Benefits HRO and the Impact of Changing Benefits Trends

This week, we look into the world of benefits from the 10^th Annual MetLife Study of Benefits Trends. The long-running employee benefits research highlights the changes in trends due to the changes in the economy and their impact on the generations of employees.

Employer goals and objectives for benefits remain the same: control costs, attract and retain employees, and increase productivity. It is what employees, especially younger employees, value now that has been changing. And that may call for a change in strategies and approaches to maximize the dollars that employers spend on benefits.

Traditionally, younger employees were not very focused on long-term financial planning and retirement; now, 52% of those 21- to 30-year-olds are concerned about long-term financial security. Even though employees know that they must accept greater individual responsibility (63%) and are likely to face additional cost shifting in the future, nearly half (49%) of those surveyed say that because of the economy, they are looking to their employer to help them achieve financial protection through a range of employee benefits. The Generation Y percentage looking to the employer for help is even higher at 66%. Today’s employees of all ages are more aware than ever of the value of employer benefits, both traditional – like medical and dental – and voluntary benefits, where the employee may pay more or all of the cost. Take advantage of this awareness to increase communication, education, decision support tools, and even branding of the benefits you are providing.

Seventy percent of surveyed employers are planning to retain current benefit levels and only 10% may cut benefits, but 30% may need to continue cost shifting to employees. Few employers are planning to spend more overall on benefits, but employers are open to shifting priorities. For example, there are plans to increase the number of wellness programs and voluntary benefits offerings like long-term care, critical illness coverage, optional life coverage, and optional disability coverage.

Another reason why I wanted to bring this study to your attention is that it separates the employer data into progressive and standard. Progressive employers more attuned to changing employee needs – such as wanting more choices and life stage options – and likely to make adjustments to achieve cost control, attract and retain employees and increase productivity. This split is similar to other areas of HRO where one client wants the latest in transformation to optimize value and achieve business results and another wants improved technology and processes to lower costs and increase efficiency.

Employee benefits needs are growing, changing and challenged by uncertain economic conditions. All benefits HRO clients should expect to have a partner in adapting to changing conditions. Whether that means access to full-scale consulting for a revamp of benefits spend, policy, and offerings, or basic access to vendor research and client networking opportunities, what matters is the match of client expectations and the service provider’s ability to deliver.

Linda Merritt, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

EAPs: A Key to Increasing Workplace Productivity

According to a report from the Centers for Disease Control and Prevention (CDC), more than 1 out of 20 Americans were clinically depressed in 2005-2006. Since that period, economic conditions worldwide have worsened, the unemployment level has reached all-time highs, and foreclosure rates have skyrocketed. Frankly, I’m a little bit frightened to check an updated statistic on depression.

You might be thinking that those individuals who have managed to maintain their jobs at this time would be grateful. But, the truth of the matter is that the glass is quite often viewed as half empty. There are many reasons why employees suffer from mental health issues. However, instead of just identifying the source of the problem, employers should focus on offering a solution that is known to improve mental health and therefore lead to increased productivity.

That solution is Employee Assistance Programs (EAPs). In 2011, Morneau Shepell conducted a study on EAPs that had two interesting findings for HRO buyers and suppliers:

• Decreased productivity and absence costs employers ~$20,000 per year per employee
• EAP intervention resulted in a 34% reduction in costs related to lost productivity.

With HR departments outsourcing processes such as payroll to focus on more strategic activities while obtaining best-in-class practices, EAPs as an activity has long been a prime candidate for outsourcing as well. After all, many EAP issues are sensitive in nature and employees may hesitate to seek help if there’s a chance that their confidentiality could be breached.

Two HRO providers that include an EAP offering are Ceridian and Morneau Shepell. While both companies conduct business in North America, Ceridian’s primary market is the U.S., while Morneau Shepell’s is Canada. These two providers are dominating their respective target markets due to a lack of competition from other HRO service providers, not to mention having extensive EAP offerings.

For example, Morneau Shepell already offers an EAP app and most recently launched online access for its EAP clients through its workhealthlife.com website, which allows clients to:

• Confidentially request help on issues including health, family, work, financial, relationship, and legal support
• Learn more about suggested EAP support services
• Select the service and how it will be delivered.

Ceridian, on the other hand, provides services beyond common EAP offerings including aging parent counseling.

Outside North America, U.K. providers have also recognized the importance of wellness programs: Capita with its occupational health services offering and Vebnet with its health and well-being programs.

As an alternative to launching a full EAP offering, some HRO providers have implemented services to address hot topics including saving for retirement. Examples include:

• Mercer’s self-service and decision support tools including its RetireTalk and Financial Engines Income+
• Aon Hewitt’s recently launched advisory service for its defined contribution clients.

However, the secret to a productive workforce is offering services that address work, life, and health issues. While saving enough for retirement is one possible source of the problem, there are many others that can be addressed with a full EAP offering.

Amy L. Gurchensky, Research Analyst, HRO, NelsonHall

Interested in reading the latest HRO news from NelsonHall? Subscribe to our newsletter by emailing amy.gurchensky@nelson-hall.com with “HRO Insight” as the subject.

Alice in Wonderland 2010 – HRO Providers Help Clients Shrink and Grow

Many are scurrying at a furious pace to publish 2010 HR and outsourcing trends and predictions, including the NelsonHall HRO team. My 2010 HRO list will be published in the next issue of HRO Today magazine, and Gary is providing RPO insight to several publications.

One of my predictions is that we are facing a spendless recovery in the HRO industry. Given the persistent uncertainty of the strength of the recovery and continued high levels of unemployment in many areas, cost will remain the leading HRO decision criteria factor. More contracts will get signed in 2010, although most will be smaller in scale and scope, and face deep scrutiny by risk adverse buyers.

What is the recipe for doing business in such a cautious environment? One way is to learn from HR trends and predictions to see how we in the outsourcing community can support clients as their needs and pressures change.

Mercer’s Human Capital group has published its list of the top five human capital issues for 2010. While presented by Mercer Australia, the issues highlighted are common to businesses around the world:  

 1. Foster growth in a new workforce context

2. Be smarter with benefits as pay packets matter again

3. Restore equilibrium in Executive Remuneration

4. Mitigate turnover risk and restore employee engagement

5. Develop well-rounded leaders who can maintain momentum and/or pick up the pieces

I was reminded of Alice in Wonderland by a comment Ken Gilbert, head of Human Capital at Mercer, made about the first challenge noted above: “Success in 2010 will be defined by organizations’ ability to ‘shrink and grow’ – maintaining a focus on costs while growing talent, workforce productivity and the bottom line.”

Wow. Alice grew very large and shrank very small, but she was not asked to do both at the same time. As budgets remain constrained and business demand starts to increase for targeted talent, HR will be looking for assistance from its partners to recruit, train and retain new employees both effectively and cost efficiently.

The benefits of improved recruiting will be as ethereal as the Cheshire Cat’s grin if turnover increases too much. Employee engagement and leadership development will be important elements in capturing growth opportunities, and throwing money around like the Mad Hatter at a tea party is not an option.

For example, targeted analysis of workforce and performance data will be needed to help focus attention and limited resources in the most impactful areas. Also, learning opportunities are needed to develop specific workforce skill sets, and as effective tools for increasing engagement. Careful planning, collaboration and curriculum management can achieve both goals while still reducing overall expense.

Buyers, be sure to share 2010 workforce goals and challenges with your HRO providers so they better understand your needs. Providers, review the services you provide to your clients and identify how they support current and returning business needs. Where might a little bit of proactive consultation show how your current or new services will help the client organization shrink expenses and grow business results at the same time?

If you want to keep your head, this is not the time to pitch a grand transformation plan. Whether it is building a closer relationship through better utilization of current services, or growing the relationship through very precise projects and new services, it is time to help Alice find the wonder in Wonderland.

Linda Merritt, Research Director, HRO, NelsonHall