Just as businesses must adapt to ever-changing conditions, HR teams face unique and complex challenges every day. From macroeconomic events that exert enormous pressure on the status quo at workplaces such as the COVID-19 pandemic, to individual employees struggling with health, productivity, and engagement issues, HR teams today often find themselves seeking solutions to moving targets.
Employee benefits specialists must also ensure that their employee benefits programs remain relevant over time. As a result, companies are increasingly turning to flexible benefits programs to support a multitude of HR and business outcomes.
As the name implies, flexible benefits programs are designed to be relevant to various employee groups as their personal circumstances change. They also offer companies with the flexibility to navigate time, manpower, and budget constraints. Flexible benefits programs are gaining popularity, and we fully expect this trend to continue for good reason. We have observed that companies offering flexible benefits programs experience the following three advantages:
1. Strengthened Diversity, Equity, and Inclusion (DEI) Initiatives
Flexible benefits programs enhance DEI efforts by providing comprehensive coverage that meets diverse employee needs. Unlike traditional benefits programs, flexible benefits programs allow employees to choose from a set of insurance plan options (usually three to five), each varying in the level of coverage offered. Employees who need different levels of care can select more comprehensive or basic options and opt in or out of certain types of coverage.
Another common feature of flexible benefits programs is a Flexible Spending Account (FSA), which allows employees to claim a variety of expenses, such as childcare, eldercare, vacations, and personal insurance premiums. Companies can customize FSA designs and eligibility rules to fill gaps in insurance coverage, including excluded dependents, health conditions, restricted procedures, and miscellaneous expenses such as supplements and medical devices.
2. Improved Employee Engagement and Health Outcomes
Providing multiple options encourages employees to evaluate the adequacy of their personal insurance plans before making a selection. Employees who are given choices are better equipped to reduce duplication of coverage, leading to higher satisfaction compared to companies that do not offer such options.
Employees are also incentivized to stay healthy. Most FSAs cover expenses for vacations, fitness equipment, hobby classes, and other enjoyable activities. Such designs not only make healthy living more accessible but also financially reward employees who spend less on medical bills.
3. Enhanced Ability to Manage Employee Benefits Program Costs
Traditional benefits programs provide a fixed set of benefits to employees based on factors such as salary, seniority, and family size or status. Amid strong inflationary pressures, the cost of these programs tends to rise sharply over time, leaving companies with few options other than looking for alternative insurers or reducing program designs – both of which can be ineffective in managing costs and employee expectations in the long term.
In contrast, flexible benefits programs allow companies to control the amount spent per employee on benefits, promoting shared responsibility in managing program costs. Companies that prefer more control over their plan designs can also create separate spending accounts with specific restrictions. Popular options include Medical Spending Accounts (MSA) and Health Spending Accounts (HSA), which cover medical treatment and preventive health expenses, respectively.
A thoughtfully crafted flexible benefits program can shape and strengthen a company’s unique employee value proposition, particularly when employees understand the principles behind its design and maximize the value they enjoy from it. While flexible benefits programs were once only offered by market leaders and innovators, today, companies of all sizes should consider this tool to positively impact every aspect of their business. Contact us (opens a new window) if you are interested in exploring the feasibility of introducing flexible benefits to your employees.
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