be paid out of an HDHP continue to go unremarked and neglected by a still-largely-uninformed workforce.
Plans like ICHRA’s and QSEHRA’s also afford employers the benefit of being able to keep their health care spending at a fixed dollar amount. It is uncertain what a Biden Administration will mean for the relevant Trump-Era Regulations and Executive Orders, but, for now, they at least merit investigation.
Like all business decisions, there are pros and cons here as well. The advantages of a financially-educated workforce include improved worker satisfaction, greater employee retention, and stress reduction. The downsides, expressed by surveyed employers, have included uncertainty as to cost, a perceived lack of interest among the workforce, and the complexity of implementing and administering such programs.
Yet, there are other ways than an employer may help to insulate its employees against financial misfortune, and it’s important not to discount them, because, especially now, the need is there. For example, the following sobering statistic certainly gives pause for thought: According to one survey, more than a quarter of respondents between the ages of 40 to 65, with annual household incomes over $100,000, have taken early withdrawals from their retirement plans during the COVID-19 pandemic in amounts that they’ve estimated will take an average of six years to replenish.
One bulwark against depleting the nest egg comes from the administration of the employees’ retirement plans itself. The fine folks at Vanguard, for example, recommend:
The upshot here is that these “smart plan design” features help to mitigate the effect of that financial planning “inertia” that we’re all probably guilty of to some degree. Your milage may vary. About 50% of respondents to one survey have enthusiastically adopted smart plan designs, with the other 50% feeling that they are too aggressive, and preferring instead to educate their employees themselves.
In addition to employee education and “smart” benefits planning, the surest way to deter premature defined benefit retirement account withdrawals is to establish a liquid asset emergency savings fund or a 401(k) “Sidecar Account”, from which an employee might more appropriately take a “hardship” withdrawal. This helps to build a psychological “wall of separation” between a strictly-savings vehicle and an emergency-spending vehicle.
It’s easy to get lost among all the reports, studies, findings, analyses, white papers, and “best practice” recommendations (trust me!). But after you and your executive team have done all the deep-digging into what might be good for your company in terms of benefits offerings, make sure not to forget to take a peek at what the agency/firm/company down the street is doing. Who are your competitors? Are they local, regional, national? Are they part of the same or a different industry? This “competitive analysis” need not be formal; anecdotal reports, if trustworthy, should not be discounted among the other information you’ll glean from various consulting or government agencies, trade or professional associations, and market and industry surveys.
Here, though, there are two final caveats. First, in this highly mutable area, even information gathered from sources before the 2nd Quarter of 2020 (i.e. “pre-COVID”) may be functionally obsolete. Secondly, employee benefits (as you know) is extremely sensitive to the particular idiosyncrasies of your particular business. What works for Ford might not work for Chevrolet, even though both companies manufacture motor vehicles.
So, to sum up: do your homework, listen to your employees, don’t be afraid to think outside the “benefits box”, use common sense, and we’ll all meet up together again on the other side until the next once-in-a-hundred-years epidemic.
 Snyder, Michael B., Compensation and Benefits, Chapter 42:19, “Competitive Analysis” (November 2020 Update).c