Over the last century, employee benefits packages have made great strides in terms of quality, diversity and availability. Nevertheless, employers could go farther still in providing the type of innovative packages and perks that can help both attract top talent and keep current employees healthy, engaged and satisfied.
Think about it: What was the last major change in workplace benefit adoption? And, given the new economic and social realities faced by today’s employees, isn’t it time for a new one?
To understand where modern workplace benefits are headed and how to remain competitive, it is worthwhile to study key moments in employee benefit history — from 401(k)s and health insurance to family leave — and take a look at the next big development in the employee benefits space.
Pensions and 401(k)s
Before sponsoring 401(k) accounts, employers supported employees’ retirement prospects through pension funds. Early pension plans weren’t particularly generous — especially by today’s standards — typically offering less than half the worker’s salary and requiring 20 or more years of service to qualify.
Things began to change after the Revenue Act of 1978 passed, essentially creating 401(k) plans, which did not tax employee contributions.
Staffing firm Robert Half found that 62 percent of workers who participated in an employment-based retirement plan relied solely on a pension in 1979. Today, that number is closer to 7 percent, with a full 69 percent of workers relying solely on defined contribution plans (including 401(k)s).
Having gained widespread acceptance, retirement matching programs are now par for the course in the workplace.
A 401(k) matching program can also secure tax benefits for employers: Companies are usually allowed to deduct their contribution matches from their tax bill. And, it can be a retention booster — a survey by Paychex found that 21 percent of employees listed the absence of a 401(k) plan as a reason to leave a company.
While many companies have recently enacted generous family leave policies — Netflix, for example, instituted unlimited paid parental leave for moms (and dads!) in 2015 — the first law compelling employers to allow employees to take 12 weeks of job-protected leave for family or medical reasons wasn’t established until 1993: The Family and Medical Leave Act (FMLA) ensures workers cannot be fired for taking time off to have a baby or care for a sick loved one.
Employers are not, however, required to offer paid leave, but as competition for top talent heats up across industries, forward-thinking companies will likely follow the example of those that do and rethink their family leave packages. Approximately three-quarters (74%) of respondents to a Pew survey agreed that employers which provide paid leave are more likely to attract and retain valuable workers than those that don’t.
Until 1942, when The Stabilization Act was passed as a way to control inflation during WWII, people paid for their own medical treatment. Because many companies couldn’t afford to offer higher salaries during those hard times, companies began offering employer-sponsored health insurance as a way to attract new employees and keep existing workers on board.
Today, it’s common for employers to pay a portion of employees’ health care coverage premium while workers cover deductibles and co-pays. There’s also been a shift toward high-deductible health plans (HDHPs), health savings accounts (HSAs), and health reimbursement accounts (HRAs).
Employers with generous health care benefits are becoming more and more ubiquitous as well: According to a survey conducted by the Society for Human Resource Management (SHRM), nearly 20 percent of HR professionals altered their benefits program to aid in the retention of employees over the past 12 months. And 60 percent of those who did improved their health care benefits.
Professional development and wellness programs
Another area of employee benefits currently in ascendance is professional development and wellness programs. According to the Society for Human Resource Management’s 2016 Employee Benefits report, professional development is offered by 86 percent of companies today, while wellness programs are offered by 72 percent of companies. Telecommuting has also gained traction as a popular perk, with 60 percent of companies now providing that option.
And in the above-mentioned SHRM survey, almost 50 percent of HR professionals indicated wellness initiatives decreased their health care costs, and another 40 percent said the initiatives helped decrease unplanned absences.
Student loan repayment
So what’s the next big idea in employee benefits?
Today’s young workforce is facing the largest student loan debt crisis of any generation in history. In fact, Americans now carry $1.3 trillion in education-related debt. Seven in 10 seniors (68%) who graduated from public and nonprofit colleges in 2015 had student loan debt, with an average of $30,100 per borrower. This represents a 4% increase from the average debt of 2014 graduates.
That’s a tough burden for someone at the entry level of their career. Given the fact that 86 percent of employees polled by American Student Assistance, a Boston-based nonprofit, said they’d stay with a company for at least five years if their employer helped pay down their student loans, companies seeking a talented millennial workforce stand to benefit by offering some help in this realm.
Are you ready to be part of the next evolution of employee benefits? Ask Gradifi for a product demo and begin investing in your workforce today.
This article is not intended to constitute tax, financial or legal advice.We make no claims, promises or guarantees about the accuracy, completeness, or adequacy of the information contained here. Readers should consult their own attorneys or other tax or financial advisors to understand the tax, financial and legal consequences of any strategies mentioned in this article.