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The Best Practices Guide: Best Practices in Managing Benefits During Tough Times

Few companies escaped the extreme financial pressures of the last few years—including The Principal 10 Best Companies for Employee Financial Security—2010. What sets these winning organizations apart, however, is the conscious effort they made to minimize the impact of the recession on employees.

Whether it’s maintaining benefits, boosting communication or taking a close look at other costs, The Principal 10 Best Companies used the following best practices to manage benefits while keeping employees’ best interests at heart:

  • Stand by your employees. As Byron Boslau, chairman and CEO of Farmers Mutual Insurance Company of Nebraska, points out, “The need for the benefits doesn’t go away during a recession, so just because things are little bit tough right now doesn’t mean that we cut back on benefits.”
  • Cut expenses in other areas. For The Principal 10 Best Companies—2010, cutting benefits or increasing employees’ costs are last resorts. Red River Credit Union, for example, made a decision to maintain its benefits by reducing expenses in other areas. “Employees are responsible for our success, so we feel committed to them mutually,” says Karen Rhodes, human resources director, Red River Credit Union.
  • Plan ahead for downturns. “We learned that it’s a lot easier to plan and prioritize ahead of the time when you have to take action,” says Rhodes at Red River Credit Union. “We didn’t have a crystal ball, but there were signs that we should prepare for things to take a downturn. We planned and prioritized for things we could do before we ever touched employee benefits. That allowed us to weather the storm.”
  • Create an expense reduction committee. A group of employees helped The Graham Company cut costs without cutting benefits. “They found a lot of ways to save substantial amounts of money without negatively affecting the employees,” says Scheuerman.
  • Get all employees involved in cutting costs. In 2009, American Immigration Lawyers Association (AILA) told employees that the organization might not be able to make its five percent discretionary retirement plan contribution. Then they asked for employees’ help to reduce expenses.
  • “Everyone pulled together, and people were extremely mindful of their spending. At the end of the year, we were able to make the retirement contribution,” says Theresa Waters, senior director, HR and administration, AILA. “The key was that we kept them informed at every monthly staff meeting. Everyone felt ownership.”
  • Ask your financial professional for help. Brokers, advisors and other financial professionals can use their expertise and experience to help control costs when things get tough. Franklin International’s broker, for instance, helped the company and employees cut benefit costs while maintaining (or even increasing) benefits levels.
  • Take advantage of market opportunities. Reduced demand for benefits due to a recession can lead to bargains for savvy employers. “A lot of smaller companies, when dealing with large insurance companies or benefit providers, feel they don’t have any negotiating leverage,” says Doug Reys, manager of compensation and benefits at Franklin International. “With the downturn of the economy, that changed very quickly. We were able to get very good savings last year. Employers have to be open to those opportunities when the market changes to take advantage of their position as a purchaser.”
  • Be available to employees. Economic downturns are stressful for employees. Making human resources representatives available to talk with employees can go a long way toward soothing their worries. “We try to help employees as much as we can within our fiduciary guidelines,” says Reys.
  • Use benefits to keep employees engaged. Benefits can help employees stay focused on their jobs by reducing their financial worries. “Our employees don’t have to worry, ‘Am I going to be able to keep my healthcare?’” explains Christy Scheuerman, employee benefits consultant, The Graham Company.
  • Take a creative approach. The Delp Company, which provides benefit consulting services to employers, prides itself on taking a problem-solving approach to benefits. “We don’t limit ourselves to routine thinking about shopping price and reducing benefits, which is what most do. We look for creative solutions to complex problems. We may identify ways to do partial self-funding, where there are strategic opportunities in the benefit structures,” says Cleves Delp, CEO, The Delp Company.
  • Help employees make the best use of benefits. Educating employees about their benefits—one-on-one if necessary—is one way The Bolles School helps its employees achieve greater financial security. Recently, the organization worked with several employees to educate them on how to use their pharmacy benefit. As a result, “one employee is now saving just under $3,000 per year on the identical medications,” says John E. Trainer, Jr., Ph.D., president and head of school, The Bolles School.
  • Minimize the impact of cost increases on employees. When Davidson Technologies had to share a healthcare cost increase with employees, the company decided to increase copays and deductibles instead of increasing premiums across the board. “We wanted to make sure the people who were using the benefit were the ones paying out of pocket,” says Pamela Peterson, director—human resources, Davidson Technologies, Inc.
  • Focus employees’ attention on total compensation. The silver lining is that tough times tend to help employees appreciate what they have. Foster this appreciation by educating employees about their total compensation. According to Claudia Perkins, vice president of human resources, Clif Bar & Company, the recession “increased employee awareness of total compensation and the value of medical benefits and retirement savings plans.”
  • Offer benefits that can last. “We’ve always had a long-term focus on our business model,” says Perkins at Clif Bar & Company. “The same goes with our benefits. We don’t just want to do things for a brief time that we’d have to take away, so we only add things we know we can sustain over time.”
  • Work with carriers to negotiate costs. Theresa A. Waters, senior director, HR and administration, American Immigration Lawyers Association (AILA), urges employers to take an active role in benefit negotiations. “You have to get involved, even if you have a broker,” she says. “You have to try to work with the carriers to get what you want.”
  • Communicate. Keeping employees informed about the status of the organization—and its plans to get through tough times—is vitally important during a down economy. You may be surprised at employees’ reactions. “We believe in open and timely communication with staff. People want to know how things are affecting them,” says Waters at AILA. “Our staff came up with all sorts of ideas to help, down to cutting travel budgets.”
  • Bring in financial experts to meet with employees. Many of The Principal 10 Best Companies—2010 brought in their retirement plan service providers, advisors and other financial professionals to address employees’ financial concerns during the recession.
  • Use voluntary benefits to fill any coverage gaps. Davidson Technologies added supplemental coverages—such as a cancer benefit, additional short-term disability, extra hospitalization coverage and more—to further protect employees from financial risks.
  • Maintain a sense of normalcy. “I understand we can’t have business as usual in all aspects, but I try to keep it as normal as possible even through difficult situations. There will be better times down the road,” says Robert Buck, Red River Credit Union’s president and CEO.
  • Tie company retirement plan contributions to profitability. Part of RLI’s retirement plan contribution is contingent on company profitability. “We focus on communicating that link. We’ll continue to provide a core benefit and a variable element if performance is there. But if performance declines, the variable elements will decline. It’s emotionally a different approach than, ‘We’ve decided to cut your benefits,’” says Jeff Fick, vice president of human resources, RLI.

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