Warning - HR Capitalist opinion ahead which many HR professionals will not agree with....
Topic - "Voluntary Benefits", defined as benefits in which the employee pays all of the cost, provides
employees with options for benefits and insurance coverage they might not otherwise be able to afford. The affordability of such benefits is usually enhanced by the fact that employees can often pay for voluntary benefits with pre-tax dollars.
It's back on my mind again after reading this from William Strahan at Human Markets:
"The first offer was to offer free administration of our health and welfare plans. The administrator would also provide access to their suite of voluntary benefits (auto, home, pet insurance and the like). They say this with a straight face.
The second offer is even more insidious. They will provide my employees discounts on electronics – their focus is on computers. They will help our employees bridge the digital divide. The employee can even pay for the merchandise over time. How? Through payroll deductions. In a variation on this theme there is no direct purchase of merchandise but there is a debit type card set up. Again the payments come directly through payroll deductions.
Reasonable people can disagree. All of these pitches came with lists of current clients that are very impressive. In my view however, this is a pretty clear market transaction. I am selling these companies access to my employee base as a sales channel with a built-in collection agency. The economics 0f this for the vendor seem amazing. The employer does the heavy lifting of branding and marketing to a group of people with steady jobs and provides an authorative mechanism to provide payment. The normal risks of extending credit and running a retail operation vanish. By lowering the risk profile of the sale, the vendor gets a much more profitable operation. As for the administration vendor – they provide a real service but also get marketing access to sell more services to the employee group."
Sounds noble, right? Read William's entire post for his view of the drawbacks. Here are a few problems from my view that are often overlooked:
-Voluntary benefits usually include benefit classes like supplemental life insurance, long-term care and auto/property insurance that can have wildly variable cost structures based on the provider and the demographics that are insured.
-HR shops don't do RFPs that closely canvas each class of voluntary benefits. They usually are hit by a comprehensive provider like an ADP, which provides a package of voluntary benefits with some high margin products built in. If an HR shop doesn't do a comprehensive provider of the benefits, then they are usually assaulted by the bank or insurance agent with the most aggressive marketing strategy. In that scenario, HR people are often bad at saying no.
-Everyone, including the employee and the voluntary benefits provider, loves the concept of voluntary benefit costs being automatically deducted from their paycheck. Employees love it for the convenience and the fact they don't have to track it. The providers love it because they don't have to collect money. Once the automatic deduction is in, it's hard to get out.
Put all that together, and it's complicated. Here's the biggest issue I have, and one of the reasons I haven't opened my shop up in a big way to voluntary benefits since I arrived at my current company - I feel responsible for the solicitation. If I'm going to open up our employee base to a voluntary benefit, for which the employee is going to pay 100% of the cost, I feel like I am VOUCHING for its quality and value across the marketplace.
And there's no doubt that employees expect you to be looking out for their best interests. So, they take the voluntary coverage, if available, often without shopping.
If I am going to allow an auto insurance product to be marketed to my employees through our normal channels, I feel like I need to say the quality/price combination is the best in the marketplace. And that, my friends, is hard to do.
And that's why I traditionally have said no to the concept of voluntary benefits.
Recent Comments