What changes are employers considering?
Employers will continue to offer competitive base salaries, but they’ll offer smaller annual raises while relying more on incentives like full value restricted stock units or stock grants. The stock will feature lengthy holding requirements, especially for senior executives.
Most surprisingly, some employers may limit access to company-sponsored health plans to critical knowledge workers. Other companies may establish steep healthy behavior requirement hurdles before employees can participate in company-sponsored benefit plans or limit health care coverage to consumer-driven health plans with health savings accounts.
Health care and retirement plans will be increasingly portable, like current 401(k) plans, as employers provide employees with the tools and technology to manage their own financial and physical health. In short, the days of uniform benefit offerings are likely over.
What upsides and downsides might result from these changes?
Employers generally stand to benefit from these changes, but each company has to consider its current and future work force and its employment value proposition before initiating wholesale modifications to compensation and benefit plans.
- Cost management. Employers will be able to reduce the cost of benefits administration and will benefit from predictable health care and retirement costs. Unless the next wave of technological change can increase productivity, cost control will play a dominant role in driving bottom line returns for the near future.
- Empowerment as an employment brand. Employers will compete for talent by branding themselves as enablers of employee empowerment. Independent workers attracted to increased freedom and self-determination will be highly engaged and more productive.
- Less control. Employers offering portable benefit plans will have less control over the timing of employee work force exits, which could negatively impact industries facing shortages of skilled workers.
How should executives proceed?
Employers need to set plans in motion before the recovery gains momentum.
- Conduct a strategic review of total rewards programs to see if they still make sense for your company’s future work force.
- Consider segments of the current work force where a new approach might be appropriate, such as part-time employees in the retail or service industries.
- Ask employees to weigh in during the review process so expenditures are targeted toward the benefit programs employees value most. Employees can make prudent choices if they are presented with the facts, and some groups might actually prefer making their own health plan arrangements, especially if it increases job security.
- Challenge the HR paradigms that impede progress. Owners may face resistance from benefits managers or company lawyers over revolutionary ideas like creating a two-tier benefits structure. Seek external opinions or hire a benefits manager from outside the HR field to stimulate nontraditional thinking.
Rick Beal is the managing consultant for Watson Wyatt Worldwide. Reach him at (415) 733-4310 or [email protected]. At the time this article went to press, Towers Perrin and Watson Wyatt have announced their intent to merge and become Towers Watson. The merger is anticipated to close around the New Year.