Given the wide diversity of people in the workplace, it only makes sense to offer a wide array of options for coverage—from student loan assistance to supplemental life insurance to pet insurance. In recent years, the concept of voluntary benefits has gained traction to help business owners cover this broad variety of needs—a menu of options above and beyond traditional health insurance and 401(k)s.
However, there’s a lot of confusion about what voluntary benefits are, and how much employees really value them.
What Are Voluntary Benefits?
Let’s start with what voluntary benefits are. In the past decade, more companies have realized that, just as employees can pick and choose the apps on their smartphones, they also want to pick and choose what kinds of benefits they’d like to get from their employers.
Voluntary benefits meet that demand. These supplemental options can include dental and vision coverage, disability and cancer insurance, group purchasing plans—whatever the employees want.
It’s really that simple. Voluntary benefits are simply a customized package of additional insurance products and other group programs, presented to employees on a menu from which they can pick what they want and leave the rest.
Firms with as few as three employees can offer voluntary benefits. Most of these options are paid for by the employee, through payroll deductions with pre-tax dollars—an extra perk for the employee.
The good news for employers is that these voluntary benefits can be offered at little to no cost to the company. Administrative services, such as online billing, cost very little, especially if the company’s existing insurance vendor offers the package.
How Voluntary Benefits Lower Turnover Costs
The big takeaway for employers that offer a package of voluntary benefits is employee satisfaction. Satisfied employees don’t quit. Having a rich array of choices is one way to keep those valued employees from leaving for greener pastures.
The small costs associated with voluntary benefits are insignificant when weighed against the cost of losing a valued employee because someone down the street has a better benefits package.
Research by the Society for Human Resource Management suggests that the cost of replacing an employee can be as high as 60 percent of the employee’s salary. Total costs, including lost productivity and engagement among remaining staff, can send the cost of losing a good employee as high as 200 percent of salary.
These estimates don’t even include some of the intangible costs to a workplace when a good person leaves, such as the blow to morale among the remaining staff and the long trajectory to get a new employee up to speed while co-workers pick up the slack and correct the newbie’s mistakes.
One way to keep those valuable staffers from leaving in the first place is to give them what they want, when they want it, in the way of benefits.
SHRM’s 2017 benefits survey found that one-third of employers had increased their menu of benefits over the past year, and the reason why was clear: “Recruiting difficulty has continued to increase over the last five years, and competition for talent is high. To attract and retain top talent, organizations must leverage the benefits package they offer to their employees.”
A 2017 study by the Kaiser Family Foundation found that among small firms offering health benefits:
- 67 percent of firms offer dental insurance;
- 47 percent offer vision care insurance;
- 23 percent offer critical illness insurance;
- 16 percent offer hospital indemnity insurance;
- 16 percent offer long-term care insurance.
The data showed that small companies are actually more generous than all companies combined. Among all firms offering these supplemental benefits in the survey, small companies have the same rate of dental coverage (67 percent) and a higher rate for vision coverage (54 percent). However, employers as a whole are considerably less likely to offer critical illness (3 percent) or hospital indemnity (5 percent) insurance than the small businesses in the survey.
The Building Blocks of Voluntary Benefits